Ability to pay debt not based on airport’s passenger tally

Friday, June 12, 1998 | 3:38 a.m.

Although only 16 of the 26 new gates that open Wednesday at McCarran International Airport have regular tenants, the airport is in a position to pay the $28.75 million-a-year debt service on construction bonds for the D concourse.

Part of the reason is that even though passenger counts have been flat for the last six months, airlines pay standard fees regardless of the number of people on the planes.

The construction bonds that are paying for the $200 million expansion are backed by passenger facility charges -- the $3 fee every airline ticket has in addition to the fare and sales tax. Every time passengers arrive or take off at McCarran, their tickets are assessed the $3 PFC.

General airport revenues are a second pledge to back the bonds. Ross Johnson, assistant director of aviation in charge of finance at McCarran, said airlines pay three different kinds of fees to maintain a presence at the airport, and contracts are written allowing McCarran to raise rates on short notice to meet expenses if necessary.

But falling short of expenses doesn't appear to be a possibility.

In addition to the millions of dollars raised from airlines in landing fees and in the rental of terminal and gate space, concessions at the airport generate thousands more. Concession revenue, already up from where it was a year ago, is expected to increase even more with the opening of the D gates.

Advertising space also is at a premium, and numerous media walls at the airport generate income, a percentage of which goes to McCarran's general fund.

The icing on McCarran's revenue cake: slot machines. When the D gates open for use on Wednesday, the airport will have more than 1,100 slot machines available. That's a revenue source most airports can't generate.

All told, there are more than 200 different contracts that have allowed the airport, for the 1998 fiscal year ending June 30, to generate about $206 million.

How much does it cost an airline to operate from McCarran International Airport?

It's different for each carrier, based entirely on how much space it occupies and how many flights it has. The rates themselves are standard across the board for all airlines. But because each carrier has different amounts of space and different schedules, each ends up paying different totals into the treasury.

Each carrier pays $69 per square foot to rent space in the terminal. That includes counter space and the baggage staging area behind the counter as well as the baggage-claim carousel area.

Each gate rents for $64,836 per gate per year. That pays for use of the passenger loading and unloading bridges and the ramp areas.

Finally, each airline pays landing fees of $1.18 per thousand pounds on every plane that comes in. Federal Aviation Administration-monitored maximum weights are identified for each landing. That rate translates to about $100 for a Boeing 737 -- the most common jet at McCarran -- up to $800 for a Boeing 747, the largest of the jumbo jets that use McCarran.

The largest carrier at McCarran by passenger volume is Southwest Airlines, the only company to acquire more gates with the opening of the D concourse. Dallas-based Southwest actually won't do anything at the D gates, but will expand on the C concourse when United and American move to the D side on Wednesday.

That means Southwest will be paying more beginning this month. But for the first three months of 1998, here are the bills Southwest accumulated:

* Ticketing and gate areas were leased for $1.278 million. The rental of the baggage claim area cost $928,000.

* Fees for gate use for Southwest totaled $195,000.

* Landing fees for the approximately 140 flights a day added up to $1.637 million for three months.

Concessionaires at the airport pay a percentage of sales or a minimum guarantee, whichever is greater. The percentages vary from category to category. The food and beverage sector, for example, pays a 7 percent rate on sales. The souvenir and newsstand products at gift shops produce an average rate of 15 percent, and there could be different items with different percentages within the same store.

An operation such as WH Smith, which has several stores and newsstands in the various concourses, pays about $2.5 million to the county every year.

Clark County also makes a percentage off ground transportation services -- car rentals, buses and taxis.

And slot machines generated another $25 million for the airport in the current fiscal year.

Because the airlines are indirectly responsible for making the debt-service payments at McCarran, contracts have been written giving the county the right to raise rates to meet any shortfalls.

"Any money we don't get from PFCs (passenger facilities charges) to pay debt services, we get in our normal rates and charges for the airlines," Johnson said.

The 13-year Clark County veteran said that, in the case of a shortfall, the county would simply bill airlines the equivalent of one-twelfth of the total annual projected cost every month.

"Theoretically, we would just increase the bill every month," Johnson said of the county's ability to raise funds through fees. "But practically, we wouldn't want to do a lot of that and would try to notify the airlines if something big were coming."

Johnson said in his tenure with the county, he has never had to unexpectedly raise rates in the middle of a fiscal year -- but the ability to do that is available in an emergency.

Rates are established based on financial projections several years ahead. The county has been making interest payments on the D concourse project, for example, since 1995.

In addition to the D concourse bond issue, which is being paid off on a 30-year note with the last payment due in 2025, nine other airport bond issues currently are being paid off.

Interest rates on the different bond issues vary, based on market conditions at the time the bonds were issued. The county has been paying interest payments of about $22.4 million per year on the D concourse notes. On July 1, 1999, the county will begin amortizing principle on the notes, raising the payment to $28.75 million a year.

The bond series includes several different interest rates ranging from 4.6 percent to 6 percent, with the average rate being 5.5 percent, Johnson said.

He added that because concession and transportation revenues are up, it's likely the county will be able to keep airport payments on schedule without having to increase rates.

"The airlines will continue to pay rent," Johnson said, "whether they bring in a million passengers or two passengers."