Randall Walker, Clark County aviation director

By Richard N. Velotta

Friday, May 8, 2009 | 2 a.m.

Anyone who keeps a close watch on Southern Nevada’s economy knows that one of the key indicators is activity at McCarran International Airport.

In 2008 the airport served 44.1 million passengers — a 7.7 percent decline from 2007’s record 47 million. The airport generates nearly a half-billion dollars in revenue each year and has an economic impact of nearly $30 billion on Southern Nevada. More than 18,500 people work at the airport, including 1,400 Clark County Aviation Department employees under the direction of Aviation Director Randall Walker.

Walker hits his 12th anniversary as director this month, but began his McCarran career in November 1990 as deputy aviation director.

He served as the county’s director of finance in 1996 and was assistant county manager in 1996 and 1997, overseeing 12 departments including the Justice Court and District Court.

Walker talked with In Business Las Vegas about the new Terminal 3 — a 14-gate facility off Russell Road, due to open in 2012 — and how the slumping aviation business and capacity cuts are affecting the airport and the local economy.

IBLV: When you drive by McCarran, you can see that construction at Terminal 3 is well under way. Give us an update on the status of the project.

Walker: Almost all of the elements of the project have been let. We actually only have one element left to bid out and that’s the ramp behind the terminal where the aircraft actually park and taxi up to the gates. The project is on schedule currently. You can see the steel coming out of the ground. That’s pretty exciting, actually. You can see the bridges for the roadways. You can see the helix for the garage coming up. There’s a lot of activity out there.

Everything is going as planned so far. It’s on time and on budget right now, but of course it’s early in the process so we’ll keep our fingers crossed that we can keep managing it in the future as we have in the past. The early civil package is done. We relocated Russell Road. We moved all of the utilities. There’s a substantial amount of work that has been completed that a lot of people probably don’t even realize we had to do just to get ready to get these facilities built. It’ll kind of be the capstone of McCarran’s development in terms of terminal work. So we’re all excited here to be a part of that process. We’re scheduled to open to the public in mid-2012.

With capacity down so dramatically, why do we need Terminal 3?

Obviously, we need Terminal 3 to be able to handle more passengers than we can handle today with our current facilities. We look to hotel rooms, which have always been the barometer that we have measured against in terms of what capacity we need for the community. We’re going through a rough economic spot, and we’ve been there before — back in the early ’80s we had this same kind of a problem, a little different but similar in effect. We have to assume the economy is going to recover and we’re going to get on some growth track. Whether it’s the blazing speed we had in the ’90s and the first part of this decade remains to be seen, but if the hotel rooms that are under construction are added to the community, which we believe they will be, we’ll need Terminal 3 to have the capacity to fill those hotel rooms in the historic levels that they have been full.

The Las Vegas Monorail access has been planned as part of the access to Terminal 3 as well as Terminal 1. What’s the status of expanding the monorail to the airport?

As far as I know, the status is no further than it was the last time you talked to me. The monorail company, as I hear, has got financial struggles with its existing system. I think it’s probably critical for it to resolve those financial problems before it can go to the markets to get additional capital to come to the airport. I’ve never thought that the airport was the salvation of the monorail system. The airport as part of a larger system might make some sense. But if all (the monorail company does) is expand what it has to the airport, I honestly don’t think that’s going to create a successful system because the stops that it has today really only provide convenience for a very small percentage of our customers. Unless it expands to many, many more locations where a large percentage of our customers would have an advantage taking the monorail, I really don’t understand how it would be economically viable.

Airline capacity cuts have trimmed some needs at the airport. Where are you saving money right now? What are your unmet needs?

With the passenger reduction, we looked at all of our contracts to see where we could reduce our expenses. We found a number where we thought it would be appropriate. For example, in front of the checkpoint, as you remember a couple of years ago, we had a lot of crowds. One of the things we did that was unique is that we actually hired a company that provided personnel in front of the checkpoints in the peak time to get people ready — hand them their bins, remind them to take their coats off and their shoes and get ready to go through the checkpoint. We found that made the checkpoint much more efficient, and we reduced the lines. Well, with the reduction in traffic, we decided we didn’t need that anymore, and we eliminated that contract. That saved us about $800,000 a year.

With the reduction in traffic and also with the introduction of the a la carte mode by the airlines in charging for bags, we’re seeing less bags come through the airport. In our in-line screening nodes, we have a company that we hire to be in the nodes to unjam the jams as the bags tend to get jammed from time to time. We have to have somebody there who will go fix the jams so the system will work properly. We’ve reduced that contract because we don’t have as many bags, and if we do have a jam and it takes a couple extra minutes to get to it, it’s not as critical as it used to be. So we’ve reduced the size of that contract.

We’ve reduced the maintenance contract on our escalators and moving walkways because they’re not getting as much stress as they used to because we don’t have as many people coming through.

Fewer maintenance cycles?

Correct. Those kinds of things. We’ve adjusted temperatures. We’ve done a number of things that will allow us to reduce our costs. We’ve certainly frozen positions. I think when we went to the board (Clark County Commission) in January, we indicated we were freezing 109 positions at the time. Each position that becomes vacant goes through a process to determine whether we’re going to add it to that frozen list or allow it to be filled. That, of course, is dependent on how critical it is to the operation of the airport. So we’re doing all those kinds of things to reduce our expenses. We’re able to get our operating expenses down 15 percent for this entire fiscal year, but when you think about the fact that we’re going to do that in six months, that really is equivalent to a 30 percent reduction in operating costs if you spread that over the entire fiscal year. For the next fiscal year, we’re doing a 20 percent reduction to start off in our operating costs and we’ll keep monitoring that month to month to see how it goes. Surprisingly, our nonairline revenues have held up much better than we had anticipated, so we’re not under quite as much stress as we thought we would be.

Nonairline revenue meaning …?

Food and beverage and retail and advertising, those kinds of things. We’re actually anticipating that it will fall off again some more next year. But we’ve been pleasantly surprised that our actual revenue per passenger is up although our total passengers are down. So our total revenue is down, but it could have been much worse. If we would have maintained the same revenue per passenger at a lower level, we would have a bigger problem to resolve. We’ll monitor it and manage our budget accordingly and make sure that we are prudent and wise in our expenditures.

Are there any unmet budget needs?

I can’t think of anything off the top of my head that I would consider an unmet need. We had some capital projects that we had deferred back in August. Some of those were roadway projects that I think we need to do eventually. But given the reduction in traffic and the cost-benefit analysis, today is not the time to do it. When the economy recovers, we’ll look at those. Part of that is the south side of the tunnel that tends to get pretty congested in the morning, creating a problem for people getting to the airport. We need to eventually fix that. We have the center core of the tunnel that we can use to address that problem. We have a plan for that. But we’ll wait until things are a little better, and revenue is not so tight to address those problems.

Do you think the short- and medium-term pain Las Vegas is experiencing with airline capacity is going to be a gain for the city in the long term?

I don’t know if what we’re going through today would be considered a gain. I guess out of every dark cloud, you try to find the silver lining. The silver lining in this is that all of us are going through our operating budgets and the way we do business to try to become more efficient. I think if you emerge as a more efficient operation, then even in the good times you’ll be more efficient and more effective and that’s always a good thing.

When you’re growing so fast and things are going so well, sometimes you don’t look at things as critically as you could have and there are some things you wouldn’t have done had you known about it. And now that you’re having to examine it more closely, you change your management structure, you eliminate some costs, you tighten things up, and we’ll emerge as a more efficient operation. I think lots of people will do that. That’s a good thing. But to go through this experience to get there, I’m not sure that’s a positive thing overall, but we’ll make the best out of it that we can.

US Airways has had the most dramatic capacity cuts at McCarran, eliminating its night-hub operation. Considering that many of those passengers were just changing planes, how big was the loss for McCarran with US Airways’ cuts?

They were significant, not as significant as th­e actual percentages would show because, as you mentioned, the nighttime activity was in excess of 60 percent connecting for that area, as best we could determine. So most of those passengers who came in at night — more than half of them — never left the airport, never got into the community. So in terms of community impact, it wasn’t as big as the numbers would indicate. Obviously to the airport, it’s an impact because we have less flights. That’s less revenue for landing fees. Those passengers did spend money as they went from one plane to the next, so we lost that revenue. So it had a negative impact on the airport, revenuewise.

But for the community as a whole, it wasn’t as big an impact as if you would have had the same percentage reduction in, say, Southwest or something like that. I’m not surprised with what happened as US Air and America West merged. As we watched them, we concluded that over time the airline was going to become more of a traditional hubbing, legacy-type carrier, more like the original US Air and less like America West. When we’re all said and done with US Air, we’ll probably see an airline that we’re a spoke in its hubs, maybe a few profitable point-to-point locations that it’ll want to keep, nothing like the old America West.

Do you expect the capacity cuts by US Airways ever to come back?

No, I would not anticipate that will happen. As the demand comes back, we will find that it will come back across all sectors of the airline business, but more the point-to-point type service from all of the different carriers that we have.

Has there been any estimate of how much revenue was lost with the US Airways cutback?

Not specifically for US Air. I suppose we could go in and look at the number of flights that it had particularly cut, and we could come up with a landing fee reduction because we know how much we charge each one of those planes to land. In terms of the passengers, we could do an average reduction per passenger that’s probably not really good since so many of them were connecting passengers. I doubt the average spend on those passengers was the same for our O&D (originating and departing) passengers. But we don’t have any independent data to show what an O&D passenger versus a connecting passenger spends. So it would be kind of a guesstimate. We more look at it across the board. To me, whether it’s US Air or Southwest or Delta cutting service, the impact’s all the same. I don’t try to focus on one particular carrier.

Has there been any discussion about international service by US Airways to Las Vegas?

No, not at all. We kind of made the decision a decade or so ago that we don’t really spend a lot of time talking to U.S. carriers about direct international service. They do not overfly their fortress hubs. They’ve got too much invested in them to bring direct service to somebody else. So they bring those flights to their hubs and they bring domestic to the hubs and they break it down and send everybody else out, and we’re just one of those spokes. That’s why we’ve always concentrated in the last 10 to 15 years on the international carriers, trying to show them, in our opinion, the advantages they would have of overflying those fortress hubs of the U.S. carriers and coming directly to Las Vegas and picking up that traffic of people who just want to come to Las Vegas and don’t want to have to come through San Francisco or Los Angeles or New York or wherever they have to go to get to Las Vegas.

Southwest also trimmed capacity here. Have you received indications that growth will pick up when the economy rights itself?

I think Southwest is poised here to continue growth. I guess the one example I could give you is in the in-line screening system that we have to screen the bags for explosives. As you’re aware, we put that in a new automated system behind the ticket counter. We have several nodes and we have a Node 5, which is for Southwest. It’s the only node that is exclusively for one airline. In the peak, in 2007, that node was pretty stressed. At the very peak times, it could have some problems. We sat down with Southwest and we said, “We can’t really grow you here in Las Vegas if we don’t address this problem.” So we came up with a construction project called Node 5A, which was going to add additional screening capacity for Southwest Airlines. When the economy started to fall and the flights were reduced, we called Southwest and said, “Given the circumstances, maybe we ought to put Node 5A as one of the projects we defer,” because we hadn’t yet started construction. They actually did not agree with us. They said, “No, we need to have that built and in place because we need it to be ready when the growth comes back.” So that gives me an indication that they’re still thinking Las Vegas is going to be a good market for them long term.

One of the bright spots for capacity has been the expansion of WestJet in Las Vegas. Is the airport gearing for more growth from the Canadian carrier?

WestJet’s been a very bright spot for us. Even back in the fall when everybody else was cutting, WestJet was actually bringing in more passengers. Our overall Canadian traffic was up during that particular time. I think we’re a good market for WestJet. We’re a very strong market for the Canadians and the more direct service we get from Canada, the better we are as a community and as an airport. So we’re very optimistic with what WestJet is doing. I think the relationship that we see going forward with it, and Southwest can only strengthen this marketplace as they develop that relationship. So we’re optimistic. We actually moved WestJet from Terminal 2 to Terminal 1. As you know, almost all of its traffic is pre-cleared in Canada so, in essence as they’re arriving here they’re just like any domestic carrier. So we have better facilities here, better concession opportunities for those customers, so we thought it was a good move to move them over here.

Is there anything new here as a result of the recent Delta-Northwest merger?

They’ll physically co-locate. We’re moving Northwest over to the southwest wing of the D gates from the southeast wing so that it can merge its operating side and get the operational efficiencies it is looking for. We’re also going to move its ticket counter. Eventually, you won’t see Northwest anymore, you’ll just see Delta. So the Northwest ticket counter is going to go away as Northwest and you’ll see the Northwest gates move over and become Delta gates.

We hear a lot more about McCarran than we do about the county’s airports in Henderson and North Las Vegas. Give us a status report on operations at those airports.

They’re both down. Particularly we’ve seen some significant reductions in the corporate (aviation) side as the economy has fallen off, but that’s to be expected. We have the same view there that when the economy comes back, we’ll see that traffic come back. Those airports are important to us to provide that type of capacity other than at McCarran. Just think, if those airports weren’t there and all that traffic were trying to come to McCarran, we would have been out of capacity a long time ago. So it’s an important element of our system to maintain capacity to help drive the economy here. We don’t have a lot of high-profile projects going on at either one of those airports now; a few small things. So we’ve slowed everything down.

Henderson, I think, will be the one to watch as the economy recovers. That’s the one we’ve planned to be our higher-end corporate aviation facility. As it grows, we’ll need to add more of those types of facilities, more ramp, more shade hanger space, provide some opportunities for third parties to come in and build some additional corporate hangers and those kinds of things. So I’d keep my eye on Henderson as the economy recovers as the general aviation airport that you’ll probably see the most growth.

Is McCarran still encouraging general aviation and air tours to use other airports? How is that working?

Yes, we are. Actually it’s worked very well. When I came to McCarran in the latter part of 1990, if I recall my statistics correctly, about 42 percent of our total operations (at McCarran) were general aviation. Today, they’re around 18 percent and of course we’ve had a significant amount of growth in operations. So the plan that we had to acquire these general aviation airports to provide an opportunity for these operations to be somewhere other than McCarran, has been very successful. We’ll continue to manage that. Our goal is to eventually get to 10 percent general aviation operations at McCarran and everything else at our other airports. So we still have a ways to go. Certainly we’re pleased with the results we’ve had thus far, and I’m confident we’ll be able to reach that goal over time.

What’s the status of the proposed heliport near Sloan?

We’ve received environmental approval to build the facility. We had to do an environmental assessment for the Federal Aviation Administration. That was a very difficult process. It was probably one of the more difficult environmental assessments we’ve ever done because nobody has ever gone through a process for a heliport like this. Heliports usually are an adjunct to a larger facility, so they’re part of an airport, or in a lot of cases you’ll have a heliport on the top of a tall building or something like that, or you’ll have a small heliport for two or three helicopters. But a heliport of this size has never been done on a civilian basis. So, it was a challenge for the FAA to get its hands around this. It took us a little longer than we had hoped to get the environmental approval. It’s done now. The design is at 35 percent and the design is proceeding forward. We’re going to try to do this as a construction-manager risk project, so we’re putting together the proposal of how we would select the team that would build the facility. We hope that we’ll have all of that wrapped up toward the end of this year, and we’ll actually go out and select the team that will finish the project.

With Papillon moving its operation to Boulder City, is there still a need for the Sloan project?

Well, I think so. When we look back to about five years ago, we had about 106 helicopter operations a day when Papillon was still located here at McCarran. With it gone, we still have 99 operations a day. So what’s happened is the businesses continued to grow. Even with the third-largest operator leaving, the total operations are still just marginally down from what they were at our peak. I think we have to do something about those helicopter operations.

When it comes to noise — I’m a native and I remember the airport being here forever and when people call and complain about airplanes flying over their house and I realize that they built their house under a flight path that’s been there as long as I’ve been alive — I don’t tend to get really sympathetic to that. But when people have lived in their homes for 50 or 60 years down the corridors of Tropicana and Charleston, and I remember some of those neighborhoods as a kid growing up, and all of a sudden the noise comes to them, that’s a different issue and we have a responsibility to come up with a solution to solve that problem.

McCarran’s airline committee opposed both Terminal 3 and the heliport projects because of the tough economy. Have there been any repercussions?

No, not really. The airlines are our customers, they’re our partners, they’re our friends. But we don’t always agree with them on every issue. Airlines tend to be a little short term in their view. I understand that, it’s a tough economy, airlines are struggling to be profitable. Even in the good times, they’re struggling with how to be profitable. So I think the view that anything that is going to add costs — even four or five years from now when they don’t know what their profitability is going to be like — creates a problem for them. I understand their point of view. Had we listened to the carriers since I’ve been here in 1990, I’m not sure we’d have had the D gates built, because they were never in favor of building anything at the time, because they never saw the need in the next two months or the next year.

We’ve never started a project here since I’ve been here where an airline had actually committed to the space before we started, but yet, except for the fourth wing of D which opened after the economy tanked, they’ve been full within 60 to 90 days of opening. So we really can’t be dependent on the airlines’ long-term view of what’s going to happen in Las Vegas. They tend to take the long-term view of where they have their investment. For Delta, that’s in Atlanta. For American, that’s in Dallas and Chicago and New York and Miami. So they’re going to focus on that and they’re going to do long-term planning.

They don’t really do that for Las Vegas. So we need to be the ones that do the long-term planning for the community and we need to make the decisions that are best for the community, not the best for the airlines.

What are some of the national aviation issues we’re dealing with?

One of the things we need to be concerned about is the next-gen(eration) for the air traffic control system. It’s something we’ve been talking about for a long time. We’ve been through two cycles now where we got to the point where traffic was so heavy in the United States that we saw all kinds of delays because the air traffic system just wasn’t capable of handling the volume. One was just before 9/11 and when 9/11 came, the traffic fell and all of a sudden we didn’t have the congestion anymore, so people forgot about it and didn’t do anything. And then around 2004 traffic started to grow pretty good again and by 2007 we were back to the same place we were and everybody was talking about the congestion. Then, the economy tanked and we’re not talking about it anymore. So we know at what level the air traffic control system breaks down. And if we don’t do something about it the third time around, well, shame on us as a country because we know what our capacity is.

We’ve got to watch that very carefully. Congress needs to get the FAA reauthorized, they need to get the money flowing to that. They need to get next-gen done. The United States used to have the premiere air traffic control system in the world. We’re now ranked No. 3. And if we’re not careful we won’t be in the top 10 as these other countries redo their air traffic control systems. And I don’t think that’s something we should allow to happen in the country, given the importance of air travel to the economy and the freedom of people moving around. So that’s one thing I think we need to watch very, very carefully at the national level because that will kind of tell us if we’re going to have some problems when the economy recovers, with congestion, which creates delays for the airlines, which creates costs, which is going to reduce the opportunity for airlines to come to Las Vegas and bring people to drive our economy.

The other one is fuel. If you recall, the reason we had our decrease in air service in October was not the economy — it was $145-a-barrel fuel. The carriers just couldn’t make money in that environment in the old ways that they did business, so they were thinking about how they could do business differently, so they cut all their marginal service out. Of course, when the economy tanked, the fuel came down and it wasn’t about the fuel anymore, it was about the demand to travel. My fear is that when the demand to travel goes back up, that means the economy has started to grow again and then all the demand on petroleum products will go up again and the prices are going to spike back up. If we haven’t done anything in this country to solve that fuel price problem — gasoline goes up to $4.50 a gallon and Jet A goes back up to the height it was in the summer — we’re going to be right back to the problem we had before the economy tanked and we may not see a recovery in air traffic, which would be disastrous for this community and for the country as a whole. So I’m hoping somebody will be looking at this at the national level and will get the supply-and-demand issue resolved.

I’m all for solar and I’m all for wind and all those good technologies — they all should happen. But the question is will that happen in two years or five years or 10 years? What’s it going to take to get enough energy produced that we actually see a significant reduction in demand on a global basis for petroleum products. If we haven’t solved that issue and we get right back to where we were this last summer with petroleum prices, we’re going to be right where we are today but for a different reason.

What’s the direct effect on Las Vegas if we have no next-generation traffic control system?

It’s the upper air space. The problem is that you have highway lanes in the sky because airplanes are flying point to point to point and they have to be spaced so much vertically and horizontally for safety. Once you fill all those slots in the sky, you can’t put anybody else up there and you have delays on the ground. In 2007 and in 2001, we had times where we had perfectly good weather here for as far as you could see and we had delays. Why did we have delays, the weather was great? There wasn’t a slot in the sky at 33,000 feet to put an airplane and so they had to put somebody on hold here until they could get one of those holes. Over Las Vegas, we’re one of the two main corridors going from California to the East Coast — us and Phoenix. So not only do we have all of that Southern California traffic flying over, you have all of that international traffic that’s coming from Asia and that direction that wants to go the East Coast that’s flying over Las Vegas. That’s a very crowded air space up there. Until they get something to make that more efficient, we’re going to have problems when we get back to the same levels that we had in 2007.

What’s the status of the environmental assessment for the land planned for a new airport at Ivanpah Valley? Give us an updated timetable.

Since the last time I talked to you, it’s been delayed again. We met with the FAA here a few weeks ago and I believe the new estimated completion schedule is October or November of 2013 to complete the EIS (environmental impact statement) and that had to do with some land issues and getting access to property to do cultural things. We had some issues with the BLM (Bureau of Land Management) to get access for our detention work. To do the detention plan that we needed to put in the EIS, we have to actually go analyze the sites. We had to do some borings and before we can do the borings we have to do the cultural analysis. So it’s a very complicated process and that whole process has now become the critical path, believe it or not. The detention basin and storm water management have become the critical path of the EIS to get that work done and that has pushed it back two more months.

But the airport is still on the drawing board for 2019?

Yeah, 2019. If we get the EIS in that period of time and we do the design and construction, we could have it open in 2019. Of course with the reduction in traffic and with the economy, it’s not a question we’re getting as often as we used to. People were really nervous when they looked at all the charts and we were going to run out of capacity before all the hotel rooms even got completed. Of course a lot of those now are not under construction. I think people are more worried about filling the hotel rooms they have and wondering what’s going to happen when those additional hotel rooms come on line in this difficult economy. They’re probably not as worried about whether we’re going to have an airport open in 2018. Let’s hope we get back to those kinds of concerns. They’re probably better issues to try to wrestle with and the kind of challenges we want to solve than the challenges we’re working with today.

Richard N. Velotta covers tourism for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4061 or at [email protected].