Struggling BKG welcomes Southwest Airlines

As Branson Airport officials celebrate the arrival of Southwest Airlines Co.’s red-bellied planes on March 9, a potential air traffic control tower closure is looming and mounting financial woes have forced the hand of its bond trustee.

UMB Bank, the trustee for bondholders of $114 million in revenue bonds issued in 2007 to fund the construction of the private Branson Airport, reported in January that Branson Airport LLC failed to make a $250,000 loan payment by Dec. 31 in accordance with its 2011 funding and forbearance agreement. As a result of the airport’s continuing default status and history of financial losses, UMB withheld its semiannual interest payment of $3.4 million, according to a Jan. 4 filing with the Municipal Securities Rulemaking Board.

UMB Senior Vice President Brian Krippner referred questions to UMB Director of Communications Pam Blase. Blase, who has previously declined to comment on bond-related issues citing confidentiality agreements, did not return Springfield Business Journal’s call for comment by press time.

FAA threat
The UMB Bank decision follows another quarter of disappointing financial results for the airport. In fourth-quarter 2012, the airport recorded $1.97 million in revenues against $3.6 million in operating expenses. For the year, Branson Airport lost nearly $7 million, not counting depreciation and interest expenses, with $6.8 million in revenues and $13.8 million in expenses. Since the airport opened in 2009, it has endured roughly $21 million in operating losses, according to municipal securities filings.

Adding insult to injury, the regional airport is among five in Missouri and more than 100 nationwide on a Federal Aviation Administration list of those facing the threat of a tower closure due to sequestration cuts of some $600 million managed by the FAA. Other airports on the list are Joplin Regional Airport; Columbia Regional Airport; Jefferson City Memorial Airport; and Rosecrans Memorial Airport in St. Joseph. The air traffic control tower closures could begin by April 1, according to FAA.gov.

Springfield-Branson National Airport spokesman Kent Boyd said proposed tower closures by the FAA due to the sequester could potentially devastate commercial service at the smaller airports, such as BKG in Branson.

“If an airport doesn’t have air traffic control during airline hours, is the airline going to fly into an uncontrolled airport?” Boyd said. “Airlines are not accustomed to having to coordinate with other pilots on a common radio frequency. That’s not their world. That’s the world of small general aviation airports.

“There is this unwritten rule that in order to have commercial air service, you have got to have air traffic control,” he said.

Springfield-Branson National Airport is not immune from the FAA threats. SGF is the only Missouri airport among more than 60 where the FAA is considering the elimination of overnight tower shifts.

Branson Airport Executive Director Jeff Bourk said in an email response to an interview request the airport was working to address issues connected to the potential tower closure.

“The airport is working on contingency plans with all of the stake holders to ensure the airport remains open, safe and Southwest Airlines and Frontier Airlines continue to operate. The airport will not close or see a reduction in air service. A contingency plan will be in place if the FAA moves forward with this plan,” Bourk said.

Southwest’s commitment
Aviation industry analyst Michael Hynes of Branson-based Hynes Aviation Service Industries said he expected the airport to have its plan for financial stability in place by now. In December, SBJ reported Branson Airport was seeking to borrow up to $23 million from investors to cover operating expenses, but no such agreement was posted to the securities board’s website as of March 7. Hynes still maintains the airport needs $40 million during the next five years to stay afloat.

“I would have thought the deal was already done,” Hynes said. “Here we are, more than 90 days later, and the money is not in the bank, which is embarrassing and putting them under a level of pressure they have not been under.”

Hynes noted as long as investor support remains, BKG’s enplanements, or number of boarding passengers, should take off with the arrival of Southwest.

He doesn’t expect the trustee would foreclose on the airport, though he was concerned to see BKG held only $771,000 in cash and cash equivalents, while its accounts payable had risen to $8.9 million.

“It is not likely to happen because what would the trustee do with it?” Hynes said. “Now, if they can’t put the cash in the bank, then somebody is going to have to step in.”

Bourk said the airport’s investors remain committed, and he pointed to the Southwest deal as key to the young airport’s future.

Coming off the winter season, Dallas-based Southwest Airlines (NYSE: LUV) is expanding service from one daily nonstop departure by AirTran to Atlanta International and a daily nonstop to Orlando International to three nonstop dailies to Dallas Love Field, Houston Hobby and Chicago Midway, and a weekly flight to Orlando International. On March 9, airport and Southwest officials were scheduled to host a press conference to celebrate the arrival and departure of the low-fare airline’s planes at BKG. Before flight cutbacks during the off-tourist season, Branson served five nonstop destinations on AirTran Airways: Atlanta, Baltimore/Washington, D.C., Chicago, Houston and Orlando, Fla., according to FlyBranson.com.

Southwest spokeswoman Michelle Agnew said the airline has a team of individuals who review the financials of airports before it signs a service agreement. Citing BKG’s private ownership, she declined to disclose details of the agreement.

“Obviously, we don’t want to see any of the airports we serve do poorly, but our top concern is the operation. It will really be up to the community how the operation fairs,” Agnew said. “We need to fill those planes and have a profitable operation in Branson and that will really be what determines if we are successful.”

Agnew also said Southwest would work with airport officials and federal regulators to ensure customers aren’t impacted by the FAA’s cuts, noting the threats to air traffic control wouldn’t change the airline’s immediate plans in Branson.

“It’s really too early to tell how our operation may be impacted,” she said via email. “We are starting service on (March 9), and we’re looking forward to it.”