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Pact cuts costs for airlines at Indianapolis International

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A new financial agreement with airlines using Indianapolis International Airport was approved Friday morning, settling what had been a fractious battle with airlines that had complained about having to foot part of the bill for FedEx Corp.’s local expansion.

Total costs in rents, landing fees and other charges for airlines are set to decrease over the five-year term of the agreement, according to the Indianapolis Airport Authority. Cost per enplaned passenger will gradually fall to $8.86 in 2015 from $10.50 this year.

The cost-per-enplanement had been estimated at $13, previously.

The airport said it will reduce its capital improvement program by $150 million over the term of the agreement as part of a cost-containment strategy.

“”We believe this agreement demonstrates our door is wide open for continued dialogue with airline executives about new and expanded air service in Indianapolis, especially to key West Coast markets,” Marsha Stone, chief financial officer of the Indianapolis Airport Authority, said in a statement.

According to the agreement, a landing fee of $1.95 per 1,000 pounds is forecast to drop to $1.80 by 2015 instead a previously projected $2.15.

 The new fee structure “helps ensure the continued success of FedEx,” the authority said.

FedEx’s Indianapolis cargo hub was at the center of what could have been disasterous outcome for the airport.

As IBJ previously reported, Northwest Airlines, Delta Air Lines, AirTran Airways, Continental Airlines and Southwest Airlines filed a complaint against the airport authority with the Federal Aviation Administration in 2007.

They alleged the FedEx expansion at Indianapolis could cost them an additional $23 million in landing fees through 2028.

That’s because the authority promised to reduce landing fees for FedEx at the same time it committed to spending $49 million for a new aircraft parking apron at the company’s hub.

The FAA dismissed the airlines' complaint in August 2008, but did so in part because it said the issue wasn’t yet ripe for FAA review. It noted the authority had yet to impose on airlines the costs related to the FedEx expansion.

Among other nods to airlines in the new airline agreement is cutting the term in half, to five years. Terminal rent remains constant at $95 per square foot. The airport authority also pledges to shave its operating and maintenance costs by $65 million.

 

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  • Curious too
    Is this why airline service here is so wretched?
  • $215 Million Question
    Interesting that the FedEx cargo-hub expansion cost was $214 million.

  • Question
    How is the airport going to shave $215 million in maintenance/operating/CAPEX expenses? What is being eliminated?

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