Washington Dulles operator approves lower debt service for 2014

Washington DC
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The Metropolitan Washington Airports Authority (MWAA) has approved a 1.4% debt service reduction in the 2014 budget for Washington Dulles International airport, reducing the per passenger costs to airlines slightly.

Debt service at the airport is $237.6 million, or a little more than 75% of the authority’s entire aviation debt service of $313.5 million, for the year, according to the new budget, which was approved unanimously by MWAA’s board today.

“It will help keep our airports competitive,” says Jack Potter, chief executive of MWAA, on the reduction in debt service. The authority can reduce the cost per enplanement to airlines as a result, he adds.

Airlines will pay $26.24 per passenger boarded at Dulles in 2014, which is down 3.9% from this year.

It remains to be seen whether this is enough to incentivise United Airlines, which operates a large hub at Dulles, to grow its operations at the airport. Jeff Smisek, chairman, president and chief executive of the Chicago-based carrier told Flightglobal in November that the high debt service levels made it difficult for the airline to expand at the airport.

“This hub also disproportionately bears a lot of debt service compared to other airports inside of MWAA, which is a terrible competitive burden and inappropriate burden on this hub,” he said.

United’s seat capacity at Dulles is scheduled down by more than 7% in 2013 compared to a year earlier, Flightglobal/Capstats data shows. This follows a nearly 6% decline in 2012.

Mark Treadaway, vice-president of air service development and planning at MWAA, says that securing additional domestic service at Dulles is the primary focus of the operator in 2014. Increased international flights at the airport are also a priority, he adds.

New domestic flights on low-cost carriers (LCC) from National, which MWAA says negatively impacted domestic traffic growth at Dulles in 2013, are likely to continue to impact Dulles in 2014.

American Airlines and US Airways must divest 52 slot pairs at National to LCCs as part of a settlement with the US Department of Justice (DOJ) in exchange for approval of their merger that was announced in November.

MWAA expects JetBlue Airways to buy eight pairs from American that it already leases, while the remaining 44 pairs will be auctioned to LCCs in bundles, says Treadaway.

JetBlue and Southwest are expected to vigorously compete for the bundles but Alaska Airlines, Frontier Airlines, Spirit Airlines and Virgin America are also expected to bid, he adds.

Potter says that the authority will continue to monitor the American-US Airways merger and divestments closely.

National’s convenient location about 4km from central Washington DC makes it attractive to the region’s business travellers, while significantly lower enplanement costs compared to Dulles are an attractive plus to airlines.

Under the 2014 MWAA budget, carriers will pay $11.32 per passenger boarded at National, which is down nearly a quarter from 2013. This is also less than half the cost per passenger at Dulles.

MWAA was not immediately available to comment on how they expect LCC growth at National to impact domestic service to Dulles in 2014.

National airport is restricted by a 2,012km (1,250 mile) perimeter rule except for 20 slot pairs where airlines are allowed to service destinations beyond the perimeter. American and US Airways are not divesting any of their six beyond perimeter slot pairs.