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Clark County approves third terminal

17 July 2008

LAS VEGAS, Nevada -- Clark County is pushing forward with a $1.8 billion airport expansion in Las Vegas despite pleas to hold off from airlines who fear there won't be enough passengers to justify the cost.

In a letter to leaders of McCarran International Airport, airline officials say the state of their industry is so shaky that every airport upgrade that can't be justified by current need should be canceled or delayed.

The letter got to the Clark County Board of Commissioners on Wednesday, moments before the board voted to award Perini Building Co. a $1.2 billion contract for the new terminal building, scheduled to open in 2012.

"The challenge we have had at the airport is to keep up with the growth," Clark County Aviation Director Randall Walker told the commissioners. "The only way we are going to get relief from that is the Terminal Three project."

The existing infrastructure at Terminal One is designed for about 42 million passengers annually. Last year, about 44.3 million people squeezed through the terminal, which handles most of McCarran's domestic airline arrivals and departures.

Still, on Wednesday leaders of Southwest Airlines, the carrier with the largest presence in Las Vegas, said they think Clark County should reconsider the expansion.

"What we want is to have the whole project assessed, and that is due to $145-per-barrel oil," said Bob Montgomery, vice president of properties for Southwest. "The economics of the business have changed significantly."

To catch up with the cost of fuel, which has increased nearly 100 percent in the past year, airlines are raising fares and adding fees for everything from on-board sodas to checking a bag.

Montgomery said the last thing passengers need is an increase in the amount of fees they pay to use McCarran. And new passenger fees are how Clark County plans to pay for the new terminal.

"The thing most people are unaware of is the users of an airport pay 100 percent of the cost," he said.

Currently, passengers pay an additional $5.50 on every airline ticket to support operations at McCarran International Airport, Montgomery said. The amount is below the median price of $5.81 among all the airports Southwest serves, he said.

McCarran officials didn't have an estimate Thursday for how much they would raise fees to pay for the new terminal. But the increase wouldn't go into effect until the terminal opens, which gives passengers and airlines about four years to brace for the cost.

By then there will also be about 30,000 new hotel rooms in Las Vegas, if the rooms now in development come to fruition. And more rooms traditionally mean more airline traffic.

Folks who track trends in the Las Vegas hotel and casino industry say to maintain Las Vegas' current occupancy rates around 90 percent, each new room will require nearly 300 new visitors annually.

With roughly half of Las Vegas visitors arriving by air, that translates to about 9 million more arrivals and departures at McCarran. That doesn't include locals using the airport.

Jeremy Aguero of the Las Vegas research firm Applied Analysis said airlines are in dire straits, to be certain, but that it would be unwise to hold off on long-term airport projects.

"If you are waiting until you are at capacity to construct that terminal, that is usually problematic," Aguero said.

That's because by the time the airport can't accept new capacity, local hotels will need new customers to fill rooms.

"That is sort of Las Vegas in a nutshell," he said. "Supply has a tendency to create its own demand."

Clark County Commissioner Rory Reid agreed.

"The only reason to (delay) that I can see is to serve the short-term interests of the airline industry," Reid said Wednesday. "I don't think it is in the community's interest to stop."