News Article - July 01 2006

New gate-lease deals mark the end of an airport era
  One of the last vestiges of airline-industry regulation ended yesterday with the expiration of the carriers' 32-year leases on gates at Philadelphia International Airport. Starting today, the long-term agreement between major airlines and the city Commerce Department's Division of Aviation is being replaced with five-year leases that give the airport more control over its 120 gates, airport officials said. Air travelers will notice no immediate change, but in the coming months, the pact is expected to give two carriers more gates. Southwest Airlines will move into two additional gates in Terminal D and one in Terminal E, and Air Canada will get a gate in Terminal D. The space in the D concourse will come from United Airlines, which is reducing its gates from seven to four. Delta Air Lines plans to move from Terminal E to Terminal A, which will allow Southwest to lease its other gate, and free space for more food service in the E concourse, said Jim Tyrell, deputy director of aviation for properties and business development. "That terminal is woefully underserved by concessions," he said.

   City Council will be asked this fall to adopt an ordinance that formalizes the lease agreement, but the airport and the airlines will operate under the terms of the deal until then, Tyrell said. When the old agreement was adopted in 1974, it was with major airlines whose routes and fares were federally regulated, making their revenue and costs predictable and letting them sign long leases with many airports. When the industry was deregulated in 1979, fares declined, and newer airlines grew. But Philadelphia International was unable at times to find gates to accommodate new carriers because they were locked up by the long-term leases. The new agreement allows the airport to require an airline to share a gate it is not using fully or take the gate back if the carrier is not using it at all, aviation director Charles J. Isdell said.

   The airport and the airlines worked out the agreement in two dozen meetings - and the exchange of mounds of paperwork - starting in September 2004. Officials of US Airways and Southwest, the airport's largest carriers, said they were pleased with the deal because it is flexible and is not expected to raise their costs much. US Airways and Southwest represented all the airport's airlines in the negotiations. The agreement calls for the airlines to pay as much as $9.50 for each boarding passenger through the term of the contract, compared with $7.57 previously. Philadelphia ranks 13th among the 21 largest U.S. airports in what it charges airlines, according to data compiled by the airport staff. Per-passenger charges range from less than $5 to more than $20 at the big airports.

   In addition, the airlines approved the airport's plans for a $315 million, five-year capital improvement program. Most of the money will be used to enlarge the bridge connecting Terminals D and E, where a single security-checkpoint area for both concourses, with 14 lanes, and a food court will be built, Tyrell said. The Federal Aviation Administration has also given the airport approval to continue charging each departing passenger $4.50, a fee included in airline ticket prices, to help pay for the capital improvements, Isdell said.

Source - Philadelphia Inquirer