Business Monday

Fort Lauderdale-Hollywood International Airport: a new path to growth

When Bob Garrison, of Toms River, N.J., vacationed in Fort Lauderdale in December, it was a natural to use Fort Lauderdale-Hollywood International Airport, but he prefers it even when flying down to visit the Florida Keys.

“It’s much more convenient and easier than Miami. That’s the overall reason,” Garrison said.

If all goes well with the $2.3-billion expansion underway at FLL, the airport will emerge with ample room to handle more passengers and jets while preserving its reputation as affordable and convenient. (It is touting a slogan of “Breeze In. Breeze Out.”)

FLL, which during the past decade has solidified its position as South Florida’s airport of choice for budget-minded travelers, is well along in the construction of a new $791 million, 8,000-foot south runway.

Confident of finishing it on time, airport officials have nailed down an opening date of Sept. 18. That will boost the airport’s capacity and flexibility by providing a second runway able to handle large commercial jets. And because it’s parallel with the north runway, the airport will be able to handle takeoffs and landings simultaneously.

The new path, dubbed 10R/28L, is an engineering feat, a sloping ribbon of elevated concrete that parallels Griffin Road, plunging in a 60-foot precipice at its eastern end, with U.S. 1 and the Florida East Coast Railway tunneling beneath.

To build it, the airport had to give up a short south runway used for small planes and its diagonal runway, leaving the busy facility to make do with only its 9,000-foot north runway, 9L/27R.

The airport, run by Broward County, also is modernizing three aging terminals and completely rebuilding the fourth, Terminal 4, a huge project that will run through 2017.

The facilities, most of which date to the 1980s, will get high ceilings, artwork, and more shops and restaurants. All told, the expansion will boost the number of gates to 66 from 58.

Yet for all the change ahead, a key aspiration is to preserve FLL’s reputation for low-hassle, affordable travel.

“The airport is known for its low fares and its convenience to get in and out of,” said Kent G. George, Broward’s director of aviation, who was hired in 2007 to kick-start the long-stalled airport expansion. “That won’t change.”

Another key aspect of the project is making the facility better suited for current security needs. Security checkpoints have been streamlined to ease passenger flow. Terminals 3 and 4 will get “in-line’’ baggage handling systems that monitor for explosives as bags move along the beltways, projects already done at Terminals 1 and 2.

The goal is to ensure one of the region’s major economic engines stays competitive. For fiscal 2013, some 23.6 million passengers flew in or out of the airport. While that was about flat with the prior year, the number of travelers has burgeoned 12.7 percent since a recession low of 20.9 million in fiscal 2009. That bustling flow is vital for business and tourism, including the cruise lines sailing from nearby Port Everglades.

Lured by Fort Lauderdale’s low operating costs, low-cost carriers from JetBlue Airways to Southwest Airlines to Spirit Airlines have flocked there. That contrasts with Miami International Airport, where it costs an airline more than four times as much to board a passenger and low-cost domestic airlines have retreated en masse (although a few international budget carriers fly there).

At FLL, New York-based JetBlue, a fast-growing, low-cost carrier, plans to grow to 100 daily flights by 2017 from its current 60 to 65 flights. JetBlue additions in 2013 included Medellín, Colombia; San Jose, Costa Rica; and Lima, Peru.

“There’s a lot of benefit in that new runway,” said Scott Link, JetBlue’s director of airports for the southeast. “We’ll see an improved flow of aircraft. With two runways, they’ll be able to handle arrivals and departures simultaneously.”

Southwest Airlines, the low-cost icon that flies nonstop to 25 cities from Fort Lauderdale, has zeroed in on the airport as a key site for launching its new international service. The carrier reached a deal with Broward County in December 2013, agreeing to oversee $295 million in upgrades to Terminal 1 to prepare for that initiative.

And Norwegian Air Shuttle, a prominent low-cost European carrier based in Fornebu, Norway, began service between FLL and Copenhagen and Stockholm in November 2013 with Boeing 787 Dreamliners. Norwegian plans to add nonstop flights between Fort Lauderdale and London starting July 4.

“It’s not by mistake we have the low-cost carriers here,” said Douglas Wolfe, chief financial officer for Broward aviation department. Even with the big capital spending, the airport will maintain its status as a low-cost center, he said. The trick to success: generating more revenue from improved airport concessions and parking and bringing in grants, so the share of costs the airlines have to shoulder remains small.

FLL boasts the lowest average domestic fare in the region: $274.86 for the second quarter of 2013. That was 25.5 percent below MIA’s average of $369.05 and 12 percent below Palm Beach International Airport’s $311.92, U.S. Bureau of Transportation Statistics show.

“With our low-cost fees to the airlines, we’re going to continue to be attractive to airlines in the future,” said George, an industry veteran who previously ran Pittsburgh International Airport.

For 2014, low-cost airlines will carry 61 percent of passengers enplaned at FLL, while legacy carriers like Delta Air Lines handle 39 percent, the airport said. A decade earlier, low-cost carriers made up 31.6 percent of FLL enplanements.

MIA, by contrast, has no low-cost domestic service left. AirTran Airways, which was acquired in 2011 by Southwest, was MIA’s last domestic low-cost carrier when it wound down service and then pulled out completely in June 2012.

“Miami is so big. It has too many people, and it cost more,” said Luis Canto Vivas, who was checking in last month at a JetBlue counter for a flight to Cancún, Mexico, with his wife and kids, who came on a shopping vacation to South Florida.

FLL’s cost per enplaned passenger was an enviable $4.16 for fiscal 2013. That key metric, which is paid by airlines, is the gap between an airport’s expenses and the revenue from concessions, parking and other business ventures.

With the added debt for the expansion, Fort Lauderdale’s cost per enplaned passenger is expected to rise modestly, peaking at about $6.51 in 2017, before tapering lower. By contrast, MIA’s cost per enplaned passenger is budgeted at $20.33 this fiscal year. Burdened by heavy debt, ballooned by cost overruns from its star-crossed expansion of its South and North Terminals, MIA’s cost structure is among the highest in the nation.

“Miami has space [for more airlines], but there’s an economic wall around it,” said Ben Baldanza, CEO of Miramar-based Spirit Airlines, which carried 18.1 percent of FLL’s passengers in the last fiscal year.

Anne Syrcle Lee, chief financial officer for Miami-Dade aviation department, said MIA’s passenger growth has exceeded expectations and that the airport is doing a great job of holding down costs, which together have resulted in a much lower CPE than anticipated when it took on debt to finance important expansion projects.

The two airports are serving “different markets,” she said.

During the first half of 2013, Fort Lauderdale carried 55.4 percent of the region’s domestic “origin and destination” passengers — those whose trips began or ended in South Florida — compared with MIA’s 27.1 percent market share and Palm Beach International’s 17.5 percent share, according to the U.S. Bureau of Transportation Statistics.

For its part, MIA, a much busier facility overall, has been flourishing in other ways: Already the No. 2 international hub in the United States behind New York’s John F. Kennedy International Airport, MIA carried 40 million passengers in 2013, its fourth consecutive record, fueled by continued growth as an international gateway.

As low-cost airlines expand more internationally, FLL is poised to gain in that service as well, particularly on shorter trips to the Caribbean and Latin America. “Fort Lauderdale is a logical jumping off point for our international plans for the future,” said Brad Hawkins, a Southwest spokesman.

Dallas-based Southwest’s recently unveiled plans to begin flying internationally for the first time hold big implications for FLL.

Southwest’s international ambitions are integral to upgrades planned for Terminal 1, including the construction of a new five-gate Concourse A. “The facility will be able to accommodate approximately 25 to 30 international daily flights and will serve as an international gateway facility for Southwest to operate flights to the Caribbean and cities in Central and northern South America,” according to a Broward aviation department summary.

The makeover of Terminal 4 —which houses Spirit, JetBlue and foreign carriers — entails an even bigger undertaking, totaling $450 million through 2017. Plans call for knocking down its Concourse H, which juts to the south, and building instead a 14-gate Concourse G that will run east-west, netting four more gates there and a host of new concessions.

Airport officials see little risk in the big spending plans. For one thing, FLL has a diverse base of airlines. Unlike MIA, where American Airlines and American Eagle account for 68 percent of passengers, FLL’s biggest carrier, JetBlue, had an 18.8 percent market share in fiscal 2013.

For all its economic promise, the airport expansion has drawn plenty of critics.

In a settlement with the City of Dania Beach, which sued to block construction of the new runway, Broward County agreed among other things to spend up to $116 million for noise insulation for some 1,700 homes, including hurricane windows and doors and roofing insulation. Of those, 857 homes hit hardest by jet noise will be eligible for sales assistance, with compensation of up to 25 percent of what market value would be if the runway hadn’t been built.

“These airports in South Florida are basically the biggest businesses in South Florida,’’ said Neal McAliley, a partner at the law firm of White & Case, which represents Dania. “They have a wide and diverse public benefit — but they also have adverse effects on a few.” The settlement, he added, “is not everything Dania Beach wanted, but it’s fair.”

Some neighbors fared well. Under a mediated settlement, Broward County paid $62 million to buy the Airport Hilton from an affiliate of Blackstone Group, the private equity giant. The hotel, at 1870 Griffin Rd., east of I-95, which sold for $25.9 million in July 2004, is set to be demolished beginning April 1 because it’s too close to new runway.

The hotel’s price was tough to swallow but necessary for the expansion nonetheless, said aviation director George.

“The runway is going to reduce delays,” he said. “It’s going to be better for operators and the customer.”