Home News Officials From Cleveland Hopkins Start Negotiations With Airlines to Fund a New $2 Billion Airport Renovation

Officials From Cleveland Hopkins Start Negotiations With Airlines to Fund a New $2 Billion Airport Renovation

Officials From Cleveland Hopkins Start Negotiations With Airlines to Fund a New $2 Billion Airport Renovation

While major construction is still years away, officials at Cleveland Hopkins International Airport are working behind the scenes to prepare the facility for a major rebuild. Talks began in September with the airport’s carriers, who are being asked to shoulder most of the cost of the project.

In addition, airport officials have been working on some early-stage infrastructure projects that will prepare the facility for what’s to come.

Dennis Kramer, acting director for Cleveland Hopkins, said he’s pleased with the progress and optimistic about what’s to come.

“If all goes well, we put a shovel in the ground in 2025,” said Kramer.

But much needs to happen before then.

The biggest hurdle is financing.

The total cost of the terminal rebuild is an estimated $2 billion, although it won’t be needed all at once.

The first phase of the project – which includes new concourses, centralized security checkpoints, a new ticketing area, a better-organized customs facility and more – has an estimated price tag of about $800 million.

The project is the result of a years-long study of the airport grounds, which concluded that the airport is old, cramped and poorly organized, and called for a series of upgrades based on increasing passenger levels.

The study was commissioned in 2019, five years after United Airlines closed its hub in Cleveland, which transformed the airport into a facility serving primarily local travelers, who require more parking, more drop-off space, more security screening and other services.

The plan for a new terminal was announced in early 2021 when air travel was still severely depressed due to the coronavirus pandemic.

Since then, however, air traffic has largely rebounded at Cleveland Hopkins and other airports across the United States.

By year’s end, Cleveland Hopkins is likely to have welcomed between 8.7 million to 9 million travelers in 2022, down about 10% from 2019. (John Hogan, the airport’s deputy director for marketing and air service development, noted that the number would have been higher if airlines hadn’t cut seat capacity during the busy summer months due to staff shortages.)

Those same carriers that are filling planes at Hopkins are being asked to back the debt that will be used to finance the terminal reconstruction. Airport officials recently began discussions with the carriers on a new “master lease,” which will govern what the airlines pay to operate in Cleveland. The lease covers the cost of doing business in Cleveland, from the fee for landing an airplane to rental rates for ticket counters.

The previous master lease expired last year but contained two two-year renewal options. Kramer said he expects the negotiations to extend through next year, which will be the end of the first two-year extension.

The ultimate goal, he said, is to convince the airlines to agree to a new set of fees that will help finance the terminal project.

He said it’s not predetermined that fees and rental rates will increase. “Obviously, the airlines don’t want the rates and charges to increase,” said Kramer, who was appointed acting director after the retirement last summer of Robert Kennedy. “We don’t know yet if the rates will increase.

A spokesman for United Airlines, the largest carrier at the airport, declined to comment on the master-lease negotiations, deferring to the airport. A spokesman for Southwest offered this observation: “We’re looking forward to continuing the conversation with the airport on a new lease agreement which keeps costs low and maintains a great experience for our customers and employees.”

Getting airline buy-in is the most common way to pay for major capital improvements at airports across the U.S. Ongoing modernization projects at airports in Pittsburgh, Kansas City, Chicago and elsewhere all are using revenue generated from the carriers to pay for construction.

Kramer noted that the costs to operate at Cleveland Hopkins have been decreasing in recent years (with an exception of 2020, when the COVID pandemic caused certain fees to spike to make up for the lack of revenue from parking and other sources).

Cleveland’s landing fee, which is assessed per 1,000 pounds of landed weight, is $1.25 in 2022, down significantly from $6.05 in 2019, due in part to sound financial management, according to Kramer, but also because of federal COVID dollars and a one-time reimbursement from a pension fund that had overcharged the airport.

In addition, the airport continues to boost revenue from non-aviation sources – by increasing fees on services like parking and renting out airport land, including the news last month that Sherwin-Williams would build a hangar on airport property.

Kramer also said the airport is actively seeking other funding sources for the terminal rebuild, including federal dollars from the Bipartisan Infrastructure Law.

Finally, Kramer said the airport continues to pay down existing debt, in anticipation of having to add substantially to its debt load in the years ahead to fund the new terminal. The airport’s total debt in 2021 was $560 million, down from $782 million five years earlier.

Getting ready for construction

While the financing is being figured out, the airport is working on several of what Kramer calls enabling projects, which should make things easier when major construction gets underway.

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