More PIT questions …

More PIT questions …

Pittsburgh International Airport (PIT) is not alone in having to delay a major construction project. The Wall Street Journal reports that as “the coronavirus pandemic stifles air travel, major airports around the world are rethinking plans to spend billions of dollars on new terminals, runways and hotels that could sit empty if demand doesn’t return.”

Continued The Journal:

“San Francisco International Airport is postponing by at least six months a $1 billion terminal renovation formerly slated to start in June.

“In Florida, Orlando’s airport authority scaled back an expansion to 15 gates from 19.

“In London, executives at Heathrow Airport say building a third runway isn’t a priority at the moment, and in New Zealand, Auckland Airport is suspending plans for a new terminal and second runway.

“Belt-tightening is winning approval from some airlines, which fear such projects could translate into higher fees.”

The Journal’s reporting raises new questions about the true future of the $1 billion-plus terminal reconfiguration project at PIT, if not the airport itself.

Chief among them: Are the major carriers that use PIT among the “some airlines” advocating airport remodeling “belt-tightening” to avoid “higher fees?

The fact of the matter is, PIT long has charged higher fees than many peer airports.

“I think it will be a long time before airline balance sheets recover,” says Jake Haulk, president-emeritus of the Allegheny Institute for Public Policy. “Especially those that had a large international passenger count.

“That would include American and United for sure,” the Ph.D. economist says.

Industry analysts have said they see air travel volume remaining at roughly half of what it was for the rest of 2020. Some even have projected the pain will extend well into 2021, especially for foreign travel.

And that could be a given if, as some medical experts have cautioned, the coronavirus ramps up anew this fall.

Still others, however, and perhaps overly rosy, say they see demand not only rebounding to prior levels but growing further.

The Journal reports that the International Air Transport Association says the global airline industry is expected to lose $84 billion this year with a return to profitability not coming until 2022. And that’s at the earliest.

For public consumption, Allegheny County Airport Authority officials indeed have acknowledged the problems associated with the pandemic. And, yes, they have addressed the need to delay the PIT terminal project.

They have even spun a positive side to it – the still not-finalized design now has time to incorporate pandemic-related precautions.

But have Airport Authority officials been far too optimistic in their public pronouncements, given the situation on the tarmac?

Bonds for the terminal project, which will raze or repurpose the existing landside terminal for a supposedly more “right-sized” ticketing, baggage/check-in and security facility, won’t be sold until there’s a more attractive market for them (currently considered “negative” by Standard and Poor’s), officials have said.

And, besides, the authority has yet to ink new long-term leases with the airlines that, previously, it said were all on board but for their final wet signatures.

One would have thought having deals in hand would have been a prerequisite for such a project even being approved. With no signed leases, what signal does that send to prospective bond buyers?

Indeed, as The Journal notes, some airports remain bullish on the return of robust air travel, eventually, and continue with their pricey projects. Among them, those in Chicago, Frankfurt, Germany and Sydney, Australia.

Some principals involved note airport projects take time to design and complete and that air travel should rebound by the time many are open. Anyway, they add, it’s also quite expensive to stop a project once it has begun.

All of that is true. But what if the pandemic has changed air travel for far longer than initially thought? What if it has changed it forever?

What if had there been no pandemic? Would the airlines have come to signed terms? Was the lack of signed deal before coronavirus an indication of a project that could not be sustained at PIT?

Additionally, who will be left holding the bag – and how big might that bag be – for work that likely should not have begun, in PIT’s case, without signed leases in hand?

And if the counterargument is that “this is the way such business is done,” well, there’s a bigger public policy problem, is there not?

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).