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Web posted Sunday, October 19, 2008

Cargo carriers question potential landing fee increases

By Rob Stapleton
Alaska Journal of Commerce


  A Cathay Pacific Cargo plane is seen taking off from the Ted Stevens Anchorage International Airport in this file photo. Officials with Cathay and other air cargo companies that operate out of Alaska's international airports are worried over proposed landing fee increases currently being negotiated with the state Department of Transportation. File Photo/Rob Stapleton/AJOC    
Air cargo carriers using Alaska's international airports are questioning proposed increases in landing fees, noting that increases to airport leases and fees paid by passenger airlines would be much less in comparison.

The increases are being negotiated in a new operating agreement between the airlines and the state Department of Transportation. The new operating agreement would increase the cost of using both the Anchorage and Fairbanks international airports.

Air cargo carriers are concerned that increased landing fees will further crimp budgets; especially since sky-high fuel costs have already crippled the industry.

Landing fees are currently $1.52 per 1,000 pounds of cargo, according to one carrier. DOT officials have not revealed the new landing fees proposed.

Other proposed increases include: a boost in fuel flowage - the amount of fuel pumped into aircraft - from 2 cents to 3 cents per gallon; ground rent increases from 9 cents to 18 cents for aviation-based businesses, while non-aviation businesses will pay 24 cents per square foot per year; and terminal leases costing an addition 8.33 percent per year.

Increases in the cargo operations would affect carriers Cathay Pacific Airways, Eva Air, Asiana and Korean Air. All have officially contacted DOT to voice opposition to increased landing fees.

“Our concern is that 75 percent of the landing fees are predominantly paid for by the international cargo carriers and may be a disproportionate share of terminal costs,” Audene Barlow, then-airport services manager at Cathay Pacific, said in a letter to DOT Commissioner Leo von Scheben.

This comes during a time when Canadian officials are trying to entice cargo carriers landing in Anchorage to use fuel and ground services at an airport in Prince George, British Columbia. Meanwhile, the Ted Stevens Anchorage International Airport has no airport director, leaving a gap in leadership.

Cargo operators are also concerned that the costs of landing fees are attached to the operating costs at both the Anchorage and Fairbanks international airports. The state's two large airports are part of the Alaska International Airport System, or AIAS. Airports in Sitka and Cold Bay are also in the international airport system. Sitka is a preferred alternate for Alaska Airlines in case of bad weather in Juneau or Ketchikan. Cold Bay is the alternate airport for air carriers operating in the Pacific Rim and for Aleutian Island flights.

Total revenue and landed weights are not yet available for the AIAS for fiscal year 2008, which ended in June 30. The 2007 figures, however, show that cargo carriers at Anchorage international seem to be underwriting passenger airlines expenses.

According to AIAS comptroller figures, 2007 gross operating revenues from the AIAS was $129 million. Of that, Anchorage international's operational revenues were $108.2 million and Fairbanks was $7.2 million. The difference is from passenger facility charges.

Operational expenses were $89.1 million at Anchorage and $19.07 million in Fairbanks.

Total assets for Anchorage after costs are $54 million, which includes Federal Aviation Administration funding and passenger facility charges. Fairbanks reports a negative $555,000 in total assets for 2007.

Domestic and international landed weights in 2007 for Anchorage were 29.1 million tons, compared to Fairbanks' 236,077 tons.

In comparing expenses by airline, Alaska Airlines, which tops the airport system's total passenger landings, paid $3.9 million in landing fees at Anchorage and $1.1 million at Fairbanks in 2007.

Combined, cargo carriers FedEx, UPS and Cathay rack up the top three landing fees, paying $14.1 million in landing fees for 2007 in Anchorage.

Total landing fee revenue for all airlines is $40.1 million in Anchorage, and signatories with the AIAS paid $1.5 million at Fairbanks in fees.

For terminal rents paid by the carriers in 2007, Alaska Airlines paid $5.4 million in Anchorage and $1.8 million in Fairbanks. Cargo carriers FedEx and UPS pay lease fees to DOT and paid no terminal rent. Cathay Pacific paid $107,268.

While the airlines wait for the final fee decisions, some have said they are upset that there is no new airport director at Ted Stevens Anchorage International Airport.

“We think there should be an airport director and some leadership here,” said Cathay's Miller. “Someone we can contact about this.”

Christine Kline is currently serving as acting airport director until the position can be filled. Carriers say they have tried to communicate with Kline, but have had no luck.

“I have called and left messages, but she never calls back,” said Kevin Miller, current manger of airport services for Cathay Pacific. “We also know that there have been some closed door meetings between Klein, deputy commissioner of aviation for the state of Alaska DOT and Kathy Smith, and we don't have any idea what is being negotiated.”

Smith is the chairperson of the AIAS Airline Airport Affairs Committee, who is also the manager of airport affairs for Alaska Airlines Inc.

Klein could not be reached for comment on this story.

DOT advertised the job of airport director in late September with an application deadline date of Oct. 3. According to Rebecca Cronkhite, a DOT statewide aviation planner, candidate interviews will be sometime in November with a decision in early December.

“Really when you look at this timeframe, it will most likely be January 2009 before anyone actually fills the position,” said Cronkhite.

DOT spokesperson Roger Wetherell said that no date for the new rates has been set because the new operating agreement has not been approved, and that too has no date of completion.

Commissioner von Scheben sent a letter to the signatories in May expressing his desire that negotiations be completed as soon as possible to implement rates from the new agreement in July 2008, but this did not happen.

Klein told the Journal late in August that she expected negotiations to be completed by the end of September.

Rob Stapleton can be reached at rob.stapleton@alaskajournal.com">rob.stapleton@alaskajournal.com.

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