A researcher at the Allegheny Institute for Public Policy is questioning the Allegheny County Airport Authority\u2019s oft-repeated claim that the now up and running new $1.7 billion midfield terminal at Pittsburgh International Airport (PIT) will save the authority tens of millions of dollars a year.<\/p>\n
\u201c(T)he question arises about the impact of interest and debt-reduction expense in the years ahead as the borrowing for the costly new terminal is paid down,\u201d says Jake Haulk, president-\u00ademeritus.<\/p>\n
\u201cThe Airport Authority has reported potential annual cost savings of $23 million in the new terminal compared to the cost of operations at the old terminal,\u201d the Ph.D. economist reminds.<\/p>\n
That\u2019s due, Airport Authority officials say, to the decommissioning of the no longer needed underground train that transported passengers from the old landside terminal to the airside terminal and a more efficient, shorter, baggage-delivery system.<\/p>\n
\u201cHowever, there is the enormous amount of debt incurred in building the new terminal that must be serviced and paid off,\u201d Haulk reminds. The Airport Authority has incurred debt of $1.7 billion to build the new terminal, up from the $1.1 billion originally estimated.<\/p>\n
\u201cHow much will it cost per year to pay off the borrowing?\u201d he asks. \u201cIf we assume the borrowing has a 30-year payoff and the interest rate is a fairly low 5.1% per annum, the annual payment and monthly payment can be calculated.\u201d<\/p>\n
Haulk, using the standard amortization procedure for the $1.7 billion debt at a 5.1% interest rate over 30 years, says the annual payment calculation is $110 million. That jibes with the Airport Authority\u2019s Annual Comprehensive Financial Report estimate of annual payments of $109.9 million. <\/p>\n
\u201cIf only interest is paid and the debt remains at $1.7\u00a0billion after 30 years, the annual payment would be $87\u00a0million,\u201d he says.<\/p>\n
\u201cEither way PIT is looking at a massive annual payment that swamps the claim of a $23\u00a0million yearly savings from moving from the old terminal,\u201d he notes. \u201cUnless the airport can find a source to help fund the huge borrowing, the airport\u2019s non-operating costs are going to rise substantially.\u201d <\/p>\n
Haulk says the question facing PIT, which already has trouble growing its passenger count, is how it will raise the money to cover the massive debt service. <\/p>\n
\u201cBoosting per-passenger gate costs for airlines is likely to be counterproductive,\u201d he notes.<\/p>\n
And, as the Allegheny Institute has pointed out in recent years, the local economy and its lack of significant job or population growth does not bode well for substantial increased air travel. Occasionally, deep discounts by some carriers can temporarily boost traffic. <\/p>\n
\u201cBut that is often accompanied by airport subsidies. And typically, once the subsidy runs out, so does the airline,\u201d Haulk says, reiterating that long-term sustained gains in air travel depend on job, income and population increases.<\/p>\n
And, as noted in an earlier policy brief, \u201cand it is important to repeat,\u201d the Pittsburgh region\u2019s population and private-sector job gains have been weak for quite some time and have failed to recover to pre-covid levels, he stresses.<\/p>\n
Pittsburgh International \u201chas made its efforts to boost passenger growth even more difficult with the added cost structure it faces over the next 20 or 30 years,\u201d Haulk says.<\/p>\n
\u201cGate and other carrier costs imposed by the airport to cover the annual bond expense will cause fares to rise and passenger demand to fall or fail to grow,\u201d he predicts.<\/p>\n
\u201cSome low-margin airlines might be forced to leave the airport altogether. And the likelihood of a major hub airline locating at PIT seems very remote,\u201d Haulk concludes.<\/p>\n","protected":false},"excerpt":{"rendered":"A researcher at the Allegheny Institute for Public Policy is questioning the Allegheny County Airport Authority\u2019s oft-repeated claim…\n","protected":false},"author":2,"featured_media":261683,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[73,75,74],"class_list":["post-261682","post","type-post","status-publish","format-standard","has-post-thumbnail","category-pittsburgh","tag-pittsburgh","tag-pittsburgh-headlines","tag-pittsburgh-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/261682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/comments?post=261682"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/261682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media\/261683"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media?parent=261682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/categories?post=261682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/tags?post=261682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}