When Forecasts Go Bad: Dulles

Dulles airport runway

Dulles airport runway

by James A. Bacon

Washington-area media finally have woken up to the major problems gripping Washington Dulles International Airport. In an April article Michael Neibauer with the Washington Business Journal noted that this important “economic engine” of Northern Virginia is sputtering. The problem of declining domestic traffic, siphoned mainly to Reagan National Airport, is compounded by the reckless expansion of the airport last decade that left its balance sheet over-leveraged. The debt service is $240 million a year, or roughly $23 of the $25 cost per enplanement. As Neibauer wrote:

A major capital improvement program and, more generally, the high cost of managing international passengers, has driven the average “cost of enplanement” at Dulles to near $25. At Reagan, it is $14.

Airlines don’t want to shoulder that burden, so they cut back on seats, or flights, or opt not to fly there at all, driving passenger numbers down and cost per enplanement up, precipitously.

Of course, none of this is news to readers of Bacon’s Rebellion. More than a year-and-a-half ago — long before other media had discovered the story — Reed Fawell detailed the airport’s problems. His articles, “Dulles’ Grand Plan” and “A Mortgage on Northern Virginia’s Future” are still worth re-reading.

So, now that Metropolitan Washington Airports Authority (MWAA) management is finally facing up to its Dulles problems, what is it doing?

Lobbying. Dulles’ friends are seeking to restrict the continued expansion of capacity at National. (In other words, they’re conceding failure and Dulles’ inability to compete with Reagan.)

Subsidize. Through a new lease-and-use agreement, MWAA is transferring $300 million in revenue from National to Dulles over ten years. (Rob from Reagan to pay Dulles.)

Attract new carriers. New carriers include Frontier Airlines and Air China.(This is a positive response — competing harder adds economic value and forces Reagan and Baltimore-Washington Airport to up their game.)

Belt tightening. “We’ve tightened our belt,” said Jack Potter, CEO of MWAA. “We’re not spending money if we don’t have to spend it. We’re not investing in anything new.” (A little late in the game, but better late than never.)

Bacon’s bottom line: The good news is that MWAA management is dealing with reality instead of pursuing a fantasy. Although one can question the rent-seeking, I-win-you-lose approach to fixing Dulles’ problems, the airport’s clamp-down on costs and hustling for new airlines are positive signs.

But I’m wondering if anyone else has learned the lesson. Dulles overbuilt in the early-mid 2000s because it extrapolated the extraordinary traffic growth of Northern Virginia’s post-9/11 boom indefinitely into the future. When that growth did not materialize, Dulles was left sucking wind. Northern Virginia’s commercial real estate sector was the next to learn that its growth forecasts not only were excessively optimistic overall but wrong as to where growth would occur within the metropolitan region. The result: many suburban office parks on the metropolitan fringe are faring even worse than Dulles.

What other growth forecasts based on outdated, 10-year-old numbers are underpinning investment decisions in Northern Virginia? Could the Virginia Department of Transportation be relying upon outdated numbers to justify its $2.1 billion capital spending program for Interstate 66? Numbers used for planning purposes tend to get updated at a glacial pace — once embedded in the system, the assumptions behind the numbers stay in place for years. That’s fine when the system is stable but potentially disastrous if the numbers fail to reflect a dramatic inflection point like that which occurred in the 2007-2008 recession.

Bacon’s Rebellion and friends will be giving the numbers a closer look.

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20 responses to “When Forecasts Go Bad: Dulles

  1. Two more big problems for Dulles are its sprawling, inefficient layout and its lack of a single-seat connection to downtown. I always fly into Reagan when I fly to DC and I’m happy to pay a bit more to do so. The last time I flew United into Dulles, it took me 40 minutes from landing to exiting the airport – rarely takes more than 10 at Reagan. At Reagan, I can immediately jump on the metro and be at my friend’s house or downtown or wherever I am going quickly. At Dulles, you have to get a cab or someone to pick you up, or figure out how to use their bus system.

    Airports take up a lot of space so it makes sense to locate them further out of town. But there has to be a connection to the city for people who are obviously not coming in with cars. On a recent trip to the west coast, I was able to get from the Seattle airport to downtown and back and from the Portland airport to downtown and back with a quick light rail ride, which made the trip much easier. My guess is that Dulles will be able to compete a lot better when the silver line makes it all the way out there – assuming we’re still using airplanes by the time that century rolls around.

    Part of the problem might be the old mindset that airplane travelers are wealthier and less price-conscious. They’ll obviously just rent a car. But I think that’s been proven very false in recent years. Airplane travelers are as cost-conscious as ever and are going to take the airport that doesn’t require them to take a cab or rent a car if that tacks $20 or $40 onto the cost of their ticket.

    • I’ve taken the Silver Line from Tysons to Reston and grabbed the shuttle to Dulles. It worked OK. Not as easy as getting to Reagan, but I do live a bit closer to DCA.

      I think full Silver Line access to Dulles will help. But keep in mind the ride will likely be about 50-60 minutes between Dulles and Downtown DC or vice versa. There is no express train. Everything is local. And during the morning and evening peak periods, the trains are full with commuters. Not that easy to wrestle anything but minimal luggage.

  2. what’s a few extra billion dollars here or there for Dulles or METRO or I-66 anyhow? Just about every major urban area in the country has an “inner” and “outer” airport – right?

    spoiler alert – Devil’s Advocate question below:

    and – give Dulles credit – you cannot build an airport once it’s needed. I’d bet that even today – if you had to build Dulles – it would be much, much more difficult and much, much more expensive. Would we expect the NoVa to grow 50 years into the future with Reagan as the only airport – or would we just wait until one is needed then have to build it every further out with even more money?

    but here’s the thing about projecting growth – it’s a deeply flawed discipline probably done by the same armchair scientists who doubt climate change science.

    1. – using past growth history as a predictor for future – is … well it’s ignorant because it’s basically arbitrary ..without any real justification other than “that’s what we do”.

    2. – worse – and even more fatally-flawed – deciding where growth will allocate itself geographically – with a caveat – that growth will likely follow wherever mobility infrastructure is built.

    so it becomes a bit of a self-fulfilling endeavor of saying “growth will occur in Loudoun so we should build roads to Loudoun – and VOILA ! low and behold – growth does indeed allocate to Loudoun – just as predicted!

    what would be interesting – would be to go back to prior projections for the 40’s, 50’s, 60’s, 70’s and see if they actually played out as projected.

  3. larryg,

    Good points….while “growth” is difficult to project…..it’s also rather useless to sit around and “wait”. If you take that strategy, you can be sure that the costs will have skyrocketed for your capital project. Building Dulles or any NoVa alternative airport to Reagan would be impossible today….it would end up being built in Stafford or Spotsy….which would be ludicrous.

    I’d be interested to know…..what if Reagan was the region’s only airport? Could it handle the traffic? Could it have expanded?

  4. I don’t see Congress in the list of bad actors. From what I read, they want to be able to hope in their limo and get to Reagan quickly so they can get back to their district to campaign and raise money. Thus, they keep adding flights to Reagan for THEIR convenience not ours and the inconvenience of noise for the citizens that live in the flight path. Also, the banks of the Potomac River would be a nicer experience without the incessant landing of jet planes. Perhaps when the METRO finally reaches Dulles that might help but at what cost. Bosun

    • The ride from downtown D.C. to Dulles or vice versa will take somewhere around 50-60 minutes with all the stops. During the am and pm peaks, it won’t be fun since the cars will be full of commuters. But off-peak should be acceptable for those wrestling more than a small suitcase.

      I’ve taken the Silver Line from Tysons to Reston and hopped the shuttle. It was quite tolerable. But I still prefer Reagan for its convenience.

      MWAA needs to cut costs at Dulles and attract some real low-fare carriers. Cheap fares will increase demand. But even now, when I compare fares at the two airports, Reagan often wins. Maybe the market is just giving consumers what they want.

  5. can Reagan be expanded?

    🙂

    • One of the big issues affecting Reagan are the two “no-fly” zones: one stretching from the Capitol to the White House, covering the Mall; and two covering the Naval Observatory. They do limit the paths that can be taken by airplanes on landing and takeoff.

  6. We, in the area, refer to it as Reagan National, or just plain National.

    The impact of the loosening of the flight restrictions at national was predicted long ago, but since it benefited Senators & Representatives it was ignored.

  7. What a cool place for a kid back in the 60s. My mom worked for the FAA. It was out in the middle of no where. There was no in-field clutter just long runways designed for the SST. You could ride out on a mobile lounge just for the fun of it. Hang out on the observation deck to watch night flights. And man did they have some awesome international air shows there back in the day. Too bad they didn’t follow the original plan of shutting down National and building a direct rail line out there.

  8. Few metropolitan areas with the population of Washington, DC could sustain two airports so close to each other (with a third just up the road in Anne Arundel County (Marshall). For example, Baltimore Municipal Airport was closed when BWI (recently renamed BWI Thurgood Marshall International) opened. When Denver opened DIA they closed Stapleton.

    Reagan should have been closed when Dulles was opened (or shortly thereafter). Of course, the jackasses in Congress would have had to commute a bit further to fly home or off on some union sponsored junket.

    Reagan should still be closed. The money raised by selling the land could be used to re-build Dulles into a top class facility. However, the jackasses in Congress will never allow that.

    I doubt there is a practical way to expand Reagan’s runways to accommodate large aircraft. The facilities can be expanded in the terminal area but I think the runways are pretty much constrained. Beyond that, Reagan sits in the middle of densely populated Arlington County. Arlington has more residents than the City of Richmond and over twice the population density. Would it really make sense to expand an airport that is in the middle of the closest thing Virginia has to a real city?

    As for what the airport is called – don’t be fooled by “come lately” residents. Most people who have lived here a long time call it Reagan. The fact that the airport’s name annoys progs is just icing on the Reagan cake. Calling it National doesn’t make much sense since there are direct international flights between Reagan and Toronto, Canada.

  9. I recently took some folks to the airport that were headed to Tanzania – surprisingly they did not go from Dulles – they went from Reagan to a flight to Brussels… so they embark international flights from Reagan – and I think it was an Airbus.

    Only the Mega planes can’t land at Reagan and perhaps this illustrates a change in the airline industry that shifted the logic for “outer” airports for the mega-sized planes. Perhaps smaller planes are now more efficient and can do international flights and not need an airport with mega-sized landing facilities.

    I don’t know – I’m totally speculating.. but the plane that went to Brussels was not for Congressmen…it was for folks heading overseas…. and I have to admit – it’s an easier trip to Reagan if you know how to navigate the roads when busy. (which is most of the time!).

    Dulles is a pain in the patute… from Fredericksburg.. there is no easy way to get there quickly.

  10. While MWAA operates both Reagan and Dulles, I believe Uncle Sam owns them both and is leasing them from US DOT.

  11. As much as I beef about Dulles’ financial issues, my wife and I have flown out of there a lot — even though it means a 3+ hour trip from Richmond. We can usually get better deals and connections for overseas trips at Dulles than at Richmond International. With the increasing congestion on U.S. 17 between Fredericksburg and Warrenton and on U.S. 29 between Warrenton and Gainesville, however, that trip is getting longer and more frustrating. The last time we flew (to London) the congestion was so bad we literally had to reschedule to a later flight. We were lucky that United had the empty seats. I dare say there will come a time soon when it’s no longer worth the risk.

  12. The unchallenged quote’s contained in the Washington Business Journal article are quite remarkable. Lets take several key of these quotes in turn. Those reading these comments can better understand them if they read the WBJ article linked into Jim Bacon’s above article.

    1/
    “Last June, we held a session with the Committee for Dulles, where we basically laid out the fact that we had a potentially major problem,” said Metropolitan Washington Airports Authority CEO Jack Potter, whose organization is charged with managing both Reagan National and Dulles airports. “There is a fear that we would have a Dulles that was not competitive.”

    Wrong. The truth is that those who ran Dulles Airport have known that Dulles has a “potentially major problem” since the late 1990s.

    In addition, the truth is that those who ran Dulles have know that Dulles would “not be competitive” since the late 1990s.

    And the truth is that despite this knowledge those who ran Dulles went ahead with the reckless and ridiculously costly and unnecesssary expansion program that was not necessary then and is not necessary now in the face of this knowledge making the problem far worse over the past two decades.

    2/
    “Dulles is planned, at full build out, to manage 55 million passengers per year, more than twice its current volume. But something happened on the way to that heady goal: National’s explosive growth.”

    Wrong. The truth is that Dulles was planned to accommodate 60 million passengers and later up to 75 million passengers and a great deal of work has already be done and some $5.5 billion dollars in debt incurred to achieve that goal, most all of which has been needlessly wasted.

    In addition, National’s growth has not been “explosive.” It has been slow and steady growth since 2000 because of the reckless spending at Dulles by the MWAA since the late 1990s which Dulles priced itself out to the market and built a severely dysfunctional airport that chased away its own best customers, its airlines, and the local Washington DC flying public, forcing them to go to National and BWI instead.

    3/
    “It is no coincidence that Dulles passenger volume is down, while Reagan is setting records. The day after President Barack Obama’s first inauguration, Reagan National hit 39,043 passengers. On March 27, it managed 39,073, a new record.”

    If this statement is true than National saw a grand total of 40 new passengers per year during the last 7 years of the Obama administration!

    4/
    “We have to have a balanced, realistic approach to the challenge at Dulles,” Potter said. “You don’t pray to God that you have something in the future.”

    The truth is that MWAA has not had a balanced, realistic approach to the challenge at Dulles since 1998. In fact MWAA approach to Dulles since that time has had a highly unbalanced and highly unrealistic approach for the last 17 years, since 1998. Since that time, MWAA for all practical purposes been “praying to God that (Dulles”) have something in the future,” while wastefully spending more than $5 billion dollars, betting on that prayer.

    5/
    “In February, for the first time, Reagan National’s passenger count topped that of both Dulles and BWI, Potter said, though specific numbers are not yet available for that month. The land-constrained facility on the Potomac River is outpacing its much larger sibling to the west. It is the culmination of federal and private airline decisions — Dulles’ capital expansion, new slots at Reagan, fewer limitations on flights out of National, airline mergers and acquisitions — dating back nearly two decades. The very people who gave us the charter to operate in these conditions are the ones who have tinkered with it and taken us out of a balance that existed a decade ago and put us into a predicament,” Potter said.”

    Wrong. No, Congress and National Airport did not take Dulles out of the Market, the Board and Managers of Dulles and MWAA that run both National and Dulles airports took Dulles out of the Market.

    6/
    “A major capital improvement program and, more generally, the high cost of managing international passengers, has driven the average “cost of enplanement” at Dulles to near $25. At Reagan, it is $14. Airlines don’t want to shoulder that burden, so they cut back on seats, or flights, or opt not to fly there at all, driving passenger numbers down and cost per enplanement up, precipitously. It’s like a cyclical thing, except you’re cycling into the ground,” Potter said.

    7/ Wrong. This is not the airlines fault. It is the fault of those who run Dulles. They forced the enplanement cost sky high by a reckless capital improvement program whose planning started in the late 1990s and has continued ever since, wasting billions of dollars that failed to properly serve the airlines and the flying public, and in so doing MWAA built an airport that airlines and customers cannot get to or leave from without the same massive and expensive inconvenience. Mr. Potter, those who run Dulles have driven their own customers, airlines and passengers away from Dulles.

    8/ “We have to stop and contain the growth at Reagan,” Potter said. “That is going to help us in the short run, so we don’t have additional leakage. That’s where you’re going to get the biggest change in the shortest period of time. We need to basically slow this whole thing down. We need a big pause.”

    Wrong. That solution punishes your customers at National for the grossly irresponsible management by your people at Dulles. Why should your customers from all over the Washington region waste their valuable time trying to get to Dulles and pay through the nose for losses incurred by reason of the negligent corporate of MWAA in the running of Dulles Airport over the past 17 years at Dulles. Just imagine the gross inconvenience and expense this would cause your National customers who are not responsible for MWAA’s mistakes in managing Dulles airport.

    9/ “We’ve tightened our belt,” Potter said. “We’re not spending money if we don’t have to spend it. We’re not investing in anything new.”

    Mr. Potter, why didn’t MWAA start “tightening its belt” decades ago, like in 1998, 3003. 2005, 2007, or 2010 when, on each of these dates, disaster loomed and MWAA kept kept ignoring it while continuing its spending binge and at the same time cooking up unworkable ill advised schemes like your major East Coast cargo hub. Why was all this time and money spent in the face of very obvious problems growing larger every year?

    10/
    “MWAA’s $5 billion capital improvement program has resulted in two new daily parking garages, moving sidewalks connecting the garages to the main terminal and the main terminal to Concourse B, a reconstructed Runway 12-30, permanent Z-gates at the terminal, an expanded Concourse B, a fourth runway and the Aerotrain system. Needless to say, the authority is now knee-deep in debt for Dulles. The debt service alone is $240 million a year, or roughly $23 of the $25 cost per enplanement.”

    I will have more to say about this in a later posted comment.

    11/
    “Through a new lease and use agreement between MWAA and the airlines at Reagan, which took effect Jan. 1, the authority will shift $300 million in revenue across 10 years from National to Dulles, helping to bring that all-important figure down. From a short-term competitiveness standpoint, Potter said, that’s where the focus is.”

    As explained above, this solution is highly unfair to MWAA’s customers at National, innocent victims who are being forced pay for MWAA’s gross corporate mismanagement of Dulles over the past 17 years.

    12/
    “It makes no sense,” Rep. Gerald Connolly said. “There’s no policy analysis behind this. There’s no economic analysis behind this. It’s purely the whim of Congress and the whim of members. And that is really a very self-defeating thing.”

    Wrong. Congress is doing nothing more that protecting its innocent constituents who have every right to use a well run National Airport and be protected against, rather than be saddled with, the consequences of MWAA own mismanagement of Dulles Airport.

    13/
    “The desire for convenience trumped everything,” Rep. Gerald Connolly said. “I understand that, but Congress should not be an engine for economic harm and we are actually damaging the investment we have made in Dulles Airport … Congress is the institution that is responsible for this, And it’s really pernicious and will have dire consequences if we don’t start to undo some of the very damaging actions.”

    Wrong, Mr. Connolly. Congress has not been an “engine for economic harm” nor is Congress damaging the investment “we” have made in Dulles Airport. Indeed the reverse is true. Congress gave Dulles the charter, and the MWAA has abused it. Indeed MWAA’s “investment” was recklessly made and it has over the past 17 years undermined the Airport while it mistreated the flying public, and done great harm to the Dulles’ entire neighborhood, from the beltway west to Leesburg and beyond, including across the entire Washington Region, including Maryland and DC as well as Northern Virginia.

    This comment will be elaborated on in a subsequent comment.

  13. MWAA is an “authority”. It’s in the same church (different pew) as many other “authorities” but what is the reason/justification for their existence?

    In our area – they become the operating entity for a govt function done on a regional, multi-jurisdictional basis.

    they often are run by boards appointed by the member jurisdictions but they are not in the county chain of command as a department reporting to a county executive. Instead they have a lot of autonomy – a lot of power and if they have the power to levy fees or access to other revenue – they can operate essentially as a govt – one that is not elected and not really very accountable to anyone – except perhaps the courts and the General Assembly.

    I’ve watched very frustrated local govt trying to rein in an authority with limited success although recently the Central Virginia Jail Authority was reined in when the member jurisdictions replaced their appointed representatives and changed votes.

    http://www.fredericksburg.com/news/local/orange/central-virginia-jail-budget-passes-but-controversy-continues/article_59f9a914-3679-53c1-9957-18c2d1a86549.html

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