Flat revenues are forecast

Southwest the bright spot as other airlines struggle

Baltimore-Washington International Airport

January 12, 2003|By Paul Adams | Paul Adams,SUN STAFF

Baltimore-Washington International Airport expects revenue and passenger totals to remain flat this year as two of its top five airlines undergo bankruptcy reorganization and several others continue to suffer staggering losses.

The good news is that the airport continues to be the envy of the aviation industry because of its status as Dallas-based Southwest Airlines' fastest-growing focus city at a time when most major airlines are shrinking to meet reduced demand.

As airports nationwide have been buffeted by an industrywide restructuring, Southwest continues to post modest profits and expand its route system, though at a slower pace. With almost half of the passenger market at BWI, the no frills, low-fare airline has been a source of stability as the airport copes with fewer flights and US Airways and United Airlines in Chapter 11.

US Airways, once the airport's dominant carrier, has shrunk its BWI operations by more than 60 percent in the past year as part of its reorganization. A spokesman for the carrier said the cuts at BWI have likely come to an end. What remains consists mostly of flights connecting BWI to US Airways' operations in Philadelphia, Pittsburgh and New York.

A bigger question is what will happen as United restructures and emerges from bankruptcy court. The world's second-largest airline has emerged as one of BWI's fastest-growing carriers. Airport officials are optimistic that the carrier will continue to use BWI to feed its hub in Chicago, but anything can happen during a bankruptcy proceeding.

The airline, which handles about 6 percent to 7 percent of BWI's passengers, has not said where it will make cuts.

American Airlines, which handles slightly more passengers than United, also has said it plans to shrink its route system this year. It's uncertain if the cuts will have an impact on its BWI operations, which have grown by more than 50 percent in the past year.

BWI officials say they expect the airport to post a 2002 passenger total of about 19.1 million when final numbers are in. That would be down slightly from the record 20.4 million passengers the airport handled in 2001, and this year isn't likely to be better.

"It's not that I'm not optimistic about the future, it's just that I don't think we'll be in a major growth mode on the business side until some of these things align themselves," said Paul J. Wiedefeld, executive director of the Maryland Aviation Administration, which oversees BWI.

Any passenger growth at BWI will be tied mostly to Southwest and AirTran Airways, the Orlando, Fla.-based carrier that stepped in after US Airways shuttered its Baltimore-based MetroJet division.

Aviation analysts say Southwest has divided the nation's airports into two camps: those that have a strong Southwest presence, and those that don't.

"Those that do have tended to do a lot better than your typical fortress hub," said Dan Champeau, managing director at credit-ratings service Fitch Inc. The company says BWI's finances are solid, earning it a stable credit rating.

"BWI being one of Southwest Airlines' main cities has done a lot better than the average airport, especially since 9/11," Champeau said.

Southwest, the nation's sixth-largest airline, began serving BWI in 1993 with eight flights a day. This month, the airline launches new daily flights that will make Baltimore its third-busiest city behind Phoenix and Las Vegas, with 144 daily departures. The new flights go to Orlando, Fla.; Manchester, N.H.; Hartford, Conn.; San Jose, Calif.; and Islip, N.Y.

"Baltimore has been a wonderful success for us," said Christine Turneabe Connelly, a spokeswoman for the airline. "I've never seen anything like it in terms of the rapid growth."

The airline plans to take delivery of 17 new Boeing 737s this year and retire six smaller, less-efficient planes. The additional aircraft will increase the airline's capacity by 4 percent to 5 percent. It's uncertain where those additional seats will be deployed.

Like Southwest, AirTran, which offers 25 flights a day at BWI, was profitable last year and expects to continue growing this year. Industry analysts say AirTran could eventually grow as large as the former MetroJet, which offered more than 40 flights a day at BWI.

"We believe that in 2003 we'll continue to grow at BWI and add at least one more city from BWI, and maybe more," said Tad Hutcheson, a spokesman for AirTran. The airline also expects to increase the frequency of flights to cities it serves from BWI, he said.

With airlines still seeking more gates, Wiedefeld said, the airport's $1.8 billion expansion program will not slow as a result of the industry's difficulties. The construction is financed through the state's transportation trust fund, which is shielded from industry downturns.

A new parking garage will be nearly complete by year's end, and construction on the new Pier A will begin. A skywalk connecting Pier D with the hourly parking garage will wrap up this year and other terminal and roadway improvements will progress throughout the year. Rental car facilities will move out of the hourly parking garage to a new facility near the airport, freeing up more parking spaces.

How the state's budget deficit will affect future airport projects is unclear. Wiedefeld said it will depend on how political leaders decide to close the revenue gap.

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