State to cut airlines' debt

It will recoup only $25.04 million of uncollected rents, fees for BWI use

May 14, 2008|By Laura McCandlish | Laura McCandlish,Sun reporter

The state has struck a deal with the airlines that use Baltimore-Washington International Thurgood Marshall Airport not to collect $32.2 million of the $57.3 million in terminal rents and other fees it undercharged them over the past four years.

The Maryland Aviation Administration said it plans to recover only $25.04 million of those uncollected fees over the next five years. Southwest Airlines, BWI's dominant carrier, has agreed to pay $12.2 million of that sum - in exchange for reduced rents and landing fees in the future, company spokeswoman Whitney Eichinger said.

Before reaching that agreement, Southwest had said last month that BWI could become too expensive an airport for the low-cost carrier.

"We negotiated a settlement, and we'll pay it out over five years, in exchange for significant cost reductions at the airport," Eichinger said.

One major reason for the shortfall is that BWI officials overstated the square footage of the terminal they built for Southwest, which meant it charged the airline less rent per square foot than it had intended after the terminal opened in May 2005.

The $12.2 million Southwest has agreed to now repay the airport is in addition to the $32 million in rent and fees it paid BWI for operations in fiscal year 2007, BWI spokesman Jonathan Dean said.

Under a five-year agreement BWI signed with the airlines in 2003, terminal rents and landing fees could be increased as airport operating and maintenance costs rose. But BWI officials miscalculated operating expenses, particularly security and utility costs, Dean said. Also, capital projects and related interest payments were overlooked in calculating the fees each airline owed, according to the MAA. The $57.3 million in undercharges covers fiscal years 2004 through 2008.

MAA officials refused yesterday to discuss how such errors were made, or how the state would make up for the money it won't collect. They are to appear before the Board of Public Works May 21 to discuss the revenue shortfall.

"The airport acknowledges the significance of these charges, which is why the MAA is working so hard to mitigate them," Dean said. "The MAA will also increase monitoring of these contracts to ensure appropriate collection of rates and charges."

State officials also have been probing the airport's oversight of its contract with BAA Maryland Inc., the management company hired in 2004 to overhaul retail and food concessions at BWI, particularly in its policies toward minority-owned businesses as the concessionaire moved to create a large shopping mall.

Dean said the aviation administration has recently hired new commercial management employees to promote better oversight of the airport's contracts.

"The MAA has new senior staff members with extensive knowledge and experience," Dean said.

BWI is currently working to reduce its operating expenses to lower future costs for the airlines, Dean said.

"The MAA has pledged to the airlines to reduce rate-based items to help moderate current and future charges," he said.


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