Southwest Airlines declined last week to sign a new use and lease agreement for the San Antonio International Airport (SAT) that was two years in the making, unless the airline gets the 10 gates it wants when a $1.4 billion new concourse is built.
But that didn’t stop the San Antonio City Council from approving the agreement terms on Sept. 12. The new, decade-long agreement is set to commence on Oct. 1 and seven airlines are ready to sign on, with or without Southwest.
For now, that leaves the airline out of revenue-sharing opportunities and out of any chance to participate in planning terminal improvements, and means it will pay higher use fees than the other airlines that operate at SAT.
Now, San Antonio aviation officials say they are open to meeting and working out the dispute, but say the terms of the agreement can’t change to benefit Southwest, the airport’s largest carrier, without all the other airlines giving the OK.
It all adds up to a complicated and uncertain future as plans to build the long-anticipated new terminal hurtle forward.
New terminal
Talks between the airlines and city officials began in April 2022 after the San Antonio City Council approved the airport’s strategic development plan without extending the airport use and lease agreement that had been in effect since 2020.
Such agreements are common in the industry and outline the airport and airline rates and charges and airlines’ use of the airport, such as gate locations. The agreements are written through a series of negotiations between the airlines and the airport, and a majority must agree to the terms before the deal is sealed.
For two years, negotiations to renew the agreement at SAT have been ongoing with a committee of seven signatory airlines participating and a Southwest Airlines representative serving as chairman.
In the end, it was Southwest that balked at the deal.
The planned new terminal — the first in 15 years at the San Antonio airport — is at the center of the issue. Expected to come online in 2028, the terminal would put an additional 17 gates up for grabs at the San Antonio airport.
The airline founded in San Antonio wanted 10 of those new gates. But so do American Airlines and Delta, both of which have said they might also build airport lounges in the new terminal.
Where it started
Negotiations began in 2022, starting with a discussion about the future needs of the airport and estimated costs. Late last year, airport officials then asked each carrier what they needed in those improvements, including the projected number of gates to accommodate growth.
That led to the airlines and the airport coming to a basic agreement over rates and charges and the amount that would be invested in building the new terminal and improving terminals A and B — $100 million each.
San Antonio officials then traveled to meet with each airline to get more details about their projections. For instance, one of those meetings was in Atlanta, where Delta representatives said at the time that they did not have plans for an airport lounge in San Antonio.
But if the airline were to be assigned gates in the new terminal, leaders there said they might consider making that investment, said Assistant City Manager Jeff Coyle.
For every airline, it came down to the same thing. “During those meetings, every carrier requested the exact same location: they all want to be in the new terminal,” Coyle said.
The decision process to assign the gates came next in the negotiation process, and that ultimately pinned American and Delta to the new terminal, which will be combined with Terminal B; United to the existing Terminal B and Southwest to Terminal A.
Airport terminal planners came up with the gate assignments, giving consideration to the number of gates each airline wants for projected growth, the destinations they will provide and the available space.
During that time, United Airlines stepped up to say Terminal B “could use some sprucing up,” Coyle said, so the decision was made to budget $200 million for Terminal A and another $100 for Terminal B.
The committee agreed, and those renovations were expected to start when the new terminal was completed. The group also conceded to a reduction of airport use fees for the airlines operating from those terminals and waiting three years for improvements.
How it’s going
In May, final gate assignments were made — leaving Southwest out of the new terminal — and a draft agreement was written as aviation officials moved toward finalizing it for council approval in September before the previous agreement expires.
Seven airlines committed in recent weeks to signing the agreement before the Oct. 1 deadline and to using the gates to which they were assigned.
Late on Sept. 11, a day before the council meeting, Southwest told airport officials they would not sign the agreement unless an additional $150 million was committed to Terminal A renovations, Coyle said.
During negotiations, “we were operating under the pretense that we would move to the new terminal,” said Chris Perry, a spokesman for Southwest Airlines, which wants to increase its market share in San Antonio to 50%. “In the absence of what we would see as a mutual agreement somewhere in there, those commercial future plans certainly would be in jeopardy.”
Airport planners working for the City had proposed turning Terminal A into a dedicated Southwest terminal, reducing the number of gates by seven in order to expand waiting areas and concessions, and promised to spend $200 million on upgrades.
In talks with Southwest, SAT officials also offered to move up the design and planning phase of Terminal A improvements to start in 2025 versus waiting until after the new terminal is done.
In recent weeks, SAT officials also flew to Dallas with the architecture team and met with Southwest “to talk through their ideas to see what they would like to see done there as we renovate,” Coyle said.
Perry told the Report the terminal is currently too narrow, and $200 million is not enough money to solve the problem. Coyle said Southwest provided nothing specific about its needs when the airline requested the additional $150 million be committed.
Additional funding needs could very well come up as the project progresses over the next several years, he said, but paying for it would require the airport director to get advance approval from the airlines through a process outlined in the formal agreement.
11th hour
When Southwest pushed back, it was the airline’s timing and how they did it that rankled San Antonio officials.
“In the 11th hour … there was a push and a request by Southwest to us directly — not to all the other carriers who they were leading as a committee — but to us directly to put another $150 [million] or more into the agreement,” Coyle said.
“Our message back to Southwest last week was we can’t just insert this now if everyone else hasn’t agreed to it.”
In airline use agreements, there are “mechanisms and processes” to make and negotiate requests, Coyle added. Tweaking a contract agreed to by every other carrier one day before the council is set to consider it was out of the question, he said.
Conversations with Southwest are ongoing, though no dates have been set for meetings, according to Coyle. It’s unclear whether they will come to the table with other concessions or agree to the original deal.
Asking for more money beyond the initial $200 million isn’t realistic and would require a majority approval from the signatory airlines, Coyle said.
Getting assigned to a fewer number of gates in the new terminal, with the remainder in Terminal A, isn’t an option either, according to Southwest.
“We do things differently than most of the industry, and how quickly we turn aircraft on gates,” Perry said. “And it’s just not really feasible, from an operational perspective, to split up our operation between separate concourses.”
‘The Southwest heart’
Not all airlines operating at the airport are signatories to the agreement. JetBlue and Frontier are not, for example. Those that are, both passenger and cargo carriers, have more say in how they use the facilities and get a cut of non-airline revenue.
Non-signatory airlines also pay 15% more in airport fees than the signatory airlines.
But with millions of dollars in shared revenue on the line, and a long relationship between the city and the airline at stake, a resolution is being sought by both sides.
“I think we want to sit down and hear what they need at this point and how we can help get better to get there,” Coyle said. “Southwest is very important to us. San Antonio is very important to them.”
Southwest is not expected to end air service in San Antonio over the deal, Perry said.
“By no means are we just going to pack up shop,” Perry said. The San Antonio airport is “very near and dear to the Southwest heart, the Southwest story.”
Correction: This story has been updated to correct the number of airlines that have signed onto the use and lease agreement.
