Airport Finances Under Pressure

Air traffic at Milwaukee Mitchell International Airport rebounded a bit in late spring and early summer, but it’s not likely to do much better.

And it’s having a serious effect on the finances of the airport.

As Urban Milwaukee reported, air traffic improved somewhat in early summer after dropping by more than 90 percent when the pandemic hit. At the time, airport officials thought that air traffic would bounce back throughout the rest of the year. But now, airport Director Brian Dranzik said “it’s very unlikely that we’ll reach those levels that we thought we may back in the summertime.” 

In the middle of July, when the airport was seeing the best air traffic it had seen since the start of the pandemic, it was still down 70 to 75 percent compared to last year. And fall, Dranzik said, is typically a lull period for the airport. During that time, the airport is mostly supported by business travel, which has been almost non-existent since the pandemic started and is not likely to return until sometime in 2021.

All this has severely cut into revenues for the airport, airlines and airport concessionaires. Dranzik told the county board’s Transportation, Public Works and Transit Committee that the airport is having trouble collecting payments from some of the concessionaires and that it will have to ask airlines to make up the revenue deficit they expect for this year.

The airport has a break-even budget that gives the airlines any revenue surpluses at the end of the year but also requires them to make the budget whole any year that there is a budget deficit. This is set in the agreement the airlines have with the airport, Dranzik said. Right now the deficit looks like it will be more than $4 million.

The airport sets its budget based upon service level estimates provided by the airlines. These inform the airport’s projected revenues that aren’t directly related to flying, like parking, car rentals, retail and food and beverage sales.

It’s these latter areas that are giving the airport revenue trouble. Dranzik said some of the business partners at the airport have not made any payments to the airport, despite monthly updates of what they owe. “We’re looking to make sure that we’re collecting at least… some amount of rent that is owed from the retail activity that is going on,” he said.

While the success of the concessionaires and businesses at the airport is dependent on air traffic from the airlines, it’s assumed that the airport will collect those payments. So, the airlines won’t cover that lost revenue at the end of the year.

The airport has already made a number of budget reductions this year, and they will need to adjust anticipated service levels going into 2021. The revenue generated from concessions and passenger facility charges are used to pay down debt and fund airport capital projects. Right now, the only work being done on the airport is that which is absolutely necessary to keeping it functioning.

“This could all be resolved… should we get a federal bill,” Dranzik said. Something like the CARES Act, he said, would stabilize the airport this year and into the next.