EGG HARBOR TOWNSHIP, N.J. - One of the two airlines that serve Atlantic City International Airport has decided to stop flying there, even as construction that will triple the size of the terminal is under way, but officials of the South Jersey Transportation Authority, which runs the facility, say the departure of Air Tran will not ground the expansion.

A 24/7 international customs station and a new fire safety station are to be part of nearly $40 million in improvements planned at the airport, which has long labored to emerge from the giant shadows cast by the Philadelphia and Newark airports.

But even as aviation officials and local dignitaries gathered Friday to celebrate the groundbreaking of a $14.3 million rescue and firefighting facility, a spokeswoman for Southwest Airlines, which is acquiring Air Tran, confirmed that the airline will cease operations at Atlantic City International in early January.

Ashley Dillon, a spokeswoman for Southwest, cited high fuel prices and other economic concerns in the company's decision to discontinue flights out of Atlantic City.

Airport authorities are brushing aside the setback, saying they expect the new facilities to help attract other commercial flights, and pointing out that Air Tran is a distant second to Spirit Airlines in the numbers of flights and passengers it handles at Atlantic City International.

They also note that in 2010, the airport had its best year ever in passenger numbers, with a 35 percent increase from the year before.

"Building a world-class facility - and that's what we're doing here - doesn't happen overnight," said Bart R. Mueller, executive director of the transportation authority.

"Moving forward with the federal [customs] inspection station and our other projects supports our work to attract new carriers and add air-service routes to maximize the capacity of the airport," Mueller said.

U.S. Rep. Frank LoBiondo (R., N.J.), who also attended the groundbreaking, saw the work on the firefighting outpost and other upgrades as laying "a foundation as a premier aviation facility."

Mueller and others also expect the 24-hour customs facility to open up the airport as an international gateway that can handle flights from the Caribbean, South America, and Europe.

"I really think that with the ability to handle international traffic, we'll add charter carriers interested in bringing in flights from Europe and other places," Mueller said.

Customs operations so far have been handled by appointment only, which has made the airport unattractive for routine international flights, officials said.

Budget airline Spirit, based in Miramar, Fla., has 20 mostly full flights heading to and from Florida daily.

Air Tran, by comparison, generally has four daily flights, connecting to its hub in Atlanta and accounting for about 131,000 of the 1.4 million passengers who use the Atlantic City airport each year.

Other business at the airport comes from private charter and jet service and gambling junkets run by the Atlantic City casinos.

The new terminal space, including the new customs area, will cost about $25 million and is expected to be completed in May 2012.

It will add 75,000 square feet of space and will make the facility - which handles flight check-in, boarding and disembarking, and baggage claim - about two thirds larger than it is now.

The new area will bump the number of gates from seven to 10 and add restrooms, lounges, and retail space, said Kevin Rehmann, security and operations manager for the South Jersey Transportation Authority, which also operates the Atlantic City Expressway.

"This is an exciting addition . . . because it opens up new avenues for this airport," Rehmann said. "It's one more piece in the puzzle that we think will help bring in new business, new carriers."

The airport, on about 5,000 acres in the center of Atlantic County 12 miles inland from Atlantic City, is also home to the Coast Guard's largest coastal rescue helicopter port and the Air National Guard's 177th Fighter Wing "Jersey Devils," an elite group that has evolved into an antiterrorism patrol monitoring the sky between New York and Washington.

The expansion is also expected to support Federal Aviation Administration functions adjacent to the airport at the William J. Hughes Technical Center.

The center houses the U.S. Department of Homeland Security's state-of-the-art Transportation Security Laboratory, where the country's newest air-traffic system, known as NextGen, is being developed. There is also a training center for federal air marshals.

The FAA is also doubling the space it leases from the airport authority for its baggage-screening operations. The expanded area will allow for quicker screenings and the installation of new, high-tech passenger and baggage surveillance equipment.

But at least one analyst cautions that even with the improvements, its geographic disadvantage means Atlantic City International's destiny may be to remain a midsize regional airport.

With about 120,000 landings and takeoffs a year, it is far from becoming a viable competitor to Philadelphia International and Newark Liberty.

Those airports serve about 500,000 flights per year.

"I don't see it ever really breaking out of being any more than a commuter airport. . . . It's too close to Philadelphia, and you've got Newark only a couple of hours away," said Helene Becker, an analyst with Dahlman Rose & Co. in New York. "It's just one of those things, geographically."

Contact staff writer Jacqueline L Urgo at 609-652-8382 or