U.S. airports plan $100B on infrastructure, meaning higher fees for airlines

Dec. 26, 2018 5:29 PM ETAllegiant Travel Company (ALGT)JBLU, ALK, ALGT, DAL, UAL, SAVE, AAL, JETSBy: Carl Surran, SA News Editor25 Comments
  • Costs always are a concern for airline investors, who have worried about pilot shortages, union disputes and oil prices over the past year, but airlines also likely will face higher airport fees in 2019, WSJ reports.
  • U.S. airports’ spending on infrastructure fell 24% during 2013-17 compared with the previous five-year period, and in an effort to catch up, airlines, as well as local governments and federal agencies, are expected to invest $100B over the next five years, meaning the fee paid by U.S. airlines to airports for each passenger will increase 19% through 2020, according to a report by Cowen analysts.
  • Airport fees account for 4% of costs for ultra-low cost carriers such as Allegiant (NASDAQ:ALGT) and Spirit (NASDAQ:SAVE), which also find it harder to pass extra costs onto consumers, while Alaska Airlines (NYSE:ALK) and JetBlue (NASDAQ:JBLU) are expanding in airports that are undergoing large renovations and are about to become more expensive, WSJ's Jon Sindreu writes.
  • There's also the risk that the final bill ends up larger than investors anticipate, even for big legacy carriers such as Delta (NYSE:DAL), United (NASDAQ:UAL) and American (NASDAQ:AAL); of the $100B billion of planned infrastructure spending, only 63% will be used to expand capacity, predicts North America's Airports Council International, which means higher investment may be needed for many years to come.
  • ETF: JETS

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