Seven airlines that together carry more than 80% of the passengers at Seattle-Tacoma International Airport have requested the airport slash the fees they pay, citing their own “dramatic shortfall” in revenue because of the drastic downturn in travel during the pandemic.
In a July 27 letter to airport director Lance Lyttle, the airlines said it was unfair they are paying to keep the airport solvent while the Port of Seattle, which oversees Sea-Tac, doles out millions in rent concessions to struggling restaurants and shops filling the terminal.
The request drew criticism from airport labor, small business leaders, and even some at the Port.
Blaming much of the airport’s anticipated $251 million budget shortfall on a rent relief package the commission created for airport concessionaires, the airlines pitched a plan to pay only enough in fees to cover the airport’s operating expenses and debt obligations for the next two years, according the letter.
It’s not clear how much that reduction would be, or how the proposal — if enacted — could affect ongoing construction at the airport, some of which has been paused due to budgetary pressures from the pandemic.
Seattle-based Alaska Airlines joined American Airlines, British Airways, Delta Air Lines, Emirates Airline, JetBlue Airways and United Airlines in signaling displeasure at being expected to foot part of the bill for the rent relief package for tenants — which, the letter claimed, came “at the direct expense of airline users.”
Any such move would likely need to be approved by the five-member, publicly elected Port Commission. Several of them said Friday they hadn’t seen the letter before it was first reported by the Puget Sound Business Journal late Thursday.
“The Port recognizes this has been a crisis for all of our tenants and the community,” said airport spokesperson Perry Cooper in a statement, adding that the commission is reviewing the airlines’ letter.
Alaska and Delta, the two largest airlines at Sea-Tac, did not respond to questions about the proposal, including whether the airlines have requested similar relief from other airports. “We believe this is an important step to ensure our financial viability, as well as maintain and grow our ability to serve the community,” Alaska spokesperson Cailee Olson said in a statement.
Despite a $25 billion federal bailout, desperate U.S. airlines are shedding planes and cutting workers. Alaska recently announced rounds of layoffs are coming soon for some employees, and arranged retirement or long-term leaves for about 1,000 pilots.
Sea-Tac itself has also been hammered by falling travel due to lockdown measures to slow the spread of the coronavirus, coupled with passengers’ reluctance to get on airplanes during the pandemic. While passenger traffic has revived somewhat since spring, the airport is still seeing less than one-quarter the travelers it did in 2019.
Fewer fliers means less money for the airport, which had been relying on rent and fees paid by airlines, retail, dining and transportation providers at Sea-Tac to provide nearly 40% of the Port’s total anticipated revenues for 2020.
The federal government in April agreed to cover $192 million of Sea-Tac’s operating expenses, part of $10 billion disbursed to airports through the CARES Act stimulus package. At the time, Lyttle said the funds wouldn’t be enough to cover losses, which he projected to top roughly $251 million by the end of 2020.
The Port subsequently trimmed nearly $70 million from its operating budget by postponing dozens of aviation and maritime development projects.
At the same time, it attempted to shelter businesses at the airport from the brunt of the pandemic downturn. It extended airport dining and retail leases for three years and allowed them to pay rent as a percentage of revenues until the end of the year. Those businesses, and others including airport parking and car rental, also have had their rent deferred through the end of July.
Airlines, which in addition to the federal funds have already received from Sea-Tac a two-month deferral of rent and landing fees and an early $30 million refund on excess fees, asked the Port to “help share some of the financial pain the recent crisis has brought to bear.”
Airlines want to be exempted from reimbursing Sea-Tac for the cost of airport improvements. The letter also requested relief from a contract provision — requiring airlines to front an amount equivalent to 25% more than the airport’s debt payments — that airlines said “shift[ed] … responsibility for any revenue shortfalls from the Port to the airlines.”
Those shortfalls, the letter claimed, are “largely” due to loss of rent from airport concessionaires, “exacerbated” by the Port’s relief package to airport tenants.
“For the privilege of serving this community, the airlines agreed to make sure the airport remained solvent in the event of substantial industry downturn by backstop financing any revenue shortfalls at the airport,” the letter read. “It’s unlikely anyone could have foreseen such a dramatic shortfall in revenues such that the airlines would be asked to not only ensure financial viability, but also to ensure sufficient profits, especially at a time when so many businesses, especially airlines, are struggling.”
While airlines received quick federal and local assistance, airline contractor employees — who handle baggage and push wheelchairs, among other jobs — haven’t returned to work, said Matt Haney, the strategic director for Service Employees International Union Local 6, which represents hundreds of workers at Sea-Tac.
“Our folks are very upset to see these major airlines still with their hands out while the low-income, mostly immigrant workforce the airlines relied on to bring them record profits haven’t seen a cent,” he said in an email.
The airlines’ reference to “profits” is also “misleading,” said a Port official familiar with the letter who asked not to be named because he works with airlines. Federal regulations require the Port — a government agency — to plow any airport income back into the airport.
“The very premise of ‘running a profit’ at the Port is totally asinine,” he said.
Airport tenants, too, disputed the airlines’ framing. Much of the rent paid by airport tenants was deferred, not forgiven, said Pallino Pastaria managing partner David Montanaro. Montanaro lobbied for rent relief from the airport as a steward of the Small Business Airport Action Committee, representing his restaurant and more than 20 airport concessionaires.
“It’s no surprise that airport revenues are off significantly,” he said. “Everyone is hurting now.”