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  Official magazine of ACI
Friday, 27 April 2012 15:30

High life

Written by  Carroll McCormick
Denver International Airport is focused on developing its key infrastructure and non-aviation facilities to widen its appeal, writes Carroll McCormick.
Shortly after updating its $500-million South Terminal Redevelopment Program, Denver International Airport (DIA) announced that it had enjoyed its busiest year ever, handling 52.8 million passengers in 2011.

The total ensures that the airport is currently the fifth busiest passenger gateway in the US and eleventh globally.

It also means that although the airport is only 17 years old, it is time to enhance its facilities, as during busy peak periods its passenger handling systems and 93 gates are operating at full capacity.

The good news is that thanks to the bold plan of the then Denver Mayor, Federico Peña, and Colorado governor, Roy Romer, to buy 53sqm of land and build a city-owned hub 23 miles from downtown Denver, there is room galore for continued growth and prosperity.

“We recently updated out master plan with the Federal Aviation Administration so we know what land to reserve to permit growth to 100 million passengers a year,” declares aviation manager, Kim Day. “We have 17,000 acres (6,880 hectares) left over, so space is not a problem.”

Day has been running DIA since 2008. Her 30-plus years in aviation include 20 years as an architect and planner specialising in airports and two years as the executive director of Los Angeles World Airports.

With this kind of real estate, getting clearance to lay down a seventh runway – a $300-million project the airport will begin within the next four years – involves none of the agony that land-poor airports suffer.

“Once completed, Runway 8R-26L will give us more capacity for east-west operations and more capacity for the early morning East Coast push,” notes Day.

The remaining land is a gold mine for activities such as developing new non-aeronautical sources of revenue, operating one of the largest solar power farms in the country and even pumping money from its own oil wells.

The airport benefits from a tremendous community pride, a great staff and a taste for controlling expenses, according to Day.

“We have a fabulous chief financial officer and a leadership team that understands that we need to strengthen the economics of the airport,” she enthuses.

 “One thing that is unique about us, because we are new, is that we have a lot of debt. It has probably influenced us to be more aggressive as we have a much stronger focus on fiscal stability than most airports have had in the past.

“A 10-year financial plan like ours is almost unheard of. We have done a lot of stress testing, such as 9/11 ‘version two’ or if an airline were to leave our hub.

“We have a lot of unrestricted cash in the bank, a good debt ratio and the cost per passenger enplanement is in a competitive place.

“We are prepared for almost any scenario. In the past, airports relied on raising costs to their airlines, but we have to maintain a competitive cost structure for airlines.”

She is also quick to point out that the airport has been careful to keep its expenses under control, keeping the number of full-time employees flat in the past few years.

“We have looked at parking, janitorial services and security individually to assess their costs and find the most efficient way to do them,” admits Day. “We have also looked at police and overtime. They have historically managed the drop-off curb, but we are switching to a contractor, so the police will go back downtown.”

The South Terminal Redevelopment Program is a big-ticket illustration of the airport’s mission to spend with some humility to keep its costs and ultimately carrier costs under control.

When unveiled in July 2010, the plan had a price tag of $650 million, although since then an airport design team has shaved $150 million off the sticker price while maintaining the critical design elements of the project.

Its key projects include a Regional Transportation District FasTracks commuter rail station, improvements to the concourse baggage handling system and additional train flexibility for the inter-concourse system that will boost passenger capacity by 20%.

The redevelopment programme will also add an open-air plaza and a 500-room Westin hotel and conference centre.

Clawing back $150 million from the project means that the train station has became a little smaller and the hotel dropped a floor, but very little else has changed from the original plans.

Gensler is the architect for the South Terminal Redevelopment Project, leading a design team of architects that includes Anderson Mason Dale, who are the architects of record for the Public Transit Center.

Others involved in the South Terminal Redevelopment Project design team include associate architects, Iron Horse Architects, and structural engineers, SA Miro.

Larger than a US football field, the open-air plaza will be used to host civic events and shows. Day has no qualms about admitting that it is modelled on the plaza at Munich Airport in Germany.

“We are trying to get people who are not flying to come out on the train from downtown, see a concert in our wonderful year-round climate, spend a little money and increase non-aeronautical revenue. A lot of people love this airport,” she says.

The South Terminal Redevelopment Program timeline includes completing the open-air plaza and hotel in 2015 and beginning commuter train service in early 2016.

The commuter train, which will run 22.8 miles from Denver Union Station to the South Terminal, will reduce car and bus traffic to and from the airport.

Success is straining the capacity of the airport’s four-lane entry road, and Day hopes that the commuter train will ease that burden so work to enlarge the road can be postponed.

Day’s business strategy is strongly focused on increasing non-aeronautical revenues and keeping cost pressure off its airlines.

“The traditional, residual model for running an airport, rolls all costs back to the airlines. We operate under the compensating model, where the airport takes on the risk of balancing revenue,” she explains.

“As we take on the risk of the costs, we are generating more money from independent sources.”

The concession programme is an important source of non-aeronautical revenue. It currently occupies 167,457sqft (15,557sqm) and over 140 concessions. In 2010 they rang up $243 million in gross sales, the airport’s share of which was worth over $43 million.

The figures sound impressive, but Day insists that there is room for improvement. “Almost all of our leases will expire in the next two to three years, which give us the opportunity to change things,” she says.

“We are trying to develop a concession programme that is more reflective of local brands and up-to-date passenger desires. We anticipate that our plan will increase revenue.”

Those fresh winds are already picking up: This January 11, the Denver City Council’s Business, Workforce and Sustainability Committee approved seven new concession contracts presented by the airport.

They include a sit-down restaurant and a wine bar, woman’s clothing, jewellery and accessories stores and a full service spa.

DIA also has other irons in the fire that are intended to strengthen its position, better serve its carriers and the community.

For example, the DIA Commercial Hub office, opened in 2011 is designed to help minority and local businesses pursue economic opportunities at the airport.

“We want them to succeed, but we really haven’t helped these small firms understand what the hurdles are,” comments Day. “The Hub works with new entrants to help them understand applications, match them with larger partners and make sure they succeed.”

In May, low-cost carrier Spirit Airlines will return to Denver and begin flying to four US airports, with connecting flights to 29 domestic and international destinations.

May will also mark the beginning of year-round service to 20 European destinations by Icelandair.

“Less than two million of our passengers are international. A focus of growth is increasing that,” comments Day.

This will bring Denver International closer to realising the goal of its founders, that of making the airport a global hub.


2_Southwest-Aerial

Denver's 'airport city' plans


Airports can be tremendous economic engines for the regions they serve. The figurative term 'airport city' is becoming popular as a label for the growing role airports can play in shaping economic development.

Pushing the concept further, some see a more profound integration, where an airport becomes an 'aerotropolis' WHERE `id` = a literal city in which transit, retail, residential and industrial activities occur.

Over 32,000 staff, including 1,000 City and County of Denver employees, work at Denver International Airport. The primary economic engine for the state, in 2008 the Colorado Department of Transportation valued its economic impact at $22.3 billion a year.

The airport only need reserve half of its 34,000 acres (13,759 hectares) to grow it to a 100 million passenger per year hub. The rest is a virtual tabula rasa for non-aeronautical development, that aviation manager, Kim Day, envisions as becoming an airport city.

"We are trying to attract businesses to our property and generate additional non-airline revenue to further lower costs to our carriers," she says.

The airport already has a Conoco Service Station and convenience store, a flight kitchen that sells to off-airport customers, and on-site oil and gas wells that generated more than $7 million in revenue for the airport in 2010.

The recent issuing of a request for proposal for a pet boarding facility at the airport, demonstrates that DIA is almost ruling nothing out in terms of its airport city development.

However, the South Terminal Redevelopment Program's Westin Hotel and public train station/transit centre mark the beginning of the real wave of non-aeronautical business opportunities.

Furthermore, it is easy to regard the programme's open-air plaza, intended for hosting civic events and shows, as the first step toward the airport becoming an aerotropolis.

The 10-mile long airport access road provides clean access to Interstates 25, 76 and 70. This 'beachfront property' WHERE `id` = as Day puts it, is ripe for development.

"We are currently finalising our Airport City concept and will unveil it to the world at the Global Airport Cities Conference in Denver on April 26.

"It will show many exciting opportunities, including ideally situated, transit-oriented development along our new train connection to downtown Denver," says Day.

Watch this space for further developments!

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