Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 6, 1994 TAG: 9403040256
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: BY MARK B. SOLOMON JOURNAL OF COMMERCE
DATELINE: LENGTH: Long
When the city turns on the lights at DIA, last week postponed again until May, it will open the first new U.S. airport since Dallas/Fort Worth International Airport in 1974.
The big question, and one that won't be answered with the arrival of the first plane, is whether DIA will be a boon to the nation's aviation network or an overbuilt boondoggle that will bleed the airlines and eventually strap the city.
Critics have labeled the $3.2 billion project "Feddy's Folly," a reference to Transportation Secretary Federico Pena, whose principal achievement as mayor of Denver was to shepherd the project to completion.
Airport critics believe DIA is unlikely to generate the traffic and cash flows needed to meet the $180 million in annual interest on the airport's debt obligations.
They also wonder whether a new airport is needed, claiming that city officials, eager to create construction-related jobs, overplayed the congestion problems at nearby Stapleton International Airport, which will close the day the new airport opens.
"I think if the city fathers could get all their money back, reopen Stapleton and operate there for the next 25 years, they'd jump at the chance," said Brian M. Campbell, a principal in an Alexandria, Va., consulting firm that has worked on several airport projects.
The project has been plagued with delays and construction problems. A projected March opening date was scrubbed when airlines serving Denver said they would refuse to operate until the airport fixed a complex baggage handling system.
And with Continental Airlines, one of the airport's hub carriers, slashing its Denver flights by 25 percent next month and the city confronting a dearth of intercontinental air service, the trends are so unfavorable that DIA will eventually require a public subsidy to continue operating, Campbell said.
Its backers say that a new airport is needed to accommodate traffic growth, that DIA's modern, efficient facilities will attract a growing number of airlines (eight passenger and cargo carriers have signed leases for five years or more) and that the airport helped jump-start a region down on its luck following the oil bust in the mid-1980s.
"The construction industry in Denver had died," Mayor Wellington E. Webb said in a recent interview. "For years, we hadn't seen a single crane in the area."
Webb said Denver will spend less on its airport than other cities will spend on enlarging their existing facilities.
"Chicago will wish they had done it," he said. "Any city that wanted an airport will have wished they had done something the way we did.
"History is going to judge us that we were at the crossroads and that we made the right decision."
Adam J. Whiteman, an analyst for Moody's Investors Service, the bond rating agency, is also optimistic about DIA's prospects. He believes the overall growth of passenger traffic, projected at 4 percent a year, and a decision by United Airlines, which has a 30-year lease at Denver and will operate about 40 percent of all daily departures, to beef up its service will offset Continental's cutbacks. United, which operates 254 daily flights at Stapleton, will increase the frequency to 265 when DIA opens, said Joe Hopkins, an airline spokesman.
Whiteman maintains an investment-grade rating on the airport's bonds, whose value has risen 20 percent since they were issued in 1989.
Jim DeLong, the city's aviation director, said Denver's traffic flows are split 50-50 between passengers using the city as a connecting point and those whose flights begin or end there. He said DIA can generate enough short-haul, point-to-point traffic to neutralize any reduction in connecting flights.
"The number of airlines is academic," he said. "Demand is the key. As long as the passengers come, we'll be all right."
DeLong takes issue with those who say DIA is unnecessary, noting that Stapleton, which has five runways, cannot expand beyond that because it is hemmed in on all sides by residential, commercial and military developments. As a result, it is ill-equipped to absorb passenger growth without the specter of nightmarish flight delays, he said.
"The runway system is an absolute disaster," he said.
Critics said the projections for growth at DIA came from the early 1980s, when the airline industry was relatively healthy. At the time, the city envisioned United, Continental and Frontier Airlines as hub carriers. Since then, the industry has lost billions of dollars, Continental filed for bankruptcy protection and Frontier collapsed. In addition, the once-vibrant economy of California, long a destination for connecting flights at Denver, has hit the skids.
"It's pretty obvious that a structural decline is taking place that will hurt DIA's ability to service its debt," said David Hoppin, a principal in MergeGlobal Inc., an aviation consultant in Arlington, Va.
Campbell said DIA's prospects are further clouded by a lack of international flights. Continental's four weekly flights to London are the only intercontinental services at Denver. Campbell said city officials should "camp out at United's headquarters and not leave" until they've received a commitment from the carrier to add international flights.
"It will be hard for Denver to attract the mega-corporations of the 21st century if they don't have a modicum of long-haul, international service," he said.
by CNB