Exploring a New Way of Doing Business at St. Louis Lambert International Airport
The City of St. Louis is considering privatizing the management and operations of St. Louis Lambert International Airport.
City leaders are considering whether to privatize the management and operations of St. Louis Lambert International Airport.
The City is considering this process to determine if service for our residents, businesses and visitors can be improved, and to explore opportunities to make the airport into a stronger asset for our economic development efforts.
In May 2018, the City selected Moelis & Company, McKenna & Associates, Grow Missouri and other local and national experts to help the City navigate this complex process.
On June 13, 2018, the City's Board of Estimate and Apportionment approved the contract for the advisory team.
For the latest information about the work of the adivsor team, visit fly314.com.
Board of Estimate and Apportionment Approves Contract for Airport Advisor Team
This advisor team includes local and national experts with experience in all aspects of public-private partnerships
Press release | 199,334
Mayor Krewson's Update on Airport Privatization Pilot Program (APPP)
City seeking authorization to explore participation in the Airport Privatization Pilot Program
News/Announcement | 199
St. Louis to Participate in Airport Privatization Pilot Program
Acceptance into the program allows the city to begin negotiations with private entities wishing to operate the airport.
Press release | 311,199
"Our region’s future could take flight at our airport"
St. Louis Post Dispatch Op-ed by Deputy Mayor Linda Martinez and Airport Director Rhonda Hamm-Niebruegge
"We should explore airport's untapped potential"
St. Louis Post Dispatch Op-ed by Mayor Francis G. Slay
Chronology of Activities
March 22, 2017: Mayor Francis G. Slay announced the city of St. Louis had submitted a preliminary application to the U.S. DOT/FAA’s Airport Privatization Pilot Program which could allow St. Louis Lambert International Airport to be operated under private management.
April 24, 2017: The United States Department of Transportation/Federal Aviation Administration announced it granted approval to St. Louis to allow the city-owned airport to be operated under private management.
September 11, 2017: The City of St. Louis formed a selection committee to issue a Request for Proposals (“Advisory Team RFP”) for an advisory team to assist on soliciting and evaluating possible private management and operations of St. Louis Lambert International Airport.
September, 20, 2017: The City of St. Louis issued the Advisory Team RFP.
October 20, 2017: The City of St. Louis received eleven proposals in response to the Advisory Team RFP.
October 20, 2017 through January 26, 2018: The selection committee evaluated the proposals, met numerous times to review and discuss the same and conducted interviews of a number of the proposers. After a very deliberative process, the selection committee recommended selection of the advisory team of Moelis & Company, McKenna & Associates, and Grow Missouri, Inc. and recommended that the City Counselor’s office negotiate a proposed form of consulting agreement.
May 16, 2018: The selection committee recommended approval of the consulting agreement with Moelis & Company, McKenna & Associates, Grow Missouri, Inc. and a broad range of other companies as the City’s advisory team recommended approval of the same by the City’s Board of Estimate and Apportionment.
June 13, 2018: The St. Louis City Board of Estimate and Apportionment approved the advisory team consulting agreement.
FAQ about Potential Lease
Who owns the Airport?
The City of St. Louis owns the airport. Should the City decide to privatize management and operations at the airport, the City will continue to own the airport.
Do taxpayers support the airport now?
St. Louis Lambert International Airport is an enterprise fund, meaning taxes and fees generated by flights and services at the airport pay for its operation. The airport operates at a marginal profit and has been transferring roughly $6 million annually to the City of St. Louis’ general revenue fund. This amount is essentially capped under a federal formula and is not expected to grow under the current management and operations configuration. There are also discussions at the federal level that may reduce or eliminate the transfer of funds to the City’s general revenue fund.
Is the City currently paying debt on the airport?
Yes, the airport has more than $600 million of debt, which is currently being paid from the airport’s operating revenue. Under any lease agreement, all airport debt would be paid off by a private entity as part of the upfront lease payment.
How much money would an agreement with a private airport operator generate for the City? Who decides where that money goes?
The amount of money generated from a lease agreement would be determined by a number of factors including market and economic conditions. Each private entity submitting a proposal to the City for consideration will evaluate this differently. The City could receive a lump sum cash payment up front, yearly cash payments for the life of the agreement, or a combination of both. The City’s regular legislative process would be followed to determine how any new money would be spent.
Has this been done in other cities? If so, what was the result?
Yes. Fully-privatized airports and airports with some private services are fairly common around the world, particularly in Europe. In 2016, the Airports Council International-Europe reported that more than 40 percent of European airports have at least some private shareholders. Major international airports with private management include Heathrow Airport in London, Charles de Gaulle in Paris, and Fiumicino Airport in Rome.
The San Juan International Airport in Puerto Rico is also now privately operated. San Juan received $615 million upfront in a lump sum payment. Additionally, the private operator agreed to invest $1.4 billion and share airport revenue estimated at $552 million over the term of the lease.
Additionally, a consortium of private companies is funding construction of a new $4 billion terminal at New York City’s LaGuardia Airport. The consortium will operate the terminal upon its completion. Chicago Midway airport has considered a privatization process twice — both attempts were unsuccessful, and the City of Chicago incurred the out-of-pocket costs during those attempts.
How long do these long-term lease agreements typically last?
Agreements in Europe are often 30 to 40 years. This is a key term which would be negotiated with potential private operators.
If management and operations at St. Louis Lambert International Airport are privatized, would there still be an Airport Commission?
The Airport Commission would remain in place and active until such time a private entity begins management and operation of the airport, at which time the private entity would then determine its operational structure.
Would a private entity have the power of eminent domain?
Will this impact employees at the Airport?
No. The federal Statute governing the Program (49 USC §47134) states explicitly that “[a]ny collective bargaining agreement that covers employees of the airport and is in effect on the date of the sale or lease of the airport will not be abrogated by the sale or lease” under the federal Airport Privatization Pilot Program (Section (c)(9)). Note also that the lessee will have to agree contractually to all of these provisions that are required by the statute, and the FAA has the right to enforce any breach from the statutory provisions, in addition to the City’s rights.
How transparent will this process be?
The City will engage in a two-phase public procurement process to select a private entity to manage and operate the airport. The City will first issue a request for qualifications (RFQ) to determine which interested parties have the experience and technical qualifications to manage and operate the airport. In the second phase, private entities that are deemed qualified by their experience and expertise will be invited to submit proposals, including financial proposals, during the request for proposals (RFP) process.
Who would need to approve a final agreement to privatize management and operations at St. Louis Lambert International Airport?
Any final agreement to allow a private entity to manage and operate the airport would require approval from the Board of Estimate and Apportionment, the Board of Aldermen, the Federal Aviation Administration and a majority of the airlines that operate at St. Louis Lambert International Airport.
Why do the airlines need to approve any agreements before a private entity could assume management and operation of St. Louis Lambert International Airport?
Airline approval is mandated by federal statute.
Where will updated information be posted as this process moves along?
Updates will be provided during public meetings and via www.fly314.com.
FAQ about Advisory Team
What is the advisor team’s role?
The advisor team of Moelis & Company, McKenna & Associates, Grow Missouri and others will provide insight and analysis. The advisors will assemble data to allow bidders to perform due diligence. They will help the City develop a request for qualifications (RFQ), a request for proposals (RFP), review proposals and negotiate with bidders. Decisions will be made by elected officials in City Hall, the Federal Aviation Administration and the airlines operating at St. Louis Lambert International Airport.
Who is paying the advisor team?
Grow Missouri is paying the cost of all professional services and expenses incurred by the advisor team during the evaluation process. No taxpayers dollars will be spent on this process unless and until an agreement is reached with a private entity
Will the advisors be paid higher fees if a lease deal is finalized?
Yes. The contract between the advisors and the City is structured in such a way that while all of the consultants get paid for their work whether a lease is successfully executed or not, most of the consultants are paid more if a lease is completed. This is a common arrangement in the financial services sector.
The advisor team’s fees decrease in percentage as the value of a potential lease increases. For instance, If a private entity were to pay the City $1 billion, the advisor team would be paid a 2.75 percent fee. If the value of a deal were $1.5 billion, the advisor team would be paid a 2.67 percent fee.
What are the advisor team’s qualifications? Will the advisor team make the final decision?
The advisor team is made up of several highly-regarded firms, each staking their reputations on the quality of service they provide to the City. These firms have experience in public-private partnerships and expertise in airport management, finance, economics and structure.
The advisor team will not make the final decision. The City’s Board of Estimate and Apportionment, the Board of Aldermen, the Federal Aviation and Administration and a majority of the airlines operating out of St. Louis Lambert International Airport have to approve any deal before it becomes final. This ensures that any potential lease agreement is in the best interest of taxpayers, the airport and the City.
No one working as part of the advisor team will be allowed to join any group potentially bidding to manage and operate the airport.
What is the next step now that the advisor team has been hired?
The advisor team will begin assembling data to be used by private entities wishing to respond to a Request for Qualifications (RFQ) from the City. The RFQ is part of the public bidding process necessary before a private entity could assume management and operations of St. Louis Lambert International Airport.