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A TALK WITH JAMES NICHOLSON: New Metro boss cites progress
Airport authority chief says a main goal is to be competitive
December 3, 2003
FREE PRESS BUSINESS WRITER
Detroit Metro Airport officials plan to focus on rebuilding the partly demolished Davey Terminal and making the airport more comfortable for travelers, said James Nicholson, the new chairman of the Wayne County Airport Authority. JAMES BRUCE NICHOLSON
TITLE: Chairman of the Wayne County Airport Authority and president, chief executive officer and principal shareholder of PVS Chemicals Inc., an international manufacturer and marketer of water-treatment and other chemical products in Detroit.
PERSONAL: Married with four sons and two granddaughters.
EXPERIENCE: Started with PVS Chemicals in 1972. Before joining PVS, Nicholson held positions at the First National Bank of Chicago offices in London and in Dublin, Ireland.
EDUCATION: Bachelor's degree in economics from Stanford University in 1964, master of business administration degree from University of Chicago in 1967, and master of science degree in economics from the London School of Economics in 1968.
CAR: 2003 BMW Z4 Roadster
: Bear, a dog.
The authority plans to get input from airlines that use Smith Terminal and are to eventually use Davey Terminal. Then by the end of January, the seven-member authority, which oversees the airport, hopes to select an architect for the new terminal, Nicholson said in an exclusive interview with the Detroit Free Press.
Nicholson, who replaced Wayne Doran as chairman Oct. 29, says he feels strongly about customer service.
He has parked his car at the airport's Blue Deck, ridden shuttles and talked to their drivers to understand the customer experience, said Michael Conway, the airport's spokesman.
Nicholson, who also is chief executive officer and principal shareholder of Detroit-based PVS Chemicals Inc., flies frequently from Detroit Metro.
He is serving an eight-year term on the authority, including one-year as chairman.
Nicholson shared his thoughts on the 10th-largest U.S. airport:
QUESTION: What are yourplans?
ANSWER: To create the best possible airport experience for travelers of southeast Michigan. We want to create the best facility. We took the first step by building the McNamara Terminal and are working on building a newer (North) terminal. We also want to be competitive, and clearly to be competitive we will have to be sensitive to the cost of enplanement.
Q: Is there a W-shaped design?
A: There is no W-shaped design. That is a rendering done pro bono that has surfaced in the newspapers. It is very premature in suggesting that there is a design before we even have an architect.
Q: Before you reconstruct the North terminal complex, are there plans to improve the Smith terminal temporarily? The complex includes Davey and Smith terminals.
A: I know that airport management has plans to replace over 70 automatic entrance doors and replace carpeting specifically at the passenger screening checkpoints, gate areas and entrance areas. There are also plans to replace some age-discolored light fixture covers; upgrade signage; replace, repair or improve seating, and conduct painting in other areas. . . . While maintaining a pleasant environment is important, keep in mind that we are existing in a cost-cutting environment. The ultimate goal is to build a new terminal for the Smith carriers equal to the McNamara Terminal in convenience, efficiency and attractiveness.
Q: What is the airport doing to keep its costs under control?
A: A great example of cost savings is the interest rate swaps on callable bonds we approved at the last board meeting. This action alone will save the airport an estimated $15 million to $20 million over the next 13 to 17 years. In FY (fiscal year) 2003, CEO Lester Robinson eliminated 82 full- and part-time positions from the WCAA (Wayne County Airport Authority) budget in addition to the nine management employees terminated in December 2002.
Employees of contracted custodial services and employees of the parking-management company were reduced in numbers.
Q: How important is it to keep costs low?
A: Everybody says lower costs make your airport more attractive to new airlines, especially low-fare carriers, and that's very true. But let's not forget that it's just as important to encourage existing carriers to maintain and improve the service they already provide.
Q: Although the airport hassaidit wants to attract low-fare carriers, it has failed to do so. Southwest Airlines hasn't expanded at the airport in thelast seven years and JetBlue has not mentioned flying from Detroit. Worse, AirTran and ATA have opted to fly from Flint.Why do you think this is the case considering the fact that every major hub has a significant presence of low-fare carriers?
A: I happen to believe that attracting low-fare competition to this airport should be a primary goal . . . However, to characterize the current effort as a failure is incorrect. In 1999, airport management provided new gates on Concourse A for Southwest and Spirit. Spirit has since grown to the extent that it made sense to move them to vacated gates on Concourse C. Southwest certainly has had the opportunity, but they move very deliberately when it comes to adding new service or new markets, and their careful research and analysis has certainly proved successful. I was pleased to see that Detroit Metro Airport has added USA 3000, a low-fare carrier with scheduled, nonstop service to St. Petersburg. . . .
We have every intention of guiding this airport to an exciting and prosperous future.
Nicholson's experience includes serving as chairman of the board of trustees of Detroit Public Television and on the boards of Handleman Co., Standard Federal Bank and the Detroit Symphony Orchestra.
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EFFICIENCY: Failure to cut costs threatens Northwest
Expenses of Metro's major user increase
December 3, 2003
FREE PRESS BUSINESS WRITER
Northwest Airlines and its two partners posted increases in costs to fly passengers in July through September while other large airlines cut costs.
Costs at large carriers such as United Airlines, US Airways and American Airlines declined because of cost cutting and concessions from workers, while Northwest's operating cost per available seat mile excluding fuel cost rose by nearly 1 percent to 8.69 cents, according to Blaylock & Partners, a New York investment banking firm.
Continental Airlines and Delta Air Lines saw their costs rise 3.37 and 3.74 percent. Both the airlines are code-sharing partners with Northwest, meaning customers of one airline can book flights on the other two and yet get frequent flyer miles or even use airlines' lounges.
The cost-per-seat mile is to fly one seat one mile -- one of the key measures of airline efficiency. The cost includes items such as labor and maintenance. Most analysts exclude fuel cost. The cost for each airline includes the cost of its affiliates. For Northwest it would include the cost of Pinnacle Airlines and Mesaba Airlines.
Northwest, the largest carrier at Detroit Metro, and Delta Air Lines have asked their labor unions for salary and benefit cuts, which could lower their labor cost.
If Northwest doesn't cut its "costs then their margins are going to be squeezed," and the airline could lose its competitive advantage, said Ray Neidl, aviation analyst with Blaylock & Partners.
It would become difficult for Northwest to raise debt or renew leases on airplanes, "nor would they be able to replace worn equipment, which would shrink," the number of planes they fly, Neidl said.
Northwest Airlines would not comment.
Among large airlines, American was the most aggressive, reducing operating costs by about 22 percent to 7.31 cents a mile.
Cutting cost is important. Large carriers have lost billions of dollars since 2001, when the airline industry started feeling the blow of drop in business travelers and later saw a further decline in passenger traffic following the terrorist attacks on Sept. 11, 2001. Northwest, for example, lost $1.3 billion through the third quarter of 2003.
Airlines like Northwest that fly passengers to their hub cities like Detroit and route them to their destinations also face tough competition from low-fare carriers like Spirit Airlines, USA 3000, JetBlue Airways and Southwest Airlines.
Northwest, whose largest hub is at Detroit Metro Airport, has asked its unionized workers to accept pay cuts and more liberal work rules that would save about $1 billion annually. That would cut operating costs by 1 cent per seat mile.
The airline has begun negotiations with two of its unions and has asked five other unions for concessions.
But analysts said it's uncertain how long or how successful those talks would be.
Getting concessions "is going to be a long shot," said Neidl. "They have a tougher job because of their unions," and because they have started making profits, he said.
Historically, negotiations with a pilots union take about 18 months, said Will Holman, spokesman for the Air Lines Pilots Association, the union representing Northwest pilots. "Issues such as pay are usually discussed in the latter stages, and they haven't been discussed so far," he said.
Delta has also asked its labor unions to take salary and benefit cuts while Continental is not asking for any concessions.
Contact RAJIV VYAS at 313-222-8760 or email@example.com.