Salt Lake City International Airport may need 2-3 years to recover from COVID-19 effects

(Trent Nelson | Tribune file photo) Planes and Delta's large hanger at Salt Lake International Airport on Wednesday, April 1, 2020.

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Salt Lake City International Airport officials say it may take it two to three years for its air traffic to truly recover from the COVID-19 pandemic, and they are scrambling to deal with plummeting revenue as they plan to open a new $4.1 billion replacement airport in September.

Brian Butler, chief financial officer for the airport, told its advisory board on Tuesday that after consulting with other airports, airlines and industry experts, he foresees an “L-shaped” recovery — with the current quick decline in passengers followed by a slow recovery.

“What it means is a very sharp decline as we’re seeing 90% reduction in traffic — never seen before in the aviation industry,” he said. “This isn’t going to recover in the next year. We’re now forecasting it could take upwards of two to three years.”

Bill Wyatt, executive director of the airport, explained why.

He said he directed the Portland, Ore., airport after the 9/11 attacks. No planes flew for about four days anywhere, but then they restarted. “People flew, and the reason they flew is because of the incredibly enhanced security. People felt like everybody on the airplane had been checked out pretty carefully.”

That is not the case with COVID-19.

“You don’t know about the person sitting next to you, whether they have the virus or not. And they may not know, for that matter,” he said. “That creates a psychological situation, which I think is going to take quite some time to recover from.”

On Tuesday, he said 1,900 local passengers were expected to arrive at the airport, down 91% from the normal 20,000 or so.

Butler said that before COVID-19 hit, the airport was on its way to set another new record with passengers — with 27 million or so expected to pass through it this fiscal year. But numbers plummeted in March and are not expected to recover through the end of the fiscal year in June. So maybe only 20.6 million will actually pass through it for the fiscal year.

“Right now, our modeling is saying we will see a 75% reduction in June. And as the summer months continue on, that will gradually come up,” Butler said.

Still for fiscal 2021 beginning in July, the airport projects that only about 16 million passengers will use the airport.

“That’s a 40% reduction in traffic. Most large hub airports are forecasting around 40% to 50% reduction in traffic,” Butler said. “You would have to go all the way back to 1993 as the last time we had such few passengers here in Salt Lake City.”

That is creating problems with the airport’s budget.

The airport is now projected to bring in 16% less in the current fiscal year, ending in June, Butler said. And for the coming fiscal year — with the anticipated opening of the first phase of a $4.1 billion expansion — the airport just cut its original operations budget by 10%.

As examples of expected revenue declines, concessions from such things as restaurants, retail stores, parking and ground transportation are expected to be down next year by 37% from original projections.

“If you don’t have people flying, there aren’t people parking; there aren’t people renting cars; there aren’t people buying food out at the terminals,” Butler said.

Wyatt said the airport has frozen all additional hiring planned for the new airport and has canceled many maintenance projects. He said the airport also had built up cash reserves sufficient to cover two years of normal operations costs, and the federal stimulus package is expected to provide $70 million to $90 million.

“We’re OK for right now, but obviously that won’t last forever,” he said. He noted that the airport is giving some financial help to airlines, including deferring their April rent and landing fees. For the next few months, it also will suspend normal fees for parking aircraft overnight as much of airlines’ fleets are idled.

Wyatt said COVID-19 has caused concern over the ongoing expansion — which is to be paid for largely by airlines and passenger fees. Still he said, “We intend to open on Sept. 15,” as planned for the first phase of the new expansion, including a new terminal, concourse, parking garage and more. A second concourse is scheduled to open Oct. 27.

Leah Hogsten | The Salt Lake Tribune The new Salt Lake City International Airport expansion project on Oct. 22, 2018.

“There was some initial pushback from the airlines about just stopping the project, but it’s too late for that,” Wyatt said. “We have acquired debt, which we will need to begin paying on.”

Also, Wyatt said the existing airport is showing its age, and officials have spent little on maintenance and repairs as they planned to move into new facilities.

“The old airport really wants to die,” he said. “So it really doesn’t do us any good to stop the project.”

However, he said later phases may be delayed or changed. Phased demolition of current facilities might even be accelerated to save money, he said. Some of those gates were still to be used because of projected high flight demand, which may no longer be the case.

“We’re going to keep going until we can’t,” on the expansion, Wyatt said. “I’m hopeful we can open on time.”