Southwest Airlines has refused to sign a new lease agreement with the City of San Antonio after it was denied a spot in the planned new airport terminal. 

On Thursday, the City Council approved the airline lease and use agreement for the San Antonio International Airport (SAT), a deal worth $3.2 billion in aviation revenue over the next 15 years. 

After two years of negotiations, seven airlines have committed to signing the agreement that outlines what they will pay to use the airport and makes gate assignments based on carriers’ requests and projected demand. 

A Southwest representative led the committee that negotiated with the City of San Antonio on behalf of the airlines. But the airline isn’t happy with its gate assignments in an existing terminal.

Both Delta and American are slated to operate from the new terminal, according to the agreement, which will also have six international gates accommodating wide-body aircraft and a federal inspection station.

United will continue to operate out of a renovated Terminal B, and is looking to expand its private lounge, while Southwest would use a renovated Terminal A exclusively with 10 gates.

The gate assignments reflect an attempt to balance all operations in the three terminals, said Michael Garnier, assistant director of finance for the airport. “So when the building is done, the curbside is not overly crowded in one section, that the walkways are not overly crowded in one section, that we have enough ticket counters spread out,” he said. “It’s not just gates. Gates is one of many components.”

Signatory airline

Days ago, leaders from Southwest, which accounts for 37% of SAT traffic, told airport officials they won’t sign unless the airline gets the 10 gates it wants, an increase from its current six gates, in the new 17-gate terminal. 

Southwest provides mostly domestic air service with one seasonal flight to Mexico using six gates. The airline has requested an additional four gates.

By not signing, Southwest will pay a higher premium on their usage rates, won’t have designated gates and will not participate in profit sharing. Several other airlines that operate from SAT are considered non-signatory, including Frontier and JetBlue.

As a non-signatory airline, SAT officials estimate Southwest would pay an additional $6 million in airport usage fees next year and will lose out on $4 million in revenue sharing. 

“We have gone through a very rigorous, fair and equitable process to define specifically what is best for the airport, the airlines and the passengers and the customers of the city that utilize our airport to specifically identify where carriers should go,” said Director of Airports Jesus Saenz. 

The former agreement, set to expire Sept. 30, was updated to include plans for a new terminal as part of the Terminal Development Program (TDP) now underway. 

The new terminal will have 17 gates with six used for international air service. At least four of those have already been designated for existing international flights, Saenz said. 

In addition to building a new terminal, the $1.6 billion TDP provides $100 million for upgrades to Terminal B and $200 million for Terminal A. 

Plans call for enlarging narrow passageways in the 1980s-era Terminal A by reducing its gates from 17 to 10 and providing more concessions. 

Surprise request

An “11th-hour” special request from Southwest came as a surprise to city officials who said the gate assignments were presented in May with 10 gates allotted to Southwest in Terminal A. 

City officials said Southwest wants another $150 million added to the terminal’s renovation budget. 

Saenz said that location and number of gates makes the most sense to planners due to the domestic air service Southwest provides. “We’ve been wanting to know specifically where that growth pattern was at, and we’re not seeing anything internationally,” he said.

Upgrades to Terminal A are already in progress, including improvements to the roof, electrical system and baggage system. In addition, a plan to upgrade the terminal’s security checkpoint has already been budgeted separately from the $200 million improvements proposed to Southwest.

The promise to spend millions in improving Terminal A, starting in 2025, to meet the airline’s needs also didn’t satisfy Southwest. 

Southwest spokesman Chris Perry said Terminal A barely meets its current needs. “It’s too narrow, it bottlenecks, it just doesn’t fit,” he said, adding that $200 million is not enough to bring it up to standards.

City officials argue that it wouldn’t be fair to the other carriers to increase the renovation budget without their agreement at this stage and would “undo two years of negotiations,” said Assistant City Manager Jeff Coyle.

“We’ve done everything we can to accommodate to this point,” Coyle said. “We understand they don’t love that they’re in [Terminal A] but we’re working to try to make that … environment everything that they need it to be.”

Coyle said the renovation budget also could increase once the design and construction process gets underway.

“If that [$]200 million doesn’t cover what we need to renovate, there’s a process, a mechanism in the agreement, for the airlines to be able to agree to expand that number,” Coyle said. “There’s an opportunity down the road.” 

Perry said he doesn’t think the other “signatory” airlines would sign off on any increases; a majority vote is required under the agreement. “I don’t know that competitors necessarily want to spend more money for something they’re not going to get a benefit from,” he said.

‘Under the pretense’

What the airline wants most is to be in the new terminal, Perry said.

The airline was “operating under the pretense” that it would move to the new terminal and get 10 gates after the terminal is built, he said. And that’s still the primary goal in ongoing negotiations.

American Airlines and Delta Airlines have committed to building private lounges in the new terminal. Southwest thinks that’s “out of step” with what San Antonio travelers want, Perry said. 

“They’re kind of targeting what we would see as like an elite customer, and that’s … not reflective of what we’ve known from that airport for the 53 years that we’ve been operating there.”

San Antonio has partnered with American Airlines to compete with other airports for one of the coveted slots at Ronald Reagan Washington International Airport (DCA). A decision is expected from the Federal Aviation Administration at any time.

There’s still a chance that Southwest could sign the agreement before the old one expires at the end of the month. But airport officials aren’t budging on the deal.

“It’s a collective agreement,” Saenz said. “We don’t base our decisions on the level of service we provide to our passengers by [what airline they fly]. We care about all the passengers. So it’s very important for us that we remain fair and equitable, that we respect the process.”

Councilman Marc Whyte said it concerns him that Southwest, “our largest airline partner,” has not signed the agreement. 

“From the city’s perspective, we value the relationship with Southwest Airlines,” he said. “We look forward to continuing to work with Southwest Airlines in the future, they are a valuable partner for the city.”

Southwest Airlines was founded by businessman Rollin King and attorney Herb Kelleher who sketched out their intrastate airline plans on a cocktail napkin in San Antonio. 

The airline moved its headquarters to Dallas in 1971, the same year its maiden flight launched. Southwest now operates from 121 airports across 11 countries.

“Some airlines do operate as non-signatories at airports,” Perry said, adding that it gives them more flexibility to start and stop air service at any time. “That’s not really the Southwest way.”

With negotiations ongoing, Southwest has no plans to quit SAT or make significant changes to its air service. “The deal technically runs through the end of the year,” Perry said. “By no means are we just going to pack up shop on December 31.”

In San Antonio, a 37,000-square-foot ground load facility is already under construction at the airport and is expected to be complete in 2025. 

The city’s aviation department is scheduled to bring a new concessions proposal before the council in October.