The Colorado Springs Airport plans to complete a complex restructuring of its finances next month that will lower costs for airlines by 50 percent - part of an effort to stem further losses after the departure of Frontier Airlines in 2013.
The final part of the restructuring - a $2.34 million loan from the Colorado Department of Transportation -, was approved last month by the state and awaits a final OK from the Colorado Springs City Council this month. The 10-year loan, which carries a 2.5 percent interest rate, will help the airport rebuild its reserves from past construction projects and is part of a larger plan to pay off much of the airport's debt and lower the interest rate on its remaining debt.
Airport officials used reserves in January to pay off $16 million in bonds and issued $11.2 million in bonds to refinance ones that carried a higher interest rate, since interest payments were the airport's second-highest cost after personnel, said Dan Gallagher, the airport's director.
The airport also eliminated 26 vacant positions, delayed buying vehicles and cut spending on supplies, utilities and other items that reduced the airport's budget by $4.7 million from last year, he said.
"We are trying to eliminate as much debt as possible," Gallagher said. "We now have reserves that would last 550 days, based on our current rate of spending. Our plan is to maintain about a year of reserves and use any reserves above that level to pay off debt. That will help retain the service we have now."
Airport costs are particularly important to low-cost carriers such as Allegiant, one of the five airlines that serve the Springs airport.
Gallagher hopes to use much of those excess reserves to make this year's payment on $8.8 million in bonds issued in 2007, and then pay them off next year, reducing the airport's overall debt to the $11.2 million refinanced earlier this year. The airport started the year with nearly $40 million in debt.
By paying off much of the airport's debt and refinancing the rest, airport officials will reduce debt payments by $4 million a year, cutting the airport's cost per departing passenger to $6.22 next year from $7.48 this year and $8.98 last year.
Without all the cost-cutting measures, the airport's cost per departing passenger - paid by airlines in rent and fees - would have soared to $13.20 this year to make up for $3.5 million in annual revenue Frontier generated for the airport before its exit from the Springs.
The state loan solves another looming problem for the airport, which had accumulated a deficit of more than $6 million in construction projects financed by a special fee that all U.S. airline passengers pay. The deficit resulted from airport officials using reserves to pay for part of runway, taxiway and other construction projects, then recouping those funds from the $2.89-per-ticket special fee, called the passenger facility charge. But revenue from the fee declined sharply as passenger traffic plummeted.
The airport's passenger numbers fell 40 percent from 2007 to a 22-year low last year, and declined another 18 percent in the first three months of this year. Traffic numbers improved in March, declining just 5.7 percent, the smallest drop in 14 months.
The state loan will help pay off the deficit and cover the construction project costs, eliminating the need to use reserves.
Gallagher said it could take the airport up to 10 years to eliminate the deficit.
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