The September 11th attack
State to tap surplus fund for airports

By Scott Ishikawa
Advertiser Transportation Writer

With the U.S. airline industry and local economy reeling after last week's terrorist attacks, the state's airports are bracing for a big financial hit.

Hawai'i officials have kept a wary eye on the airlines' fiscal predicament since last week, while re-evaluating the state Transportation Department's own outlook.

"We're looking at a major loss in revenue and an increase in operating costs due to extra security," said state Transportation Department spokeswoman Marilyn Kali.

Gov. Ben Cayetano yesterday said the state will tap the airport's special fund, which totals about $390 million.

Cayetano yesterday also suspended airport landing fees to help the struggling airlines and postponed state construction projects.

"We have a huge surplus in the airport fund," Cayetano said. "And what we will have to do is reprioritize the projects that we have.

"It's not a big problem because I think that we can handle postponing some of these projects and use the money not only to waive the landing fees for the airlines but to also perhaps use the money, if approved by the FAA, for promotion for air (travel). That would be one source," he said.

The problem is Hawai'i's airports are required to be financially self-sufficient, relying almost entirely on airport-related revenue that includes airplane landing fees and profits from duty-free shops.

With U.S. airlines planning to lay off up to 100,000 employees and cut their flight schedules because of sparse passengers, state airport officials will have to look at other ways to make up the shortfall.

"We're reassessing our budget situation right now," Kali said. "We don't know yet how much the cutback in flights will affect us."

Landing fees made up approximately 10 percent of the state airports' total revenue of $332 million for fiscal year 2000.

Other airport revenue would be affected by decreased airport activity. About 32 percent of state airport revenue came from duty free shops, and another 22 percent from other concession fees.

Sharon Weiner, group vice president at DFS Hawai'i, which operates the duty-free shop at Honolulu International Airport, said business is "down dramatically" since last week. DFS Hawai'i annually brings approximately $70 million in revenue to the state airport system.

"Right now, it feels like a house of cards coming down," she said. "The slow activity on our end is also hurting the local vendors we purchase products from."

Weiner said the tourism industry should be courting the Japanese market right now, since the Asia-based airlines have not been hit as hard as domestic ones.

State transportation officials also must find money to pay for beefed-up airport security.

While Kali said it was still too early to say how much it would cost the state to improve airport security, she said the department will increase its security budget by 40 percent.

The state is responsible for staffing extra sheriffs, private security guards and dogs. The airlines pay for staffing and improvements to passenger and luggage screening. Since the Hawai'i Army National Guard is on active duty, its presence at the airports is at no cost to the department, Kali said.

And still unclear is whether $200 million in planned renovations at Honolulu International Airport will begin.

The first phase of renovations was set to begin in November, an $18 million project that would create a larger, central security checkpoint in the middle of the main terminal.

It would not be the first time major airport renovations were shelved. The Persian Gulf War in 1991 forced the state to shelve plans to construct a new international flights terminal when passenger counts dropped by 5 percent.

"All the passenger numbers dropped off in 1991," Kali said. "It's taken 10 years for those numbers to come back up. If things start rolling downhill again, everyone will be affected in some way."

Staff Writer Lynda Arakawa contributed to this report.

Reach Scott Ishikawa at sishikawa@honoluluadvertiser.com or 525-8070.