Examining the past, present & future of the aviation construction business

In President Donald Trump’s assessment, the condition of America’s airports is equivalent to that of a third-world country. It’s not the first time the political realm has commented on the deteriorating conditions of the airports in the country’s major hubs, such as New York, New York; Los Angeles, California; and Washington, D.C. During his campaign for president, Trump said that infrastructure was “obsolete” and vowed to overhaul airports.

With more than 3,000 public-use airports in the country, United States airports desperately need updating. Federal grants from the Federal Aviation Administration (FAA) offer some funding for planning, development and/or noise compatibility projects.

The FAA’s Airport Improvement Program (AIP) provides “grants to public agencies—and, in some cases, to private owners and entities—for the planning and development of public-use airports that are included in the National Plan of Integrated Airport Systems (NPIAS).”

 

 

A public-use airport is an airport open to the public that is publicly owned, privately owned but designated by the FAA as a reliever, or privately owned but having scheduled service and at least 2,500 annual enplanements.

According to the FAA, to be eligible to receive a grant, “an airport must be included in the NPIAS. The NPIAS, which is prepared and published every 2 years, identifies public-use airports that are important to public transportation and contribute to the needs of civil aviation, national defense and the Postal Service.”

According to the 2019-2023 NPIAS, there are 19,627 airports in the U.S. Currently, 5,099 of those airports are open to the general public, and 506 of them serve commercial flights.

The Past

“We need to make long-overdue investments in America’s airports, roads, rail system and other assets that encourage travel,” Roger Dow, president of the U.S. Travel Association, said in a speech on the state of the U.S. travel industry at the National Press Club in February. “Travel and commerce are inextricably linked,” he added, noting that “travel is the front door to economic development,” which further emphasizes the need for infrastructure improvements to better accommodate that development.

“America was once the global leader of transportation and infrastructure innovation, from the development of the Interstate Highway System to the first commercial flight,” Dow said in 2018. “Outdated, inefficient and deteriorating infrastructure is a drag on our economy and way of life, and that’s what U.S. travelers have dealt with over several decades.”

 

In the U.S., many airports are more than 40 years old. In fact, Denver International Airport (DEN) was the last new major airport built … in 1995. According to The Brookings Institution, spending on transportation infrastructure in the U.S. has dropped $4.2 billion since 2007.

The Present

Record traveler volumes over the past few years have made updates to the aging infrastructure imperative. “With major terminal construction projects now underway in L.A., Boston, Chicago, Atlanta and many other airports, it is becoming impossible for travelers not to experience some form of disruption,” said Michael Taylor, travel intelligence lead at J.D. Power, in a recent press release.

Key findings from the J.D. Power “2019 North America Airport Satisfaction Study” include stagnant traveler satisfaction rates after several years of growth. The study attributes this factor to lower-than-average facility access scores, owing to airport accessibility and construction delays.

Newsweek’s coverage of “The Worst Airports in the U.S.” makes mention of the country’s most failing campuses. Unfortunately for travelers, much of the 2017 rankings still hold up. According to the American Society of Civil Engineers, the U.S. airports that need the most infrastructure spending currently are:

  • LaGuardia Airport (LGA)—As a major Northeast hub, LGA serves around 28 million people each year, but was ranked the worst in the U.S. in J.D. Power’s “2016 North American Airport Satisfaction Study.” However, last fall, Delta’s first new concourse opened as part of a complete rebuild of LGA.
  • Newark Liberty International Airport (EWR)—Also low in the ranks according to J.D. Power, EWR is reputed to have one of the highest rates of flight cancellations in the country.
  • Chicago O’Hare International Airport (ORD)—With 867,635 flights in 2019, ORD suffers long delays and boasts some of the longest security-line wait times of any airport. According to MiFlight, ORD’s average wait is about 24 minutes, and the longest is over 3.5 hours.
  • John F. Kennedy International Airport (JFK)—As the busiest airport in the country, JFK also ranks low for reasons like including customs wait times, which average 55 minutes.
  • Philadelphia International Airport (PHL)—Ranked third worst by J.D. Power, PHL is working on some improvements and recently completed a runway expansion to accommodate more international long-haul flights.

To exacerbate the situation, listed below are the top market pressures on all U.S. airports.

  • New safety and security requirements from federal authorities, including the FAA, Transportation Security Administration (TSA) and U.S. Customs and Border Protection (CBP)
  • New design guidelines from airport authorities
  • Changes in the fleet mix

 

The good news? Almost every major airport in the U.S. has a multibillion capital improvement program underway.

The Future

Current market pressures and the U.S. Department of Transportation’s 2019 announcement of the release of $478 million in airport infrastructure grants to 232 airports in 43 states (including American Samoa, Puerto Rico and the Northern Mariana Islands) has spurred movement where renovation and expansion projects are concerned. This is the fourth allotment of $3.18 billion in FAA Airport Improvement Program funding for airports across the U.S.

At press time, Trump had announced a proposed budget for the upcoming fiscal year that included $1 billion for federal infrastructure spending, much of which will go toward surface transportation improvements. While many in the industry remain hopeful that a federal infrastructure plan will come to fruition in the coming year, the plan remains a bipartisan issue held up in Congress.

Aviation Projects in the Headlines

Moving forward, the greatest airport investments will likely be in terminals—whether new, expanded and/or renovated—with the primary objective being capacity enhancement to meet the new demand for air travel. Airfield pavement projects are ubiquitous, but don’t represent the largest investment category. Most of these efforts are rehabilitative in nature, with few new runway projects planned.

The 2017–2021 NPIAS identified an investment need of $32.5 billion in projects eligible for federal funding for public-use airports (3,332 existing and 8 proposed). According to the NPIAS report, there is currently a national initiative to improve nonstandard airfield geometry (think surface markings on airport taxiways) beginning, which should increase development costs in the next NPIAS report.

 

Design-build and construction manager at-risk models are gaining interest by airport sponsors, where available. Public-private partnerships (P3) for components of U.S. airports continue to increase in frequency, while airportwide P3s continue to be rare due to higher cost of capital.

Some U.S. airports are finally getting the capital improvement funding they so desperately need. A prime example of this are at Miami International Airport, which has announced $5 billion for a terminal optimization program and a cargo optimization, redevelopment and expansion. And Orlando International Airport’s multi-phase project has $2.15 billion in play at its new South Terminal Complex, which will comprise 19 gate terminals upon its 2021 completion.

 

The construction industry remains bullish where aviation construction is concerned. It is a sophisticated business and requires the best professionals at all levels. But the profit margins are better, too.