People flying out of Lehigh Valley International Airport can expect higher airfares next year because the airport’s new budget forces airlines to pay 10 percent more to land and rent space there.
Adopted Tuesday, the $20.5 million 2014 budget is balanced largely with the help of an additional $1.4 million from the four major airlines that fly from the airport in Hanover Township, Lehigh County.
One piece of good news in the budget — it does not repeat the layoffs and deep service cuts that accompanied the Lehigh-Northampton Airport Authority’s 2013 spending plan.
While it’s unclear how much airlines might increase fares for travelers, there’s no denying that increases in airline landing fees and terminal rents usually get passed on to passengers.
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“Unfortunately, that’s how it generally works,” said Charles Everett Jr., the authority’s executive director. “No one likes increasing rates and charges, but given the costs of doing business, it’s unavoidable.”
The budget is projected to reverse more than $1 million in deficits in the past two years’ budgets without laying off workers or cutting services. Last year’s budget plan for 2013 eliminated 10 percent of the airport’s more than 100-member staff, while cutting services such as economy parking and the airport shuttle.
“Like everyone else, we’re sharpening our pencils wherever we can,” authority Chairman Tony Iannelli said. “But the days of sending people home without jobs appear to be over, at least for the near term.”
In fact, the budget calls for adding eight part-time workers to the staff to cover security exit stations now manned by federal Transportation Security Administration officers. The TSA is pulling out of the duty but requiring airports across the nation to take over the task and the costs. For LVIA, that amounts to more than $100,000.
The airport’s financial woes are the result of pressure from two sides. From one, its budget is weighed down by a court order to pay the remaining $14 million of a $26 million court judgment against it for seizing a developer’s land in the mid-1990s. The debt must be paid off by 2015, and authority members are trying to sell surplus assets. The airport’s next payment of $3 million is due Sunday, followed by payments of $5 million in 2014 and $6 million in 2015.
On the other side, passenger travel through LVIA was down 18 percent last year, and is projected to be down 20 percent this year, dropping the passenger count to under 600,000 for the first time since the mid-1980s.
To help fill the fiscal holes left by those realities, the airport authority is raising an extra $450,000 by increasing landing fees to airlines roughly 11 percent. It also expects to raise an additional $920,000 by increasing terminal rental fees 9 percent for its major carriers Allegiant, Delta, United and U.S. Airways.
After having as many as eight air carriers flying from LVIA in the past, the facility has four because of airline mergers, declining passenger counts and increased airport fees. Everett said he’s confident the upcoming rate increases, due to take effect Jan. 1, will not prompt any more defections.
“We’ve discussed the new rates with all of [the carriers], and we’ve seen no indication that any of them are considering pulling out,” Everett said. “Rate increases sometimes happen. They’re necessary.”
How that will affect ticket rates out of LVIA remains a question. Airport officials often worry that nearly 80 percent of all Lehigh Valley fliers use airports in Philadelphia, Newark, N.J., and New York because rates for direct-flight fares are lower. This move would figure to add to that worry.
“By and large, costs become fares,” said Robert Mann, an airline industry analyst and consultant out of Port Washington, N.Y. “Whether it’s for jet fuel or landing fees, the passengers end up paying for increases.”
The most recent report by the Bureau of Transportation Statistics shows that the average LVIA round-trip airfare of $407 is about $30 higher than the national average, though Mann said those statistics can be deceiving because they lump the routes of all airports together, whether long expensive routes or short less expensive ones.
The $20.5 million budget is about $900,000 more than this year’s budget, largely due to increases in personnel costs for salaries, health care and workers’ compensation.
Among the biggest savings in the budget is the reduction of roughly $338,000 the airport paid in each of the past two years to have AvPorts management run airport operations. The authority decided against renewing the AvPorts contract and instead hired its manager, Everett, as airport executive director.