A Blue Christmas At Memphis International Airport? 

Facing its first deficit, the Airport Authority plans higher fees in 2002.

As usual this time of year, the outside of the passenger terminal at Memphis International Airport at night is bathed in green, red, and white lights in the spirit of the season. A good-looking building looks even better -- that is, until you get closer and notice something is missing: the crowds.

The days after Thanksgiving weekend are usually slow until traffic picks up a couple weeks before Christmas. But this year is the slowest in memory because of the terrorist attacks in September and the economic recession.

After three decades of steady growth, the Memphis and Shelby County Airport Authority is looking at an $8 million deficit in its $92 million budget this year.

This is news because it would normally be as difficult for an airport authority with the FedEx Superhub as a tenant to run a deficit as it would be for Tunica County to run out of tax revenue or the anti-Taliban forces to run out of bombs.

Of course, this has not been a normal year.

The non-profit Airport Authority gets about half of its revenue from the the airlines and half from non-airline sources such as the terminal building, concessions, rental cars, and parking.

Thanks in large part to new business from the U. S. Postal Service, the cargo side is doing fine, even growing a little. FedEx expects to handle six million packages on December 19th, its projected busiest day of the year, down only slightly from last year's 6.2 million. Memphis International Airport's place as the number-one cargo airport in the world is secure for the eighth year in a row and beyond.

It's the passenger side that's facing a blue Christmas.

"From now until December 15th I expect horrible loads," says Airport Authority president Larry Cox. Rental cars, he adds with characteristic bluntness, are "getting whacked."

A year ago there were 338 daily flights from Memphis. Now there are 249, and indications are that few of them are full.

Northwest Airlines and its partners, which have roughly 82 percent of the Memphis market, knocked off the fourth bank of flights in the evening. The KLM flight between Memphis and Amsterdam (quoted at $428 round trip with a seven-day advance or $625 without restrictions) is running about 55 to 65 percent full. New lower fares are published every week, and Memphis politicos and entertainers have taken to the airwaves to urge people to fly Northwest as an act of civic duty. The airline has announced it will cut 10,000 employees including 400 to 500 in Memphis, and it plans to furlough 1,003 pilots by the end of July. (Northwest has about 2,000 employees in the Memphis area.)

On a recent Friday night, the terminal was nearly deserted shortly after 6 p.m., with idle ticket agents at Northwest, Delta, and American airlines happy to check out fares for a reporter in order to have something to do. Concessions inside the security area such as Corky's and Interstate Barbecue were already closed. In the terminal, which is now the new "meet-and-greet" area, the only customers at McDonald's were uniformed airport employees waiting for their shifts to end.

On separate morning and afternoon visits to the airport on weekdays before and after Thanksgiving, lines appeared to be shorter than some reports after September 11th might lead passengers to think they are. Cox said the average wait at the security check to get into the concourses is only about 10 minutes.

No one wants to see long delays, but an uncrowded, hassle-free airport is not necessarily a good sign for Memphis, aka America's Distribution Center, where one out of five residents makes their living working with or one remove from airplanes.

The airport is part sacred cow and part sacred trust. It is a product of the ahead-of-its time vision of entrepreneur and World War II bomber pilot Edward R. "Ned" Cook, who died earlier this year, and his friend General Joe Johnson, who thought that Memphis should have world-class aviation.

"They were pilloried at the time they built the 'champagne' terminal over there [in 1963] as being sort of a white elephant," FedEx chairman Fred Smith recalled in a 1996 interview with Memphis magazine.

Airport Authority president Larry Cox
After Cook moved away to Florida, Smith carried on his risk-taker tradition. The Memphis and Shelby County Airport Authority, first chaired by Cook and passed on to carefully hand-picked successors, is a model of old boy clubbiness, efficiency, and stability. It has had three presidents in five decades, the first two retired Navy officers from Millington and then Cox for the last 29 years. Agribusiness might come and go, pro sports might fail, racial wounds might fester, but Memphis has always had its airport.

Along with Elvis, FedEx, good water, and cheap utilities, Memphis could also boast until a month or two ago that it had more passenger air service per capita than any city in America. The Airport Authority had hoped that Memphis would achieve "large hub" status in 2001. It won't, not this year or next year or possibly the year after that. "That's mostly bragging rights," says Cox, but it was important enough that the authority and the Memphis Area Chamber of Commerce had already made it part of their marketing.

As Northwest goes, so goes business in and around the terminal. The slowdown touches everyone from Cox to ticket agents, rental car companies, hotels, and the clerks in the concessions. Some of them have more margin for error than others.

"I'm an optimist," says Cox, whose 29-year career as airport manager has spanned the birth of Federal Express and the 2000 opening of the two-mile, $113.7 million World Runway. "My best guess is that eventually, and I mean six to 18 months, we'll be back to where we were pre-September 11th. That assumes a strong economy and positive growth and comfort level among the public. I think the fourth bank will be back and we'll be back in a growth mode."

Cox was at an airport executives meeting in Montreal, Canada, on the weekend before September 11th. He left Montreal on Monday to make a doctor's appointment in Memphis, otherwise he would have been stranded until Friday. He was in his office on Tuesday when he heard that a jet had crashed into the World Trade Center. A pilot himself, Cox says he "knew right away it was terrorism. No pilot would accidentally do that."

Within a few hours, the airport was closed. More than two months into the post-9/11 era of Memphis aviation, 42 armed National Guardsmen patrol the airport, parking isn't allowed within 300 feet of the terminal, and passengers have roughly a 25 percent chance of getting a pat-down after they pass through the metal detector and a smaller chance of having their bags opened and their identification checked.

A new baggage scanner is in place but it can only handle 150 bags an hour so the burden falls mainly on employees of Argenbright Security. In about two months they will be working for the federal government when Argenbright's contracts are assigned to the Department of Transportation.

Cox's personal opinion is that terrorists will strike somewhere else next time, maybe pipelines or power plants, where security precautions are more difficult.

"I don't think they'll hit aviation again," he says.

To wipe out the $8 million deficit, the Airport Authority is cutting $4 million from its operating budget (the annual financial statement comes with a paper clip instead of a cover) and raising another $4 million by hitting the airlines with a 54 percent increase in terminal building rentals in January and an 18 percent hike in landing fees. Airfield construction, including an overhaul of one runway, is moving ahead without delay, but construction in the terminal, except for some restaurants and bathrooms, is on hold "until we see how the industry recovers," Cox says.

Passengers can expect ticket prices to go up when the higher fees are passed along next year. If they don't bite on cheap fares, will they like more expensive ones? Northwest won't say anything specifically about Memphis beyond the 400 to 500 layoffs and 25 percent cut in service already announced. John Moore, head of state and local affairs for Northwest in the Memphis area, declined to be interviewed for this story. Response to price promotions has apparently not been great so far.

"We're encouraged by some upticks through the holiday season," says Northwest spokesman Mary Beth Schubert. "But we're not giving out numbers or percentages."

Cox says the airlines in general need in excess of 90 percent loads just to break even.

"If there is no recovery in 2002 then all of the airlines have serious problems," he says. So will related businesses.

Thomas Blanche is general manager of HMS Host which runs the 29 concessions at the airport with combined revenues of $23 million. For the first five weeks after the terrorist attacks, he was getting five briefings a week from the Airport Authority and trying to juggle the needs of restaurants and gift shops split between the terminal and the concourses. Some of the signature restaurants, including Corky's and Interstate Barbecue, are inside the security area which is now off-limits to all but ticketed passengers. Elimination of the fourth bank of Northwest flights and an earlier 5 p.m. departure time for the KLM Amsterdam flight have killed their evening business.

"Before September we were up 13 percent over last year," says Blanche. "Since then, we are down 16 percent. Everybody that has anything to do with the airport parallels Northwest."

Long lines have not been a problem for most travelers at Memphis International.
HMS Host has reduced its employees from 400 to 225 and closed three concessions including a Pizza Hut, TCBY, and a Samuel Adams bar. But it is adding two Starbucks locations and a Budweiser Brew House where it is even bringing back smoking inside the terminal for the first time in 10 years.

"Passengers traded out to other facilities, and we got a lot more efficient," Blanche says. "We didn't have a lot of meeters-and-greeters to begin with at our locations on the concourses because only 20 percent of the airport is originations and destinations."

At the 44-room Skyport Inn, the only hotel in the terminal, business is off 22 percent from this time last year. The hotel relies on airline crews for much of its business, and many of them are not staying over in Memphis as much as they used to, partly because there is almost no place to eat in the terminal after dark.

"If we stay at these levels we will survive, but we're going to have to do things a lot differently," says general manager John Sosh. "We have a small staff so there won't be any layoffs. I don't care whether your business is hotels or retail or whatever, we are going up against something we never had to consider before. If Northwest increases its flight schedule in the spring then I'm optimistic."

Whatever the fate of Northwest, the airport and Memphis are buffered by FedEx, where the daytime sorting operation is approaching the fabled overnight sort. Spokesman Jesse Bunn says there are approximately 60 flights during the day now (compared to 130 at night), up from 30 before the contract was signed with the U.S. Postal Service. Memphis is the only airport in the country that had positive growth numbers this September and October, a fact Cox attributes to FedEx.

Both Northwest and FedEx have received big shares of the federal airlines bailout after the terrorist attacks temporarily shut down U.S. aviation. Northwest has received $229 million so far, while FedEx got $100.6 million. Additional payments are expected later this year. A chunk of that will find its way to Memphis International Airport, but what would really bring a smile to the Airport Authority would be additional passenger flights. And that can only come from a restoration of consumer confidence and willingness to fly.

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