MAC might use $41 mllion of Federal Grant dollars for airline bailouts

On Tuesday afternoon, 8 September, the Metropolitan Airports Commission (MAC) Operations, Administration and Finance Committee passively listened to MAC's Finance Director, Atif Saeed, recap a Staff Memo to the Committee. In effect, it was a proposal to rebate or reduce rents and fees paid by airlines using the Minneapolis-St. Paul International Airport in 2020 by "up to $41 million!"

“A steep drop-off in air travel since the start of the pandemic ... prompted airlines to ... scale back. As of August (2020), passenger volumes remained [sic] about 70% below 2019 levels, an improvement from April, when they were down 95% year-over-year.” according to the MAC's Public Relations officer, Pat Hogan, as quoted last Friday in a Minneapolis-St. Paul Business Journal article by Dylan Thomas.  

https://www.bizjournals.com/twincities/news/2020/09/03/msp-airport-plans-financial-relief-for-airlines.html.

Staff presented formulae, discussed with other airports, they used to decide amounts per airline aided. The $41 billion is about 30% of the MAC's $125 million Federal CARES grant received in April. U.S. airlines were already given $25 billion for passenger air carriers, and $4 billion for air cargo carriers. The stimulus monies were to allow airports and airlines to continue payroll and provide essential services during the pandemic. 

Delta Airlines dominants flight operations at MSP: in 2019, Delta operated 70-some percent of MSP flights (about 430,000 operations or 215,000 flights).  The size and weight of the aircraft also figures in the "rents and fees" and Delta paid more than 70% of the gate leases and landing fees last year. Want to guess where the rent and fee reduction idea started?

Our first reaction was "been there before."   MAC reduced in-financial-duress-airline's fees and rents in 2008; later, with NWA in bankruptcy, banks and other creditors were glad to get the money. We can't say that the deal benefited MAC or Minnesota though.

Our second thought was: a lot could be learned by funding health, safety and environmental impact studies. With 1% of the MAC's $125 million CARES Grant (stimulus), quantitative information about the real costs of MSP operations off-site could be produced --and thought about in the elections; maybe a really busy hub airport in the middle of a city isn't all that good a long-term plan.

SMAAC's goal is to get a discussion going that includes public health, the environment and whatever Pat might have meant by "being competitive."  During the long, teleconferenced FAO meeting, SMAAC and several Chambers of Commerce weighed in on changes at the airport because of COVID-19. Remarks by President Spensley will be reported separately.

 

Mr. Hogan was discussing a MAC Staff Memo to the Committee proposing, in effect, to rebate or reduce rents and fees paid by airlines using Minneapolis-St. Paul International Airport in 2020. 

The Memo recommends up to $41 million; Could MSP operations under stressful conditions and uncertain needs and costs this year spare that? There were several public comments on airport practices and costs on the Agenda, and a lot of discussion about lesser costs went on. Soon the Committee and the Commission will be taking up 2021 budgets, we are afraid without much new health risks information. 

Hogan also told Thomas that maintaining "partnerships" with the major airlines will "put the airport in the best position to recover after the pandemic. We want to stay ... competitive." The Commission needs to consider that every-other-passenger is a connecting traveler, on the way from their city through MSP to their destination. Do they contribute 50% of the airport’s revenue from operations? Not close. They airport revenue is based on the capital and operating costs, overhead and financing. And he airport is sized for about 8000 daily operations.  Less demand reduces fess and costs,  Less use of runways, taxiways, ramps, gates reduces income, but many costs remain constant on an annual basis.

We wish "review" meant "consider very carefully.” Many MSP costs are not funded, including health and safety risks, and overflight disturbances and emissions that add to air pollution and other harm to the environment and ecology, including climate change.

 


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  • Smaac Forum Panel
    commented 2020-09-11 11:11:40 -0500
    Define competitive. Hogan was not referring to offering competitive air service, but to daily airline operations and airport jobs and revenue. For Twin Cities airlines. an April federal grant through the federal CARES (Corona-virus Aid, Relief and Economic Security) Act. Since airlines produce about one-third of the MAC’s annual revenues, airport officials decided an amount equal to roughly one-third of the grant, or $41 million, was OK to help the incumbent airlines in proportion to each airline’s actual 2020 MSP oper@tions?