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"Northwest would be very careful about cutting back on international travel, where it makes the bulk of its money," said Terry Trippler, airline analyst for CheapSeats.com.Metro: North Terminal will be built
But airport may raise landing fees, cut services.
Julie Sweet of Holt waits for her son at the L.C. Smith Terminal, which has received minimal repairs in recent years.
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ROMULUS -- Detroit Metropolitan Airport officials don't expect short-term changes in operations following Wednesday's bankruptcy filing by its largest carrier, Northwest Airlines Corp., but the carrier's reorganization could impact long-term bond obligations for the planned $418 million North Terminal project.
Earlier this year, the Wayne County Airport Authority, which operates Detroit Metro, sold $373 million in bonds to build the North Terminal for carriers that compete with Northwest Airlines. The authority doesn't start paying the bonds back until 2008, when the North Terminal is scheduled to open.
Northwest is by far Detroit Metro's largest carrier, handling about 65 percent of its 35,187,000 passengers last year.
The figure is closer to 78 percent when including Northwest's commuter partners, Mesaba Airlines and Pinnacle Airlines.
"Our revenue sources are fairly consistent as it concerns concessions, parking fees and rental car leases," said Mike Conway, authority spokesman. "The one variable is landing fees. If Northwest cuts back on its flights, we could boost landing fees (for all airlines at Detroit Metro) or look to reduce other services to keep from increasing those landing fees."
Even though Northwest plans to trim flights, airport officials believe competing carriers will pick up the slack to help cover future bond payments, Conway said.
Detroit Metro could adopt a so-called business interruption plan, which would allow it to shut down certain services to reduce costs. The airport last used the plan to close a runway during a 17-day strike by pilots in 1998, Conway said. "It would be very rare for us to adopt a business interruption plan," he said.
Airport analysts said Northwest may be able to reduce its landing fee obligations if approved by a bankruptcy court. Currently, all airlines at Detroit Metro pay $3.16 for every 1,000 pounds of landing weight. Landing fees have been reduced six times in the last three years, but Conway said the fees may go up next year due to rising costs.
"Northwest would be very careful about cutting back on international travel, where it makes the bulk of its money," said Terry Trippler, airline analyst for CheapSeats.com in Minneapolis. "But they could cut back on domestic flights. I know United Airlines has been in bankruptcy for three years, and competitors are complaining that they've been able to reduce their landing fees."
In recent years, Detroit Metro has added several carriers, including Royal Jordanian Airlines, Lufthansa, Frontier, Independence Air, Air France and USA 3000. Passenger traffic is rebounding. Last year, Detroit Metro recorded its second-best year on record -- handling nearly 35.2 million passengers. Its best year was in 2000, when 35.5 million passengers came through the airport.
Through the first half of 2005, the airport handled more than 18.2 million passengers and is on pace to set new passenger records this year.
"We are working on building the North Terminal, and we have several options in place to pay those bonds back," Conway said. "We don't foresee Northwest Airlines allowing competing carriers to occupy its terminal. The bankruptcy filing will allow Northwest Airlines to reorganize and better compete."
In 2002, Northwest Airlines opened the $1.2 billion, 97-gate Midfield Terminal in part by using landing fees and passenger facility charges, or PFCs, currently $4.50 per passenger.
The Midfield Terminal is occupied by Northwest and its affiliates, including Continental, KLM and others.
PFCs can be used for federally approved airport capital improvement projects "that enhance safety, security or capacity; reduce noise; or increase air carrier competition," according to the Air Transport Association.
"I would expect the North Terminal project to proceed because Northwest would be obligated to pay for expenses going forward," said Barbara Rom, a bankruptcy attorney with Pepper Hamilton in Detroit. "But Northwest, like any company in bankruptcy, will make full use of any advantage available to them."
Doug Maibach, vice president of corporate affairs for Barton Malow Co. in Southfield, which partnered with Walbridge Aldinger Co. in Detroit to build the North Terminal, said construction plans are on track.
"We are moving full speed ahead and making plans to reroute roads and utilities to make way for the North Terminal," Maibach said. "While the (bankruptcy) impact on Northwest is unknown, the airline industry is enjoying excellent demand."
The North Terminal would replace the L.C. Smith Terminal, which opened in 1957 and serves such carriers as United, Spirit and American Airlines. The Smith Terminal has received minimal repairs in recent years in anticipation of a replacement facility.
Problems include torn seats, missing tiles and worn carpeting.
The two-level North Terminal will provide at least 26 gates, a glass facade and 50,000 square feet of space for stores and restaurants. It would be built at the site of the former James M. Davey Terminal, which opened in 1975 and was used by Northwest Airlines prior to its move to the Midfield Terminal.
You can reach R.J. King at (313) 222-2504 or rjking@detnews.com.
The planned $418 million North Terminal project would replace the L.C. Smith Terminal, which opened in 1957. Carriers that compete against Northwest would fly out of the new terminal.
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