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"THE MOD SQUAD"
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Team Beracha
brings business savvy to Lambert Airport—will it fly?
By Bob Schaper
For Barry Beracha, old habits die hard. Sitting in his temporary
office overlooking the tarmac at Lambert-St. Louis International
Airport, Beracha tells a visitor, “The projections that we used
for flight traffic getting in and out of the airport said that we
were going to be well over $10 a thousand.” Somebody corrects him
at once—You mean $10 per passenger, not per thousand —and
Beracha laughs at himself. After a long career counting beer cans
and bagels, the terminology is tough to change.
A crew of workers departs through the Lindbergh Boulevard
tunnel at the end of a work day. |
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Beracha is a modest, soft-spoken man, but one with a reputation
for getting things done. He joined Anheuser-Busch Cos. (A-B) in
1967, and rose to the rank of group vice president of Anheuser-Busch
and CEO of Metal Container Corp., A-B’s can manufacturing subsidiary.
In 1996, he left to become the first chairman and CEO of Earthgrains,
an independent, newly spun-off company from the A-B family.
Beracha was praised by industry analysts for identifying and trimming
excess production, tightening distribution routes and hacking overhead.
“Earthgrains was probably the fattest baby ever born,” said one
analyst in the St. Louis Post-Dispatch. “Barry Beracha and his team
have done a good job of recognizing what had to be done, and taking
the costs out of the system.”
So good, in fact, that in July 2001, Earthgrains was acquired by
Sara Lee Corp. for $2.8 billion in cash. Beracha stayed on as CEO
of the new unit, Clayton-based Sara Lee Bakery Group, from which
he retired two years later.
Now, as “Personal Representative of the St. Louis Mayor,” Beracha
and a small group of volunteers are charged with helping to reduce
costs at Lambert, while at the same time making the airport more
attractive for airlines and passengers.
“Everybody’s got to be cost and price competitive,” Beracha says.
“I came from the beer can business and the baking business. A few
cents per unit makes all the difference in the world, whether you’re
a very profitable company, a break-even company, or you’re running
an operating loss.”
Beracha says the same is true for the airlines, which live or die
by enplaned passenger charges. If we take their last $6 per passenger
and say, ‘You have to hand that to us because we’ve added all this
cost,’ it could take their position in this market to a loss,” Beracha
says. “Or certainly erode their profit.”
He points out that profit margins are already razor thin in the
airline business—and non-existent for several carriers. Exacerbating
the problem, with fewer flights now operating in and out of Lambert
since American Airlines’ reductions in November 2003, the per passenger
unit costs have necessarily gone up.
“The airport is a break even operation, so the costs are all passed
through to the customers,” Beracha says. “To the extent that you
have more passenger landings, the more you can spread your costs
over a larger number. To the extent that you have fewer flights,
you have to pass more costs along to each flight and passenger that
you have.”
Indeed, it was the move by American Airlines to cut over half its
daily flights at Lambert that prompted St. Louis Mayor Francis Slay
to commission “The Business Task Force on Lambert—St. Louis International
Airport.” Put together by the RCGA, Civic Progress, and the Regional
Business Council, the task force, chaired by retired May Department
Store Co. Chairman David Farrell, came out with its findings and
recommendations in March.
The report pulled no punches.
Beracha, who was a member of the task force, says the group used
a downside forecast for revenue. “We did not want to plan for what
might be considered a reasonable or even a slightly optimistic forecast,”
he says. “To the extent that revenues come in higher, we can feel
good about that.”
With the help of outside consultants, the task force established
a goal to keep airline costs as low as possible. In order to achieve
that goal, the task force determined that $35 to $45 million of
additional annual revenue or cost reductions would be required to
keep per passenger costs competitive.
Since then, Beracha says the outlook has brightened considerably.
With a Federal Aviation Administration (FAA) grant of $85 million–which
will ensure an on-schedule completion of the W1W expansion–and an
additional $5 million trimmed from the airport’s operating budget,
the gap has been eliminated.
Beracha gives much of the credit to Airport Director Leonard L.
Griggs Jr. and his staff for taking an aggregate $12 million out
of the airport’s operating budget on an annual basis. Additionally,
the City of St. Louis is proposing to forego about $2 million of
revenues that it currently receives from the airport.
Beracha, who is devoting a third of his time to the effort, is assisted
by retired Anheuser-Busch executive Al Litteken, business consultant
Allen Sherman and others. The key, they say, is to look beyond pure
economics.
“I think the administration of the airport has focused very well
on safety, security and efficiency,” Beracha says. “And that’s what
they see as their task. [But] we as passengers, and particularly
the business community, look for more than that from the airport.”
For example, passengers had long complained about a security bottleneck
at concourse A at peak times of the day. Litteken challenged the
airport staff to revisit the problem. “We asked all the people in
the airport that were involved in getting a passenger through security
to come together,” he says.
The response by airport staff was a new system in which passengers
start preparing themselves earlier to go through security. “It allows
them to organize themselves and their families better, and when
they get through security it allows them to reassemble themselves
at their own convenience,” Litteken says. “As a result, we have
considerably lessened the time it takes for somebody to get through
security at A concourse.”
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Passengers shown checking in before departure time. |
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Beracha also points to a new cooperation between the airport and
the St. Louis Area Hotel Association. “They sought us out,” Beracha
says. “As a result of our discussion, they’re going to help us get
data on the passenger experience through the airport.”
The RCGA is also conducting a survey for Beracha and the airport
team, with the aim of supporting a regional strategy for enhancing
St. Louis air service. Specifically, Beracha has asked the RCGA
to assist him in compiling demand, volume, and destination information
from the region’s major employers. This information will be used
to explore various avenues for restoring and enhancing air service
in St. Louis.
Beracha says the airport can be a powerful marketing tool for the
St. Louis region. At a minimum, passengers should get a sense of
St. Louis and the activities going on in the region. “We can use
the airport to make sure that excitement and interest is communicated
to passengers,” he says. “I think that’s something we bring over
and above what the airport is very good at, in terms of safety,
security and efficiency.”
The ultimate goal, Beracha says, is to help the airlines grow their
businesses. The timing is critical, because Lambert’s tenant use
agreements must be renegotiated at the end of 2005. The signatory
airlines–including American, Southwest, Delta, Northwest and America
West–comprise more than 90 percent of the air traffic through Lambert.
“It’s very important for us to put our best foot forward and to
show that we’re very cost efficient, and that we can remain competitive
in terms of service to the airlines,” Beracha says. “And that we
are not just going to be passing along costs to them; that we’ll
work hard to show them that we’re a well-run airport.”
No matter what, however, Beracha says changes in the airline industry
continue to have an impact on Lambert’s customer base. “I think
hub airports are going to become less and less prominent, because
the growth is going to be in point-to-point airlines,” he says.
“It’s going to be less important to say you’re more of a hub or
less of a hub. What it’s really about is getting sufficient service
for the community, and putting the airport and the air service in
a position to where it helps the community grow.”
He considers his work and that of the committee a good start. “My
impression is that we are a better airport today than we were in
November when the first cutback occurred,” Beracha says. “And we’re
going to get better every month. It’s all about passenger experience,
selling the community, and preparing yourself to work with the airlines
to grow the business.”
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Airport
Authority May Become Regional
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St.
Louis-Lambert International Airport is owned and operated
by the City of St. Louis. Although the arrangement has worked
well over the years, shifting economics are now prompting
city leaders to consider “reinventing” the airport as a regional
institution—sharing both its revenues and expenses.
Serving as the oversight panel to the airport and its 660
fulltime employees is the 17-member St. Louis Airport Commission.
Much like a corporate board of directors, the commission approves
all spending and revenue agreements. The commission is chaired
by the city’s airport director, Leonard L. Griggs Jr., and
is made up of representatives from St. Louis, and the counties
of St. Louis, St. Charles and St. Clair, Ill.
Why the county representation?
“Having representation by [St. Louis] County, St. Charles
and St. Clair is very valuable to the airport,” says Richard
Hrabko, one of five St. Louis County appointees to the commission.
“Lambert is a regional asset, and it benefits from a regional
perspective.”
As for taking the next step and regionalizing the airport’s
management and/or ownership, the issue has been under discussion
for at least six years, according to Mike Donatt, a spokesman
for Lambert. Recently, St. Louis Mayor Francis G. Slay appointed
former U.S. Sens. Thomas Eagleton, John Danforth and Alan
Dixon to undertake a regional “diplomatic mission,” seeking
a regional approach to the airport’s governance and finance.
However, there is one catch: Lambert is permitted to capture
5 percent of its gross revenues for the city’s general operating
fund, but only because it was granted an exemption by the
FAA. “The FAA decided it would be grossly unfair to ban the
city from continuing the practice,” Donatt says. But if the
airport governance were to change, some predict the grandfather
clause could expire.
St. Charles County Executive Joseph Ortwerth says he could
support the idea of joint ownership—under the right circumstances.
“The notion of the City and the County joining together to
run Lambert is feasible if it were structured as a separate
multi-jurisdictional entity of its own,” he says. “If it were
structured like the Metropolitan Park and Recreation District,
I’d be supportive.” |
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Airport
Expansion Ahead of Schedule, Under Budget
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Airport
Director Leonard L. Griggs Jr. and his staff are constructing
a new 9,000-foot air carrier runway which will be complete
in June 2006—six months early, and $21 million under budget.
When finished, airport officials note that Lambert will be
able to handle simultaneous arrivals in all weather conditions,
which will improve the airport’s capacity by up to 50 percent.
In addition, the airport will continue to upgrade its terminal
facilities to provide a more attractive environment for the
traveling public.
Griggs notes the airport already contributes about $5 billion
annually into the region’s economy. The completion of the
new runway is expected to grow that number even higher.
“Our priority is to keep Lambert financially viable, a good
value for the airlines, and convenient to the passenger,”
Griggs says. “By doing this, we will continue to grow Lambert
into a world-class airport for air travel in the 21st Century.”
Barry Beracha, St. Louis Mayor Francis Slay’s personal representative
at Lambert, agrees. “[The new runway] will make us a much
better airport,” Beracha says. “It will certainly make us
more attractive for companies and airlines considering expansion.”
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47
New Flights Added at Lambert Since November 2003
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With
the elimination of 210 daily American Airlines flights
in November 2003, Lambert-St. Louis International Airport
has seen a dramatic reduction in passenger service in the
last six months.
Now, however, the trend appears to be reversing.
Passengers in line for security check. |
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Today, American operates about 172 less flights than before
the cutbacks. Other airlines, including Southwest, Frontier,
Delta, United and Air Canada have added flights. Frontier,
for example, now offers nonstop service from St. Louis to
Los Angeles, along with additional flights to Denver. Taken
together, nearly 50 daily flights have been added since the
fall.
Barry Beracha, St. Louis Mayor Francis Slay’s personal representative
at the airport, says some airlines are looking at American’s
flight reductions as an opportunity. “They know that with
the excess capacity that this airport has, we can move quickly,”
he says.
Still, Beracha doubts there will be a “flood” of new flights
anytime soon. “We’re not going to get 100 out of a 170 flights
in the next 12 months,” he says. “But I think the fact that
we went from over 210 less to about 170 less–and that’s going
to continue to be chipped away–means that service will continue
to improve here.” |
Bob Schaper is managing editor of St. Louis Commerce Magazine.
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