(upbeat music) - Welcome to "At Issue."

Thank you so much for joining us.

I'm H Wayne Wilson.

The pandemic has had a huge effect on almost every business sector across this country, and airlines and airports were significantly impacted.

We're going to talk about coming out of the pandemic and what's happening at the Central Illinois Regional Airport with its executive director.

Carl Olson is here, Executive Director of- - Hello.

- CIRA for short.

- Yes.

- Or the Bloomington-Normal Airport Authority, I suppose we could say.

- Exactly.

- So thank you for being with us.

- Thank you for inviting me.

I appreciate it.

Thank you very much.

- So mentioning the pandemic, can you give us, at least in percentage wise, what's happened to traffic, both leisure and business pre-pandemic, the nadir of the pandemic, and how are you coming out of it?

- It has been a wild ride, but it is also a boomerang.

So at its worst point, in 2020, our traffic dropped to 97% of what it was the year prior.

- 97% down?

- Yes, 97% down.

By the end of calendar year 2021, we had rebounded approximately 80%, 81% of 2019's traffic.

And also so far this year, through July, we're back 90% of what we were for the same period in 2019.

So, of course, as you know, the dramatic drop off in 2020, and then the climb out ever since then.

- So financially speaking, how do you weather a storm like that?

I mean, it was not just a temporary dip for a month or so.

How do you handle that financially?

- Well, we were fortunate to have very strong finances and good reserves, and it was an opportunity we had... Of course, we had to look for ways, like every business had to do.

We had to trim our costs and control our costs.

We had to look for some new revenue streams.

And we kind of just had to fight our way through it, just the way other businesses did as well.

Fortunately, we have a tremendous staff with good board and good leadership, and we were able to work our way through that successfully.

- One of the ways you pay for expenses is through a passenger facility charge.

That almost disappeared.

- Yes.

- Were you able to make up for that in other ways?

- Yes, a passenger facility charge is a fee that a customer pays when they purchase a ticket, and a large majority of it goes to an airport for approved capital projects, construction projects.

In our case, it's CIRA.

The PFC revenue, as it's called, was the exclusive sway to support a debt issuance that we used to pay for the terminal building when it was constructed in the year 2001.

So obviously when PFC revenues take such a dramatic drop, that puts a pinch on the debt service payments.

We were fortunate, in our case, that when the federal COVID funds came available for airports, one of the approved users for that was to offset debt service payments.

So rather than having us have to dip into our debt service reserves, we were able to use these federal COVID funds to supplement any shortfall in our debt service payments for these PFC revenues.

- You mentioned that the airport was built in 2001.

- Yes.

- It still looks like a new airport, but obviously maintenance is required.

How do you keep up on maintenance at an airport when you have...

The passenger facility charge pays off debt service, et cetera, but you have maintenance after 20 years?

- Yes, we do.

And we're going through that cycle now.

For example, we had to replace the air conditioning system for the building, or we might have to replace telephone systems, or other systems in the building, things that the public doesn't generally see.

And the trick to do it is not just doing it and funding it, but phasing the work so that the general rhythm of the airport continues, of the terminal building continues to function and passengers aren't impacted in any way.

So for example, when we swap out the air conditioning systems, we do it in the winter months.

When we do work on the boiler system, we do that in the summer months.

And it's all in phasing it, so that the public never knows this work is taking place.

- You, of course, get a lot of FAA money, Federal Aviation Administration, and you received a good chunk of federal funds for a study to improve the runway, tarmac, et cetera.

- Yes.

- Another thing when people purchase airline tickets, there's a sales tax, and that goes to the FAA, to the federal government, into a trust fund.

And then every year Congress allocates some of that money to go to airports, for grants, for approved projects that enhance safety in the vitality of the airport for infrastructure needs.

In our case, we received a grant to help us pay for what's called a preliminary design study.

One of our runways is getting a little long in the tooth, and it's gonna need some rehabilitation work.

But before we can design that project, we need to know what needs to be done.

So we're doing this preliminary study to begin with, which looks at the quality of the pavement, the subsurface, and the sub base materials, the drainage, to see what needs to be corrected in that rehabilitation project.

So the grant paid for the large portion of that preliminary design study.

The second component of that grant was also gonna be used in the process of designing and building a new general aviation facility.

And this is gonna go towards funding a major share of the first phase of construction, which is the grading and the site preparation and the utility work.

- You'll still need funds for actual construction?

- Yes, this is a phase one of about a three-phase project.

- Mm-hmm, timetable for completion?

- Oh, it's going to be a couple, few years.

- Okay.

And you mentioned general aviation.

We're gonna come back and talk about commercial flights, et cetera, but people need to remember that there's much more to an airport than just getting on frontier or American or- - Exactly.

- Let's talk about the general aviation component.

- General aviation, typically you would define general aviation as anything that isn't commercially oriented.

So it's private recreational general aviation, it might be corporate aircraft activity.

It is recreational in nature.

CIRA is very fortunate to have a very vibrant general aviation community.

We have many corporate flight departments.

We have almost 90 aircraft hangars.

We have an EAA chapter, which is Experimental Aircraft Association, and there are advocates involved in helping people build their own airplane and STEM education.

We have a squadron of the Civil Air Patrol Air Force auxiliary, and we have a very large flying club with almost 80 members in over a half dozen airplanes.

So we have a very vibrant general aviation community, and it really adds to the character and the positive dynamic of the airport and the community.

- Before we continue the conversation, I wanna mention that if members of our audience haven't been to Oshkosh, Wisconsin for the Experimental Aircraft Association Convention or fly-in- - AirVenture.

- Yeah, AirVenture, thank you.

I've been there several times.

- It's amazing.

- It's amazing.

So that aside, we mentioned the general aviation, you also have cargo is an important portion of the CIRA operation.

- Yes, we're fortunate to host two FedEx Express air cargo facilities at the airport.

One of them is the regional sorting and distribution hub for FedEx Express that covers all of Central Illinois.

They've become now our single largest employer.

And you really saw the role of air cargo, especially during the pandemic, where in the past cargo in and cargo out would've been nearly 50/50, however, during the pandemic, it got skewed much more heavily towards inbound cargo, because of e-commerce and people at home shopping and buying online, as those products then came into the community for delivery.

So cargo is a very important component of the airport.

And again, is really seen a more important role in the last couple years.

- I wanna talk a little bit about the... You mentioned the traffic was down in 2020, and it's starting to come back up, but leisures coming back more quickly than business travel.

Do you have... Is there more leisure travel through Central Illinois Regional Airport than business travel now?

- There is now.

Typically CIRA's been more than 50% business travel.

It's just the nature of the community, nature of the market.

But with COVID on the wind-down and people wanting to get out and reconnect with family and friends, and go on vacation, and have cabin fever, like every airport, we saw a real surge in leisure travel, and that surge continues now, even at this point, going through the summer so far.

Leisure is now probably upwards of 70% of our total traffic, at least at the start of the year, first quarter through spring break.

What we're seeing now, we've saw the start of business travel coming back in the first and second quarter, and now with small and medium sized businesses.

And now this summer, we're starting to see the return, not a surge, but a steady return of business travel from the large travel generators, the nameplate companies in the region that people tend to be familiar with.

- How long before you see a return?

Or will there be a return to 2019 levels?

- To 2019?

With respect to travel, again, through July, we're back to 90% of 2019, but it is largely leisure at this point.

Business travel will come back.

I don't know when it's gonna come back to the 2019 level.

Obviously you see the things taking place with travel around the country.

You see it in Europe, you see it in Asia.

International travel is still depressed.

You're seeing airlines reduce some flights to those areas because there isn't a market for it.

But in terms of regular business, domestic business travel, we do see it coming back.

We just don't think it's gonna be the same surge or the same concentration that leisure was.

We really hope that by next year we're back to 2019 business travel levels.

- Let's address the issue of airline service.

It fluctuates, if I may use that term.

- Yes.

- Dubuque lost air service, Toledo lost some flights, Toledo, Ohio lost some flights.

Ithaca, New York lost flights, other communities we can name.

CIRA lost a flight, a Delta to Detroit.

It was temporary, but it was just this past winter.

- [Carl] Yes.

- Can you explain how you try to maintain consistency in those flights?

And what do you do to convince a Delta to say, "No, don't be pulling your flights out of CIRA."

- Right, well, you have to have an active and strong relationship, which I think all airports have with the airline partners.

I know at CIRA, we certainly do.

In the case of Delta dialing down the Detroit service over the winter months, Detroit tends to be a heavily business traveled route.

And obviously there's not a lot of business travel during the Thanksgiving, Christmas, New Year's holiday period.

So what the airlines are doing now in order to save costs is, at off-peak parts of the season, they will reduce some of their capacity, some of the seats that they offer in that route, in that market for sale.

And then when we get more into a business-oriented time of year, they'll bring those seats back in again.

So they're trying to carefully, surgically reduce cost without hurting the market.

Things that airports can do, things that we do is that we always look to work with our airlines on retention.

We wanna help them to be financially successful, operationally successful.

And it just goes into how the airport is operated and managed that builds on that opportunity.

- Do you know if the cancellation of that flight to Detroit was a shortage of staff at Delta, or a shortage of aircraft, or aircraft of a particular size?

- The feedback we received in our conversation at the time was they just wanted to pull those seats down for that timeframe, because it wasn't a good business travel time.

They didn't give any background.

- It's their business.

- Yes.

(Carl and H. Wayne laugh) - So let's talk about the leisure aspect of this.

And I wanna point out, you have Allegiant and you have Frontier.

- Yes.

- Frontier flies into hub airports or main airports, such as Orlando.

And whereas Allegiant flies into Sanford.

- [Carl] Yes.

- Allegiant flies into Mesa instead of Sky Harbor at Phoenix.

Do you know why Frontier would differ from Allegiant in their style of air choosing airports?

- I think it typically falls back to what their business model is, what their cost structure is.

There are some airlines that like to go into the secondary markets, the non-primary airport in that community, because it might be easier, more efficient to operate on a schedule basis.

It might have lower operating costs.

Conversely, another airline might like to go into, for example, Sky Harbor rather than Phoenix Mesa, because they think it better fits their model, it better fits the traffic they're going to attract or want to attract.

So it really depends on the airline, I think, their business model, and their unique operating characteristics.

- And the potential of not having any slots available at a Sky Harbor?

- Yes.

- So I want to look at international travel.

What role does CIRA play in getting passengers to Europe, Asia, Australia?

- Oh, it's a huge role.

For communities of all sizes and communities all over the country, it isn't just getting our residents and our customers on a vacation to go to Europe or to go to Asia.

It is about bringing people into the community.

Airports, especially in Central Illinois, are a portal for people coming into the community, whether they're new business investors or family members or vacationers.

And a lot of times those folks, for example, people that are coming into our community, we recently had the opportunity to have Ferrero chocolate join our community and manufacturing chocolate.

This is an Italian-based company.

When they're going to do business and come and see their only chocolate manufacturing plant in North America, which is now going to be in Bloomington, they're going to fly in from Italy.

So international travel, even to a Bloomington-Normal, is critically important for the Regional and for the community.

It's bringing new investors, new jobs, new business in, as well as allowing our customers and our neighbors to go out and travel internationally.

- Do you communicate with State Farm or Rivian or some of the other larger corporations in Bloomington-Normal, in terms of, "We can provide connections that you need."

- Yes, we work together.

It's important that the airport try to make sure that we have the service that's most efficient for our major business travel generators.

So example, when you look at some of our routes, those are important to our major companies in our community, and that's why you see that reflected... You see that reflected, rather, in the route network that we're able to offer.

So we work very closely, and it is a hand-in-hand partnership.

And we're fortunate to have the relationships that we do.

- There was a point in time where, it was just early this year, that at least major airports, maybe not the smaller airports, but major airports were worried about 5G high-speed internet.

- Yes.

- Has that been resolved?

And was there ever any issue with 5G interfering with the communications of an airplane coming into CIRA.

- Great question.

And actually there never was a concern for CIRA.

You typically saw that in some of the larger markets, large communities, larger airports.

It wasn't the case for CIRA.

We haven't tracked it so closely as we did this winter and spring.

Our understanding is that the technology companies and the airlines and the FAA have found ways to work together to mitigate this.

They've slowed the rollout of some of this 5G activity in certain areas to give the airlines time to take mitigating actions on their part in the aircraft.

And it's gone very smoothly.

- You have four airlines right now?

- Yes, we have American and Delta, which are network carriers.

And of course that gives you, both domestic and internationally, one stop to the world.

And then we're also fortunate to have two low-fare carriers.

We have Frontier and we have Allegiant.

- And how many different destinations do you have right now.

- Nine, including Dustin, which is seasonal.

We also have Orlando seasonal and Frontier seasonal.

Year round, we have Orlando Sanford, Clearwater/St.

Pete with Allegiant.

We have Atlanta and Detroit with Delta, and we have Chicago and Dallas with American.

- And just for people who don't know Destin, that's Fort Walton Beach.

- Yes.

- That's the Panhandle.

- Panhandle.

- Panhandle of Florida.

- Yes.

- For those that aren't familiar with the town of Destin, it is very small.

A very small town.

- But Central Illinoisans love the Gulf Coast of Florida.

- A huge traffic for you going down to Florida?

- Yes, for all of Central Illinois, Orlando, Tampa, Fort Myers, Destin, the whole Gulf Side of Florida really is a popular, popular place for Central Illinois to vacation.

- We've talked about COVID and the impact on passenger load.

Are there any requirements with regard to COVID now in terms of mask, vaccine requirements, et cetera.

- None, actually, there's no mandated masks anymore.

There's no mandated testing, no mandated vaccinations.

The airport has, of course, continued with... Now that we know more, right?

We continue with our enhanced cleaning and disinfecting activities.

But with respect to social distancing, mask wearing, the plexiglass partitions that were very popular a couple years ago, those have been set aside, hopefully not to return, but if a need arises, we'll be right there with them.

But no, it's just continue with the best practices and march forward.

- I probably should've asked you this earlier when we were talking about the impact of, airlines had laid off some pilots, et cetera, and it was difficult getting them back after the pandemic has subsided somewhat.

Did you have a problem?

Did you lay off a certain amount of people?

And did you have a problem getting replacements to come back when airline traffic started to- - For our airport authority staff?

- Yes.

- Actually, we were very fortunate.

We did not have to lay anybody off.

We did do a short-term furlough for some of our shuttle drivers.

We have similar to the Peoria Airport, we have free shuttle bus service in the parking lot.

And our shuttle drivers, while being fantastic individuals, tend to be retirees, felt a little bit concerned about risk for their safety and health.

And what the reduction in traffic, and to keep our folks safe, we did do a short-term sort of furlough during the peak of COVID.

But the rest of it, all the other airport employees were on the job.

Some were still, of course, essential working on site, some working remotely.

We were able to work our way through that very well, actually.

- Your control tower is not 24/7?

- No, it is 6:00 in the morning to 10:00 PM, and they were able to function.

I know they had some folks that were out for short periods of time, ill, as everybody was.

And they also... You know, I think it's amazing how society fought through this and really adjusted and adapted very quickly, whether it's air traffic controllers, or airport employees, or airline employees, I think we've talked in the office, imagine if you could look back in time and say to somebody, "We're gonna shut down a lot of the economy, and we're gonna have people work from home."

And whether it's schools, or colleges, or medical services, or everything, you're gonna work at home, and we're gonna get through it.

People would've thought, "There's no way."

But isn't it a testament to society that we were able to be as adaptive as we were, and to continue to function.

More difficultly, obviously, and with some prices to pay.

But I think the same for airport.

Certainly at CIRA, we were able to work through it as best we could, and we're happy to be back to the new chapter.

- You've talked about the increase in passenger load, especially in leisure.

Fuel prices, jet fuel has gone up with everything else.

Has that impacted the airlines at all in... Because ticket prices are much higher than they used to be.

- Yeah, ticket prices are... Well, personnel costs are up.

Whether it's pilot contracts, flight attendant contracts, salaries are up, so human resource costs for airlines are up.

Operating costs are up, whether it's parts or supply chain to repair the airplane.

Fuel is a major spike in price for the airlines.

So the economics of the airlines have radically changed in the last two years, even after COVID.

Oil prices are starting to settle.

Jet fuel prices have come down a little bit, but it's just something that has to be built down into the system.

This new economics has to be managed.

- But that doesn't seem to have impacted the purchase of leisure travel tickets.

- No, and actually the market has proved to be very elastic, where the travelers who wanna fly for leisure purposes are willing to pay these higher prices.

The question will be, at what point does the market say, "We're not paying more than this," and does the price stop being elastic and the airlines have to start thinking about what their other options are?

So far, the market has responded by purchasing those higher price tickets, but certainly, as there always has been in the past, there will be a limit.

There'll be a cap.

- Are there projects.... Or do you have a wishlist that you don't have the money for?

- Every airport does.

You know, we often say in the office, "It costs money to run an airport."

Always you're looking for projects, whether you're looking to strengthen something you already have, or to build new, or to improve or to add on.

That's always the case, but typically airports do a good job.

And that kind of guidance is set by the FAA, where we have a master plan, and that's basically a 15-year plan in many cases.

and you work through that list.

And then when it becomes outdated, you make another plan.

So airports are very much of the mindset of make a plan, work a plan.

- For instance, jetways.

- Yes.

- So you have, I think, three gates that don't have jetways.

- Yes.

- But they're jetway capable- - Yes, they are.

It's just the market doesn't dictate the value for the airport authority to invest the money to put boarding bridges in all of those gates.

So we put them... We have new bridges.

We put them in...

I think we've got five, six bridges out there now.

We have a couple gates that don't, but those gates aren't being used.

So it's just not worth the investment right now to put that infrastructure, that investment there without any opportunity to get a return.

- So for clarification, some of your gates aren't used at all right now?

- Correct, and what happens there is, for example, yesterday was a great example.

We had diversions.

You might be aware that severe thunderstorms rolled through the Chicago area yesterday morning.

And we picked up two or three diversions yesterday from Chicago.

And this is a case where they just wanna come down and refuel and park.

The passengers don't get off the airplane.

They're not here very long.

And so these gates that don't have bridges, that's where we put the overflow parking.

They'll park the aircraft there, they'll get fueled, and then when the weather passes, they'll leave to go back to Chicago or St. Louis or Indy.

- Do you work at all in conjunction with your neighboring airports, whether that be Champagne, Springfield, Peoria.

- We do, Central Illinois is very fortunate to have just a tremendous roster of airports and really talented airport people.

At the same time, recognizing that airports are hypercompetitive.

We've talked about air service and things like that.

So we work very well together.

We tend to work more in areas, whether it's construction projects, regulatory issues, state or federal issues, not on those competitive characteristics, because while we're neighbors, and we work well together, we are also competitors.

Airports are always competing.

They're competing for passengers.

They're competing for air service.

They're competing for airline, or airport businesses, excuse me.

And you're not just competing regionally, but we're competing nationally.

So airports are very competitive.

And I don't think at times the general public recognizes that.

- So there's some things you don't wanna share on this program that Gene Olson at PIA might hear?

- I would love for him to share.

I'd love to hear some of the details.

They do a great job there, and I bet I'd learn from that.

- Carl Olson, Executive Director at Central Illinois Regional Airport.

- Thank you very much.

- And the Bloomington-Normal Airport Authority.

Thank you for being with us on "At Issue."

And this won't surprise you, next week on "At Issue," Gene Olson of Peoria International Airport will be here to talk about Peoria International Airport and Mount Hawley Airport, because he's a director of both airports.

So an airport topic next time on "At Issue."

(upbeat music)