BusinessReport.com

With the airline industry in a nosedive and ticket prices climbing, what’s a Southern capital city’s mid-sized airport to do? If you’re Baton Rouge Metropolitan Airport, you get ready for more customers.

Consolidation means fewer planes in the air, fewer seats, higher demand and higher ticket prices, which might mean fewer customers. Nevertheless, Metro Airport has several projects under way or in the planning stages, including a new parking garage and an expansion of the 5-year-old terminal building.

The airport recently was on the winning end of a $2.5 million legal settlement, which drew to a close a litigious chapter in its history. It started with the decision to build a new terminal, a project that began in early 1998. The terminal was finished in 2003, roughly three years behind schedule. Even before completion, the atrium—along with its restaurant and gift shop—were closed to all but ticketed passengers after the Sept. 11, 2001 terrorist attacks.

The $2.5 million settlement might not have been much, but it still wasn’t a bad deal for the airport, considering it was the target of a lawsuit by a contractor that had been terminated late in the terminal construction process. The first contractor, Roxco Ltd., walked off the job after nine months. The bonding company responsible for guaranteeing completion of the job brought in an interim contractor and then a permanent contractor, J. Caldarera & Co. of LaPlace.

Anthony Marino, director of aviation for the airport, says things weren’t working out with Caldarera, who took over the project in April 1999. “We ended up with a number of issues in the job and finally felt like the job wasn’t progressing,” Marino says.

The project was about 90% complete but just couldn’t seem to make it over the last hill, he says. The airport commission and Metro Council fired the bond company, which took Caldarera off the job, and filed suit. A subsequent bid from the Caldarera to finish the project was rejected. The contractor appealed, to no avail. Gibbs Construction was awarded the contract to finish the project, which came in about $9 million over the original $33 million estimate.

Now a preliminary design contract has been approved for an expanded terminal atrium, which is projected to cost around $13 million. Bonds have already been sold, and the money is part of the $57.5 million in debt the airport plans to retire through two sources: a passenger facility charge added to each ticket, and a customer facility charge added to each airport car rental.

The airport has done $330 million in capital projects since 1996, with Federal Aviation Administration grants and state capital outlays. Former Gov. Mike Foster helped get the terminal project accomplished with $9 million in state appropriations.

Any state money the airport receives to match federal funding comes from a state aviation fuel tax. The airport gets no financial support from city coffers. It’s one of the city’s five so-called enterprise funds, which also include CATS and the River Center and are supposed to be self-sustaining.

“We’re the only one that actually creates its own revenue,” says Ronnie Pickard, the airport’s marketing manager.

For the terminal project, $4 million came from the FAA in addition to the $9 million from the state. The rest came from wherever Marino could dig it up.

“We had 17 different funding sources,” Marino says. “We do things that are considered unorthodox in government. Finance departments don’t particularly care for it because it’s a tremendous amount of accounting.”

Ideally, the final price tag for expanding the terminal, rerouting the concourses, building bigger bathrooms and other improvements won’t balloon too far past $13 million. Marino says the instability in fuel prices has made accurate estimates on big-ticket items hard to pin down.

“All these items are expensive items: steel and concrete and a lot of glass,” he says. How much this thing is going to cost is a concern. Estimating right now, it’s just difficult.”

The airport conducted fresh estimates for a runway resurfacing just prior to awarding a contract, and still bids came in almost $1 million higher than the estimate, Marino notes. Groundbreaking on the terminal project will take place during the third quarter of 2009 with completion scheduled for fall 2010, he says.

Whatever it ends up costing, the result will be a relocated security check-in area, opposite the atrium where it is now. A new glass wall facing the runways will be built beyond the diameter of the existing one, which will be cut out overnight to guarantee no interruption in service.

With the new configuration, which will take at least a year to complete, non-ticketholders will be able to hang out in the atrium, as it was before 9/11. The new setup will also include two more X-ray machines. This will speed up the capacity for handling the growing numbers of passengers Marino envisions.

The architect on the new project is Russell Washer, who was a subcontractor on the original building. “They’re aware of what went in the building originally,” Marino says.

Aside from the terminal expansion, the airport’s runways—torn up from heavy traffic following Hurricane Katrina—will be resurfaced in June 2009 and all lights replaced, thanks to $35 million that Marino succeeded in getting from the FAA. A $1.5 million beautification project is ongoing, and ground has broken on a new five-level parking garage to be completed in May 2009.

With all these plans and projects under way, it’ll be swell if there’s still an airline industry to carry passengers in a few years.

“You don’t know what color they’re going to be painted, and you don’t know who’s going to own them,” Marino says. “You’re going to have service. You just don’t know exactly who’s going to be the survivor.”

Despite the pain of winning—and then losing—Frontier Airlines and its low-fare service to Denver and, before that, Allegiant Air and nonstop to Las Vegas, Marino is determined to get another low-fare carrier in Baton Rouge. The airport was involved in intensive negotiations with one or two prospects when the price of oil started spiking. Since then, all bets are off.

“We’ve got some lined up, but the problem is fuel,” he says. “Nobody will commit. It’s a major variable in operating cost, and you don’t know what’s at the end of the tunnel. Until it stabilizes, they’re just not going to commit. We’re going to get another airline in here.”