7/17/2007 by Richard Thomas

Enjoying a resurgence in scheduled passenger traffic, the governing authority at Duluth International Airport is considering a new terminal building with a price tag as high as $77 million.

The cost would include enlarging the “apron” area where aircraft is parked to load passengers. The terminal would be part of a capital improvement plan totaling $128 million from 2007 to 2012.

The plan includes extending the northeast/southwest runway and developing commercial businesses on the north side of the airport.

Exploring the new terminal option since December, the airport authority learned on July 17 that year-to-date traffic aboard three scheduled carriers is running 9.4 percent above the record pace in 2004. Meanwhile, June and July traffic was running 25 percent ahead of last year, Brian Ryks, the airport’s executive director, told authority members at their monthly meeting.

The airport counted 164,424 passengers for January through June of 2007. That number includes both departures and arrivals, so a passenger on a round trip is counted twice.

Ryks credited the two airlines that entered the Duluth/Superior market in the past two years — Allegiant and Midwest — for a “competitive pricing environment” attracting more travelers. In response to its new competition, Northwest Airlines, the airport’s No. 1 tenant, has cut some fares dramatically.

In 2004, the previous record year, the Duluth airport had two scheduled carriers, Northwest Air and American Eagle. The latter folded its Duluth operations after only a six month stay, partly due to fierce competition with Northwest.

Midwest’s service to Duluth may be brief as well if AirTran Holdings succeeds in its hostile takeover attempt of the Milwaukee-based airline. But Ryks believes a Midwest loss would not negate the case for a new terminal. “Other carriers are interested,” he told BusinessNorth in an interview.

“You can’t accommodate them unless you have the facilities to attract them,” he said.

Total flights at the airport, including private, charter, and military aircraft, dropped from the peak of 75,669 arrivals and departures in 2003 to 66,524 in 2006, according to the Federal Aviation Administration (FAA). Ryks said runway construction and deployment of the Air National Guard to Iraq reduced the numbers.

But the numbers are climbing again. In the first six months of 2007 there were 35,559 arrivals and departures.

Renovation vs. new construction

Until last December, the airport authority was considering a $25 million makeover of the existing terminal. But airport directors then learned those costs were approaching $38 million, owing in part to more scheduled traffic and more stringent FAA standards.

Ryks says the terminal, built in 1978, is too small to accommodate three scheduled airlines and charter services. Other problems include inefficiencies related to post-9/11 security requirements, and structural issues, including water leakage.

Another problem for the terminal is that airplane tails have become taller, protruding into airspace when parked.

On Dec. 19 the authority approved a resolution to consider a new terminal “capable of servicing the region for the present and far into the future.”

The airport authority has received a $1.2 million FAA planning grant for a feasibility study. The authority also is requesting $5.7 million from the state for pre-design, design, and phase 1 construction.

The airport authority’s rationale for the state bonding request states, “The events of September 11, 2001 have completely changed airport security requirements adversely impacting passenger flow and making the existing facility dysfunctional.

“Over the past two years, the Duluth International Airport has recruited additional airline service to the community resulting in record passenger numbers. The current facility has outlived its useful life and can no longer accommodate the space needs of the increasing airline and passenger traffic. The current facility cannot be expanded due to the proximity of the building to the taxiway and runway environment,” the request states.

Mark Sixel, the Oregon-based consultant who helped bring Midwest Airlines to Duluth on March 4, said the terminal is large enough to accommodate more airline service. “The infrastructure is no problem. There’s gates and ramp space available. When you’re in a pinch you’ll squeeze them in anywhere you can.”

But he said the terminal building’s limitations will grow along with increased passenger traffic. For example, when boarding passengers clear security they are held in an area with no restrooms.

In its December presentation to the airport authority, national airport facilities consulting firm Reynolds Smith & Hills assessed the renovation and new construction options.

Phased remodeling as funding is available represents the least cost option. But it comes with a longer list of negatives: congestion on aircraft taxiways, difficulty in expanding to accommodate more carriers, limited gate expansion capacity, structural barriers to terminal expansion and ongoing building repairs costs.

Benefits of a new terminal include greater efficiency, improved airport image as a gateway to the region, and improved vehicle access and movement.

Negatives with a new terminal are the costs, difficulty in obtaining federal funding, and potential disruption of operations facilities.

The Reynolds consulting firm developed five plans for a new terminal ranging in price from $68.3 million ($55.6 million for the terminal and $12.8 million for the “apron” area) to $76.8 million ($60.4 million and $16.4 million respectively).

“These are very preliminary costs at this point,” Ryks said. “A lot of refinement needs to be done on the numbers.”

Funding and support

The firm’s presentation included a “grant attainment action plan” that requires “public support, congressional coordination, (and) consensus within the business community.”

Federal grants could provide 90 percent of the funding with the balance from state and the airport itself. The Reynolds firm suggests increased rents.

At a January meeting with Duluth airport officials arranged by U.S. Rep. James Oberstar, D-MN, and chairman of the House Transportation and Infrastructure Committee, FAA officials orally committed $20-25 million towards a new terminal, said Oberstar spokesman John Schadl. More federal funding likely will come after the design is completed, he said.

If a new terminal is funded, construction would be phased in over four years beginning in the fourth quarter of 2008 or spring 2009.

The airport received $40 million in grants for capital improvements in the 2001-06 period.

The airport authority also wants to make available building sites on undeveloped land on the north side of the airport, using either tax increment financing or the state’s Job Opportunity Building Zones program.

“There’s a challenge in supporting businesses that would like to locate close to the airport but we’re running out of room on the south side,” said authority member Nancy Norr, Minnesota Power’s regional economic development manager. Worthington Aviation, SCS Aircraft Interiors, and Lake Superior College already have expressed interest, she said.

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