It's not as if MIA hasn't been trying. Dade County, which owns the facility, approved an expansion plan four years ago, but that effort is grounded under a cloud of complaints and lawsuits. Six major competitors of American Airlines, MIA's biggest tenant, argue that the county is favoring American at their expense. The Fort Worth-based airline will get exclusive use of a slick new "Super A'' concourse, complete with shuttle train, and can consolidate 41 gates now spread over three concourses. The project would take eight years to complete, but the first shovel of dirt has yet to be turned.
To be sure, Miami remains an important crossroads in the global economy, but there are disturbing signs of slippage. MIA was the tenth busiest passenger airport on the planet in 1996, serving 33.5 million air travelers. But last year's head count was up just 0.8% from 1995. That gave Miami's facility the slowest passenger growth rate last year among the world's top 30 airports. Cutting-edge Orlando International Airport, meanwhile, grew the fastest among the top 30 last year, up 13.7% last year, with 25.5 million passengers.
Complicating matters, the airport has less terminal space, on a per passenger basis, than most major U.S. airports. And its busy airfield needs a new runway, but MIA has no contiguous land available for expansion.
"We're one of the most landlocked and one of the busiest airports there is," says Lauren Gail, a spokeswoman for MIA. "We need to remain competitive in the global market. We can't assume that the world needs us because we're in the best geographical position."
At its heart, the Super A controversy stems from a communal system of paying for improvements at MIA. Dade County normally charges all carriers some portion of every project in the form of higher fees or rents. Super A is expected to cost $1 billion, and American has agreed to pay at least $150 million of the cost. This year, Dade County hiked both terminal rents and landing fees by $10 million to go in part toward planning, designing and managing the Super A project.
The six plaintiffs in the suit against Dade County, which describe Super A as a "Taj Majal," are no fly-by-night carriers: Air Canada, Lufthansa, Delta, TWA, United and US Airways. In an attempt to mollify American's competitors, the county, led by airport director Gary Dellapa, packaged the Super A project with more than $3 billion in improvements throughout the airport. Taken together, the proposed projects would double MIA's total terminal space and turn the horseshoe shaped terminal building into a more linear design. But the six carriers remain unsatisfied, arguing that the project would raise their operating costs in Miami while giving American more competitive clout.
"There haven't been too many cases that have been taken to this level, where they have filed suit and it has gone all the way to the DOT (Department of Transportation)," says Ernie Perez, a director of Standard & Poor's infrastructure group. "The litigation could take forever," Perez adds.
Wall Street financiers have been watching developments in Miami closely because the county needs to raise money to help finance the project. "They're basically going to be reconstructing an airport while operations are going on," says Perez, who follows MIA. "The longer it takes to work this thing out, the more it's going to cost, and it's already a big capital project."
"The biggest credit challenge, from Moody's standpoint, is for management to be able to pull it off," says Adam Whiteman, senior vice president at Moody's Investors Service in New York City. He also notes that Dade's overall expansion plan would quadruple its airport bond debt outstanding, from the current level of $1.3 billion to more than $5 billion.
Even as the Super A debate rages on, unrelated legal problems are surfacing that further cloud the future for MIA. In a recent filing with the Securities & Exchange Commission, American Airlines parent, AMR Corp., acknowledges the possibility of costly environmental cleanup liabilities at Miami International. "We have a whole environmental division which has been added to the airport as a result of this," says an MIA spokesperson.
Not surprisingly, there's plenty of local support for the Super A concourse in Greater Miami. Since American took over most of the routes of bankrupt Eastern Air Lines in 1989, Latin America has become a lucrative operation for the Fort Worth, Texas-based airline. Last year, AMR Corp. logged operating income of $1.8 billion, and nearly 20% came from its Latin American operation based at MIA.
The big airline hasn't been bashful about promoting the notion that what's good for American is good for Miami. It commissioned a study showing that its eight-year-old Miami hub supports, directly or indirectly, 114,000 local jobs - or 9.8% of Dade County's total employment. With a new superhub facility, the airline says it would support at least 171,000 local jobs by the year 2010.
"We think the new terminal will be a driver of economic activity and a source of continued prosperity for Dade County and the state of Florida," asserts Bob Crandall, chairman of AMR Corp.
While MIA is caught up in litigation and controversy, other airports are gaining on it. Just up the road, Fort Lauderdale-Hollywood International Airport is making progress on winning final approval for a $265 million expansion. In central Florida, a $240 million project to improve Orlando International Airport is moving forward after the airport's administration and major airlines achieved a consensus. "Orlando sees what's going on in Miami as a huge opportunity because they think Miami is overplaying the American card," says Avery Vise, editor of Airports, an industry newsletter based in Washington, D.C.
But the biggest threats to MIA may be coming from out of state. Some of the same carriers that are fighting MIA's expansion plan are flying over Miami from other airports in the U.S. This month, for example, Delta will begin daily round-trip service to Brazil from Cincinnati and Atlanta, rather than sending its passengers through Miami. And near Newark International Airport, Continental Airlines advertised its Latin American service with the simple message in Spanish, "No pare en Miami" - Don't stop in Miami.
TRAVEL expenses American's Muscle
If American Airlines tightens its grip on passenger traffic at Miami International Airport (MIA) and discourages competitive threats, the cost of flying through Miami may increase. Fares tend to be higher at U.S. airports dominated by one or two airlines with large hub operations, according to studies by the U.S. General Accounting Office (GAO) in Washington, D.C.
Last year, American and its little sister, American Eagle, handled 52.4% of the 33.5 million passengers who passed through MIA. And with plans for a new hub facility, American is poised to raise its Miami market share even higher.
Under its deal with Dade County, owner and operator of MIA, American would get exclusive use of the 41-gate facility so long as it operated at least 250 flights a day at MIA, up from the current level of 191. As a result, American's market share in Miami conceivably could rise to 60% or more.
Frank Mulvey, a GAO official who has overseen airline-competition studies, says the federal agency identified a "hub premium" in fares charged by carriers at "concentrated airports." He says the premium averaged about 15% at airports where one carrier controlled at least 60% of passenger traffic, or two controlled 85% or more.