Airport debt hinders United expansion at Washington Dulles: Smisek

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The amount of debt allocated to Washington Dulles International airport hinders United Airlines’ ability to expand its hub at the airport, says chief executive Jeff Smisek.

“This hub also disproportionately bears a lot of debt service compared to other airports inside of MWAA [Metropolitan Washington Airports Authority], which is a terrible competitive burden and inappropriate burden on this hub,” he said at the opening of the Chicago-based carrier’s new widebody maintenance hangar at Dulles today. “We’re keenly interested over time in discussing that with MWAA.”

He explains that airlines pay the higher debt service at Dulles through leases and landing fees, which makes it “more difficult to do business here compared to other hubs”.

MWAA, which operates Dulles and Ronald Reagan Washington National airports, allocated $240.9 million in debt service to Dulles and $81.9 million to National out of a total debt service of $322.8 million in its 2013 budget.

Based on these numbers, Dulles carries about three-quarters of the authority’s airport related debt service and National about a quarter despite total passenger traffic being split about 53% to 47%, respectively, between the airports based on 2012 numbers.

Dulles handled 22.6 million passengers and National 19.7 million passengers in 2012, according to MWAA.

United is the largest carrier at Dulles, carrying more than 65% of passenger traffic during 2012, authority data shows.

MWAA was not immediately available for comment on the debt service.

“We have, in fact, enjoyed a tremendously wonderful partnership with United Airlines for many, many decades,” says Margaret McKeough, executive vice-president and chief operating officer of MWAA, at the event today. She adds that the new maintenance facility is a “statement” of the carrier’s commitment to Dulles and the Washington region.

United is interested in expanding its operations, as well as renewing its ageing passenger facilities, at the airport.

“We are keenly interested in improving, what I would call, the mature facilities that we operate out of here today,” says Smisek. “That said, we need to work with our good partners at MWAA to find a way that we can improve the facilities here at a cost that we can afford and a cost that will not destroy the profitability of the hub.”

The airline operates from concourses C and D, which opened as temporary structures in 1985. Some United Express flights operate from a separate regional aircraft facility that opened in 1999.

Various plans have been discussed to replace concourses C and D with a new permanent facility. However, the economic shocks from the 11 September 2001 terrorist attacks and 2008 credit crunch and recession have seen the plans postponed indefinitely.

Available seat kilometres (ASKs) on United were down 18.2% to 1.8 billion this November compared to November 2011, following its 2010 merger with Continental Airlines, Flightglobal/Innovata data shows. System ASKs were down only 6.8% during the period.