Our billion-dollar runway: Who will pay?

By J. Martin McOmber
Seattle Times business reporter

TOM REESE / THE SEATTLE TIMES Aerial view, looking south, of Sea-Tac Airport's current runways and taxiways, left. The land at right will be filled with 17.5 million cubic yards of dirt to extend the natural plateau on which the airport sits so the new runway, which will run parallel to the current ones, can be built.

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It was an important moment in the fight over the third runway, a project four years behind schedule and nearly double its original budget. And as the woods fell, so did the last major legal obstacle to completing the $1.13 billion runway.

But as the tangle of environmental challenges over the third runway clears, the Port of Seattle, which runs Sea-Tac, faces a different kind of thicket: a financial one.

Due to open in late 2008, the third runway will be among the most expensive built during an unprecedented construction boom at major airports around the country. To pay for it, Sea-Tac will raise rents and landing fees to some of the highest in the nation at a time most airlines are bleeding money.

The Port is scrambling to pay for the runway and terminal expansions amid rising complaints from airlines that say they can no longer afford them.

For Gina Marie Lindsey, Sea-Tac's outgoing director, the choice is simple: press forward with the runway or be hobbled by growing congestion and delays at the airport that will take a toll on the region's economy. "We have to afford this project," she said.

Runway opponents, whose legal and environmental challenges contributed to the ballooning cost of the project, have little sympathy for airport officials' troubles. "We thought when we started to see the costs skyrocketing, it would become such a burden that it would collapse from its own weight," said Bob Sheckler, mayor of Des Moines and chairman of the Airport Communities Coalition. "Why did they continue?"

Crowded skies

A rise in airline traffic challenges an airport where closely spaced runways limit the number of planes that can land in bad weather.

Tomorrow Sea-Tac North? Expansion of Paine Field considered.

The third runway is the centerpiece of a $4.2 billion airport expansion, the first since the early 1970s, that includes new and expanded terminals designed to handle a rising tide of airline traffic that could pass a half-million flights a year by 2020.

More traffic means more delays. And, depending on how you measure it, Sea-Tac historically has suffered some of the worst delays in the country, with nearly one-third of its flights arriving more than 15 minutes late. That has subsided since the number of flights fell 18 percent after the Sept. 11, 2001, terrorist attacks. But airport officials said it is only a matter of time before the planes — and the delays — return.

"My guess is, by this time next year, we will have serious delays in dozens of airports," said Richard Marchi, senior vice president of the Airports Council International-North America, which represents airport executives.

The Federal Aviation Administration predicts about half of the country's major airports will see the number of flights at or above 2001 levels by the end of this year. That's especially true at hub airports like O'Hare International Airport in Chicago, where airlines have replaced larger jets with smaller regional planes that fly more often.

But at Sea-Tac, where the main commuter airline, Horizon, is switching to larger planes, the recovery is expected to take longer. Forecasters said Sea-Tac won't see a record number of flights again until 2012, four years after the third runway is set to open.

Opponents say the drop in traffic is another reason the runway should be scrapped. But Sea-Tac officials say they are glad to have the breathing room. The airport is the 16th-busiest in passenger volume in the country, handling some 26.8 million last year.

Sea-Tac has additional challenges: its closely spaced runways — and the weather. On clear days, when pilots fly by sight, the airport can handle two streams of arriving aircraft. That's about 60 landings an hour. But when the clouds set in, which happens about 44 percent of the time, and pilots switch to instruments to guide their landings, the planes must line up single-file. Landings drop to 36 or fewer, and planes stack up.

The third runway, 2,500 feet west of the first, will allow two streams of traffic on cloudy days. It will allow 48 planes an hour to land because the aircraft must be spaced farther apart to land in poor weather.

Building boom

Nearly half the nation's largest airports are expanding their runways. The FAA says many others should as well, to avoid national air gridlock.

Sea-Tac planners began the push for a third runway in 1988; official approval came after eight years.

Sea-Tac isn't the only airport to roll out costly upgrades. In the past five years, 16 of the nation's 35 largest airports have either built additional runways, started construction or plan to begin soon. A recent FAA study concluded at least 11 more airports should add runways in the next 10 years to avoid gridlock.

The FAA has pushed runway construction as one solution to a congestion problem that reached a crisis in summer 2000. Congress has fueled the boom, by essentially doubling the amount of money available for airport construction annually to $3.7 billion. And despite the sharp downturn in traffic after Sept. 11 and the continued financial plight of airlines, only a few projects have been scrapped or delayed.

Sea-Tac's struggles with lawsuits and changing environmental regulations are well-known among airport executives.

So is the staggering price tag. Only the Hartsfield-Jackson Atlanta International Airport and Lambert-St. Louis International Airport have similarly expensive runways under construction. Like Sea-Tac, those projects required dramatically reshaping the landscape and faced stiff opposition from surrounding communities.

In St. Louis, the new $1.1 billion runway is the largest public-works project in the city's history. The airport had to buy 2,000 homes in the suburb of Bridgeton, which bitterly fought the project.

In Atlanta, costs skyrocketed when it was forced to move its fifth runway after stiff opposition from the town of Hapeville, which would have essentially been wiped off the map by the project. Now the $1.35 billion runway project and taxiway cross over a 10-lane highway and require a staggering 27 million cubic yards of fill.

"To get a runway approval in less than 10 years is unusual," said Marchi, of the airports council. "If you have a determined opposition, and they want to challenge the process, it can take a very long time."

Costly fight

Neighbors' lawsuits cause environmental improvements in the project, but could not stop it.

	STEVE RINGMAN / THE SEATTLE TIMES The view from a mound of 5 million cubic yards of dirt, part of what will be needed to fill in land for the runway.

For all but a handful of communities within earshot of Sea-Tac, the 15-year battle to stop the third runway has largely faded into the background, eclipsed by other public projects: stadiums, rapid transit and a replacement for the Alaskan Way Viaduct.

Near Sea-Tac, however, the third runway is impossible to ignore. Since some construction began in 1997, the airport has poured about $377 million into the runway project. About one-third of that was spent buying property and moving families. Nearly 400 homes will be razed.

Dump trucks — about 1,400 a day — have begun carting the massive amount of dirt needed to expand the natural plateau on which Sea-Tac sits to make room for the new runway. The 17.5 million cubic yards of dirt is enough to fill Safeco Field more than five times.

Noise, pollution and the loss of millions of dollars in property tax on land that now belongs to the Port have taken a toll on the quality of life.

The cities of Des Moines, Normandy Park, Tukwila and Federal Way and the Highline School District, outraged over the way Sea-Tac has dealt with neighbors, formed the Airport Communities Coalition to fight the third runway in court and through environmental regulators.

The group has spent about $13 million and succeeded in forcing the Port to make costly changes in the project to better protect the environment, especially the quality of streams and groundwater affected by construction. But it hasn't stopped the project.

A May ruling by the state Supreme Court dealt a blow to the group's remaining legal efforts. "The [coalition] will not go away but will evolve into a monitoring coalition to make sure that all the conditions that are set are in fact met," said Sheckler, coalition chairman. "Litigation would not necessarily be our main goal, but it would be in our pocket."

Airlines balk at fees

Sea-Tac wants the airlines and the federal government to help pay for the billion-dollar runway.

All along, the coalition had hoped the delays and cost increases would make the runway too costly to build. That hasn't happened, but it has increased the financial pressure on the Port.

The airport plans to pay for the runway three ways. Money from the federal government, a share of the $4.50 passenger-facility charge levied on each ticket, and bonds that will be repaid with terminal rents and landing fees, which are paid by airlines. Those fees will rise once the runway opens.

As it stands, airlines will be responsible for about 49 percent of the total runway costs, or about $553.9 million. That is 173 percent more than they originally anticipated.

Making matters worse, the airport is borrowing heavily for other major projects that have expanded gates and terminals, and the price of that debt is hitting airlines now.

The money worries Alaska Air, parent company of Alaska Airlines and Horizon Air, which accounts for more than half the flights at Sea-Tac.

"We can't eat those costs," said Alaska Airlines executive Cliff Argue. "And as a result, they will have to get passed on one way or another to the flying public."

Prices are rising at other airports, too, as the bill comes due for runway and construction projects started several years ago, during the heyday of air travel. As airlines scour their budgets for savings, they are focusing attention on airport costs, which typically represent 4 to 7 percent of operating costs.

That has shed an unflattering light on Sea-Tac.

Sea-Tac, like other airports, sets its landing fees and terminal rents each year based on how much money it will need to cover the costs of running the airport plus the amount it will need to make debt payments.

Airlines look at the total as the "cost per enplanement," or the average amount they spend per passenger to use the airport. At Sea-Tac, that amount will need to grow more than fivefold from a low of about $4 in the mid-1990s to about $23 in 2009. That will make Sea-Tac one of the most expensive airports in the country, behind those in the New York area and Miami.

But the fallout could bring more than higher ticket prices.

In March, Sea-Tac's major airlines sent a letter to the FAA warning that the airport was heading for trouble unless the agency could find more money to support it. "The potential for $23 cost per enplaned passenger at Sea-Tac when the runway is complete simply does not work in the business model of any airline," the letter said. "There could be significant detrimental effects on air transportation service in the Puget Sound Region."

That same month, Southwest Airlines, the fourth-largest passenger carrier at Sea-Tac, trimmed three daily flights to Spokane, citing rising airport costs. The airline has cut flights to Sea-Tac 5 percent during the first five months of the year compared with the same period in 2003.

"We continue to be very concerned about costs at Sea-Tac," said Whitney Eichinger, a Southwest spokeswoman. "It is one of our most expensive airports."

Sea-Tac officials are scrambling to find a way to curb airline costs to $18 a passenger in 2009. In the spring, the airport asked the FAA to nearly double the $216.5 million earmarked for the third runway. Sea-Tac officials said the amount would essentially cover increases caused by federal environmental regulations.

But the $394.6 million would set a record, and the proposal was met with skepticism in Washington, D.C. The FAA is expected to decide by the end of summer whether to grant Sea-Tac's request.

"This is a big ask, no doubt about it," Sea-Tac's Lindsey said. "Every dollar we get from the federal government is a dollar the airlines don't have to pay."

Over the next few months, the airport will consider other ways to cut costs, including delaying other big-ticket construction projects, trimming operation-and-maintenance costs and trying to increase profits from parking and other non-airline sources.

The Port also is considering riskier ways to cut costs, including using flexible-rate loans and decreasing its revenue cushion by collecting less from airlines. Those decisions will be made during budget discussions this fall.

Cleared for takeoff

Airlines' support for the runway grows — along with the price tag.

The airlines are partly to blame. Until this year, airlines could veto major construction projects if they didn't think they were needed. They have voted four times since 1997 to approve the third runway.

Several airlines opposed the project at first, but as the number of flights at Sea-Tac increased, so did support for the runway, even as the price tag climbed from the $587 million originally budgeted in 1997 to $773 million and the schedule slipped.

The final vote in 2001 was unanimous. That was before the budget climbed past $1 billion and airline fortunes diminished.

Still, Alaska and other airlines see little alternative to completing the third runway. While improved technology could make Sea-Tac more efficient, it can't do as much as more concrete can, said Argue, of Alaska Airlines. And few would relish the cost of creating another regional airport.

"All of the carriers have agreed that this is a project that needs to go ahead," Argue said. "Not only for the good of the airport, but for the good of the region as well."

J. Martin McOmber: 206-464-2022 or mmcomber@seattletimes.com

Copyright © 2004 The Seattle Times Company

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