September 18, 2013

MCI’s Cost Per Enplanement (Terminal Financing – Part 4)

During the Sept. 10 Kansas City Airport Terminal Advisory Group meeting, panelists discussed airport financing. In a slide show presentation, Aviation Department Chief Financial Officer John Green indicated that with their key assumptions, cost per enplanement (CPE, or cost per passenger) will grow from the current $5.25 to between $14.36 and $18.70 in 2022 if the single terminal is built.

As my colleague Joe Miller wrote several weeks ago:

Having a high cost per passenger can mean fewer passengers, as the marginal leisure traveler chooses not to fly for vacation and businesses decide to economize on airline tickets. This, in turn, reduces airline profits and constricts service, which further pushes up CPE. This is precisely why that measure is a major point in airport bond ratings, and why MCI [Kansas City International Airport] currently advertises the fact that its CPE is only $5. The Star seems to assume that $19 per passenger, far above the median CPE for peer airports, will have no effect on MCI’s bond ratings or competitiveness.

Now it appears the Aviation Department is also assuming that tripling the CPE will have no effect. While it may be unknown how a high cost per passenger impacts ticket cost, it likely does influence whether an airline chooses to fly out of an airport. Isn’t that the whole point, making MCI more attractive to airlines?

For more about this topic, read here and here.

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