Bob Hope Airport faces tough times

Thanks to the loss of an airline, declining parking revenues and fewer passengers using the airfield, Bob Hope Airport is facing one of its roughest budget years ever, officials reported this week.

Airport officials also are staring at a multimillion-dollar bond debt that will be needed to construct a transit center — a move that will be watched closely by credit rating agencies that have taken notice of the falling passenger and revenue numbers.

“These are difficult times for us,” Dan Feger, the airport's executive director, said at meeting on Monday of the Burbank-Glendale-Pasadena Airport Authority. “[It's] perhaps the most difficult budget year we've seen.”

Because of the departure last month of American Airlines, airport officials will closely monitor the economic picture during the next six months, said Kathy David, deputy executive director of finance and administration.

The airport's operating revenues are only about 1% above budget projections, so it's imperative to make sure American's unexpected move doesn't force revenues to drop, David said during a mid-year budget review.

David is not the only one watching the financial health of the airport. Credit rating agency Fitch has warned that keeping the airport's credit rating at AA- is “unlikely” if it takes out a multimillion-dollar bond to build a new transit center, which will bring rental car, bus and rail services under one roof.

Overall, however, the airport looks to be in good financial health, Fitch officials said, noting that many mid-sized airports have just a single A rating.

Transportation consultant Jack Keady agreed, saying the airport looks to be in stable condition even if it takes on the additional debt for the center, for which the budget dropped by about 10% — to $81 million — following American's departure.

The deadline for bids to build the new transit center is March 22. Bidders were given the option to include additional plans using concrete to build the facility in an effort to further drive down the cost.

But the airport has been dealing with declining parking revenues, which make up about 40% of its operating revenues, for the past four years, according to a recent report. Likewise, passenger numbers have taken a tumble — two trends that concern Fitch.

Still, Bob Hope officials have held firm to building the transit center.

Airport spokesman Victor Gill said the center's main goal is to integrate the airfield with the regional transportation system, as well as to improve convenience for rental-car customers. The need for the project is also driven by the fact that the current location of the rental car offices is too close to a runway, according to FAA requirements.

Brett Snyder, who runs the airline industry website, said that whenever an airport undertakes a major project, it should be designed to enhance the experience of the majority of patrons and generate more passengers. But he also had concerns that making the airport more accessible via public transportation could further erode parking revenues.

Gill acknowledged the possibility, but said the transit center wasn't necessarily designed to bring in more passengers.

“We were willing to take that minimal risk of perhaps a reduction in parking patronage,” he said, adding that the ultimate goal is to make the airport more public-transit friendly and environmentally responsible.

In looking at the airport's financial data, Keady pointed out Bob Hope's comparatively low per-passenger cost for airlines. At just $2.09 — the lowest by far in Southern California — adjusting the airfield's fees upward could be an untapped source of additional revenue.

The next highest per passenger cost is the $4.07 at Palm Springs International Airport and $5.34 at Long Beach Airport, according to financial data from individual airports. Los Angeles International Airport's per-passenger cost is $11.

“There is some room to increase airline charges,” Keady said.

But David on Monday recommended that the airport not increase the fee it charges airlines, although she left the door open to a possible hike in the future.

“That is something we may have to look at as we develop next year's budget,” David said. “But at this time, we don't have a good support presentation to bring to the airlines and we hope we don't even have to get there.”

American's departure from Bob Hope puts Southwest, the airport's largest carrier, into an even more prominent position.

Ashley Dillon, a Southwest spokeswoman, said Bob Hope's per-passenger cost is one of the lowest of any airport the company serves and is one of the reasons the airport is so attractive.

If an airline fee hike is proposed, Southwest would work with other airlines to reach a “mutually agreeable cost,” Dillon said in a statement.

“Southwest is not in the habit of exiting airports,” she said. “We will do what we can to ensure we are paying fair prices.”

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