Austin airport officials have spent months in discussions with lawyers trying to figure out how to end a lease with the company behind the South Terminal, a privately run facility where ultra-low-cost carriers Allegiant and Frontier operate.
Officials with the city-owned airport want to demolish the South Terminal as part of a $4 billion expansion plan that includes building a new concourse with at least 10 gates.
Now the South Terminal's operator, Lonestar Airport Holdings, is trying to wriggle out of an expected eminent domain war with the city by floating a short-term solution to the airport's infrastructure crunch: Move the South Terminal farther south and vacate the property the airport wants razed.
"It would be a significant enhancement for the airport," said Jeff Pearse, CEO of Lonestar Airport Holdings.
Within two years, he claimed, the so-called "South Terminal 2.0" would add:
- up to 10 gates
- up to five security lanes
- 22 check-in counters
- more than 154,000 square feet of terminal space
The South Terminal 2.0 would cost $140 million and be funded by Oak Tree Capital Management, Lonestar's parent company. The city and airport would share some of the revenue, Pearse said.
"It would allow ultra-low-cost carriers Allegiant, Frontier, Spirit and others to continue to expand in the Austin market," Pearse said. "Capacity constraints are a real concern. We think we have a solution."
The South Terminal opened in 2017. The three-gate facility serves between 20,000 and 30,000 passengers monthly. The Barbara Jordan Terminal has 34 gates and served 1.2 million passengers in February alone.
Airport officials have seemed cool to the idea of a new, expanded South Terminal. The proposed 75-acre site is on land reserved for a new employee parking lot, a catering kitchen and other support facilities in the airport expansion plan.
But that wasn't always the vision. Pearse said the South Terminal 2.0 plan was developed at the request of city officials in 2018. Back then, ABIA was run by longtime director Jim Smith. He retired in 2019.
Smith was replaced by the current airport director, Jaqueline Yaft. Shortly after she took over, the city ended conversations with Lonestar about creating a new South Terminal.
Within months of being hired, Yaft urged City Council to try and buy back the South Terminal lease for $10 million.
"[The Department of] Aviation believes it is in the best interest of the City for Aviation to regain control of the facility and maximize the use of it throughout the development of the 2040 Airport Master Plan as well as improve customer service for all passengers traveling through the South Terminal and Barbara Jordan Terminal," Yaft wrote in a 2019 memo to the mayor and council members.
Now that the South Terminal is again in the city's crosshairs, Lonestar Airport Holdings has resurrected the expansion proposal, bringing it this month to the Airport Advisory Commission in the hopes of gaining traction.
Airport officials dodged KUT's questions about the South Terminal 2.0 idea, declining an interview request and issuing a two-sentence statement.
"The Department of Aviation continues to progress with airport improvements through the Airport Expansion and Development Program," the statement reads. "The Department of Aviation will continue to work with business stakeholders and tenants throughout the duration of this program and looks forward to delivering an improved passenger experience to all AUS customers."
Airport officials might be tight-lipped because of a looming legal fight with Lonestar Airport Holdings.
The city has already committed to paying corporate law firm Winstead PC up to $847,000 to help force Lonestar out of the South Terminal. Lonestar has said it expects the city to try and seize the South Terminal using the state's eminent domain law.
Lonestar's minimum 30-year lease agreement with the city could complicate efforts to evict the company.
A copy of the lease obtained by KUT includes a provision that appears to grant Lonestar an "exclusive first right" to develop any expansion or new facility if the South Terminal outgrows demand.
"We are confident there's a mechanism with our lease that affords us the ability to engage in future [expansion]," Pearse said. "The city, unfortunately, views this differently."
