ST. LOUIS — Consolidate flight gates, concessions and car rental properties into a single terminal. Rebid concessions contracts and hike fees on private shuttle, taxi and limousine operators. Expand airport parking as an alternative to off-site privately owned parking. Build a “cargo city” along a runway.
These were among major changes to St. Louis Lambert International Airport suggested by consultants exploring the possibility of turning over the city-owned airport to a private operator, according to a draft of a confidential 110-page report obtained by the Post-Dispatch.
The report, prepared by consultants hired by the city and led by New York-based Moelis & Company, offers the clearest blueprint of how a private operator could have transformed Lambert with new investments and service enhancements. It also provides some clues about businesses that might have opposed those changes.
The Airport Advisory Working Group, the city panel exploring privatization, mostly behind closed doors, had planned to provide the final report to bidders, along with a formal request for proposals on a tentative 45-year lease, had the city continued privatization talks. Instead, after the city received responses from 18 potential bidders, Mayor Lyda Krewson on Dec. 20 abruptly pulled the plug on the two-year process, citing a lack of broad support, including from the business community.
The consultants’ report detailed the airport’s operations and logistics, perceived strengths and opportunities for growth. While Lambert’s flight services and passenger numbers have rebounded in recent years, the report highlighted a growth strategy focused on building non-flight revenues to pay down debt and spur development on land surrounding the airport, citing the airport’s unused terminal and runway space and more than 1,100 acres of adjacent undeveloped land.
Revenues not derived from flights have grown consistently each year since 2014, but still lag behind airports comparable to Lambert, the report said. If all of the recommended changes were adopted, and passenger growth were to continue as expected, revenues from non-flight sources would increase dramatically over the years while the airport would be able to charge lower rates to airlines. Parking revenues, for example, would increase from $27 million in 2019 to $158 million in 2036, the report estimated.
“Looking at non-aero is generally the way to go,” said Michael Boyd, head of Boyd Group International and an industry expert who has followed privatization talks in St. Louis. Investors have recently started looking to airports because of their focus on long-term growth under strict federal oversight, he said.
“Any airport property has a lot of controls on it,” he told the Post-Dispatch. “You can’t play games with it. … It’s a stable business environment to put a property in and has a lot of value.”
Consultants, according to the report, explored the possibility of swapping the occupants of the airport’s terminals or replacing both terminals with a new facility before deciding to consolidate Terminal 2 — now used exclusively by Southwest Airlines — into Terminal 1, according to closed-door meeting minutes.
That consolidation, which the report said could be completed within five years, would include rebuilding the airport garage to add more parking spaces, reopening Concourse B in Terminal 1 with a new security federal inspection services facility, and moving all seven rental car companies at Lambert into one new facility attached to the terminal.
The change would eliminate wait times and traffic congestion, and raise revenues by exposing concessions to more foot traffic, according to the report. The report suggested Terminal 2 could then be repurposed, but did not specify how. Nor did the report provide cost estimates for many of the proposed capital improvements.
The report suggested unused runway space and undeveloped land go toward building a major cargo hub, the report said.
“Significant runway-adjacent real estate exists for a developer to construct a Cargo City,” the report said.
Lambert’s proximity to major interstates and location within the central U.S. — within a day’s drive to several states and a total one-third of the U.S. population — would also be attractive to cargo, the report said. It could draw in cargo flights from Asia and Europe that currently go to Chicago O’Hare International Airport and Rickenbacker International Airport in Columbus, Ohio, as well as add more flights to a newly launched Amazon Air cargo operation.
In September, the airport contracted with ABX and Air Transit, which operate cargo flights for Amazon Air, as part of a recent focus on cargo, according to the report.
“We will always first and foremost be a passenger airport, that’s who we are,” airport director Rhonda Hamm-Niebruegge told the Post-Dispatch, when asked about the consultants’ report. “But not to take advantage of cargo with the size of the airport we have and the access to different modes of transportation — rail, water, air, highway — it would be silly not to pursue that.”
Boyd warned that air cargo wasn’t as viable an option for growth without more specific plans.
“They say look at the long runways you have, we can put in a big cargo facility,” he said. “But then they don’t tell you what that cargo traffic would be, where would it be going.”
“Air cargo works when you have the need for speed and then somebody to use it at one end or the other. There is no industry in St. Louis that would be heavy-duty cargo generators to any destinations.”
The recommendation to move the airport’s rental car companies under one roof is part of a larger effort to revamp ground transportation and parking at the airport, which together generated about 70% of the airport’s non-flight revenue in 2019. The former rental car spaces would be turned into airport-owned public parking lots.
That recommendation was likely to be controversial: Lambert currently faces stiff competition from private parking operators that enjoy close proximity to the airport and pay lower fees to Lambert than what similar services pay at other airports, according to the report.
Untapped parking revenue growth could be unlocked, the report said, “through new product offerings and pricing techniques to better compete with off airport competition.”
In addition to building more public parking spaces, the report also recommended raising fees on private shuttle, taxi and limousine businesses that currently pay less to Lambert than similar services at other airports.
Boyd cautioned that trying to grow revenues from parking and ground transport has to be weighed against competition from ride-hailing competitors like Uber and Lyft, which reached an operating agreement with Lambert in 2017.
“Parking has always been a great source of revenue for any airport,” Hamm-Niebruegge said. The airport has added more parking in recent years, and plans to build another lot on the east end of Terminal 2.
“You have to watch the trends very carefully,” she said. “We’re one of the few airports that hasn’t seen a decrease in parking.”
It was unclear to what extent airlines, parking and ground transport businesses were aware of the suggested changes to the airport.
A spokesman for Southwest, the airport’s largest tenant, said the airline was part of a committee representing airlines at Lambert to the working group, but did not provide more details. Clayton-based Enterprise Holdings, which owns the Enterprise, National and Alamo car rental businesses at Lambert, declined to comment. HMS Host, the airport’s largest food and beverage concessionaire, could not be reached for comment.
Hamm-Niebruegge said the businesses had not yet been approached about the suggested changes, which would not have been binding on a future operator had the city moved forward with privatization.
“This was put together to help bidders understand (that) hey, if you’re going to look at this, here’s how the airport operates today,” she said. “Here are some of the positive things, here are some of the opportunities for growth.
“It was never a document that was going to be used to say here is what you have to do.”
But changes outlined in the report were concepts the airport had discussed before privatization talks began, and remain on the table, Hamm-Niebruegge said.
“It’s a conversation we need to have going forward,” she said, “and with greater input from the region, the mayor’s office, business partners, airlines, and the community.”
‘No need for a new system’
Meanwhile, passenger volume at the airport grew from 12.4 million in 2014 to 15.8 million passengers in 2019 — the highest number since 2002, according to the report. The number is expected to grow by 3% each year through 2031.
The growth is largely attributable to Southwest, which has continued to add service to Lambert in recent years. According to the report, “The airline continues to dramatically shift connecting passenger volume from other cities to St. Louis, making the Airport one of Southwest’s most important hubs.”
Boyd notes that Lambert lost its status as a hub airport when American Airlines drastically cut flights here in 2003, and quietly regained hub status — albeit on a smaller scale — thanks to another airline. That rebound is a good sign, he said.
“Once they got to the point of showing those metrics, the project probably should have just stopped right there,” Boyd said. “All those bullet points say, ‘Why would you change the current governance?’
“There is no need for a new system when the current system is working as well as it is.”