Jim Smith, who oversees the city-owned airport in Austin, Texas, needed help fast. Mexico's no-frills airline, VivaAeroBus, wanted to make Austin its first U.S. destination, and Smith had no free gate space.
To help quickly build and manage a three-gate terminal, Smith turned in June to a company with roots deep in aviation: General Electric Co., which leases more than 1,450 planes to 230 airlines and ranks as the world's biggest maker of jet engines.
"We kind of stumbled into GE," says Smith, executive director of the city's Aviation Department. "They already headquarter some of their freight operations here, and we were familiar with them. GE can move a whole lot quicker than we can as a city, and that's one of the attractions."
The deal, if given final city council approval, will be welcome business for GE amid the global boom in air travel and shipping: Returns on owning, building and managing airports can produce profit margins of as much as 60 percent, according to Geneva-based Airports Council International.
In the last year, GE has moved to take advantage of airport growth by forming three units: a $1 billion joint venture with Credit Suisse that buys and runs airports, a division that designs and manages terminals for low-cost airlines, and a cargo group that does the same for shippers.
"We wanted not only to grow our own business, but also to help our airline customers grow," says Norman Liu, the No. 2 executive at GE Commercial Aviation Services, the unit that oversees plane leases and the expansion in airports.
Airline construction is expanding along with growth in passenger miles and shipping. Boeing Co. estimates that about 28,600 airplanes will be ordered globally in the next 20 years. Air-cargo traffic should rise 6.1 percent annually in that period on increased trade with China, Boeing predicts. Global passenger volume will climb 5.3 percent this year, the International Air Transport Association said in June.
All those planes will spark demand for terminals, Liu says, adding that GE's fleet gives it daily insight into the needs of the world's airports.
GE's terminal unit can arrange financing and use its own standard models to build terminals that save energy by using more natural light and lower ceilings. GE typically will manage the terminals for a fee, including spaces for shops, newsstands and restaurants, which provide revenue for airport operators. That helps lower the cost of gate leases for airlines that don't own their own terminal space.
At Austin-Bergstrom International Airport, the new terminal will add three gates to the 25 normally in use. The airport has nonstop service to 45 U.S. destinations plus Mexico City.
Under the contract, GE would lease land from the city for 30 years, build and operate the terminal and related parking areas, and share revenue with Austin gained from fees and concessions that the terminal generates. Final terms haven't been set, Smith says.
Liu says GE sees a gap where so-called low-cost carriers and airports in emerging markets aren't able to raise funding for new terminals.
More airport growth is on the horizon. About $170 billion in projects have been announced for the next five years, according to the Sydney-based Centre for Asia Pacific Aviation.