Charlotte’s airport built itself into a powerhouse by rigorously sticking to its roots as a low-cost hub that connects travelers between planes as quickly and cheaply as possible.
But the nine gates opening at Charlotte Douglas International Airport next week in a new concourse aren’t just a major expansion to the airport’s capacity.
With more space for travelers, multiple outlets to charge devices in every seat, a soaring glass facade with Internet-connected panes of glass that change to regulate light — not to mention 2,000 square feet’s worth of and digitally generated LED artwork on pulsing screens that cover three walls — the gates represent a new vision for Charlotte Douglas, one with more focus on “passenger experience.”
It’s the first part of the airport’s $2.5 billion expansion and renovation program to open.
The plans also include renovating the existing concourses, building more gates and adding a runway. With growth, however, comes added expenses. The cost per passenger at Charlotte Douglas — largely paid by primary carrier American Airlines — has increased more than 50 percent over the past decade, though it remains well below comparable airports.
“That is a tricky balance,” said Brent Cagle, aviation director at Charlotte Douglas.
The airport is city-owned but independently operated and financed. “We know our (costs) will rise. That’s just the natural order of things. We’re on the front end of a large capital program, and that will lead to increasing costs.”
The airlines that lease space at Charlotte Douglas all gave their OK to the new gates, which will increase the airport’s gate capacity by almost 10 percent. Cagle said the airport’s projections show its per-passenger costs will remain below those of comparable airports, even after factoring in expansion costs.
Cagle said the new gates — which will serve non-American Airlines carriers, including JetBlue, United Airlines, Southwest, Frontier and Air Canada — will start relieving congestion immediately.
”We’re literally at 100 percent capacity for the (existing) gates,” which see an average of eight flights each per day, Cagle said. Too often, Charlotte Douglas hears from passengers with a similar story, he said: “ ‘Great, got to Charlotte 30 minutes early — sat on the ramp for a half-hour.’
“That happens every day. That’s really frustrating for passengers,” Cagle said. “This will be the first step in helping to relieve some of that ramp congestion.”
But the specter of once-booming airports that have been “de-hubbed” still flit around conversations about Charlotte’s future. Airports like Pittsburgh International and Memphis International that once hummed with passengers and built terminals to accommodate huge growth projections are now dealing with the new reality of empty gates and silent concourses.
At Memphis, officials are planning to close 60 gates at the former Northwest Airlines hub after the number of passengers fell from about 11 million in 2007 to 4 million last year. Airport executives at the former US Airways hub at Pittsburgh are forging ahead with a $1.1 billion plan to reduce the number of gates from 75 to 51 (the airport uses just 39 gates now, according to the Pittsburgh Post-Gazette) and modernize the facility.
“You never want to be overbuilt, and we’re not. Our program is completely scalable,” said Cagle. “If the world changes ... we can slow it down and stop it if we need to.”
The number of passengers at the airport has increased steadily, rising 3 percent to a new record of just under 46 million last year. That’s up dramatically from 2007, when about 33 million passengers traveled through Charlotte Douglas. American Airlines has added a dozen destinations since 2017, including Toledo, Ohio; South Bend, Ind.; Panama City, Fla.; and Barbados.
American Airlines will gain access to four more gates in the existing Concourse A after they’re renovated, potentially allowing the carrier to expand.
“We’re looking forward to that. It’s exciting,” said Dec Lee, the head of American Airlines’ hub in Charlotte. It’s the company’s second-busiest, after Dallas/Fort Worth.
High fares for locals
Charlotte Douglas remains extremely dependent on American Airlines, which operates its second-busiest hub at the airport. More than 91 percent of passengers at Charlotte’s airport flew on American Airlines in fiscal 2017.
Most passengers are transferring from one plane to another, not starting or ending their trip at the airport. That means Charlotte is particularly vulnerable to any shifts in routes from American Airlines that reduce the number of connections.
Airport executives point to the growing share of local travelers, however.
In fiscal 2017, the share of local fliers rose much faster than the airport’s traffic as a whole, jumping more than 6 percent. That means the local travel market is strengthening, with increasing demand from people who live in Charlotte.
Still, roughly 7 out of every 10 travelers connected through the airport vs. just 3 out of 10 who started or ended their trip at Charlotte.
Financial statements paint a mostly rosy picture for Charlotte Douglas. The airport’s revenue in fiscal 2017 rose more than 4 percent, to $294 million.
Expenses jumped at a faster clip, however, rising more than 8 percent, to $237 million.
But the airport’s available net revenue to cover its debts remained “extremely strong” at 5.4 times the level required by outstanding bonds, the airport said in its most recent financial report. And Charlotte Douglas has enough cash on hand to fund more than four years of its operating expenses.
Charlotte’s business model is a bit like Walmart: Push a lot of passengers through the airport as cheaply as possible, counting on volume to make up for low prices.
The average cost-per-enplanement (a standard industry metric that basically means cost-per-passenger) is $1.23. That’s up from 78 cents a decade ago, driven in part by construction and expansion costs, but it’s actually down from $1.35 in 2016.
Charlotte’s cost is well below other major hubs, and a major reason US Airways and its successor, American Airlines, have made it a primary hub: Atlanta’s cost-per-enplanement averages $2.50, Dallas/Fort Worth’s is $11.28, and Miami’s is almost $20.
“Historically, Charlotte’s been the most efficient large hub in terms of cost per passenger,” said aviation industry analyst Bob Mann.
But despite its low cost for airlines, Charlotte’s status as a so-called “fortress hub,” comfortably ruled by American Airlines, often means high airfares for local travelers. The average domestic, round-trip airfare from Charlotte averaged $412 last year, almost 20 percent above the national average.
The new gates could allow competing airlines like Southwest and Frontier to add flights at Charlotte Douglas, said Seth Kaplan, an industry analyst and managing director of Aviation Weekly.
“The new capacity will open up some opportunities for not just American but its competitors, too,” said Kaplan. “That could put some modest pressure on American’s competitive position in Charlotte.”
But Kaplan and Mann said they don’t see any major risk that American Airlines will lower the number of flights at Charlotte Douglas or take the more extreme step of removing the airport’s hub status.
“When any entity is very dependent on one other entity, there’s a certain level of risk that goes along with that,” said Kaplan. “But Charlotte isn’t an extra hub in a highly fragmented U.S. airline industry in the same way Pittsburgh, Cincinnati, Memphis and Cleveland were. ... Charlotte is by all accounts and appearances a profitable hub.”
Kaplan also said that the wave of consolidation that swept the airline industry starting in the early 2000s and culminating in American’s 2013 merger with US Airways won’t be repeated in the foreseeable future.
“American can’t merge with Delta and make Charlotte merge with Atlanta,” the Southeast’s other mega-hub, he said.
Despite Charlotte’s status as the seventh-busiest airport in the world (measured by takeoffs and landings), a majority of the airport’s revenue actually comes from much more earthbound sources. The single biggest source of dollars for Charlotte Douglas is parking, which accounted for $59.3 million, or more than 27 percent of the airport’s revenue.
Food, beverage and retail sales in the terminal accounted for another $42.5 million, or almost 20 percent, of the airport’s revenue. American Airlines accounted for $55.1 million, or just over a quarter of revenue at Charlotte Douglas. Delta Air Lines, by contrast, made up just $3.1 million, or 1 percent, of the airport’s revenue.
More construction on the way
In addition to the new Concourse A North gates, here’s a look at what travelers at Charlotte Douglas will see in the coming years, and the cost.
▪ New terminal roadway ($50 million): The road in front of the terminal is being expanded from three lanes each for arrivals and departures to eight. The new roadway, which will separate commercial and passenger vehicle traffic, will open in early 2019.
▪ Terminal lobby expansion and renovation ($247 million): Once the new roadway is open, the old lanes can be torn down, allowing the terminal to be expanded and create more space for the increasing number of passengers. Design work is complete, and construction is expected to take about 3 1/2 years.
▪ Fourth parallel runway ($422 million): A 12,000-foot runway, the airport’s longest, will run parallel to Charlotte’s three north-south runways, providing more capacity for planes, including long-haul flights. The runway could open in 2022, pending FAA approval.
▪ New control tower ($112 million): The 367-foot tower rising over Charlotte Douglas is more than twice as tall as the current tower and will provide space for more air traffic controllers. It’s scheduled to open in May 2020.
▪ Additional gates ($1.2 billion): After Concourse A North opens, plans call for adding up to 38 gates attached to Concourses A, B and C. Construction could run through 2026, in multiple phases.