Airline Fees, Debt Decrease at Cleveland Hopkins as Airport Prepares for Possible New Terminal
CLEVELAND, Ohio — The fees that airlines pay to operate at Cleveland Hopkins International Airport have come down dramatically in recent years, a result of increased revenue from parking and other sources.
The airport’s debt also is decreasing, down 27% in five years.
The improving financial picture is a necessary precursor to what’s to come: The possible construction of a new terminal in several years, the cost of which will be shouldered in large part by the airlines.
Airport Director Robert Kennedy said he’s working hard to improve the financial health of Cleveland Hopkins, which for years has collected some of the highest fees in the industry from airlines who operate there. “The less reliance we have on the airlines for revenue, the better position the city is in,” he said.
Hopkins’ fees are still high, at least on average, but they’re trending down, decreasing 38% in five years. Passengers don’t see these fees listed separately in the ticket price, but rest assured, airlines pass these expenses on to travelers.
In 2018, for the first time in many years, the revenue collected from passenger airlines was less than revenue collected from other sources, including cargo fees and non-air sources like parking and restaurants.
Airport officials believe that by charging airlines less to fly here, carriers will be more likely to expand in Cleveland, and there’s already some evidence that is happening.
In the U.S., airports generally are self-supporting, with operating revenue coming not from tax dollars but fees and rents paid by airlines, restaurants and other sources. And while airline fees may not be the primary consideration for carriers when deciding where to fly, they are one factor.
Said one airline spokesman, Southwest’s Dan Landson: “Southwest Airlines strives to keep costs as low as possible, including airport rates and charges, as those costs are passed along to the customer within the ticket.”
One way to compare fees across airports is a figure known as cost per enplanement (CPE) — that’s the grand total of fees and rents paid by a carrier, divided by the number of passengers boarding at that airport.
In 2019, Cleveland Hopkins’ cost per enplanement was $13.26, down from a high of $21.25 in 2014, the year that United Airlines pulled its hub from Cleveland.
Cleveland’s cost per enplanement is still high compared to many other airports. According to FAA data for 2018, the most recent year available, Cleveland’s CPE was higher than Pittsburgh, Columbus, Indianapolis, Akron-Canton and Cincinnati. Only eight airports had a higher cost per enplanement in 2018: Newark, New York JFK, San Francisco, New York LaGuardia, Miami, Chicago O’Hare, Los Angeles and Washington Dulles.
Kennedy said Cleveland’s cost per enplanement should continue to decrease, down to between $12 and $13 in 2020. “Before I go fishing in Puerto Rico, I would like to see us below $10,” said Kennedy, referring to retirement plans at some future unspecified time.
Kennedy also pointed out that Cleveland’s average cost per enplanement is somewhat deceiving — different airlines pay vastly different rates, he said, depending on their footprint in the airport. United Airlines, for example, pays much more than other carriers, because it is still paying off $75 million in debt used to construct Concourse D, which closed in 2014.
One airline official at Hopkins, who requested that his name not be used, said decreasing airport fees, combined with other factors, has lowered his carrier’s cost per enplanement by 40% in recent years, and that his airline is adding flights as a result.
So if the airlines are paying less to the airport, from where is the additional revenue coming?
Parking and ground transportation is one significant area of revenue growth, according to both the airport and figures filed with the FAA.
Parking and ground transportation revenue in 2018 was $38.1 million, up 71% from $22.3 million in 2013, according to FAA figures.
The revenue has increased, in part, because parking rates have gone up, as have fees charged to limo drivers, Uber and Lyft drivers, and hotel and parking lot shuttles operating at the airport.
Revenue also has increased because Cleveland is no longer a hub airport, where many passengers are just passing through. The airport is now used almost exclusively by Northeast Ohio travelers, who drive (or get driven) to the airport. Airport parking lots are increasingly full during busy travel times.
The increase in local travelers also has put pressure on Cleveland’s aging airport infrastructure, including roadways, parking and terminal space.
Last fall, the city hired a Florida firm to update the airport’s master plan, which is an FAA-required blueprint for future infrastructure improvements. The firm, RS&H, is expected to outline perhaps a half-dozen suggestions for airport improvements as early as this spring, according to Kennedy. After a series of community events and conversations, the airport will select one “preferred” alternative.
Airport officials have said they expect a new or substantially renovated terminal to be among the recommendations. Cost estimates could exceed $1 billion.
Once a recommendation is agreed upon, the task turns to financing it.
In Cleveland, the likeliest scenario is that any major addition or renovation will be funded largely by bonds, paid off by airline fees and other sources (not including local tax dollars). Kennedy said the airlines have been involved in conversations about the master plan for months, and are generally supportive of the process.
Said Southwest’s Landson: “When building terminals, we look at every square foot of the project including areas like employee breakrooms, hold rooms, and baggage handling systems to restrooms and everything in between to ensure the project is being designed in the most economical fashion possible.”
The possibility of issuing as much as $1 billion in new debt in the coming years makes it important to bring down the airport’s current debt, said Kennedy.
The airport’s debt has decreased steadily during the past 20 years, from $986 million in 2003 to $816 million in 2013 to $595 million in 2019, according to FAA and airport data.
The airport has also improved its bond rating numerous times in recent years, which will make it less expensive to borrow money. The airport’s bond rating suffered after United pulled its hub in 2014, but has rebounded since.
If the master plan recommends reusing Concourse D, Kennedy said he is confident the city will be able to negotiate terms with United to reopen the space. Significant modifications of the concourse would likely be required, he said, because the facility was built to accommodate smaller, regional jets, and most airlines are reducing their reliance on these planes.
“You hate to see it just sitting there. But that doesn’t mean we’re going to make a bad deal for the airport,” Kennedy said. “I think that we’ll both be reasonable.”
In the meantime, airport officials are finalizing their 2020 budget, which will be presented to city council later this week.
Read more: Cleveland Hopkins airport passenger traffic hits 10 million in 2019, up 4%
Delta, Frontier airlines show biggest growth at Cleveland Hopkins airport in 2019
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