Destination CLT: Speculative Analysis
Just over a year ago, I was living as a broke nomad; sleeping in airports, on benches in foreign towns, and bunk beds in hostels I couldn’t quite pronounce the name of were common for me, just as they are for any twenty-something-with-no-money-but-an-eye-for-adventure lifestyle. It hadn’t occurred to me then, but I’d sleep-walked my way through Charlotte Douglas International’s billion-dollar renovation in progress something like twenty times — and this isn’t because I love Charlotte (please see: the highway on/off ramps). Looking back, this is strange considering I’ve always been one to think that anything affiliated with the aviation industry didn’t have much capex to leverage.
Businesses in aviation typically operate with slim margins and little room for financial error. Air travel restrictions are ever-tightening to make the process safer and more fluid at the expense of saving money. A Bloomberg article by Kriston Capps jabs one specific organization — the TSA — by titling his piece about their efforts “Astoundingly Expensive and 95 Percent Ineffective”. His article’s foundation is built on a research paper by Stewart and Meuller that concluded it was bound to be expensive anyway, mostly negating his point, though Capps is right that there’s a ton of money in motion in the aviation industry, and notably in airports.
On brand with my initial hypothesis, the financial results of airports are less than loving (USFunds.com). So, how is Charlotte Douglas International (abbreviated as CLT) able to afford a pricey renovation — especially when 70% of the airports surveyed by the US Global Investors net negative (in 2013)? It turns out CLT’s pretty good at playing politics.
Airports are broken down into three big chunks by the FAA: the commercial service airports, the cargo service airports, and the general aviation airports. CLT falls into the commercial service section — and specifically the primary subsection within. This basically just means that CLT moves a lot of people on the daily.
This also means there’s a significant amount of money that flows through it, too. CLT itself has a beefy economic impact on the state; in 2019 alone, it generated roughly $24.6b for the state’s economy, $1.3b in state/local taxes, nearly 170k jobs, and about $6.8b in personal income. The airport alone makes up for 4% of the entire state’s gross product — which makes sense, considering it also saw about 50.2m passengers in 2019. This prompted my interest in the reports from the source — I used the 2019FY report, which can be downloaded from the CLTAirport Mediaroom here. From that, I found the airport reported its assets to be $2.9b and liabilities to be $1.1b, for around a $1.8b net position (p.42–43).
Now for the fun part — politics.
The Destination CLT project itself is set to total around $2.5b conservatively. CLT is owned by the City of Charlotte, meaning that the success of the airport directly contributes to the success of the city. In other words, Charlotte, NC basically operates like a big business with a really solid revenue stream. To Charlotte, a $250m price tag for ten years (13.8% of what CLT reported as its FY19 net position) with potential to stimulate the growth in all of its other income-generating industries across Charlotte, NC is a small drop in the bucket to secure its place on the map as a jetsetter’s destination.
The takeaway? Now’s probably a good time to buy a house in Charlotte, NC.