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Company that operates South Terminal at Austin airport rejects City’s offer

The South Terminal is planned for demolition within the next year or so, based on the latest Austin airport expansion plans.

AUSTIN, Texas — Expansion plans at Austin-Bergstrom International Airport (AUS) are moving forward but the demolition of the South Terminal, part of what the plans call for, could lead to years of litigation and slow down the expansion progress, according to a letter obtained Wednesday by KVUE News.

The company that leases the property from the airport and operates the South Terminal, Lonestar Airport Holdings, officially rejected on Wednesday an “offensive” $1.95 million offer from the City to take it over, according to the letter.

“The Initial Offer is far below the substantial amount of capital Lonestar has invested in the South Terminal facility,” the letter said.

Just over two years earlier, in November 2019, the City offered to pay $10 million to buy the South Terminal. Days after the publishing of this article, the airport told KVUE the new offer is based on the professional opinion of an independent appraiser who appraised the value of the leasehold. The airport also noted that previous negotiations between the City and LoneStar to acquire the leasehold interest occurred before the Airport Expansion and Development Program was initiated. 

The demolition of the South Terminal is needed to make room for a new taxiway and concourse, according to a memo AUS CEO Jacqueline Yaft wrote to Austin Mayor Steve Adler and Austin City Council members last July. It said, as of last July, the South Terminal would need to be closed and removed within the next two years.

RELATED: Letter to Austin airport CEO: Tearing down South Terminal won’t hold up in court

“It is difficult to understand why the City would jettison an experienced and efficient redevelopment partner that the City already has under contract, especially during this time of difficulty and uncertainty at AUS,” the letter from Lonestar’s lawyer said. “Given recent events at the airport as passenger volumes continue to skyrocket, Lonestar’s ability to help the City redevelop AUS is particularly needed right now, but the City is inexplicably ignoring a trusted, capable and proven partner that would relieve expenses and operational burdens the City is preparing to lay at the feet of airport passengers and those of us that call Austin home.”

Read the full letter from Lonestar Airport Holdings here. 

Lonestar wants to continue working with the City, which owns the airport, to expand airport facilities quickly and efficiently, the letter said.

The South Terminal opened in 2017. Low-cost carriers Allegiant and Frontier operate out of it. So far this year, the two airlines have carried more than 100,000 passengers from AUS, according to the latest airport data.

RELATED: Allegiant Airlines will be first to make Austin's airport a base for airline operations

Allegiant made AUS a base for operations last November, a $75 million investment that added about 90 full-time jobs.

The letter said that, in 2019, Lonestar submitted a $140 million plan to create a new ultra-low-cost airline terminal – known as South Terminal 2.0 – at AUS, at the direction of the aviation department, which would have added 10 new gates, five security lines, and 22 check-in counters. It would have been paid for by the company while rent and revenue would have been shared with the City and airport.

Lonestar Airport Holdings has a 40-year lease agreement with the City as part of a public-private partnership. It took effect in March 2016.

“Eminent domain is costly, inefficient and time consuming. Regardless, Lonestar will not walk away from its investment at AUS, and Lonestar stands ready to vindicate its rights in court as needed,” the letter said.

A spokesperson for the airport released the following statement on Thursday:

“The Department of Aviation continues to progress with airport improvement through the Airport Expansion and Development Program. The Department of Aviation will continue to work with business stakeholders and tenants throughout the duration of this program and looks forward to delivering an improved passenger experience to all AUS customers.”

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