Port fine with 30 percent drop in earnings

If the Port of Seattle were a business accountable to shareholders, its stock would probably be plunging on Wall Street.

The Port said Tuesday that earnings fell 30 percent in the first half, the kind of drop that typically sends investors scurrying to sell.

But instead of raising alarms, the port's first-half performance drew plaudits from its staff.

"We're actually excited," the Port's corporate budget manager, Dwight Rives, said while presenting the budget to commissioners Tuesday. "There are no immediate red flags."

Most of the drop came from a rise in depreciation — the charge businesses take on their books for the slow decline in value of their buildings and equipment. The Port is on a building spree, and as new facilities open, the deprecation grows. Of course, most businesses also grow faster than depreciation, so it doesn't pull down profits. That wasn't the case at the Port.

The Port also measures its performance with a different yardstick than Wall Street uses.

Wall Street judges a company's progress against how it did during the same period a year ago; when Amazon recently said its quarterly profit fell by more than half, the stock tumbled 22 percent.

The Port, by contrast, compares itself to budget forecasts that are nine months old at this point.

So staff could legitimately say it beat the budget, because the Port budget called for earnings to drop 56 percent in the first half.

It also was possible for the airport division to say it put in a "very strong performance," even though its net income fell 31 percent.

Airport revenue fell and expenses rose — trends that would trouble Wall Street. But because the Port's budget called for airport earnings to fall even further, staff could say it was doing fine.

However, there was a note of concern: Mark Reis, airport director, said the Port will raise the rates it charges airlines to use the terminal at the Seattle-Tacoma International Airport.

According to the Port, revenue from airlines at Sea-Tac fell 9 percent in the first half — more than even the budget had predicted.

That's because airlines took less space at the airport, as a way to lower their own costs. Because airlines are responsible for paying all the costs of building and operating the airport, their fees for space will have to increase to make up the difference. The shortfall, about $4.4 million in the first half, is expected to grow to $10 million by year end.

"We will evaluate pretty soon whether to increase rates this year or roll the increase into next year's rates," Reis said.

Last year, Southwest Airlines said rising costs at Sea-Tac prompted it to consider moving to Boeing Field. But Reis said the airport is deliberately trying to charge airlines less overall as a way to keep their costs down. Even with higher rent, airlines will still pay less in 2006 than in 2005, because other fees are lower.

At the seaport, revenue, expenses and depreciation all rose, and net income fell 15 percent. The seaport, which includes cargo and cruise docks, is forecast to lose $4.9 million in the full year.

Alwyn Scott: 206-464-3329 or ascott@seattletimes.com