Airlines' costs at airport decrease as shale gas drilling money arrives

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Airlines are paying a little less to operate out of Pittsburgh International Airport these days, thanks to the potentially lucrative contract awarded last winter to mine the land for shale gas.

The Allegheny County Airport Authority cut the airlines' cost per enplanement by 55 cents, from $14.66 to $14.11, on July 1 -- the first fruit from a $46.3 million lease bonus payment received as part of a 20-year deal with Consol Energy for drilling on airport land.

"They were like little kids on a holiday morning," Bradley D. Penrod, the authority's president and chief strategy officer, said of the airlines.

For accounting purposes, the upfront bonus payment is being spread over five years, with $7.1 million of it available this year. Of that amount, $2.5 million was used to reduce costs to the airport's airlines.

Under the airport's use and lease agreement with carriers, the rest of the money will be used for capital improvements and economic development projects, Mr. Penrod said.

The authority expects to use a portion of the bonus payment each year to cut costs to the airline. Based on the 55-cent reduction this year, the carriers could see the cost per enplanement -- or airplane boarding -- slashed by nearly $3 over five years.

In addition, the authority will receive annual royalties of 18 percent on all proceeds from oil, gas and hydrocarbon production on the land. The county estimates that could generate $500 million to $700 million over the life of the lease.

Even with the 55-cent reduction, Pittsburgh International's cost per enplanement remains almost double the median of $7.22 for origination and destination airports in the United States, according to Moody's Investors Service.

Allegheny County Executive Rich Fitzgerald said reducing the fees is a "piece of the puzzle" in attracting more flights to the airport but it is not a panacea.

"I don't think it's the fees per se," he said. "Every airline tells us the same thing. It's not a silver bullet. It's not the one thing that's going to do it."

At a news conference at Pittsburgh International on Monday, Consol Energy president Nicholas DeIuliis said that drilling is expected to start at the airport in mid-2014.

He said the company has identified six potential well site pads for the drilling.

Consol, he said, also is in discussions with Findlay and Moon about supplying fresh water for the drilling operations. If those discussions are successful, they should produce income for the townships and help to reduce truck traffic into and out of the drilling sites.

Transportation - businessnews - marcellusshale - neigh_west

Mark Belko: mbelko@post-gazette.com or 412-263-1262.


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