When Bryan Rowan enters LaGuardia Airport, he begins
mentally renovating. Its really too bad about
this, he says, gesturing to a low-ceilinged food court in
Terminal B. It all got redone recently to make the
concessions more of a draw, but nothing can change the fact
that these places are presecurity. For Rowan, a financial
model man behind the terminals $4 billion rebuild, a
presecurity food court is like filet mignon cooked well done:
Potential is a terrible thing to waste.
As we amble down a hallway toward Gate D security, Rowan
explains that this Central Terminal Building was designed
in the 1960s. And it was designed for half the current
passenger volume. The CTB (the formal name for the central
terminal) curves in a wide C shape, affording plenty of room
for shops and restaurants. From the main building four narrow
concourses extend like concrete quills. Around each one jut
bridges capped by constellations of narrow-body and regional
Theres not enough room for two planes to back up at
the same time, Rowan points out. Theres not enough room
for almost anything. See how this concourse funnels
people into a single security lane? We watch a bottleneck
of passengers in the security line, stripping laptops from
cases, shoes from feet, dignity from selves. Back when
LaGuardia was built, of course, there was no way to foresee
what flying would look like post-9/11.
Having postsecurity shops and restaurants
concessions, to the airport aficionado began to matter
financially after security became so much tighter.
Nonticketed people used to be allowed right up to the
gate, Rowan notes. While they waited to pick
someone up, they could wander to a restaurant in the terminal
to have dinner, then walk up to the gate for coffee. They had
the run of the place. Now the travel experience is such that
people are not going to be able to relax until theyre
through security. We watch a line of holidaymakers
snaking through the entrance to JetBlues gates.
Once that time uncertainty is gone, instead of grabbing a
water on the run, a passenger might sit down and have lunch or
stop for a drink.
A Look Inside America's Worst Airports
We amble past the Bowery Bay Tavern, a recent corporate
attempt at a hipster pub. A couple of dozen beer taps flaunt
local offerings, including Brooklyn Brewery. Despite the mostly
empty bar stools (typical for presecurity), this attempt to
bring the city into the airport is apparently a hot trend
nationwide. Yet LaGuardia has five Auntie Annes pretzel
stores and sometimes only Auntie Annes, depending on your
gate. Either carbo-loaded passengers are more docile in a
truculent plane takeoff line, or Auntie Anne is a legit
Neither is true, according to Rowan. And that matters. Just
like the bars and food halls that are concentrated in the
presecurity area, many things exist at LaGuardia that
The concessions are not optimally located from a
revenue perspective right now, Rowan explains. They
are where most of the room for growth is. Whatever
LaGuardias shops and restaurants bring in, the airport
receives a portion to fund operations and capital. Buy a $4
bottle of Poland Spring from Hudson News and the airport gets
roughly 72 cents, based on median figures from a recent survey
of North American airports. On a pretzel dog ($3.99) with salsa
cheese dip ($0.89), Auntie Annes might hand over 65
cents, but there isnt enough heartburn in the world for
that paltry amount of change to fund a world-class
Americas airports feel like bus stations because,
broadly speaking, they are funded like bus stations. They
dont rely on taxpayer money, nor are they allowed to turn
profits. Anything they earn must be reinvested into the
facilities. The trouble for U.S. airports is that what they
earn through pennies on pretzels, rent from airlines,
and a $4.50-per-ticket charge isnt nearly enough
to keep pre-9/11 facilities safe, functioning, and ready for
the 21st century. Overseas and in Canada airports have solved
this problem by bringing in private investors, selling off
operator rights, and taking control of, and often raising, the
user fee. Those tactics either arent allowed in the U.S.
or they havent been exercised. The result: places like
LaGuardia. All day every day, thousands of people file onto
airplanes headed to the U.S. guaranteed of one thing: Wherever
theyre leaving is better than what lies ahead. LaGuardia
Airport is North Americas worst, the perverse jewel in
New York Citys Triple Crown of terrible airports.
LaGuardia, Newark Liberty International, and John F. Kennedy
International often sweep the bottom of U.S. rankings.
LaGuardia, remarkably, has earned unanimous condemnation from
airport nerds as the worst in America, uniting
Travel + Leisure editors with the Points Guy, J.D.
Power and Associates, and Frommers. T+L, perhaps
the most discerning of the publications, gave
dilapidated LaGuardia the dubious honor of
ranking the worst for the check-in and security process, the
worst for baggage handling, the worst when it comes to
providing wi-fi, the worst at staff communication, and the
worst design and cleanliness. Its also worst for
on-time performance and cancellations, says the Points Guy, and
has somehow declined in overall quality since 2014. Welcome to
the greatest city in the world.
If I blindfolded someone and took them at two in the
morning into the airport in Hong Kong and said, Where do
you think you are? theyd say, This must be
America; its a modern airport, Joe Biden,
then vice president, told a crowd in Philadelphia at a 2014
Amtrak engine unveiling. (With infrastructure photo ops, U.S.
politicians have to take what they can get.) If I
blindfolded you and took you to LaGuardia Airport in New York,
you would think, I must be in some third-world
country. The audience broke out in laughter. Biden
pressed the point. Im not joking.
Even in the petty world of tristate politics, the officials
in charge of LaGuardia didnt come to its defense. I
agree with him, said Patrick Foye, executive director of
the Port Authority of New York and New Jersey, which runs the
regions major airports, bridges, ports, and roadways on
its own balance sheet. New York Governor Andrew Cuomo has
called LaGuardia a disgrace.
But at least LaGuardia is trying. The Central Terminal
Building is set for the scrapyard, and its massive new
replacement is budgeted to cost $4 billion, the main piece of
an $8 billion overhaul plan. Frasca & Associates the
transport finance firm where Bryan Rowan has worked since
college joined the LaGuardia project in 2012 and
supported the years-long process of evaluating bids to select a
developer. What makes this project special is that the
developer not only pours the concrete for the new LaGuardia, it
owns the concrete for the next 35 years, at least.
On June 1, 2016, the 35-year lease on Terminal B transferred
from the Port Authority to an international consortium of
private companies, winners of a long and competitive bidding
war. Theyve promised a 21st-century LaGuardia thats
bigger, cleaner, easier to get to, and makes much more money,
benefiting both the investors and the region. By 2021,
LaGuardia should no longer suck. If all goes as planned
admittedly, thats a big if passengers will be able
to swiftly exit taxis or meet their Uber drivers via an extra
level for traffic, revel in three times the current Terminal B
security screening capacity, walk to the Delta Air Lines
terminal without going outside, and relax with a cocktail and
nonpretzel-based meal postsecurity. Luxuries, one imagines,
will abound in the terminal just as puddles used to proliferate
on the floors when it rained.
How all this gets paid for is the job of Frasca &
Associates. Rowan has spent a decade with the firm,
specializing in financing airports. He does not rustle up
capital from investors; instead, he works out the ideal
combination of municipal bonds, taxable debt, equity offerings,
cash flow, fees, leverage, creditworthiness, and more that puts
a project into motion and sustains it. His and the firms
presence at LaGuardia is a sign that this airport, and perhaps
American airports as a whole, are finally ready to enter the
modern age an entrance delayed, experts say, by a nearly
70-year game of catch-up.
American aviation peaked high and early.
The age of flight began in 1903 with 12 airborne seconds over a
windswept Kitty Hawk, North Carolina. Four years later a
Brazilian in France debuted what would become the first
series-production aircraft, capable of a searing 75 miles per
hour. The French weaponized airplanes during World War I, and
Americans continue to perfect the art. The Kim Kardashian of
the sky first in fame, one might say was the Red
Baron, the German ace who downed 80 rivals before taking a
bullet to the heart over a village near the Somme River. Once
again, what Europe did first, the U.S. did better: The 1920s
and 30s were the era of celebrity pilots like Amelia
Earhart and Charles Lindbergh. Initial ventures into commercial
aviation abruptly halted as World War II began and U.S.
aviation became military aviation. When the war ended, Europe
and its allies across the pond refocused on commercial air
travel. The aeronautics industry began branching into two
missions: flying civilians for money and transporting weapons
Americans took to the skies. Too many, in fact, for the
converted military airfields and early civilian marine
terminals. Air traffic nearly doubled between 1946 and 1955,
according to government figures. Then came a technological
revolution the most important since Wilbur Wrights
12 glorious seconds aloft.
The jet age began in the late 1950s and rendered existing
infrastructure obsolete. Planes became bigger, faster, louder,
and cheaper to operate. American Airlines first
transcontinental route spirited passengers from New York to San
Francisco nonstop! in a mere five hours, for 25
percent less than a ticket on the older-generation,
piston-engine airships. In their place, Boeing 707s and
McDonnell Douglas DC-9s arced coast to coast, and Pan Am
stewardesses shook martinis for passengers in the smoking
American factories churned out jet planes faster than
developers could build places to take off, land, and hangar
them. Enter: the lag. By 1955 the strain on existing air
facilities and the inadequacy of flight traffic controls
compelled president Dwight Eisenhower to enlist three private
institutions and several advisers military and civilian
to make a long-range plan for controlling jet-age chaos
and upgrading propeller-era systems. Much of our
airspace is already overcrowded, the committee concluded.
The development of airports, navigation aids, and
especially the air traffic control system is lagging far behind
both aeronautical development and the needs of our mobile
population and industry. In the previous five years, 65
midair collisions occurred all involving personal planes
killing scores. Airliners reported an average of four
near misses per day.
Within months Congress funded the nations first modern
air traffic control system: radar, radio, 40 control towers,
and illuminated runways for the busiest routes and airports.
Order was imposed, and flying got safer.
Sixty years later North American airports and carriers are
the worlds safest: The risk of crashing is roughly one in
10 million, according to 2015 data from the International Air
Transport Association. This is an important caveat to the
contention that Americas airports suck. Any mode of
transport that can operate never mind fly, with a human
pilot daily for 2,700 years before failing is the
opposite of suck.
Starting in the 1950s safety took priority over passenger
experience, insufficient airport capacity, and development for
the future. Then, as now, nearly all U.S. airports had
constrained spendable assets, and operators picked safety over
bathroom tiles and proactive expansions. We cannot go on
year after year expanding all our airport facilities, a
Civil Aeronautics Board official declared in a 1955 speech.
We have a right to expect a kind of aircraft to be
developed that will be more economical of facilities on the
U.S. cities have been continuously playing catch-up
since World War II, historian Janet Bednarek writes in
Airports, Cities, and the Jet Age. While many
cities came out of WWII with converted military bases that
helped absorb the first new waves of air traffic, unexpectedly
large growth in passenger traffic, new technologies, and
changes in the rules of the game challenged even the best
airport planning. Civic leaders expanded many times with the
expectation that the facilities could then meet demand for
decades. But many airports were congested within a few
years of wrapping up construction. Others, Bednarek writes,
baked aggressive passenger traffic growth into their project
funding models the airport hucksters version of
supply-siding a tax cut to reach revenue
Local governments strove to close the lag, Bednarek
explains, as airports became logical places for cities to
promote themselves to national and even international
markets. They built runways big ones and
commissioned terminals that would become landmarks of
architecture. In 1962, for example, New Yorks Port
Authority opened the TWA Flight Center at Idlewild Airport (now
JFK). A prominent architect described the structure, designed
by Eero Saarinen, as the Grand Central of the jet
age. It took seven years to build, and as many to become
obsolete. Boeings 747 kicked off the so-called wide-body
war in 1970, compelling airports to retrofit for the new
planes expansive girth. But in a few short years, that
war was over. Later, post-9/11 fuel prices made jumbo jets
impractical for all but the longest hauls.
Maintaining a major airport could feel like a Sisyphean
task. Americas newest Denver International
opened in 1995 and has expanded twice since then. Chasing
capricious traveler flows and yo-yoing plane sizes with a
seven- to ten-year building handicap is a nearly impossible
mission, and one that the U.S. is performing worse than nearly
every other first-world country, not to mention many in the
The airports goeth before the fall, futurist
economists contend. Americas air infrastructure requires
$75 billion in investment through 2019 to keep up with
passenger and cargo growth, rehabilitate existing facilities,
and support aircraft development, according to the North
American branch of trade group Airports Council International
(ACI-NA). Of course, a high estimate would be self-serving
given the constituency the organization represents. Yet any
frequent flier can attest to the fact that Americas
airports have fallen behind.
When you fly into an airport like LaGuardia, what do
you see when you land? An airport in desperate need of
repair, ACI-NA president and CEO Kevin Burke told me at
the organizations recent conference in Washington. The
biggest issue: funding, especially the $4.50 user fee, or
passenger facility charge (PFC), that U.S. airports borrow
against for development projects. Instituted in 1992 at $3 and
increased to $4.50 in 2001, the fee can only be raised through
an act of Congress. Since 2001, passenger volume has climbed
while inflation has diminished the fees real value to
$2.20. Congress has refused to heed the industrys call to
raise the cap, seeing the fee as a tax that would reduce
flying. This argument infuriates Burke and U.S. airport
operators, who typically compare it to checked-bag fees.
(Airlines, unlike the facilities they fly in and out of, can
add charges without lawmakers go-ahead).
Canada allows airports to dictate their own passenger fees:
Set them too high, and the market will punish that airport
accordingly. Nearly all are multiples of the $4.50 maximum
allowed at U.S. airports. Calgary International, for example,
charges each passenger C$30 ($22.82); Toronto adds C$20; and
Bathurst, New Brunswick, tops the chart at C$40 for the
privilege of flying from its tiny gateway. Furthermore,
Canadian airports are mostly run by private organizations,
which pay the government for long-term leases on the land.
When they want to build a runway, they build a
runway, Burke says, shaking his head. And our
airports are competing with one hand tied behind their back,
thanks to Congress.
The ACI-NA isnt lobbying for Canadian-style fee
freedom or even that level of increase. A $4 raise to $8.50 per
ticket, Burke says, would be like manna from
heaven. But with an antitax, Republican-controlled
House, Senate, and White House, its about as likely to
Airlines dont get veto power over passenger fees, but
in practice their lobbying has prevented any increase.
Our position is that we want our costs to be as low as we
can, says Deltas Christine Kennedy, general manager
for network planning and partnerships. At the ACI-NA conference
she presented her airlines extraordinary
profit growth to attendees. I understand the arguments
for the PFCs, but for me its just a number in the
P&L, she says. Obviously, the lower the
By preventing airports from raising sufficient capital the
traditional way fees per ticket airlines
essentially hold the purse strings for U.S. airport
development. We absolutely care about passenger
experience, Kennedy asserts. You can see that in
the money Delta spent on JFK nearly $1.4 billion
to overhaul Terminal 4, which serves the airline exclusively.
Airlines have positioned themselves as the only source of
capital and, in doing so, have taken enormous control over U.S.
airports. If Delta, American, or United is signing the check
for a new terminal, you can bet the improvements wont
benefit passengers flying JetBlue, Air Canada, or Spirit. And
thats a problem for any airport with a crumbling central
security screening area or multiairline runways.
Privatization hasnt taken off in the U.S., because of
the countrys unique structural and philosophical
barriers. In discussing airport financing, the U.S. is
different from the rest of the world in some key
respects, says Perry Offutt, a managing director at
Macquarie Infrastructure and Real Assets in New York. Macquarie
is invested in airports in Brussels; Glasgow and Aberdeen,
Scotland; Delhi and Hyderabad, India; and Hobart, Australia,
among others, and is a leader in financing public-private
infrastructure projects worldwide. Despite the
countrys focus on capitalism, some local entities, which
control most U.S. infrastructure, are reluctant to privatize
because they worry about the potential impact on key
constituents of changing the status quo.
Local jurisdiction over airports means that fundamental
change, such as privatization, is enormously complex. It
involves a range of stakeholders whose interests dont
necessarily align, including unions, mayors, city councils, and
state governors, for example. Those who oppose
public-private partnerships often suggest that private
capital is profiting at the expense of the public, Offutt
says. What that misses, he explains, are the enormous
efficiencies private operators can bring to bear and the risk
transfer from governments to investors. If a new terminal
development goes sideways, for example, the Macquaries of the
world are left holding the bag, not taxpayers.
But those arguments failed to overcome the hurdles of the
U.S. market until LaGuardia, that is. Americas
infrastructure philosophy for the people, by the people
sounds democratic, but the result for airports is the
opposite. Block off private investment, and youre left
with whatever the airlines throw your way and (over)leveraging
against capped user fees. As the manager of one midsize,
overcapacity U.S. airport puts it, Airport financing is a
hot mess right now.
Why not accept this perverse American exceptionalism and
treat airports as the bus terminals of the skies? People still
fly, after all. Consider LaGuardia in its direst state: Rain
outside means rain inside the terminals, with leaks cleverly
siphoned into inverted traffic cones taped to rubber tubes that
run into garbage bins. Yet the airport still kicked off $35
million in operating income in 2015. Together the Port
Authoritys Big Three are more than the Triple Crown of
terrible places to be alive in. Theyre also the
worlds second-most-popular airport system (122
million passengers in 2015), behind Londons quartet of
Heathrow-Gatwick-Stansted-Luton (150 million), according
to the Port Authority and the CAPA Center for Aviation.
For LaGuardia, business is up. More than 1 million
additional people passed through its doors in 2015 (the most
recent statistics available) versus the previous year.
Thats 175 percent of the airports intended
capacity. And unlike many less fortunate cities in the U.S.,
travelers to and from New York have options. Its broke
but why fix it?
There is a sense of pride one wants
to have in their public assets and infrastructure, says
Jane Garvey, head of the Federal Aviation Administration in the
Clinton administration and one of the people tasked with
rebuilding LaGuardia. Airports are our gateways. You want
the gateway to be something you can be proud of.
Garvey is chairman of North America for Meridiam, a leading,
Paris-based infrastructure investment firm. In 2011 the Port
Authority solicited private sector interest in overhauling
LaGuardia, and Meridiam joined forces to bid with international
specialists in airport construction (Skanska, Walsh Group),
design (HOK, WSP Parsons Brinckerhoff), and operations (Vantage
Airport Group). Together they became LaGuardia Gateway
Partners. Bryan Rowan and his Frasca & Associates
colleagues spent years analyzing the numbers and
stress-testing the models of each bidder, just one of many
professional contractors to the Port Authority in the massive
leap into airport privatization. In 2015, LaGuardia Gateway
Partners won the landmark contract; it took over the Central
Terminal Building lease last June. It vows to stop rain from
falling inside the terminals.
We had been holding our breath for two years, and
Im sure you could hear the sighs of relief and cries of
joy all over Manhattan, says Rebecca Catley,
Vantages senior director of communications, recalling
that Thursday in May 2015 when the Port Authority picked her
group. It was very, very exciting. Three finalists
remained in competition for the contract, all of them
experienced international groups that had invested years of
effort and millions of dollars in wooing the Port Authority.
Leaders gathered at the World Trade Center to hear their fate,
and each team was assigned a color. We were the purple
team, Catley remembers, and we all bought purple
ties, purses, and scarves for that extra bit of good luck. I
dont even remember if we went out to celebrate, but
Im sure we raised a glass that night.
Patching the leaky roof and fixing other egregious issues
was the first $5 million line item in LaGuardias CTB
overhaul. The next $3.2 billion should turn the stepchild
of New York airports, as one Port Authority official
calls it, into world class. Vantage, Meridiam, and
Skanska brought $200 million in capital to the table, but
insiders say the Port Authority wasnt after their money;
it wanted their expertise.
The Port Authority, having experienced significant
delays and cost overruns at the World Trade Center that
was one of the main drivers for soliciting an alternative
delivery method for LaGuardia, says an insider.
They saw how awry things went and thought, We could
use some people who know what theyre doing.
Bringing in private partners was a massive decision, and not
everyone was in support of it.
Its a testament to good governance that the Port
Authority learned a lesson. Many public entities have
undertaken big infrastructure projects and bungled them; the
Port Authority applied its experience to make a better plan for
the next project. From early on in the process, it carved out a
role for private partners in the design and construction of
LaGuardia 2.0. That matters to the eventual outcome, according
to Meridiams Garvey and Marie-Liesse Marc, Vantages
vice president of acquisitions and asset management.
As an operator, the best way to deliver really good
customer experience is to have input in the design from the
beginning, Marc explains. In the case of LaGuardia,
we had to think the Port Authority would lead the project to a
successful outcome, because its going to be a complex
process. Partnerships like these are going to be critical in
the much-needed development of the U.S. market: An experienced
operator focused on deliverability looks ten years, 20 years in
the future and asks, Am I overbuilding? Am I
underbuilding? And when you have a deliverable project,
Rowan knows the LaGuardia project can be financed, and he is
convinced its deliverable. The companies running the show
are pros, in his view. As for their plan: Hello, postsecurity
dining, drinking, and shopping. The vast majority (95 percent)
of concessions will be accessible after the ritual strip
search; Rowan thinks this will pay off for investors and
travelers. After all, only happy passengers shop. From
the airport roads to the terminals to the airside, the
redevelopment should significantly improve every aspect of the
passenger experience, he writes in an e-mail. As a
New Yorker, and as someone in the industry, Im beyond
excited to witness this transformation taking place.
So are investors worldwide, who are itching to put money in
this desperately undercapitalized, highly stable long-term
market. Thats where hope lies for Americas airports
and the 900 million people who fly through them every year.
Airports could be awash in cash for redevelopment if their
controlling entities choose to take it (and give up a little
control in the process).
We have clearly underinvested in infrastructure in
this country, Garvey says. There has been a
distrust of private entities on the part of public officials.
As more and more P3 [public-private partnerships] are built and
operated well, public opinion may change and be more embracing
of the delivery mode. This model, she adds, is as
much about shifting risk and fostering innovation as it is
For that reason, the infrastructure cash tsunami promised by
Donald Trump elicits wariness from many airport experts.
Governments have poor track records putting public capital to
work efficiently, rarely delivering projects on time and on
budget. Entire administrations change over the course of a
terminal or runway rebuild, putting projects at the whim of
politicians which, as the Port Authority has learned, is
the worst way to do them well.
On January 4, a year and a half into New Yorks
privatization experiment with LaGuardia, Governor Cuomo made an
announcement: The Triple Crowns days are numbered.
We are New York, and we remember the bravado that built
this state in the first place, he told a large audience.
That is the attitude that will take JFK and turn it into
the 21st-century airport that we deserve.
Potential private investment in the JFK project: $7
Leanna Orr is the Global Content Director of
Institutional Investors Investor Intelligence Network.