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July 30, 2014

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Slow rebound for McCarran traffic

Many airlines scaling back to recover

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Tiffany Brown

Construction is under way on Terminal 3 at McCarran International Airport. It will have 14 gates, six capable of handling international arrivals and departures.

The airline industry’s recovery won’t necessarily lead to more flights in and out of Las Vegas, McCarran International Airport’s director told a Southern Nevada real estate organization.

The reason: Some airlines are cutting flights as part of their recovery strategies.

Clark County Aviation Director Randall Walker pointed to the downsizing of US Airways in Las Vegas as an example of a carrier trimming capacity as a means to become profitable.

Over the past two years, the Tempe, Ariz.-based carrier has cut more than half of its Las Vegas flights and now has 34 daily operations to and from McCarran. But Walker said the damage may not be as bad as some perceive because 20 percent of US Airways’ McCarran traffic connected passengers to other flights and didn’t result in customer stays in Las Vegas.

Some of the capacity Las Vegas lost is slowly being picked up by other carriers, Walker told the Southern Nevada Chapter of NAIOP, the Commercial Real Estate Development Association, at a breakfast meeting March 18.

Walker said Miramar, Fla.-based discount carrier Spirit Airlines picked up abandoned US Airways routes to Detroit and Fort Lauderdale, Fla., and Frontier, Midway and Allegiant Air have added capacity during the recession.

Walker said high fuel costs still hamper the airline industry and discourage expansions, especially on the long-haul routes Las Vegas needs most.

Fuel costs about $80 a barrel, said Walker, who monitors the price daily. In 2005, airlines were cringing when the price was hovering around $50. In 2008, it climbed to about $145 a barrel.

“If it gets to $100, we’ll be back to where we were in 2008,” Walker said. “I’m thinking we’re not going to get back to the 2007 high-water (traffic) mark anytime soon.”

“This (high fuel costs) dissuades a lot of carriers from looking at long-haul markets into Las Vegas and that’s the area where we’re underwater in terms of supply and demand.”

One high-profile exception is British Airways’ decision to offer daily nonstop service between London’s Heathrow International Airport and Las Vegas. It was the only new nonstop route from Europe to North America last year, and it was the first time a foreign carrier started a transoceanic route to Las Vegas with daily service. Most carriers start with two or three flights a week.

Walker said another international route on the horizon for Las Vegas in May is tiny XL Airlines’ twice-weekly scheduled charter service between Paris and Las Vegas.

Walker said airport officials and the Las Vegas Convention and Visitors Authority have focused on recruiting foreign carriers because domestic carriers have too much invested in their U.S. hubs to offer point-to-point service to Las Vegas from overseas.

“We tell foreign carriers that they would have a competitive advantage over U.S. domestic carriers if they offered nonstop routes to Las Vegas,” Walker said. He points to the successes enjoyed by Virgin Atlantic and British Airways over airlines such as United, American and Delta.

McCarran will have new accommodations for international flights in 2012 when the $2.4 billion Terminal 3 is scheduled for completion.

Terminal 3 will have 14 gates, six capable of handling international arrivals and departures. It will be able to accommodate five wide-bodied jets at once. The current international facility at Terminal 2 can handle two at a time. Terminal 3 will be able to process 2,000 international arrivals an hour compared with 800 an hour at Terminal 2.

Walker said Terminal 3 is considered a “unit terminal,” meaning it will have airline ticket counters and baggage claim areas and can operate independently of the other terminals. But Terminal 3 also will provide access to passengers going out from Terminal 1’s D Gates.

“It’s definitely going to be a learning process when we open in June 2012 because passengers will have to know where their airline is at the airport before they show up,” Walker said.

Terminal 3, which has eight subcontracted projects under way such as roadways and a parking garage in addition to the terminal building, is the largest single construction project undertaken at McCarran, Walker said.

He anticipates critics will second-guess why airport officials decided to proceed with a multibillion-dollar project in the middle of a recession. But he told the breakfast meeting he thinks it was the right thing to do.

“The conversation went something like this,” Walker said. “You have one of two risks. One risk is you could build the facility and we open up in 2012 and we don’t need it. The second risk is that you do not build the facility and in 2012, (convention authority President) Rossi (Ralenkotter) has been able to encourage all these additional people to come to the community and they can’t get here.

“So which risk do you want to take? The (Clark County Commission) chose to take the risk of going forward with the project. I think that was the right decision, but there will be a lot of people that will want to second-guess that in June 2012.”

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