Capital Uncertainty

COVID-19 Accelerates Some Projects, Puts The Brakes On Others

BY ANDREW TELLIJOHN

LaGuardia Gateway Partners announced in June that the first phase of its LaGuardia (LGA) Terminal B project – a $5.1 billion project redeveloping one of the nation’s over-capacity and under-cared-for airports – was completed and open.

The completion of the Arrivals & Departures Hall for the new Terminal B, where departing passengers check-in and pass through security to a new collection of post-security food and retail or arrivals pick up their baggage and head for their destination, meant that 80 percent of this project was finished.

COVID-19 had some impact on the project. There were challenges, for example, with regulations changing on the fly.

“It’s one thing to work to the building code and the regulations that you knew were on the books,” says George Casey, chair and CEO of Vantage Airport Group and director of the LaGuardia Gateway Partners board. “It’s another when new things come into place that are events that were unforeseen.”

But he credited the experience and flexibility brought to the project by Vantage and its partners, who were able to keep workers safe and construction largely unimpeded.

“[We] couldn’t keep up the exact pace we had before, but we could still keep generally on track with nominal interruption,” he says “COVID set us back a matter of weeks, but not multiple months.” Accelerating Projects

LaGuardia Gateway Partners unveiled phase one during a time when travel was down more than 90 percent across the country. While most of the news across aviation through the second quarter of 2020 was bleak, some airports kept plowing forward with infrastructure investments to set themselves up for the future.

Nobody wanted to see the industry’s traffic drop dramatically, but many of the airports that have chosen to keep moving forward on infrastructure projects have been able to speed up portions, simply because managing heavy traffic flow has been largely taken out of the equation.

That was true for Vantage when it was completing the first phase at LGA. “There were circumstances where lower traffic levels allowed us to work through construction, logistics, operational and management issues,” he says.

Some, including LaGuardia Gateway Partners, even used the downturn in passenger counts to accelerate projects that otherwise might have been phased.

Low traffic levels will substantially accelerate the completion of a new terminal at Salt Lake City International Airport (SLC), where the first phase of construction is scheduled to be finished in September.

After it became clear the degree of impact COVID-19 would have on the industry, airport officials met with Delta Air Lines and other stakeholders to determine whether they could speed up the next phase. Initially, says Bill Wyatt, SLC’s director, the plan had called for continuing to use portions of the old airport as the new facility was being completed. But with traffic down they decided instead to tear down those facilities earlier than planned.

“It’s going to save us two years on the project and could save us up to $300 million or so in capital costs,” Wyatt says. “Most importantly, during the course of construction, not only does it reduce risk, but it reduces annual operating costs, because operating the old airport and the new airport at the same time was going to be, relatively speaking, expensive. We’re excited about it.”

He acknowledges some risk in making the call to bump things up from a completion date of 2027 to around December 2024. If a COVID-19 vaccine is discovered quickly and travel starts taking off, “We’d be pretty tight,” he says, adding that “I don’t really expect that. … It feels like we have somewhere between a threeand five-year ramp back to what people would have considered to be normal.”

The Port of Seattle opted to continue with many of its expansion and modernization projects at space-constrained SeattleTacoma International Airport (SEA). The largest of those are the $780 million International Arrivals Facility and the $485 million North Satellite Renovation and Expansion.

These and other projects were considered for acceleration because certain elements could be done simultaneously rather than through sequencing required to limit the impact to airport operations, traffic and passenger experience. The Port saw moving forward as a way of helping boost the local economy through the COVID19-related downturn and provide jobs to locals.

“As one of the largest public sector builders in the region, the Port is uniquely positioned to help lead the region’s recovery,” notes Peter Steinbrueck, president of the Port of Seattle Commission. “Our goal is to help keep construction workers employed by providing certainty to large public works construction projects, accelerating some projects where feasible, and by supporting our private sector partners.”

Not Just Large Airports

Many of the highest-profile projects are ongoing at LGA, John F. Kennedy International Airport (JFK), Los Angeles International Airport (LAX) and other international hubs, but work is moving forward across the country in small- and medium-sized airports, as well.

Kansas City International (MCI) waited years to get approvals necessary to replace three dated terminals with a new, stateof-the-art facility. With construction well underway when COVID hit, the airport has continued making progress toward an early 2023 opening.

“Steel erection has been going well and we’re in the early phases of the elevated roadway construction,” says Justin Meyer, deputy director of aviation for marketing and air service development. “The parking garage will begin soon.”

The Concourse B Modernization project at Memphis International Airport (MEM), which involves widening corridors, increasing the size of boarding areas, raising ceilings and adding natural light to improve the aesthetics so the airport can consolidate all operations in that building, was deemed essential and kept on track.

And Asheville Regional Airport (AVL), which has been bursting at the seams for several years, has continued planning and executing some preparatory projects for a new terminal building, with hopes of a late 2021 or early 2022 groundbreaking.

Executive Director Lew Bleiweis certainly never anticipated this kind of decrease in passenger travel and he hopes travelers return soon. But for an airport that had been overflowing with record travel in recent years, the slowdown actually has been helpful in making sure some of the planning gets done well.

“It really puts us either equal to or in front of the eight ball rather than flying behind it,” he says. “It gives us time to catch up, gives us time to properly plan while our passenger numbers are down. Hopefully they will not be down too long, but this is not going to be a “V” shaped recovery. We will have a growth period of time so we can appropriately plan.”

The decrease in traffic, Bleiweis says, actually makes certain aspects of planning and executing a project easier. For example, AVL is currently upgrading sewer and water infrastructure necessary for starting on a new terminal build. That work is taking place in front of the existing facility.

“We anticipated a nightmarish experience with traffic and travelers going through, reducing our drive lanes in font of the terminal by half,” he says. “We weren’t quite sure what was going to happen, but we had to move forward with it. With the lack of traffic right now, we’re able to move through that project pretty easily and it’s not disrupting a lot of travelers.”

Other Projects On Hold

While construction crews have been busy at several airports across the country, some municipalities have made the decision to put the brakes on projects.

Pittsburgh International Airport’s (PIT) $1.1 billion modernization, aimed at rightsizing the facility for its future as an originand-destination airport rather than a hub, is slated to include a new landside terminal tucked between the current airside building’s C and D arms. That project was indefinitely placed on hold when Pennsylvania Gov. Tom Wolf ordered nonessential businesses closed earlier this year.

At San Francisco International (SFO), a $1 billion project to renovate a portion of Terminal 3 where United Airlines operates has been put on hold until at least the end of the year. The big buck project that will create 190,000 square feet of new space and targeted upgraded amenities, architectural finishes and more concessions, had been slated to start in June, but lack of passenger and flight activity shelved it.

“Lack of passenger demand doesn’t warrant taking on the debt service associated with a $1 billion project,” says spokesman Doug Yakel.

Yakel and Mark Van Loh, president and CEO at the Jacksonville International Airport (JAX), both experienced some relief that they were still a few months away from breaking ground on their big projects when COVID tanked travel.

JAX was initially down 95 percent in travel counts and Van Loh suspects it’ll be three to five years before traffic returns to 2019 levels, a record-setting year for many airports.

The airport has decided to move forward on some smaller projects, such as a terminal re-roofing and baggage claim renovation. But JAX decided to hold off on building its new $200 million Concourse B.

“We had already started lining up financing. We had hoped to break ground late this summer,” he says. “I’m so glad we didn’t have the steel coming out the ground when this hit. We were fortunate in that aspect, that we didn’t start.”

Little Bit Of Both

Then there are airports where projects are both moving forward and temporarily backing off. At Dallas-Fort Worth International Airport (DFW), for example, airport officials had been working with American Airlines on the construction of a new terminal. A fourgate expansion of Terminal D, that acted as phase one of the project that would result in a new Terminal F, is proceeding as planned, as is the completion of a new integrated operation center, says Bill Begley, spokesman.

The new Terminal F building, however, is indefinitely on hold. “These projects are important for the airport, and so they also are important for the region,” he says. “At the appropriate time, we will sit down with American Airlines and discuss what comes next for the Terminal F project.”