It's obviously a leap of faith to spend hundreds of millions of dollars to build stunning new terminals at one of the country's most congested, delay-prone airports. But that's exactly what AMR's ( AMR) American and JetBlue ( JBLU) are doing, as they ratchet up the competition at New York's John F. Kennedy International Airport. American on Wednesday celebrated the opening of its $1.3 billion terminal, "one of the biggest, boldest and most expensive projects in American Airlines history," said CEO Gerard Arpey, during a press conference. The airy, imposing structure has 65-foot ceilings, 84 staffed ticketing positions and three passenger lounges, and it will have 36 gates. With Kennedy the top U.S. gateway for international passengers, "our focus was to create something so that when customers come through,
they are proud that they're in the United States of America," Arpey said. The improvements come at an airport where clogged airspace and air traffic control delays mean that just two-thirds of all flights departed on time during the first half of 2007, ranking it 31st of 32 major airports, according to the Bureau of Transportation Statistics. "It doesn't do much good to build a lot of new runways and beautiful facilities if the airspace is so congested that you can't use it," Arpey conceded. "One of the major challenges confronting the U.S. is the infrastructure of our air traffic control system in this country. It desperately needs modernization."
Airlines are pushing for legislation that would begin a transformation to a satellite-based air traffic control system and would change a funding formula that allows corporate jets to largely avoid paying for the traffic control services they use. Meanwhile, JetBlue is gearing up to open the terminal of the future at Kennedy in the fourth quarter of 2008. It will resemble, in some ways, a new ticketing-area design by Alaska Air ( ALK) that eschews ticket counters in favor of kiosks and self-check baggage facilities. So far, Alaska's design has only been implemented in Anchorage, but when JetBlue's $750 million terminal opens in the world's media capital, it will likely become the talk of the airline industry and could trigger redesigns around the country. A primary concept is that CEO "Dave Barger never wants to see a passenger in line," said Debbie Usvaltas, project manager, who guided TheStreet.com on one of the first tours of the facility, which is now under construction. Instead of lining up, JetBlue passengers will flow past dozens of ticketing kiosks to areas where they can tag their own baggage and place it on conveyor belts. Only 32 staffed check-in positions are planned, and they will have low counters "to encourage customer-friendly interaction with the agents," said Usvaltas. Nearly 200 kiosks will be located throughout the terminal. Some will be used for check-ins, some will be at the gate for rebooking, and others will be at the baggage claim so passengers can report problems.
Whereas American built a spectacular monument, JetBlue wants innovation. Inside its secure area, the JetBlue terminal will feature a five-foot high grandstand-like structure with tiered steps for tables and seating. Besides improving the airport experience, both new facilities will allow for more passengers. JetBlue, which carried 27.3 million Kennedy passengers in 2006, expects it can move 40 million passengers through 26 gates. American, which carried 19.8 million passengers, says it can handle 25.5 million. Delta ( DAL), the third-biggest Kennedy carrier, with 15.9 million passengers last year, is growing too. President Ed Bastian said on a March conference call that Delta will spend money to improve its aging facilities in the former Pan American terminal, though he did not specify an amount. Overall, Kennedy expects 45 million passengers this year, up from 32.8 million in 2000. Already, aviation consultant Robert Mann says, the three principal carriers "are managing to gridlock each other to death." In an interview, JetBlue CEO Dave Barger says the immediate solution is for the FAA to reimpose slots at Kennedy, restricting the number of flights each carrier can fly. Arpey says the fastest growing carriers -- he did not specify names, but seemed to refer to Delta and JetBlue -- ought to negotiate flight reductions, just as American and United ( UAUA) did at Chicago's O'Hare Airport in 2004. "Capacity restraints, if done properly, are realistic in the short run," Arpey said. Long-term, he said, an air traffic control upgrade is the only possible solution. "No one is going to be happy just simply constraining capacity," he said. "We need more infrastructure in the air."