Fight over flight

In the struggle for control of Charlotte’s airport, Aviation Director Jerry Orr wound up grounded. 
By Julie Rose clientuploads/Archive_Images/2013/09/Jerry-Orr-Airport copy.jpg

The light is so dim you have to squint to see him sitting on the back row of the section reserved for city employees. Arms folded high across his chest, the airport director slouches, his expression conveying a sour disposition. People who know him recognize it as his game face. Or his bored face. They look a lot alike. The City Council speeds through its consent agenda, items members have decided can be approved in a single batch. On the list is $2.6 million of spending for Charlotte Douglas International Airport: a new stretch of perimeter fencing, grading on one of its seemingly endless series of construction projects, cleaning services to keep the terrazzo flooring in high gloss …

This is why Jerry Orr has grudgingly come downtown to the Government Center this May Monday from his office above Concourse A, where the roar of departing jets punctuates his work. The money he wants to spend is airport revenue, not tax dollars, but because Charlotte Douglas is a city department, he needs the council’s blessing. That grates on him, but he might not have to suffer it much longer. The General Assembly is working to wrest the airport from the city and give it to a new regional authority. Should the legislation pass, he could spend money — or save it — in the manner he deems fit. “Move to approve.” Council members’ heads are down as they riffle through papers or check cellphones. “Second,” comes another disembodied voice, nearly cutting off the first. “All in favor say …” Eleven voices concur. Orr nods slightly, eases from his perch and slips out the side door. He’s used to getting what he wants. 

Charlotte Douglas has been a city department since it opened as Charlotte Municipal Airport in 1935. The aviation director reports to the city manager and council, but they had been hands-off for decades, says Stan Campbell, a council member from 1987 to 1995 and later chairman of the airport’s citizen advisory committee. “The mantra for mayors and councils going back years was, ‘Let the airport be run as a business and keep politics out of it.’ That was the secret to it being as successful as it is.” 

Orr took the reins in 1989, and Charlotte Douglas became the most cost-efficient of the nation’s 25 largest airports. That’s why it’s Tempe, Ariz.-based US Airways Group Inc.’s biggest hub and the eighth-busiest U.S. airport, with an economic impact on the state estimated at $12.5 billion a year. City leaders rewarded Orr with relative autonomy until 2010, when they began tightening his leash. With him in his 70s, US Airways and a group of local businessmen began to worry about how much longer he’d be at the controls. They pushed for the authority, and state lawmakers introduced legislation to create one in February.

City officials felt they had been blindsided, but they were powerless to stop it. The Republican-controlled legislature passed a bill creating an airport authority on July 18. That same day, Orr sent a letter to the city manager stating “my employment as Executive Director of the Airport Authority commenced and my employment by the City as Aviation Director terminated upon the enactment of the Act.” If he thought the matter decided — that he had won — he was wrong. 

Charlotte got a temporary injunction, and Orr found himself unemployed. The city claims he resigned; his attorney says he was fired. The General Assembly was incensed. “The city opted to fire the only person who knows how to run the airport with authority, and now it’s floundering,” state Sen. Bob Rucho said. So they passed another bill July 26 to replace the authority with a commission. The city would continue to own the airport, but 13 appointees and an executive director would run it. A Superior Court judge later ruled the commission couldn’t operate until the Federal Aviation Administration approves the move. Even if it does, the city could continue its legal battle. Either way, Orr’s future, like that of the airport he made, is up in the air. 

 

Our growth for 35 years has been like that,” he says, making what seems to be his favorite gesture. Orr doesn’t talk much with his hands — or words, for that matter — but his arm shoots up on a diagonal, as if his hand is an airplane climbing, when discussing the airport’s growth or the savings it delivers to airlines. US Airways Vice President Michael Minerva chuckles at the number of times he has seen it. “Jerry has really a unique vision for how the airport should run, and that vision is also a very large factor in CLT’s growth over the years.”

Growing up in Charlotte, Orr tagged along with his father, who owned a surveying company that frequently did work for the city. After earning a civil-engineering degree from N.C. State University, he took over the family business and continued doing contract work at the airport. In 1975, Josh Birmingham, then aviation director, asked him to join his staff. Orr had reservations. “The problem with government is they don’t understand business. And they don’t understand what people want.” Nevertheless, he became a staff engineer, tasked with overseeing construction of a new terminal. Birmingham gave him wide latitude. “I’d come in and tell him, ‘Here’s what’s happened, here’s what I’m doing,’ and he wouldn’t say anything, so I went on and did it. I got used to that fairly quickly.” In 1979, the proposed terminal led Winston-Salem-based Piedmont Airlines Inc. to establish a hub in Charlotte, a coup that allowed the airport to rebrand itself Charlotte Douglas International and set off on a path of rapid expansion that accelerated after USAir — now US Airways — bought Piedmont in 1987. Two years later, Birmingham retired, and Orr took his place.

When the terminal opened in 1982, it measured roughly 400,000 square feet. Just shy of 2 million people boarded planes there that year. Today, its footprint has more than quadrupled. Annual boardings top 20 million. Most of that sprang from US Airways; few airports in the country are more dominated by a single carrier. As a result, it has a high rate of transfer passengers, which are cheaper because they don’t need parking or security screening. Combine that with Orr’s thrift, and the secret to Charlotte Douglas’ success is no secret: “Our everyday low prices,” he says.

The industry measures efficiency through cost per enplanement — an airport’s terminal-rental and landing fees divided by its number of passengers. Charlotte Douglas’ is $2.28, according to New York-based airline consultancy Oliver Wyman. The median among the top 25 U.S. airports is $9.82. Philadelphia International Airport and Phoenix Sky Harbor International Airport — US Airways’ largest hubs after Charlotte Douglas — are $9.66 and $5.07, respectively. “I talk to a lot of other airports, and a lot of time they have cost-per-enplanement charts, and I know they all hate to put Charlotte on that chart because it makes them look bad,” Minerva says with a chuckle. “But we’re very fond of it.” It’s no wonder Charlotte handles nearly the same number of US Airways passengers as Philadelphia and Phoenix combined. 

How did Orr create such a massive operation in a midsize city without gouging his most-important customer? “I’m a small-business man,” he says by way of introduction in nearly every meeting or media interview. Despite being one of the city’s highest-paid employees — $211,000 a year — he didn’t consider himself part of its bureaucracy. “I see myself as part of the airport, and the airport is a business.” But that’s not true. It’s the most efficient arm of Charlotte government, a self-sustaining department that offers something no other U.S. city its size can: 700 daily flights. 

 clientuploads/Archive_Images/2013/09/airport-charts.jpg

Pluck a ticket from the automated dispenser and drive into one of the four long-term lots. Most major U.S. airports have a plethora of off-site private parking options, which siphon business with cheaper rates. Not Charlotte Douglas. At $5 a day, it’s about half what you would pay at the Phoenix and Detroit airports, both of which have similar total passenger traffic. “Nobody can compete with us,” Orr says. That may be true on the consumer side, but the airport’s $38.6 million of parking revenue for fiscal 2012 pales in comparison. Detroit raked in $20 million more; Phoenix, more than $30 million more. But Charlotte Douglas didn’t need more — parking covered nearly a third of its operating expenses. Phoenix’s and Detroit’s covered less than 20%. This is a reoccurring theme of Orr’s management: It’s not so much about revenue generation as revenue efficiency

Slip into the nearest empty space, grab your luggage and board one of the 63 perpetually crowded shuttle buses. Riding to the terminal, you’ll pass workers building a seven-story, $120 million hourly-parking deck. At the end of fiscal 2012, Charlotte Douglas had $860 million of outstanding revenue bonds for construction projects. Issued in the city’s name, they will be paid off with airport revenue. The majority of that comes from you, the traveler, through parking, concessions and fees added to plane tickets. Visitors who rent a car chip in through a $4-a-day tax. That money, $9.1 million last year, is going toward the parking deck’s bottom three levels, which will house rental-car lots now stranded on a side road, accessible only by shuttle. Come 2014, renting a car will be within walking distance of the terminal. 

“All airlines this stop,” the intercom squawks. It’s a mad dash off the bus, but an even thicker crowd waits inside. “We run a lot of people through this little building,” Orr says. Little is relative. The terminal totals more than 1.8 million square feet — bigger than 30 football fields — but a 2012 study by Air Transport Research Society says no other U.S. airport handles more passengers per square foot. It’s a point of pride for Orr and something US Airways appreciates. “The facility has never gotten out ahead of the operations,” Minerva says. If you’re flying anything but US Airways, you have to walk to either end of the long line of ticket counters, but you’re probably not, considering the carrier leases three-quarters of the ticket counters, gates and waiting areas. 

Boarding pass in hand, you reach a bottleneck that Orr is none too pleased about. “Thousands standing around” is his nickname for the Transportation Security Administration. It’s really only hundreds. In 2010, about 450 TSA agents manned 20 security lanes at five checkpoints. “To put that in perspective,” Orr says, “we have about 350 employees to run an entire airport.” To be fair, Charlotte Douglas has a lean staff. For instance, McCarran International Airport in Las Vegas has about 1,500 employees. Paying them ate up half its $222.3 million operating budget last year. Charlotte Douglas’ payroll is $15.8 million — 13.5%. It doesn’t, however, have to pay for the blue-uniformed TSA agent ordering you to empty your pockets and remove your shoes. Federal funds cover passenger screening.

Hungry? Need something to read on the plane? Orr hopes so. Concessions are so important to the bottom line that he caused a stir in 2001 when, shortly after Sept. 11, he complained about federal authorities barring unticketed visitors from passing through security. “That’s the money we use to operate the airport,” he argued. A typical concessionaire agreement includes rent and revenue sharing. Charlotte Douglas gets $63.14 per square foot from 95 shops, restaurants and bars, but it forgoes revenue sharing in favor of half the profits. Bethesda, Md.-based HMSHost Corp. leases all the restaurants and bars. Some, such as Beaudevin wine bar, are its own concepts, while others are subcontracted to vendors such as Charlotte-based Bojangles’ Restaurants Inc. Last year, HMSHost paid Charlotte Douglas $6.9 million in rent and $12.9 million in profit sharing. Atlanta-based Paradies Inc. runs the newsstands and convenience stores under a similar agreement. It paid rent of $1.9 million last year and profit sharing of $6.7 million. A 20-ounce Diet Coke costs you $2.29 — a price Paradies reached after surveying Charlotte convenience stores and adding a 10% markup — so hit an ATM if you need cash. But be prepared to pay a fee if you’re not a Bank of America Corp. customer. Nearly two years ago, the Charlotte-based bank signed an exclusive deal that booted all other ATMs. That contract earns the airport just shy of $1 million a year.

All revenue — from parking and concessions to terminal rent and landing fees — hit $150.3 million last year. From that, the airport subtracted three things: First, what its “signatory airlines” — in 2012, they were American Airlines, Continental, Delta, Jet Blue, United and US Airways — paid in rent and landing fees. The $21 million was just enough to cover maintenance and operations of their share of the terminals. Second, the landing fees of nonsignatory airlines and revenue from cargo and general aviation operations. That was $48.9 million. Finally, the $66.3 million nonsignatory airlines paid to use the terminal. Just like signatories, this is only cost-recovery. Almost $35 million was left over. Signatories’ deals with the airport stipulate they get 40% of that. Because US Airways leases 75% of the ticket counters, gates and waiting areas, it took home three-quarters of the pot. So the carrier spent $17.7 million in rent and fees but got back $10.4 million in revenue sharing. In return, signatories agree to make up the difference if the airport can’t meet expenses. That’s never happened. 

 “We’ll continue boarding US Airways Flight 374, servicing JFK, using our general-boarding red lane.” You toss your empty Coke bottle in the trash. Last year, the airport opened a $1.4 million recycling center, where a dozen employees sort some 25 tons of trash every day. Organic materials go into composting bins where 2 million red worms munch on it. Their waste will soon fertilize airport flowerbeds. Charlotte Douglas raised $185,000 selling plastic, paper and glass to recyclers in the program’s first six months and cut landfill fees by $40,000 each month. 

“Zone 1, Zone 2, please. Welcome aboard.” Get your boarding pass ready. During the first quarter of 2013, fares averaged $417.07, $38.38 higher than the U.S. average, according to the U.S. Bureau of Transportation Statistics. You might wonder why the airport’s everyday low prices don’t translate to everyday low fares. That’s because US Airways is so dominant — 650 of the 700 daily flights. The trade-off is a host of destinations and nonstop options. That translates into Fortune 500 businesses relocating to the region for the airport, as Chiquita Brands International Inc. did when it moved from Cincinnati last year.

You merge into a clot of passengers disappearing into the jet bridge. Engines rumble and whine outside the wall of windows. Part of your fare includes a $3 passenger facility charge, which generated $53.1 million for the airport last year. It’s not included in revenue sharing because it must pay for FAA-approved expansions or upgrades. Airports can raise it to $4.50, which most have done. Orr didn’t. “We don’t need to.”

 

In 2010, an Internal Revenue Service audit found Charlotte Douglas had misallocated about $30 million of bond funds. Each bond issue is designated for specific projects; co-mingling is not allowed. “It was just a mistake,” Orr says. The IRS did not penalize the airport, but some Charlotte officials were troubled. “Jerry should have known better,” City Council member Andy Dulin says. “I thought he should have been fired.” City Manager Curt Walton imposed stricter controls on airport finances. Orr bristled. He already suspected that Walton coveted more control. Walton, who retired in 2012, wanted to consolidate operations across the city. In 2010, he moved two of the airport’s information-technology staffers downtown and began billing Charlotte Douglas for services provided by the centralized team. Orr thought he could better manage cost and quality with them on-site. But the disagreement was merely an irritant compared with what came next. 

That November, the mangled body of 15-year-old Delvonte Tisdale was discovered in a Boston suburb beneath the path of a US Airways flight from Charlotte Douglas bound for Logan International Airport. Police surmised that the teenager had stowed away in a wheel well. Orr asked the Charlotte-Mecklenburg Police Department to investigate how he had gotten into the airport — which had its own security force — but it turned up nothing. Still, Police Chief Rodney Monroe recommended more frequent patrols of the airport perimeter and more city officers at the terminal to create a visual deterrent. He advocated new radios and computers for officers and for all service calls to be routed through CMPD 911. Orr wrote Monroe a memo calling the recommendations “irrelevant, incorrect, unfounded and possibly harmful.

Walton disbanded the airport force, putting Monroe in charge of all law enforcement there. CMPD swallowed most of Charlotte Douglas’ officers, increasing their ranks from 41 to 62. The extra officers, new equipment and higher CMPD pay boosted annual policing expense from $2.6 million to a projected $5.5 million in 2013. That infuriated Orr, who had to explain the higher costs to signatory airlines. He called the transition a “debacle” in an internal email. 

Word of his growing discontent spread among his supporters, including local business people and past members of the citizen advisory committee. Developer Johnny Harris started speaking about the need to “depoliticize the airport.” US Airways Managing Director for Government Affairs Chuck Allen met with Walton in early 2012, hoping for a say in who would replace Orr when he retired. “He was basically shown the door and told to mind his own business,” Campbell says. (Neither Allen nor Walton would comment for this story.) Airline officials huddled with business leaders concerned about the post-Orr era. By late last year, Rucho, a Republican from Matthews, had been approached about drafting a bill to strip the city of the airport and give it to a new regional airport authority.

Orr denies driving the effort but says, “A lot of people call me, and I answer their questions.” And he’s never hidden his preference for an authority: “I think it takes a lot of unnecessary motions out of getting things done.” No longer would he need to sulk on the back row, waiting for approval. “This airport has gotten to be a very, very large business, and it needs to behave like a business to continue to be successful,” he said in January, just before Rucho and Rep. Bill Brawley, another Republican from Matthews, introduced a bill to create an 11-person Charlotte Airport Authority, with only two members appointed by the council and mayor. 

The measure seemed destined to pass until the new city manager, Ron Carlee, went on a publicity warpath, telling any reporter within earshot: “Do this and the Charlotte airport will descend into chaos.” The City Council passed a resolution to “vigorously resist any outside, unilateral changes.” The uncertainty and acrimony of a lawsuit was the last thing Orr wanted, especially as US Airways finalizes its merger with Fort Worth, Texas-based American Airlines Inc., placing each of its hubs under a microscope. “Jerry didn’t want a scorched-earth approach to getting the airport authority,” a supporter says. Neither did Gov. Pat McCrory — a former Charlotte mayor — nor House Speaker Thom Tillis, a Republican from Cornelius, another Charlotte suburb. They quietly urged authority supporters to seek compromise, and Brawley tabled the bill in the House in favor of a proposed state-and-city commission to study the issue. 

But Charlotte officials rejected the offer, fearing it would be predisposed to an authority. They countered with an invitation that legislators weigh in on the city’s own evaluation. Angry lawmakers revived authority legislation, this time giving Charlotte four appointments instead of two. It also stipulated that Orr would be executive director. McCrory urged the issue to be settled “the Charlotte way” — through consultation and consensus building. “It’s not the Charlotte way … but it’s the only way we’ve been left with when we can’t get the other side to sit at the table and deal with us as equals,” says Rep. Ruth Samuelson, a Republican from Charlotte. 

The bill that finally passed changes the city’s charter, creating a 13-person commission — seven from Charlotte, the others from surrounding counties — instead of an authority to manage the airport. Charlotte still owns the property, but the appointees and an executive director would run it independently. So Orr got his way. Or he would have, had the judge not sided with Charlotte. In mid-August, as the city and state awaited the FAA’s decision, his deputy Brent Cagle was acting aviation director. At age 72, the man who so craved control had, at least temporarily, lost it.

Julie Rose is a reporter for Charlotte public radio station WFAE.