Detroit terminal opening in industry slump

AP Business Writer

updated 11:52 a.m. ET Sept. 16, 2008

ROMULUS, Mich. - Detroit Metropolitan Airport's new terminal has more retail and restaurant space than its predecessors, the latest in energy-efficient lighting and refueling technology and room to expand.

What it couldn't account for during the four-year design and construction process was opening amid an industry retreat. Saddled with high fuel costs, airlines are cutting flights and raising ticket prices, leaving some airports to delay big projects.

Still, the $431 million colorful terminal opening Wednesday further raises the airport's national and international profile, building on the 2002 opening of a $1.2 billion, 97-gate terminal serving as one of Northwest Airlines' main hubs.

The new terminal has 50,000 square feet of retail and restaurant space — more than double that in the two terminals it replaces — although about 9,000 square feet is yet to be occupied.

Now dubbed the North Terminal, it is soon expected to be the first major airport facility in the country to bestow naming rights on a bidder.

It accommodates Spirit, American, Southwest and United Airlines and others. Lufthansa and Royal Jordanian airlines also are moving in from the larger McNamara Terminal.

The new terminal is being financed with bonds to be paid off with revenues from a $4.50-per-ticket surcharge. Like many other airports, Detroit Metro uses a residual financing mechanism, through which it generates revenue from parking, rental cars and other concessions.

Airport spokesman Scott Wintner said the $431 million price tag is modest by airport development standards. He said the budget was set during the last downturn in 2001 and held to as construction began during the relative boom of the mid-decade.

Fact file A look at Detroit’s new airport terminal Information about the North Terminal project at Detroit Metropolitan Airport in Romulus, Mich.: WHEN IT OPENS: Wednesday WHERE IT’S LOCATED: The 3,000-foot-long terminal is being built on the site of the demolished Davey terminal. WHO WILL USE IT: Air Canada, Air Tran, American, Frontier, Southwest, Spirit, United, USAirways/America West, USA 3000 and all charter airlines. Lufthansa and Royal Jordanian will switch from the McNamara Terminal, used primarily by Northwest Airlines. AMENITIES: 24 gates, with two more expected to open in the spring of 2009; 40,000 square feet containing 14 retail outlets including Borders, Brookstone, USA Today TravelZone, Sports Illustrated and a duty-free store; and 21 restaurants including Ruby Tuesday, McDonald’s, National Coney Island, Caribou Coffee, Coffee Beanery Cafe and Le Petit Bistro. Source: The Associated Press

Standard & Poor's analyst Kurt Forsgren said it's tricky to balance economic cycles with major airport construction, since airports have to build for more than they need, even in a slowdown.

Airports in Oakland, Calif., and San Luis Obispo, Calif., which both have lost major airline service, are canceling or delaying terminal projects.

"There's an inability to forecast what's going to happen five years from now," Forsgren said. "No one likes to open a facility when the outlook is so bleak. (But) what hasn't changed is people still need to get around this country. The fundamental demand is expected to continue to grow over time."

Wintner said the airport has had its best year so far in terms of passenger levels, despite a struggling local economy and modest schedule trimming by airlines — and he thinks Detroit Metro will weather cuts better than smaller airports.

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