PIT’s pandemic pickle

PIT’s pandemic pickle

By the Allegheny County Airport Authority’s own accounting, the coronavirus pandemic has left Pittsburgh International Airport (PIT) in a world of hurt.

And an analysis of the overall industry in The Wall Street Journal suggests things could grow even worse before they get any better.

As David Storer, PIT’s director of business development, told the authority’s communications operation in an article posted on Sept. 4:

“Overall, year-to-date traffic is down significantly. Right now, a large majority of customers are leisure travelers, who typically spend less while at the airport than business travelers.

“We greatly appreciate all those who are flying during the pandemic, but the lack of business travel worsens the financial impact,” Storer said.

Since March, PIT’s overall passenger traffic is down 65 percent. (It tanked early on and has experienced some modest gains as of late.)

The authority house organ, Blue Sky News (BSN/blueskypit.com), also quotes Amy Mitkus, vice president of Fraport Pittsburgh, which operates PIT’s concessions program:

“As frequent fliers, business travelers spend more time in airports and are more familiar with the restaurants, services and retail offerings,” she said. “They also dine out and use their expense accounts to cover meals and related travel expenses. As a result, they may use more of their discretionary income on other purchases such as a gift or souvenir from their trip for the kids.”

Mitkus says that in January, prior to the pandemic ramping up, the airport looked as if it would exceed the 2019 sales per enplanement (SPE) figure of $14.69, the average amount spent by each ticketed passenger.

But through June of this year, “SPE has dropped to $12.50 and overall sales have sunk further than the 65 percent drop in traffic,” BSN reports.

Slow sales have slashed from 76 to 26 the number of retail outlets that are open in PIT’s Airside Terminal. Additionally, PIT’s largest parking lot – the Extended Economy Lot – has been closed for five months.

Notes David Paga of Grant Oliver, which manages the airport’s parking lots: Daily revenues of more than $100,000 were common, at times coming close to $200,000. But the highest total since mid-March has been a Sunday that inched over $45,000.

“The airport’s parking garage, a haven for the cars whose drivers are on expense accounts, is barely breaking 30 percent occupancy this year on Wednesdays, the day when most business travelers are away,” BSN says. “Typically, Paga said, occupancy is at 90 percent mid-week.”

Additionally, nearly a third – 30 of 85 – of monthly lease holders in the airport’s Gold Key Lot, with the closest and easiest access to the airport, have suspended their leases, the authority says. That has led to steep price discounts in PIT’s Short Term and Long Term lots (from $24 to $16 daily and from $16 to $8 daily, respectively).

All this said, there is another pandemic dynamic in play at PIT and other airports that is foreboding. As The Wall Street Journal reported on Sept. 3:

“(W)ith global (airline) traffic not expected to fully recover until 2024, airports are left with a lot of unused space—especially those that were in the middle of expansions. Some projects, like London Heathrow’s third runway, can be shelved indefinitely. Others, like those taking place in Los Angeles, Frankfurt and Hong Kong, seem too far along.”

A billion dollar-plus reconfiguration of PIT’s landside terminal appears to be on indefinite hold. And how it is paid for now could be in flux. At last report, the Airport Authority never did have signed leases from its carriers.

“Carriers, which were once expected to foot almost the entire bill for these investments, will now have more leverage to negotiate,” The Journal says. “And airports have a natural incentive to cut fees to attract footfall” – that is, the number of people entering an airport – “because 40 percent of their revenues come from nonaeronautical sources, chiefly retail concessions.

“Main airports will still be able to milk legacy airlines that need to defend their hubs, but the secondary ones” – think PIT – “will have a much harder time.”

How Pittsburgh International fares over the next three years, of course, is a wild card. But in a current climate that might see little change in bread-and-butter global business travel for several more years to come, attempting to sell construction bonds (to be paid off from such things as airline fees, gambling proceeds, shale gas income, along with state and federal grants) hardly looks positive.

And the Allegheny County Airport Authority has had poor track record of retaining airlines it bribed to operate out of PIT with public subsidies going into the pandemic. Now, the pandemic has made those straits ever more dire.

As The Wall Street Journal assessment concludes:

“With airport and passenger fees alike, low-cost carriers are likely to force the rest of the aviation industry into a race to the bottom on price. Until signs emerge of a sustainable pickup in air traffic, particularly business travel, this is a race that only budget airlines can win.”

Where that leaves PIT, in a self-made pickle exacerbated by the coronavirus pandemic, is anybody’s guess.

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