New airport terminal sets stage for future travel

When the Atlanta airport’s new international terminal was envisioned in the late 1990s, buoyant forecasts projected tremendous growth.

Airport planners emphasized the need for expansion, saying 121 million passengers would be flooding Hartsfield-Jackson International by 2015, up from about 68 million at the time. They floated initial cost estimates of a few hundred million dollars and eventually laid out a plan to open the complex in 2006.

Fast forward to today and the Maynard H. Jackson Jr. International Terminal’s actual price tag: Nearly $1.5 billion. The facility, named for the city’s first black mayor, is set to open May 16, six years later than planned.

It will add 12 international gates — to be known as Concourse F — and create a new entry-exit point for travelers on the opposite end of the airport from the main terminal. That will eliminate the current cumbersome baggage claim setup for Atlanta-bound international travelers, who must recheck their baggage for the train ride to the distant main terminal after clearing customs.

The airport’s passenger volume last year was 92.4 million and is now forecast to be about 101 million in 2015, according to Federal Aviation Administration figures.

The vastly different landscape demonstrates the tenuous nature of forecasts of passenger traffic — a key driver for airport development. It highlights the challenges airport managers face when determining the right time to build, the right facility to design and the right size to plan.

“You can’t build something today that meets your needs for today,” said airport general manager Louis Miller, who inherited the project when he arrived in 2010. “We’re building for the future.”

Just a few years after plans for the terminal first took shape, air travel took a huge hit from the 2001 terrorist attacks on America. Almost every major carrier has gone through wrenching bankruptcies and cutbacks, including Atlanta-based Delta Air Lines, Hartsfield-Jackson’s biggest tenant and a key player in the terminal project.

Airline mergers, including Delta’s with Northwest and Southwest’s with AirTran, have shrunk the industry. The economy has suffered from a severe global recession that continues to dampen consumer and business spending on travel.

Airport officials say that while the terminal may not be immediately necessary to handle current passenger volume, it was always envisioned as a facility to grow into.

Miller said the additional gates will not only provide more capacity for international flights but also open space for domestic flights. That’s because domestic gates on other concourses are sometimes used for international departures.

“At peak hours, we have a need for additional facilities,” Miller said. “But we’re really looking toward the future.”

Miller expects airlines will want to shift a number of their international flights to the new concourse F since it’s more convenient to the new terminal for entry and exit.

Delta said it expects the new concourse to operate near capacity several times a day. Spokesman Trebor Banstetter said operating flights out of the new concourse will give its top customers access to the “world-class facility” and its new Sky Club lounge.

“We want our best customers to be in this facility,” Banstetter said.

The international terminal is indirectly paid for by travelers — most of whom live outside Atlanta and merely connect at Hartsfield-Jackson — mainly through passenger facility charges on airline tickets, through fares paid to airlines that then pay lease and landing fees to the airport and through payments for concessions and parking.

Those revenue streams are used to back airport bonds that financed construction.

Airlines’ cost of using Hartsfield-Jackson will climb from about $4.50 per boarded passenger last year to $6 next year, based on lease payments, landing fees and other airport costs divided by passengers. That calculation is why airlines often closely watch construction costs, an issue that came up during contentious Delta lease negotiations in 2009. On the other hand, those costs can be offset by more efficient airport operations and expanded business, which is why airlines often support new facilities or additional runways.

In any case, Hartsfield-Jackson officials no longer cite total passenger forecasts as the motivation for the terminal, though they say the terminal will be needed to accommodate an expected 13 million international passengers in 2015.

International air travel is still slowed by a wobbly world economy and high fuel costs that have discouraged fare discounting to gin up traffic.

Delta is cutting international flights this year in Atlanta and across its system, discontinuing its routes from Atlanta to Shanghai; Athens, Greece; Copenhagen, Denmark; Moscow; Prague; and Tel Aviv, Israel.

In the first two months of the year, the number of international travelers at Hartsfield-Jackson fell 1.5 percent from a year earlier, including a 5.7 percent drop in international passengers carried by Delta. Delta plans to operate about 85 international departures a day from Atlanta this summer, down from about 90 last summer.

To be sure, Hartsfield-Jackson remains the world’s busiest airport and has recovered after a decline in 2009 to post last year’s record volume. And building new facilities despite slowdowns in growth is not without precedent. Work on Hartsfield-Jackson’s Concourse E, for instance, began when an entire domestic concourse was empty because of Eastern Airlines’ 1991 collapse.

Holden Shannon, Delta’s senior vice president of corporate strategy and real estate, called the new international terminal “a 30- to 40-year asset.”

“This is the right investment,” Shannon said. “It’s very important that we continue to invest properly in the future.”

Miller acknowledged that by this time, “We’d have thought we’d be recovered.” He said any long-term major facility project involves risk.

“There’s no guarantees out there,” he said.

Colorado-based aviation consultant Mike Boyd said it’s not unusual for airline passenger forecasts to change significantly over time.

“The reality is, if we don’t build these things, you’re going to find yourself way behind the curve,” Boyd said. Atlanta is “still going to grow ... Delta is going to turn Atlanta into what we call a global portal, where there will be enormous amounts of traffic flows going all over Latin America and all over Asia.”

Boyd added: “I will bet you this: Five years, we’re going to look back, and say, ‘How come you didn’t build more?’”

New York-based airline consultant Bill Fife said that with airline shifts, changes in market forces and fuel price volatility, forecasts have many ups and downs.

“You know that you’re going to need facilities for 115 or 120 million [passengers] at some point in time, but it’s now become very difficult to say that year is going to be 2017 or 2012,” he said.