Airlines at Atlanta’s airport have agreed to make $30 million in extra rental payments to help the city get bond financing needed to keep the new international terminal project on track.
Atlanta Mayor Kasim Reed, flanked by the chief executives of Delta Air Lines and AirTran Airways, announced the deal Tuesday. The supplemental rent payments will occur over four years starting in fiscal 2013, and the city could refund at least some of the money later in the decade depending on financial conditions.
The move is designed to boost Hartsfield-Jackson International’s revenue stream, making bonds more attractive by assuring investors that it has adequate revenue and reserves to repay the debt, city officials said.
A successful bond sale this fall or winter, in turn, should assure the international terminal’s completion in the spring of 2012, officials said. The terminal will open an east entrance to the airport for travelers, add gates for more international flights -particularly by Delta -- and create space for new growth at the world’s busiest airport.
“It’s a lot more than just adding gates,” Delta CEO Richard Anderson said.
The airport expects the deal to generate monthly supplemental payments equivalent to $12 million in the first year, $8 million in the second year and $5 million in each of the last two years. Other airlines at Hartsfield-Jackson are included but Delta and AirTran are by far the biggest tenants and pay the bulk of rent.
Without the deal, “We would have had to slow down a bit and it would have affected the completion of the international terminal,” Reed said.
The airport later in the decade could refund up to the full $30 million to the airlines, depending on the strength of the economy, financial indicators and the airport’s debt-service coverage ratio.
The deal enables the airport to maintain adequate financial reserves until then, Reed said.
The city also is seeking to increase fees charged to other businesses at the airport, including shuttle operators and other ground transportation businesses, as well as off-airport parking lots. Those plans are still proceeding, though they may be delayed, said Hartsfield-Jackson spokesman John Kennedy.
The airport has also increased parking fees for travelers.
The supplemental agreement also comes after some criticized a 7-year Delta lease renewal last year as being too favorable toward the airline. City officials at the time estimated the lease would cost the airport $17 million a year in revenue. Airport revenue was virtually flat in 2009 amid a downturn in passenger volume.
But Reed said, “I don’t think this was about the city being shortchanged . . . This transaction really was about the future.”
Reed also announced Tuesday his signing of a new seven-year lease with Orlando-based AirTran, following city council’s approval in July. The deal gives AirTran an opportunity to expand its hub in Atlanta, AirTran chief executive Bob Fornaro said.
Airport officials have been seeking bond financing for nearly two years, and plan a three-part, $1.6 billion bond issue including more than $500 million for the international terminal. The rest would be for refinancing.
Anderson said Delta will “be side by side with the mayor” in the effort to sell the bonds.
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