A new 519-room hotel and a rail line to the city centre will soon put the finishing touches on an airport once derided as an expensive boondoggle.
America’s largest airport by area, Denver International (DIA) has become Colorado’s top economic generator, worth $26.3 billion a year and supporting 225,000 jobs. A sign of its health is that the bonds that financed its construction entailed lower borrowing costs than their peers while generating higher returns. The bonds’ 5.41 per cent gain made them the sixth-best performer in the past 12 months among 53 American airports with outstanding debt.
“A large part of the population in the Denver area voted for the bonds to build this airport – it’s really unique,” said Kim Day, the airport’s chief executive. “This community understands the economic engine they get growing this airport – we’ve got political support you don’t find anywhere else.”
The airport started life as a project people loved to hate, with the political consultant Roger Ailes, now chairman and chief executive of Fox News Channel, spearheading a campaign by businesses near the former Stapleton International Airport to defeat it. Today, as Congress debates whether to replenish the federal Highway Trust Fund while roads and bridges crumble, DIA has become a testament to the economic heft of infrastructure projects.
The facility helped to transform the Denver metro area from a cow town to an international destination of choice for business and leisure travellers. Passengers ranked it North America’s second-best air hub for customer satisfaction in 2015 after Cincinnati/Northern Kentucky International Airport in a survey by Skytrax, a London-based research firm.
DIA’s domestic flight network – America’s third-largest after Hartsfield-Jackson Atlanta International and Chicago- O’Hare International – enticed corporations such as Panasonic Enterprise Solutions and Charles Schwab & Co to expand in Denver in 2014. These gains helped Colorado’s economic health improve more since 2010 than any other state except North Dakota and Michigan. And Denver, the state’s most important city, recorded the sixth-highest economic growth of any US metropolitan area last year.
DIA is twice the size of Manhattan and has room to grow. It is the only major commercial airport within 800 kilometres. Its location, nearly equidistant from both coasts, helped to make it the fastest-growing market in the Dallas-based Southwest Airlines’ 44-year history. The airline began service at DIA in January 2006 with 13 daily non-stop departures to three cities. Today it serves more than 170 daily non-stop departures to 56 destinations.
“We have people who drive from Nebraska or Wyoming here to fly,” said Ms Day, former executive director of Los Angeles World Airports.
Coloradans travel by air 3.2 times as much as the US as a whole, she said.
The nation’s fifth-busiest airport, DIA served a record 53.4 million passengers last year and its 140 shops, restaurants and services reported historic revenue of $322.8 million. Its record-breaking growth isn’t without challenges. To compete with well-established facilities with global networks like Dallas/Fort Worth International, the city and county of Denver accrued $4.4bn in debt to build DIA, said Standard & Poor’s in a November report. “Debt per enplanement is, in our opinion, high, at $169 based on total enplanements, or $291 based only on origin and destination enplanements, in 2013,” analysts wrote.
Airlines use enplanements, a measure of each passenger that boards a flight at a facility, to compare costs among airports. Origin and destination passengers, or those who begin and end their trip in a designated city, represent the region’s true demand for air service.
S&P cited several other possible constraints on growth, such as a high proportion of connecting traffic, at 42 per cent, and the fact that United Airlines serves about 41 per cent of the airport’s passengers, making it vulnerable to cuts by the carrier.
Even so, Denver’s airport benefits from some of the lowest borrowing costs in the $3.6 trillion market for tax-exempt securities among the country’s airport authorities. At 2.2 per cent, it is cheaper for DIA to raise money than it is for airports in California, Georgia, Michigan, Florida and Texas.
DIA’s economic ascendance outstrips that of its predecessor, Stapleton, which opened in 1929 and is 5km east of downtown Denver. In the 1980s, Denver trailed Dallas-Fort Worth, Houston, Phoenix, Seattle and San Francisco in population and economic growth. Skiers en route to a Rocky Mountain holiday eschewed Stapleton, where a parallel runway system prevented simultaneous landings in bad weather, in favour of Salt Lake City.
“It had a very bad reputation – business travellers would say to their travel agencies, ‘Send me to Chicago or Atlanta, do anything you can to help me avoid Stapleton’,” said the former transport secretary Federico Pena, today a senior adviser for Vestar Capital Partners, a private equity firm. As Denver’s mayor in the 1980s, Mr Pena assembled a coalition of businesspeople, city council members and state legislators to promote building a new airport.
In May 1989, Denver voters approved airport bond sales by a nearly 2-1 margin, with many seeing it as a way to jump-start the local economy. Denver issued the last set of bonds without airline agreements – forcing interest rates up to 10 per cent, said Mr Pena. The airport has never lost money and proven profitable for bondholders, he said.
“DIA has surpassed everyone’s projections in terms of direct, indirect and induced revenue – it’s had an extraordinary impact,” Mr Pena said. “The Denver metro economy is booming – it’s far more diverse than it was in the late 1980s – and to some extent that’s a result of the airport.”
Prices for office and retail space are escalating faster in Denver than in any other US municipality. Metro Denver also charted the greatest one-year rise in home resale prices in January of 20 US markets on the S&P/Case-Shiller index.
The airport’s sheer size keeps aircraft noise largely within its boundaries and saves money when it expands.
“When Chicago built their last runway [at O’Hare] they had to do a 15- year environmental process and they had to buy land and soundproof houses,” said Ms Day, the Denver airport’s CEO. “All we have to do is put down pavement.”
O’Hare spent $1bn on a seventh runway, while Denver’s costs for a planned seventh runway will be about $350m, she added.
When the Colorado governor John Hickenlooper, then Denver’s mayor, hired Ms Day to run the airport in 2008, they agreed a top goal was to complete Mr Pena’s vision of making the airport into the hub in a global network.
The facility’s international flights comprise only 4 per cent of total passengers, with service to nine countries including Germany, Iceland, Japan, the United Kingdom, Panama and Mexico. Ms Day wants to add flights to Europe and to Latin America, Asia and the Middle East. Denver’s location allows carriers to bypass coastal hubs in fuel-efficient aircraft like the Boeing 787 and the Airbus A380.
When she travels to meet with airlines overseas, Ms Day brings business leaders and city and state officials to court companies like Samsung Electronics and Panasonic.
As a selling point with carriers, Ms Day points to the planned $1.2bn light-rail line that will connect DIA with the rehabilitated Union Station downtown in 35 minutes, and a $589m airport hotel and transit centre project. The Westin is scheduled to open in November, with the train being operational by the second quarter of 2016.
The hotel’s conference facilities are already helping the city compete, luring a convention away from Dallas-Fort Worth, said Ms Day, who is trained as an architect. The facility includes an open-air plaza that Ms Day plans to use for concerts and other events.
She is working to reconfigure DIA’s main terminal, crowned with tents to mimic the Rocky Mountains, and opening up space for concessions. The project is expected to be complete in 2019.
“Our goal is for you as a passenger to say ‘I didn’t know you could do that at an airport,’” said Ms Day. “We were built to be a major global hub – we are fulfilling that vision.”
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