Washington Airports Works with Airlines to Overcome Reagan National and Dulles Imbalance

The Metropolitan Washington Airports Authority (MWAA) Board of Directors has approved a new Use and Lease Agreement for airlines operating at Ronald Reagan Washington National Airport and Washington Dulles International Airport. The arrangement, which will take effect from January 1, 2015, will help the airport operator to develop a true airport system and balance investment and costs between the two airports.

This will see a $1 billion capital construction program at Reagan National to help accommodate the recent and expected growth in passengers as the facility expects to handle additional passengers due to the recent changes in airline slot holdings.

The capital construction project does not provide for expansion of the airport, the sole intent is to make Reagan National “better, but not bigger,” according to MWAA officials. It will include the construction of a new commuter concourse to provide enclosed facilities for the 14 outdoor boarding positions for commuter planes, which currently are accessed with bus services from a terminal gate.

The construction project also will include a new parking garage to meet increasing demand and the relocation of security checkpoints to the ticketing level which will improve the flow of passengers between concourses and convert the National Hall shopping and dining area to post-security space to serve awaiting passengers.

Additionally, the project will study additional long-term improvements that may be needed for Terminal A to accommodate anticipated passenger activity levels and relocate the Airports Authority corporate offices, which are currently on the site where the commuter concourse will be built.

For decades, Reagan National’s passenger numbers have been constant around the 16 million passengers per annum figure. But, in more recent years, these have grown to more than 20 million and are expected to surpass 22 million next year due to American Airlines’ slot allocation divestures generating more passenger activity at the airport.

As a condition of its merger with US Airways, the US Department of Justice ruled that American Airlines was required to divest 43 slot pairs at Reagan National and open the previously constrained market to new airline options. This resulted in the closure of flights to some local markets, the majority served by small regional jet equipment. These have been replaced by flights from JetBlue Airways, Southwest Airlines and Virgin America, using larger equipment.

These new flights are providing new service options from Reagan National for both residents and travellers to Washington. Many of these are providing competitive service to a number of destinations, including new airports not previously served from Reagan National such as Dallas Love Field and Chicago Midway. The slot divesture has seen Southwest move from the fifth largest to second largest airline at the airport.

At Reagan National, the new service following the American Airlines and US Airways merger divestiture is clearly the major highlight for 2014. We expect to see the full impact of this in 2015,” Donald Fields, head of passenger air service development, Metropolitan Washington Airports Authority told Routesonline in an interview this week.

“The American Airlines – US Airways merger, is likely the last major US airline merger affecting Reagan National, thus opportunities for significant numbers of slots changes are much less likely in the future. Airlines are now giving Dulles International greater consideration.”

Donald Fields
Head of Passenger Air Service Development, Metropolitan Washington Airports Authority

“We are expecting as many as two million more passengers at Reagan National in 2015 largely due to upgauged equipment. This could lead to the largest one-year increase in Reagan National passengers in its history. Total passengers could exceed total passengers at Dulles International and Baltimore-Washington International,” added Fields.

This growth will certainly leave an imbalance between the two airports as terminal facilities become more congested at Reagan National as a result of increased passenger activity, and a corresponding decline in passengers at Dulles International creating this imbalance in the efficient operations of the two-airport system.

“There have been negative impacts on Dulles International from prior divestitures following commercial transactions at Reagan National such as the Delta/US Airways slot swap, and Congressional actions regarding the Reagan National perimeter rule (1,250 miles),” explained Fields.

“The Airports Authority was created to operate the two airports as a system. So, with greater utilisation of Reagan National slots, we will be devoting far greater attention to bringing balanced growth to the two airports, with particular focus at Dulles International,” he added.

The landmark new Use and Lease Agreement will for the first time allow revenue sharing between Reagan National and Dulles International. Although Congress directed the MWAA to operate Reagan National and Dulles International as a two-airport system, the Use and Lease Agreement that has been in effect since 1990 did not allow revenue generated at one airport to be used to cover costs at the other.

This new agreement allows as much as $300 million in revenue to be shifted from Reagan National to help offset operating costs for Dulles International over the next ten years. “The American Airlines – US Airways merger, is likely the last major US airline merger affecting Reagan National, thus opportunities for significant numbers of slots changes are much less likely in the future. Airlines are now giving Dulles International greater consideration,” said Fields.

“We needed greater flexibility to manage the system, and we have achieved that through provisions in this new agreement, which give us new financial tools that were not previously available,” he added.

MWAA has already made previous capital expansion works at Dulles and has no plans over the three years of this agreement to invest in the airport. “We will be using this provision to transfer revenue earned at Regan National to reduce airport costs at Dulles which have risen due to significant capital improvements in recent years,” said Fields.

The agreement also holds scope for further revenues to be transferred from Reagan National to Dulles International should the US Government create any new beyond-perimeter slots at the more centrally located Reagan National.

Fields confirmed that the agreement “provides for additional revenue to be transferred to Dulles should there be future changes to the flight makeup at Reagan”. It is believed this could equate to an additional $1.5 million per slot pair created by the US government.

The new agreement provides an excellent platform for the MWAA air service development team to attract new operators and increase the network map and connectivity of the Washington Airport system, which is also served by Baltimore Washington International Thurgood Marshall Airport, a focus destination of Southwest Airlines.

“We have several large Washington markets that still do not have non-stop service in Latin America and Asia.  There are a few markets in the Middle East, and still others in Europe we are pursuing.”

Donald Fields
Head of Passenger Air Service Development, Metropolitan Washington Airports Authority

MWAA expects to see the full impact of this year’s new services at Reagan National in 2015. But while the new services at the slot-limited airport may have dominated industry news, the airport operator has attracted more carriers to Dulles International, most notably Frontier Airlines, the first ultra-low-cost carrier at the airport, which is offering links to 17 destinations. Elsewhere in the domestic market, United Airlines also began seasonal service this year to popular ski destinations Jackson Hole, Wyoming and Steamboat Springs.

In the international arena, Air China launched a non-stop service to Beijing – providing a second daily service alongside United Airlines four days a week. “Beijing, in fact, is now the 12th destination where Dulles has non-stop international service by more than one airline,” noted Fields.

Dulles International has also seen the return of United Airlines’ seasonal link to Madrid this year, and the carrier also began seasonal service to Nassau in the Bahamas. Another major highlight was British Airways deploying its Airbus A380 on its route from London Heathrow - the second A380 at Dulles after Air France.

There are also two new routes already confirmed for 2015, which will see two new airline brands at Dulles, adding complementary services to two markets already served from the airport. Aer Lingus will offer a flight from Dublin, while Alaska Airlines will operate a domestic route from Seattle’s Tacoma International Airport. Hub carrier United Airlines has also recently announced a second daily flight on its route to Paris Charles de Gaulle for summer 2015.

“The welcome mat is definitely out to all airlines at Dulles”

Donald Fields
Head of Passenger Air Service Development, Metropolitan Washington Airports Authority

However, although the airport is served by 28 international carriers offering links to over 50 international destinations, Fields still sees more opportunities on almost every continent from Dulles.

"We will of course be working with our hub carrier United Airlines to grow domestic service markets, as well as with Frontier and other domestic airlines. Outside of the USA, we have several large Washington markets that still do not have non-stop service in Latin America and Asia. There are a few markets in the Middle East, and still others in Europe we are pursuing,” said Fields.

“The welcome mat is definitely out to all airlines at Dulles,” he added.