Should the city turn over operation of St. Louis Lambert International Airport?

You’re flying off to an island for a week of blissful relaxation. You shove your bag overhead, slip into your seat, order a celebratory cocktail, and open John Grisham’s latest thriller.

The guy in the window seat starts talking. He’s a lobbyist hired to educate people about airport privatization, and he’s pumped. “Finally, St. Louis has a chance to be in the forefront, to be innovative,” he says. “We can capitalize on our biggest asset and sweep up all those dollars we leave on the table. This is the cash influx the city desperately needs.”

A little hiss, like steam escaping, comes from the guy in the aisle seat. He’s been fighting privatization for months. “Our airport is well run, its credit rating has gone up, and its numbers are better every year,” he says. “Why hand over the city’s best asset to some big corporation that just wants profit for its shareholders?”

“Because these multinational operators have negotiating power,” the lobbyist fires back, “and we could pay off the airport’s $630 million in debt. Surrounding land could be developed. We could have more carriers, more connections, more cargo, better concessions…”

“And if the operator ruins our airport?” 

By now, the ice has melted into your long-awaited scotch and Grisham has fallen under the seat in front of you. Leave him there. Who needs invented conflict?

Airport privatization is not strictly a St. Louis issue; these arguments are taking place all over the world (see sidebar below). But the way it’s unfolding here? “It’s so St. Louis,” remarks someone close to the deal. The city is David surrounded by Goliaths; the aldermen are staking out their own turf; the C-suite is pushing free market; the mayor’s agreeing, but ever so tentatively; consultants are taking baby steps to make privatization palatable. The prospect of a cash influx is dazzling some, inspiring long wish lists. Others are indignant at the perceived insult to hardworking civil servants; furious at the closed-door, big-money process; fearful of innovation that could tip into disaster.

For those whose minds are not already made up, it’s hard to know what to think. There’s something satisfying about refusing to be bought, something stolid about refusing to think bigger. Public opinion won’t hinge on data anyway; there are too many unknowns. Where St. Louisans land will be a matter of whom they trust, how they envision the city’s future, and how they want the world to run.

Whatever the outcome, the process itself deserves a little deconstruction.

Preparing for Takeoff

The idea of privatizing Lambert’s operation first cropped up in 2015, in a conversation between Mayor Francis Slay and David Agnew, a managing director with Macquarie Group, an Australia-based investment banking company that’s heavily involved in privatization projects around the world—and would become one of Lambert’s prospective bidders.

Slay was intrigued but knew the city didn’t have extra cash to fund an exploration. So he called Rex Sinquefield, a free-market libertarian who’s all for privatizing revenue streams instead of relying on local taxes. They met at the chess-themed Kingside Diner, and Sinquefield brought his lobbyist Travis Brown. Slay later assured the Riverfront Times that Sinquefield had expressed no desire to profit from the airport project—although he had suggested that an influx of cash might make St. Louis more willing to repeal the earnings tax.

Slay and his former chief of staff, Jeff Rainford, looked into various forms of public-private partnerships, including a terminal project at Denver International Airport. And Slay pursued the Lambert privatization idea, completing the application to the FAA in 2017, late in his term as mayor.

The FAA was definitely on board: In March, ProPublica reported that in 2017, when Dan Elwell was a consultant for the FAA (he is now deputy administrator), he emailed JetBlue executives, asking whether the airline had “any luck finding a JetBlue exec we can throw to the lions, er, I mean, introduce to a nice reporter to say nice things about airport privatization?” According to ProPublica, “JetBlue, the airline lobbyist, and the FAA then coordinated on talking points for a story about privatizing management of St. Louis Lambert International Airport.”

Once out of office, in 2018, Slay took a gig as a lobbyist for Ferrovial, a Spanish multinational that’s another likely bidder to run Lambert. Longtime lobbyist John Bardgett also went to work for Ferrovial; meanwhile, his firm won a contract to lobby for the city. Rainford became a lobbyist for Oaktree Capital Management, yet another likely Lambert bidder. (Rainford de-registered this past May.)

To lead the exploration, Sinquefield funded a nonprofit called Grow Missouri and made Brown its president. At that point, Brown’s political consulting firm, Pelopidas, was also helping put together the Better Together campaign, and airport privatization meshed well with the plan to reunite St. Louis city and county. An airport that was an island in the county, owned by the city, didn’t sit well with county power brokers, and the city would be far more attractive to the county if, instead of dragging $630 million in airport debt to the party, it brought a gift-wrapped bundle of cash. Even if that cash still technically belonged to the city, it would be managed, in Better Together’s proposed model, by a board that would be appointed and overseen by the “metro mayor”—who at the time was expected to be former County Executive Steve Stenger. 

Over time, however, there was growing resistance to Better Together—and to airport privatization. Sinquefield declined to comment, through his chief of staff: Mary Ellen Ponder, who was Slay’s second-to-last chief of staff. Her husband worked briefly for Stenger, who described him, according to the feds’ sentencing memorandum when Stenger was indicted for criminal conduct, as “an insurance policy. His wife is working for Rex.” 

Slay was on the board for the organization behind Better Together; so were Rainford and Jeff Aboussie. As noted by St. Louis Post-Dispatch columnist Tony Messenger, Aboussie then became a lobbyist for the city—and for another Sinquefield organization, Great St. Louis, which donated money to a PAC that pushed against amendments to limit the power of the county executive. Aboussie also lobbied for The Kelley Group, political consultants who helped put both Stenger and Slay’s successor, Mayor Lyda Krewson, into office. Ed Rhode, who’s close to Kelley Group founder Mike Kelley, was an advisor to Krewson and a spokesman for Stenger and now works for Pelopidas, as does Tom Dempsey, another city lobbyist.

It’s like Paramount Pictures in the old days, when the same actors starred in all the different movies.

Cabin Pressure

Sinquefield funded Grow Missouri to pay a team of consultants to analyze Lambert’s prospects. Grow Missouri set up an RFP (request for proposal) process—then won the RFP, which was awarded by a selection committee of city officials in January 2018.

Losing bidders protested what they called the “significant conflict of interest” (Credit Suisse Securities) and “perverse incentives for advisors” (Ernst & Young) “to try to close the matter ‘at all costs’” (Faegre Baker Daniels). The city says Grow Missouri and California firm P3 Point were the only two that offered a “fully comprehensive bid.” P3 Point’s founding president, Mike Palmieri, still isn’t sure what the city meant: “Maybe we had all the paperwork filled out? We never saw the 11 submittals. My interpretation was that the other bids were a man, his dog, and a Cessna. We already had that full team together, ready to go. Grow Missouri did not.”

The structure of the RFP still makes Palmieri shake his head: “When the tender for advisors came out, it said we won’t pay you a dime for any of your work until we reach financial close, and if the day before, we change our mind, you don’t get a dime. Personally, I’ve never seen anything like it. I’ve seen it in real estate, where you are brokering a company, but this is much more complex.”

Imagine, he suggests, that a week before signing the deal—after months of negotiations—your preferred bidder says its investors need a higher return and changes the terms. An advisor might be tempted to tell the client it’s still a good deal, just to keep it moving. Or, “instead of doing 38 different types of analysis to show all the risks and impacts, you might only do six, because you know the whole thing could be canceled at any time.” Instead of an all-or-nothing contract paying a percentage of the deal, Palmieri offered the city off-ramps: “We will do the first $100,000 worth of work, and you can see what you think,” then opt to continue or stop. “At least that way, you will be getting unbiased, independent advice.”

The city preferred Sinquefield’s model, which cost nothing unless a deal resulted. 

Sinquefield may not expect a profit, but the firm he co-founded, Dimensional Fund Advisors, is well aware of the opportunities of privatization. In his Post column, Messenger reported that DFA bought shares of Moelis (now a consultant for Grow Missouri) in 2015 and of Macquarie in 2016. Because the shares only represented a sliver of DFA’s portfolio, Krewson wasn’t bothered by the connection. 

As of June 30, though, DFA is also one of the large institutional shareholders in Southwest Airlines, owning more than 5 million shares. Tech News Observer reported that DFA “grew its position by 37.7 percent during the fourth quarter.” 

Changing Course

The first time Aldermanic President Lewis Reed heard the idea of airport privatization was spring 2017, when the mayor called from D.C. He and Brown had just left the FAA office, and Slay wanted Reed to know that he was working on a way to capture revenue through the airport. Reed’s gut reaction? “Well, that’s something I would not support.” But in the weeks that followed, he thought, “We have a murder rate that’s out of control. We have an aging infrastructure and this slide of major corporations leaving—for reasons that include access to nonstop flights…” He softened, deciding to at least listen. But after Krewson took office, he heard nothing more about privatization.

Then, in January 2018, someone walked into his office with a binder-clipped stack of paper: the draft consultant agreement. It named three consultants: Grow Missouri, Moelis & Company, and McKenna & Associates. They would form a working group—but with no requirement for open meetings or votes. “We could never have a conversation or any engagement with those consultants at all,” realized Reed—who says that to this day he’s never spoken to Sinquefield. 

Reed slammed on the brakes. He persuaded lawyers at Greenberg Traurig to look at the agreement pro bono. They recommended massive revisions; he ended up demanding 800 changes. “We look at this document as a boat with 800 holes in it,” he told the mayor. “For the city to get into this boat, they all need to be filled.”

It took months, but Reed prevailed. Had he not, he’s convinced, “there would be this group operating with all the powers of the city, controlled by Grow Missouri, and we would have no idea what they were proposing.”

Next, Reed enlisted outside financial advisors at Stifel Nicolaus. He wanted teams at Greenberg and Stifel to receive whatever data would be presented to the working group and to offer an independent assessment.

Reed also demanded minority representation, and he recommended several firms, including Charbonnet & Associates, who had worked at Lambert before, and Jones Strategic Advisors, because Mike Jones had worked in public policy and economic development for both the city and county. “Bunny [Bernard Charbonnet] understands this airport inside and out,” Reed says, “and Mike Jones knows what he’s doing. Neither one of these guys are wallflowers. That takes that internal team and exposes it to the world.” 

By summer, the FLY314 website scrolled photos of a diverse team of 41 consultants. “We have voluntarily incorporated minority businesses from day one,” Brown tells me.

Critics of the process note that all these consultants, regardless of race, are still being paid by Sinquefield. But proponents see no problem with the structure. because the final decision rests with the Board of Estimate & Apportionment, the aldermen, the airlines, and the FAA. 

The consulting firms are being paid about $800,000 a month, a total that prompted Elliott Davis to do one of his Fox2 “You Paid for It” segments. “Is this a good deal for the city of St. Louis?” he repeatedly asked Jones, who finally flashed back an annoyed “It’s a good deal for me.” But Jones’ pay is slim (in the second quarter of 2019, he collected $37,500) compared with, say, what Ricondo & Associates, an aviation consulting firm was paid: $568,995 that quarter.

Interviewed on KTRS, McKenna & Associates founding president Andrew McKenna, who is co-leading the exploration with Brown, said, “I have no problem walking away from a bad deal.” He added, “People who have a negative view on this, I ask them to just do their homework.” Where else, McKenna asked rhetorically, could St. Louis find this kind of cash? Challenged about the annual $9 million consulting expense, he dwarfed it by comparison to the salary of Blues star Vladimir Tarasenko. As for the contract’s structure, McKenna repeated other consultants’ frequent analogy to a real estate transaction.

Listening, Gerry Connolly, who calls himself “a government transparency watchdog,” rolled his eyes. How many real estate agents end up telling their clients not to move?

Cloud Cover

When the privatization idea first went public, in 2017, what was interesting was who wasn’t surprised. Stenger made a statement, as did then–mayoral candidate Krewson.

Airport director Rhonda Hamm-Niebruegge reportedly knew nothing about the plans until Slay had already filed the application. “This is the first I’m hearing about this,” blurted city Comptroller Darlene Green. Reed says that when he got the first call, the media knew more than he did. 

How successful has Reed been since in his fight for transparency? 

Deputy mayor for development Linda Martínez and Alderwoman Marlene Davis, who chairs the transportation committee and serves on the working group, agreed to come on St. Louis Public Radio with Alderwoman Cara Spencer, who was skeptical about privatization—then canceled at the last minute. Martínez came on the air a few weeks later with budget director Paul Payne instead. 

The working group has public meetings, but they’re sometimes as short as six minutes. Then the video camera is turned off and the public is shooed out. The closed meetings that follow can last hours. Connolly faithfully goes to those brief public meetings. He grew up “in [Prime Minister Margaret] Thatcher’s Britain, and privatization was at the top of her agenda,” he says. “But airports are such huge operations, I’ve always perceived them as within the public jurisdiction. And right at the get-go, the clandestine nature of how the application was made and the structuring of the consultants only getting paid if the deal goes through—the process seemed ridden with conflicts.” He volunteered to help STL Not for Sale, a citizen action group that opposes privatization. The cycle was all too familiar: Because those with an agenda didn’t trust the public to not be obstructive, they worked behind locked doors. The public jiggled the doorknob, then sat down outside, fuming, and looked for a way to be obstructive. 

Yet Brown calls the process’s public outreach and transparency “unparalleled and unprecedented,” noting a massive public survey conducted by a Grow Missouri communications consultant. The team gathered 16,000 responses to eight questions about how often people travel, whether they’ve heard the idea of leasing the airport, what grade they’d give the airport, and whether they believe there’s room for improvement. 

Activists point out that the survey did not ask what St. Louisans think about the risk of trading an annual $7 million for a one-time cash influx; whether they feel there’s been public access to clean, unbiased information; whether they’d like to see finer dining and more luxe goods or prefer a less expensive airport; whether they think privatization is worth the damage that might be done if a private manager fails. 

Questioned on St. Louis Public Radio, Martínez said the consultants would not be making a written report of their findings available to the public. 

A Skirmish in Midair

On June 13, 2018, the Board of E&A met. The last item on the agenda was “a proposal to engage an advisor team for the purpose of considering whether or not we want to privatize the operation and management of the airport,” as Krewson put it. “We don’t know if we want to do that or not.” She emphasized repeatedly what a complicated process it would be: “We’ve engaged a team of professionals in order to guide us.”

“Running an airport is complicated, too,” Green pointed out dryly. She already knew she was the only no vote. But she pressed on, citing years of positive growth. Why bring in “a private leasor who’s not beholden to the citizens of our region?” she asked. Privately, she was convinced that people “became aware of how well-funded the airport is and how much of a plum it is, ripe for picking by a private investor.” Green worried that “the airport would be stripped to the bone, stripped of its cash.” She still hadn’t gotten over Krewson’s first stalling, then proposing an alternative, back when they had just weeks to spare, to gain a $29 million financial advantage by refinancing airport bonds. “She’d created a second option: to treat the new debt more like a mortgage so the savings wouldn’t show up in the next six years but [instead] over 30 years,” Green says. “That is not the structure that was pleasing or beneficial to the airport or the airlines. It would benefit privatization, because they would not see upfront cash.” Southwest and American airlines sent a letter just hours before the special meeting, urging the city to accept “the comptroller-preferred option.”

Martínez says there were never two options: “The mayor was asked to approve bonds, and she, as an accountant, was very interested in the business terms, so she asked questions. She never said what to do. She especially wanted to make sure they would avoid a significant penalty for redeeming the bonds if a lease was approved.”

Krewson did as the airlines asked. Later, Green recalled how Martínez kept asking for the advisory team’s counsel to play a role in the refinancing plan. “They’re definitely trying to derail the positive management operations so the airport looks less strong,” Green decided. “And the aldermen have been suckered, hoodwinked. This mayor has come with a lot of polarizing tricks that focus on a cash infusion for the North Side, as though the North Side is just going to automatically spring up.”

Speaking only for herself, Martínez, who is on the advisory working group, says she has “aspirations that this exploration could yield more for all of us, a better airport and a better city.” The airport has “significant underutilized runway capacity and land,” but its ability to pull revenue from those assets is constrained: “One, we don’t have the best credit rating in the world. Two, in order to increase operating revenues, risks have to be taken, and the city as a government is not in the business of investing in private enterprises to see if they make money.” 

Blue Sky Thinking

“The airport is a gateway to our community,” Brown says. “It’s also the city’s very valuable asset, and we have a right to expect a lot more revenue. We were asked to look at this, and it’s a good thing we did, because we found a mountain of debt. That runway was the biggest mistake in the public works history of the state of Missouri.” Brown points to “the surrounding 1,000 acres that the airport eminent-domained” when it expected thunderous noise from all those TWA jets. “Once the debt covenants are removed, there are no restrictions” on how that land may be developed, he says.

(Martínez says the land could be developed right now: “The challenge has been to locate and capitalize on such opportunities, and hopefully with a private developer we could do that more readily.”)  

Brown also bemoans the state of the main terminal: “Visit when it’s raining, and you’ll find a guy dedicated to buckets. The design that was revolutionary in 1956 is no longer revolutionary.” Consumers expect more, Brown says—and will spend more. At Lambert, “the average person is spending $4 to $5 less than they would at a more modern airport. With 7 million enplanements, that $5 adds up to $35 million a year.”

How will there be enough profit to appease shareholders and improve the airport at a time when Lambert isn’t jam-packed and St. Louis’ population isn’t increasing? “As a region, we’re not the most significant growth area of the country,” Brown replies, “but today, the vast majority are connecting flights anyway. The debt service requires cost per enplanement to be artificially high. If you lower that cost, you can be more competitive for cargo, too.”

Hamm-Niebruegge says the cost per enplaned passenger is already starting to go down: “In 2010, it was close to $15; it’s now $8.86. We promised the airlines we would get down to industry average, and this year we’re actually slightly below industry average for medium-hub airports. And we’ve had a tremendous drop in our landing fees.” 

The annual number of passengers moving through Lambert (15.6 million at last count) hasn’t been this high since 2003. There were more local passengers this year than there were in 2001, at the peak of the TWA hub. Connecting enplanements have increased 29.4 percent since 2015; Southwest has moved 14 connecting flights from Chicago’s Midway to Lambert. The airport now has 74 nonstop destinations, and it’s added Frontier and other low-cost carriers.

“We were a high-cost airport when the hub went away,” says Hamm-Niebruegge, “and we had a low bond rating.” Then came terrorism and its financial fallout, then the 2008 recession. But in the past decade, the numbers have been steadily improving, so “it’s getting to be an easier sell,” she says, for cargo and economic development. FedEx and UPS are renting warehouse space, and Lambert just leased space to Majestic Terminal Services, which does ground handling for airlines flying for Amazon. The silver lining beneath that pricey underutilized runway is an airport with far less congestion than at others its size—which also appeals to passenger airlines, because there’s scant risk of missing a connecting flight. Plus, there’s Lambert’s location in, as writer William Gass put it, the heart of the heart of the country. 

Still, “other places use airports to market their city,” grumbles one traveler. “They have sleeping pods and fine restaurants; we have Cinnabon. Aim a little higher, folks.”

“We haven’t had Cinnabon for 10 years,” snaps someone close to airport operations. The airport’s food and beverage contract was due to be renegotiated next year. Five years ago, a renegotiation of the retail concession netted $45 million in additional revenue. But because Lambert is exploring privatization, the airport is not looking to go into long-term leases. The food and beverage contract was extended three years; it will add a St. Louis Blues–themed bar and grill. Meanwhile, by putting out bids directly, Lambert has brought in Three Kings, Vino Volo, and the new Urban Chestnut bar. The airport also has its first common-use lounge, Wingtips.

This is the fourth year of a five-year capital improvement plan which the airlines agreed to support. “And we have 670 days’ cash on hand,” adds Hamm-Niebruegge, “which is an extremely good place to be.” At the end of 2017, Fitch acknowledged the airport’s growth and stable cash base by upgrading its bond rating from stable to positive, giving Lambert its highest rating in a decade, an A minus. 

Asked about necessary improvements, the airport director mentions service animal relief areas and lactation suites. “You look at Dubai, Seoul, Shanghai, and dear God, they’re like Disney Worlds,” she adds. “If that’s the type of infrastructure you want, let’s think about what it would take to get there—and is it worth it?”

Fare Play?

Was this exploration designed to objectively assess the pros and cons of privatization, or simply to see what kind of offers Lambert could attract? Brown says the former, though he characterizes phase one as “the preparation phase, figuring out what you have as an asset. Then our second phase is the bidding phase: Who wants to be here? Who’s qualified? And the third phase is the approval phase.”

So what have the team identified as cons to privatization? He blows out a gust of breath. “The con is not the philosophy of privatization. It’s the inertia of getting started. The average city can’t staff up like this. But we have venture capitalist philanthropist Rex Sinquefield, who I will call the patron saint of St. Louis, because he loves this town more than it deserves. That’s why Grow Missouri stepped in. Congress authorized $750,000 to help, but $750,000 would not pay for one of my aviation forecasters, and I have three I’ve negotiated in the last year.”

One of the three, Unison Consulting, is no longer on the team; it’s the firm that the airport was using, so its numbers are the baseline for current projections. “Then we had a specialty firm,” Brown says, “and then the airlines wanted their own forecaster. They might come up with three different projections, because there are different vested interests. It’s like expert opinions: You get a couple, and people can choose to make their own conclusions.”

Brown thinks Lambert will be very attractive to bidders, and his aldermanic antagonist agrees. “Privatizing a major market like an airport is a private operator’s dream,” says Spencer, “but that’s also why we should keep it. This is akin to selling off the silverware. We are not at a point where we should be hocking everything we own.” Besides, she adds, “It’s our bargaining chip when considering merging with the county.” 

As MetroLink extends, Lambert will connect to MidAmerica, on the other side of the Mississippi, Spencer says, “and we’re the second-largest port in the nation. We ought to have a transportation authority that looks at regional transportation assets.” Others have suggested a more dramatic possibility: Make the airport itself regional. Let the county and St. Charles County buy in, which would give the city a cash infusion. Then forge a regional transportation plan and decide—in that context, not one of fiscal desperation—how much it might make sense to privatize.

If you keep following the money, though, you come full circle. A regional airport would jeopardize the city’s annual $7 million without a whopping cash settlement to compensate. The city needs cash.

Its elected officials seem a little more eager for that cash influx than its citizens, though—which is why Spencer has pushed hard for a public vote. Slay’s original application noted two paths to privatization and preferred the one that required a special election to amend the city charter.

Martínez says “the current mayor did not favor that approach, because she believes that no single city official should have the authority to enter into a lease. She wanted a more inclusive process.” The comptroller is now included, but she, too, would have preferred a public vote; she doesn’t understand the city counselor’s inability to write a board bill making one possible. “They all day long write the board bills for developers,” says Green. “They can’t figure out how to make a public vote? And then they stoop to blaming an alderman?”

When Spencer pushed harder, city counselor Julian Bush told the Board of Aldermen he had “grave reservations whether the board could adopt an ordinance making a privatization contingent on a public vote. That’s an unlawful delegation of legislative power.” To Green’s point, sure, “the charter can always be amended” to allow a public vote. The city could “get rid of the unlawful delegation provision altogether.” But the cleanest alternative, he says, is putting a city charter amendment on the ballot to require a public vote, then voting again. And the simplest way to take the public’s pulse would be a nonbinding referendum.

While we’re talking, I ask Bush about the structure of the Grow Missouri consulting process—is it typical? “It’d be hard to find a precedent for this one way or another,” he says. “It’s an unusual transaction. It creates, or would appear to create, an incentive. But these consultants get paid one way or another.” So it’s only Sinquefield who has the incentive? “So, yes, it’s in Grow Missouri’s interests that there be a deal. In an ideal world, maybe it would have been done differently.”

Will It Fly?

All the debate might be a moot point. 

“The only people who still think it can be done are the people who are continuing to make money on it,” says someone close to the process. “These private enterprises aren’t going to want to deal with E&A and public meetings. If they find a place with a more nimble government, they’ll go there. They’re not going to figure out how many people they have to put on the payroll to get Lewis Reed’s vote.” Even the number of aldermen is an obstacle: “Twenty-eight aldermen for a city of 300,000? That strangles everything. And the three-person E&A is the dagger.”

Macquarie has already dropped out (though Brown says he “wouldn’t be surprised if they’re back. These global operators go through a lot of changes”). How many other giants are going to want to contend with St. Louis’ clunky governing structure, populist suspicion, and glacially slow timetable? “We’ve already heard concerns from prospective bidder teams about delay,” Brown says.

“Look at how long it’s taken already,” remarks an insider with less stake in the outcome. “The longer the process goes on, the more those people make ungodly money and have no incentive to just stop.” To prospective bidders, meanwhile, “these things start looking less like opportunities. This is going to go into the next mayoral election, and why would you ever want to do that? Confidence erodes. Also, the county executive indictment played a role; he crashed and burned, and a lot of the same people were around him. What potential investor wants to go into a market tinged with corruption?”

Local opposition isn’t limited to activists and a few aldermen. Quite a few members of the airport commission aren’t thrilled, though they won’t say so on record. We also talked to civic and business leaders who are following the privatization closely, some because they say they’ve watched too much St. Louis history unfold in just this way.

Todd Litman, executive director of the Victoria Transport Policy Institute, in Canada, says “optimistic predictions about privatization have often proven false. Privatization does introduce some economic discipline, though. It makes certain types of graft more difficult. And private companies tend to pay some employees less; they’re setting wages based on the market. If you accept the premise that governments are too vulnerable to organized labor or graft,” then there’s an argument for privatization.

Economic development, though, ought to be just as possible for the public sector, Litman says. “Governments are selling bonds at a much lower rate than a private company can sell shares. A lot of times, it’s just that private companies are more aggressive. There’s an unfortunate narrative that says it’s bad for government employees to be entrepreneurial; it looks like they’re empire-building.”

Here’s a bit of irony: Sinquefield might have had a better shot at St. Louisans’ hearts and minds if he’d thrown a little less money at his targets. “‘Just stop spending!’ you want to tell him,” says a source close to the process, “but no one around him is going to say that.”

The activist group STL Not for Sale didn’t choose its name randomly. They think Sinquefield’s trying to buy things his way. “He has spent the last decades doing everything he can to strip revenue sources from the city,” notes one critic.

“It’s important that the public understand that this can be a really good idea and still be so horribly handled,” says another observer. Someone closer to the deal says, “People are afraid: ‘Oh, these big bad investment banks are going to come in and rob us of the airport, and we will be broke.’ We’re already broke! There are ways of creating those deals that give the city some leverage.”

As we went to press, the RFQ (request for qualifications) had just been issued, asking bidders to explain why they’re qualified to take on Lambert. 

How much cash are we talking about, anyway? The $2.3 billion the St. Louis Business Journal calculated, or closer to $1 billion, most of which would be eaten up by paying off the $630 million debt? We don’t know yet. Nor do we know how well the contract would safeguard airport quality, protect employees, and keep consumer costs affordable. 

Air travel is expected to double over the next 20 years. But with today’s airplanes able to fly long distances without refueling, how many additional connecting flights could St. Louis lure? Some analysts are predicting a shift from the hub-and-spokes model to point-to-point direct flights. And there’s now “flight shame.” Worried about carbon emissions, people are seeking other forms of transportation; in Europe, the old-fashioned sleeper trains are coming back strong.

Then there are the larger uncertainties: Will the corporation that takes over the lease keep it? National Express sold Stewart International back. Oaktree Capital is reportedly looking to get out of its role operating a terminal in Austin, Texas. Aerostar Airport Holdings—the holding company for Highstar Capital and a Mexican firm—took Luis Muñoz Marín public, then Oaktree acquired Highstar, then Oaktree sold its 50 percent stake in Aerostar for $430 million. “Presumably, Oaktree is thinking the easy money made on turning around the San Juan airport has been scored, and looks to get out before the efforts to further monetize the investment become a little harder to exploit,” wrote Bob O’Brien on TheStreet. 

Transportation Secretary Elaine Chao hailed the FAA’s acceptance of St. Louis’ application as an example of the Trump administration’s commitment to privatizing infrastructure: “This approach to airport management increases productivity, revenue, and operating efficiency for airports.” But what if Trump isn’t reelected? What if there’s a serious economic downturn? At the moment, firms big enough to bid on this “are sitting on a lot of cash,” one analyst notes, “and they’re looking for ways to put it to use.” That could change quickly.

Still, there’s momentum. St. Louis “is being watched carefully, both within the U.S. and internationally,” a CAPA analyst wrote in March. A bidder might overpay here to break the ice so it can win other privatization contracts, noted CAPA, and the deal “could have a catalytic effect on other cities with unmet infrastructure needs and a large airport asset from which they receive no direct financial benefits,” not even our annual $7 million.

Brown spoke at the Global Airport Development conference in Chicago in May, then in New Orleans in August, in front of a screen reading, “St. Louis airport privatization is closer to takeoff.” He’ll speak at a GAD conference in Dublin this fall, and he’ll moderate a conference panel in New York next May: “St. Louis’ Partnership Under the Magnifying Glass.”

For a partnership to be put under a magnifying glass, it has to exist—and in many people’s imagination, this one already does. Slay initially talked about using the cash to bolster infrastructure and expand MetroLink. McKenna talks sweepingly about “billions and billions of dollars that are sitting around the world and could enhance the airport”; about a “transformational” influx of cash for the city to spend on “police officers, fire trucks, educational reform…” Adolphus Pruitt, director of the NAACP’s St. Louis chapter, wants 50 percent of the proceeds designated for improvements on the North Side: “It’s critical that we demolish this blight.” Reed agrees: “We could set up renewable development zones—façade improvement and parks to keep residents in a particular place. You’d have the capital to better help our school systems. You’d have more economic activity to train and connect a workforce.” 

And Krewson? She’s said repeatedly that what she wants is a better airport; if privatization can’t deliver that, forget it. She was unavailable to comment for this story, but Martínez says the consulting agreement calls for research into how St. Louisans want the money spent. “We have been careful not to get ahead of this,” she adds. “People could get so enamored with how the money might be spent, they might not think about whether this is a good decision.”

It can look evasive when Krewson says she hasn’t made up her mind yet, but if you set both philosophy and fear aside, whether this is a good deal for St. Louis hinges on the terms of the deal. Her critics, though, say neutrality is damaging Lambert’s odds. The mayor’s office “has not created a public rationale for why they want to do this, which has made room for a ton of speculation,” says someone close to the process. “If you haven’t made up your mind, you shouldn’t be doing it. You don’t want to tell the truth and say the only reason we’re doing it is because we’re flat-ass broke! [Bidders] want a mayor who believes in this process and will lead it. 

“This is probably the most important issue facing our region, but it’s not easy to get people to pay attention or understand.”  

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Pockets of Turbulence 

The federal government first created an airport privatization program in 1997, but there were only a few takers. Since then, there have been a few false starts.

New York Stewart International Airport

Formerly Stewart International, the airport was the first in the U.S. to be privatized. In 2000, it was sold for $35 million to National Express to free up some public money. Under National Express, operating expenses per boarding passenger rose sharply; meanwhile, the corporation changed strategy and began buying school bus companies instead. In 2007, it sold the airport back for $78.5 million. Stewart is now run by the Port Authority of New York and New Jersey, which approved a 10-year capital funding of $500 million for airport development. 

Westchester County Airport

In 2016, the county executive proposed leasing this New York airport to Oaktree Capital for $150 million over 40 years. He gave legislators one month to decide. Fuming, they insisted on open bidding. In 2017, Macquarie was selected to run the airport for $1.145 billion over 40 years. The new county executive took office, he braked anyway; Westchester has since withdrawn its application to the FAA. 

Luis Muñoz Marín International Airport

When it went private, in 2013, Puerto Rico’s governor was frank about the necessity: “Right now, the Port Authority has zero dollars to invest in this airport. If this deal wouldn’t have gone through...there would be no money to pay our salary.” Puerto Rico received $615 million up front and a 40-year contract promising revenue-sharing and an additional $1.4 billion in sorely needed improvements. It expanded capacity, brought all activity into a single terminal, and increased security checkpoints to reduce costs and wait times. Retail shifted from tchotchkes to luxury goods. Between January and August of this year, the airport’s total passenger influx increased by 11.4 percent, reaching 6.5 million. But skeptics still warn of “consultants and lawyers connected both to the government and to prospective bidders. The web they weave is thick and strong,” according to a Puerto Rican academic, Juan Giusti-Cordero, in an op-ed published in the Post. “Agencies steering the airport privatization contracted with advisers who later became bidders, such as Macquarie Capital USA,” he noted. “Our airport has become just one more commodity in a fast-moving global financial market. Its contract has already changed hands on two occasions, as per the whims of investors.”

Chicago Midway International Airport

The first time Midway tried privatization, the public was told that it could make as much as $3.5 billion. “To make such a deal pay, whoever ponies up that kind of cash for a 50-year lease will have to squeeze a lot more money out of the airport,” noted Crain’s Chicago Business in May 2008. “The key is to look for every opportunity to have more places to sell things” to a captive audience, said one source, an expert in aviation architecture. But “some wonder how much more shopping a private owner can expect from Midway travelers, typically budget-minded vacationers flying discount carrier Southwest Airlines,” the article concluded, quoting Steve Steckler, chairman of infrastructure at a Maryland asset valuation firm: “You can open a fur salon and hope they all buy a fur coat, but there’s a limit.” The 2008 recession canceled Chicago’s privatization effort anyway. Three years later, Mayor Rahm Emanuel was elected—on a ticket that emphatically did not favor privatization. But Emanuel “began to soften that position in the face of ever increasing requests from the FAA, which was keen to reallocate the ‘major hub’ category,” noted a CAPA article. (The federal program has limited slots for larger airports to privatize.) On the second round, in 2013, Midway wound up with only one bidder, a Ferrovial-Macquarie partnership—so Emanuel called off the deal. The Chicago Sun-Times quoted an inside source saying that the $2 billion bid “fell short of what city taxpayers deserve.”

Denver International Airport

Many airports are creating partial P3s (public-private partnerships) to build and manage new terminals. But this summer, Denver’s airport pulled its contract with Ferrovial and took back construction management. Ferrovial blamed the substandard concrete it discovered for increased cost and time estimates. Airport CEO Kim Day told Business Monitor Online that the dispute went well beyond the concrete: “We are very far apart in terms of cost and schedule, and our values—prioritizing safety, the passengers’ experiences, and airline operations.”

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Alternate Routes

Though U.S. airports have been reluctant to embrace privatization, that’s not the case elsewhere around the globe. 

“The U.S. is the only country in the world that hasn’t had an environment that encourages airports to be businesses,” says Robert Aaronson, a privatization consultant who’s the former CEO of the Air Transport Association of America. “When airports were first built, they were public works projects. Over the past 20 years, in the rest of the world, that philosophy has been dropped, because it’s become clear that airports generate significant revenue from parking, food and beverage, merchandise, what have you. But the U.S. has some peculiar laws: Airports cannot earn a profit. They can generate surpluses for future development, but they cannot earn a profit that can be used for any purpose.”

The rationale for privatization is that it can generate enough money to both improve the airports and provide cash for other city purposes. “U.S. airports haven’t had an incentive to change their structure and operate like a business,” Aaronson continues. “Passenger services have lagged behind the rest of the world until very recently. Now, they’re catching up”—he mentions Brooks Brothers merchandise and fine restaurants—“because they’re pretty well managed, and it’s professional pride and also feedback from the community. But in other places, it happened because of business incentives.”

London’s Heathrow is privately operated, as are the major airports in Paris, Beijing, and Sydney, and all of Saudi Arabia’s airports are in the process of privatizing. But the U.S. is very different, a decentralized patchwork without a comprehensive transportation plan and system. In Europe, small national governments owned the airports and didn’t want to be in the airport business. Here, ownership has been driven by local need, with municipal ownership, under a blanket of federal oversight. Our airport facility charge, for example, can’t exceed $4.50 by federal law, and our excise tax is 7.5 percent of the ticket price. At Heathrow, you can pay $172 in passenger duty and service charges; in Frankfurt, $104; at Charles de Gaulle, $65. Also, European governments don’t put grant funding into airports. The 457 public airports in the U.S. receive federal support, much of it for infrastructure on the airfields, plus huge tax breaks that wouldn’t happen overseas.

Wholesale privatization is most common with large airports; smaller, regional airports “tend to be structurally unprofitable,” according to Airports Council International Europe, and “are thus suitable to a more limited range of private operation.” The International Air Transport Association reported in 2018 that airport privatizations wind up more efficient, more profitable for the corporations running them, but “generally more expensive for users.” IATA’s director general and CEO, Alexandre de Juniac, voiced frustration that the airport community seemed to accept the increased costs as normal; he blames inadequate regulatory oversight. 

Regulations are also being called for to ensure effective crisis response. Kansai International Airport was leading Japan’s privatization trend. But last year’s typhoon sent water over the seawall, inundating the runways and knocking out power. “The airport operator failed to respond swiftly to the crisis, causing serious confusion,” reported The Asahi Shimbun, noting that two corporations had 40 percent shares of airport management and there was “no clearly defined chain of command to deal with such emergencies.”

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A Privatization Primer

Over the past 22 months, the basics have become clear.

1. Privatization is a lease, not a sale. The city would still own St. Louis Lambert International Airport but would not make day-to-day decisions about its operation. 

2. Privatization would have to be greenlit by the FAA and the airlines (chief among them Southwest, about 60 percent of Lambert’s traffic). Next, a privatization lease would need to be approved by a vote of the three-seat Board of Estimate and Apportionment. 

3. Opponents of privatization, in the hope of stopping the process, are demanding a public vote right now. Proponents of privatization don’t want a public vote, even after a bidder is chosen, because knowing the agreement could be scotched at the last minute could discourage corporations. 

4. The consultants exploring privatization are being paid by Rex Sinquefield, who donated the cash to a nonprofit called Grow Missouri. If a deal is not struck, he’s out millions. If the deal goes through, part of the lump-sum payment to the city will reimburse Grow Missouri costs and throw in a bonus.

5. With privatization, the Board of Aldermen would lose its control over daily operations, as would the airport commission, the mayor, and comptroller. The city could retain the right to take back control of the airport if certain conditions were not met. 

6. About 700 airport employees would be directly affected by privatization, by Comptroller Darlene Green’s estimate, because they are employed by or contracted with the city.

7. The airport’s remaining $630 million in debt was incurred when Lambert built a great big $1 billion runway, only to be de-hubbed by American Airlines (which had absorbed the bankrupt TWA). Income from airline fees is being used to slowly pay down the debt.

8. Because Lambert is an enterprise fund, it’s a closed circle, supported by airline user fees, concessions, and federal funds. No city tax dollars may be used.  If you haven’t bought a latte or a plane ticket or rented a parking space, you’ve contributed nothing to Lambert’s operations or its debt. 

9. The city receives about $7 million a year from Lambert, because it’s one of 12 airports grandfathered by the FAA to receive a percentage of revenue. The amount is capped by a federal formula and won’t grow much larger. With privatization, it would go away altogether.

10. St. Louis would be the third U.S. city to privatize airport operations; the first, New York Stewart International Airport, is no longer privatized, and the second is in Puerto Rico.