Airport revenues rise at fastest clip in four years

McCarran International Airport revenues rose at the strongest clip in four years, according to the latest annual report on airport finances, with the bulk of the gain coming from fees paid by airlines.

The audit for the fiscal year that ended June 30 showed operating revenues rose 8.3 percent to $392.6 million, marking a rebound after two years that were flat or declining. With expenses dropping for the third consecutive year, operating income jumped 100 fold to $39.1 million from just $388,000 in 2010.

Of the $30.1 million revenue gain last year, just more than three-fourths came from fees airlines pay to use runways, gates and ticket counters. The remainder came from concessions such as gift shops and rental car companies, and those revenues grew at much slower rates.

McCarran's cost per enplanement, the average fee that airlines pay for each passenger, has grown 83 percent since 2006. While an arcane statistic to much of the world, the fee plays a significant role in determining the profitability of flights and where airlines schedule their planes. With more than 40 percent of visitors arriving by air, plentiful plane seats are critical to the economic health of the Strip and nearby resorts.

"The cost to operate at a particular airport is always a key variable in the equation of where flights are scheduled," said Steve Lott, a spokesman for the trade group Airlines for America. "A lot of airports, when they make their pitches for more service, put up charts to show that they compare favorably with competing markets."

Clark County Aviation Director Randall Walker described the recent spike in cost per enplanement as something of an anomaly. Over the previous three years, the airport deferred the collection of $50.7 million in airline charges as a short-term financial aid during the recession. During the past year, he added, the airlines started making good on their IOUs, which should be paid off by the end of June.

Otherwise, he said, previous years would have been higher and last year lower.

Auditors also noted that a change in the billing formula raised costs, helping to push terminal rental rates from $79.33 per square foot to $116.67.

Paying for capital improvements also drove up costs, which will jump again when the $2.4 billion Terminal 3 comes on line at the end of June.

While highly mobile airlines have been known to shift flights to airports offering lower fees, Las Vegas's average of $8.46 per enplanement is still relatively cheap among large U.S. airports.

According to a survey by the managers at Dallas-Fort Worth International Airport, cost per enplanement in 2010 ranged from $3.77 in Atlanta to $24.62 in Newark, with 10 of the 14 busiest hub airports higher than $10.

However, Moody's Investors Service calculated the median for all airports at $7.04 in 2010 and 13 cents less at airports, such as McCarran, that are not airline hubs.

Walker said he often reminds airlines that McCarran's costs cover "a higher level of service than many other airports," in that it owns fixtures such as jetways, waiting-area chairs, desks, and kiosks were passengers print their boarding passes. The airport also provides cleaning services.

Several other airports, by contrast, make airlines install and maintain their own equipment. The cost per enplanement at Los Angeles, for example, jumps from $10.62 to $17.03 when that is factored in, according to the Dallas-Fort Worth survey.

But working against Las Vegas are perennially low fares. The city has a high share of leisure travelers, people who pay close attention to the ticket price because they, not their company, are paying.

According to the federal Bureau of Transportation Statistics, only five of the 100 largest airports had a lower average domestic airfare than Las Vegas in second-quarter 2011. The price came in at $284.54, compared with a national average of $369.67.

While cheap flights attract passengers, Lott noted, low fares mean airlines must squeeze as much profit as possible out of each seat and are more likely to feel pinched by high enplanement costs.

Other highlights of the audit included:

■ Slot machine revenues are up 1 percent after skidding during the recession. However, this amounted to only $1.28 per passenger compared with $1.90 a decade ago.

■ Personnel costs rose 1.8 percent even though the employee count dropped 3.2 percent, to 1,321 full-time equivalents. Walker attributed the increase to union contracts that cover nearly all airport workers.

■ Repair and maintenance spending dropped 2.9 percent as things, such as carpet replacement, were stretched past the normal cycles. Walker said the tight economy has also prompted the staff to experiment with various savings, such as expanding the inside temperature range to cut utility costs.

Contact reporter Tim O'Reiley at toreiley@review
journal.com or 702-387-5290.