Six years after hiring a company to run the South Terminal at Austin-Bergstrom International Airport, the Austin City Council voted Thursday to pull the plug on the 40-year deal using the power of eminent domain.
ABIA officials want to raze the terminal and build a new concourse to accommodate the rapidly growing number of passengers traveling through the airport.
The City Council's move frustrated Lonestar Airport Holdings, the company running the three-gate facility where ultra-low-cost airlines Allegiant and Frontier operate. Lonestar argues the city's $2 million offer for its lease rights is "objectively offensive" and insists the city's plans will eliminate discount air service at ABIA.
"Closure of the South Terminal will kill ultra-low-cost carrier service from Austin, challenged by higher operating fees and inadequate capacity at the main terminal," Lonestar Airport Holdings CEO Jeff Pearse said in a statement. "Options for price sensitive travelers will disappear in our market."
City officials insist Austin wouldn't lose Allegiant or Frontier, saying the discount airlines would be transferred to the 34-gate Barbara Jordan Terminal, which charges airlines higher fees to operate.
"This isn’t eminent domain. It is the taking of a business."Jeff Pearse, Lonestar Airport Holdings CEO
"The relocation of the airlines operating at the South Terminal to the Barbara Jordan Terminal will not decrease the service and benefits that passengers have come to expect from [ABIA]," airport Executive Director Jacqueline Yaft said this week at a meeting of the city's Airport Advisory Commission. "Opportunities for relocating South Terminal tenants and their employees to the Barbara Jordan Terminal are also being explored."
Allegiant and Frontier did not respond to request for comment before this story was published.
The new concourse and taxiways planned to replace the South Terminal are part of a $4 billion airport expansion. The concourse would be connected to the Barbara Jordan Terminal by an underground pedestrian tunnel and open in 2028 with at least 10 gates and the capacity for 40.
ABIA is currently configured to handle 15 million passengers annually, but 22 million travelers are expected this year. Airport staff believe they'll have 30 million annual passengers sometime around 2028 — close to a decade earlier than originally forecast.
Lonestar has floated a short-term solution to the airport's infrastructure problems: Move the South Terminal farther south, add another seven gates and vacate the property the airport wants to seize. City officials have rejected the $140 million plan, which would be funded by Oak Tree Capital Management, Lonestar's parent company.
Lonestar is vowing to wage a legal war over the eminent domain proceedings that could scuttle the city's plans.
"The airport's pursuit of eminent domain ... will result in years of expensive, time-consuming litigation, delaying expansion plans even further and sending a signal to every business in Austin that making major investments alongside the city is a dangerous bet," Pearse said. "This isn’t eminent domain. It is the taking of a business."
The case marks a novel use of eminent domain authority, which is normally used to seize private land for a public purpose. In this case, the city is terminating a lease on its own property.
