American Airlines’ tenure as the leading carrier at the Luis Muñoz Marín International Airport could officially come to an end on June 1, if the U.S. Bankruptcy Court approves its petition to turn over the $350 million, 370,000 square-foot terminal facility it built in 1986 to the Puerto Rico Port Authority, News is my Business learned.
In its petition, the carrier has reportedly informed the New York court handling its Chapter 11 proceedings of its negotiations with the local government to reduce its space by 92 percent, down to a mere 27,000 square feet inside Terminal D starting this summer.
If approved, it would begin to pay a little more than $1.3 million a year — significantly less than the $8 million it currently shells out annually, airport officials confirmed.
“The carrier would become one more tenant, and it would rent only the space it will use,” LMM General Manager Arnaldo Deleo said. “It would be signing a one-year lease, which is what we’re signing with all of the tenants as we negotiate the public-private partnership contract for the airport.”
Under the new contract, American Airlines would be keeping its Admiral’s Club facility, four jet bridges, counter facilities and office space. Furthermore, it would retain use of three jet bridges for its American Eagle regional carrier, Deleo said.
That said, Deleo also shot down reports that circulated earlier this year saying Eagle would cease operations out of Puerto Rico next year. Instead, he said, the carrier will be replacing its aging ATR aircraft with regional jets to service the routes it has left to neighboring islands.
“However, there are airports throughout the Caribbean that cannot accommodate jet service, so it remains to be seen what will happen there,” the airport official noted.
As News is my Business reported, American’s parent company, AMR Inc., filed a motion stating its interest in getting out of its current lease agreements with the government for the use of the facilities, citing the significant reduction of its business out of LMM in recent years.
On Friday, Ports Authority Executive Director Bernardo Vázquez acknowledged knowing about American Airlines’ petition, saying the agency was “studying the possibilities we have, and we’re evaluating what we will do about it.”
That evaluation includes taking over the U.S. Customs inspection facility currently housed inside Terminal D, which in its motion American Airlines said was one of the expenses it was looking to eliminate.
40 years of history
American landed on the island on March 2, 1971, when it began flying to San Juan, offering 11 daily flights to four destinations and employing 185 people. The service grew to nearly 40 flights a day at its peak and another 70 to the Caribbean through its affiliate American Eagle. In all, it employed 2,800 people.
The bustling passenger traffic and activity generated over the next 15 years led the carrier to pump $350 million into its facilities at LMM and establish its Caribbean hub there.
But trouble began brewing a decade later, when the airline eliminated its local flight attendant hub, a move that was heavily criticized by employees and government officials alike. The flight attendant hub was dismantled in 1996 and employees were sent to other hubs in New York, Florida and Texas.
Problems really began to bubble over around 2008, when American cut by half the 38 daily flights it had at the time out of LMM, as well as reduced its American Eagle regional service.
“Puerto Rico’s airport activity is cyclical. It began with TransCaribe, followed by PanAm, then Eastern. Until recently it was American who was the dominant carrier, now it’s JetBlue,” Deleo concluded.