Allegiant Air is banking on a growing number of passengers at Phoenix-Mesa Gateway Airport to guarantee a $3 million loan for expansion of the terminal.
The loan was promised to airport officials by the Las Vegas-based airline after Gateway lost more than $7 million during budget maneuvers by the Arizona Legislature last month.
Lawmakers took the money slated for airport and transportation programs and placed it in the General Fund to make up for financial losses. "It upset a lot of people who use airports, including ours," said Brian Sexton, Gateway spokesman.
Gateway had set aside $3.35 million of the state funds for a 10,000-square-foot terminal expansion next year, but it was forced to find another source of funding.
"This is the perfect example of private and public agencies combining to serve the community," Sexton said.
Allegiant, which has steadily added flights at Gateway since beginning service there in October, pledged an unsecured loan of $3 million, providing it receives $1 million in interest for a total repayment of $4 million within 10 years.
The airport will pay Allegiant $4 for each passenger that boards an Allegiant plane at Gateway until the loan, including interest, is paid off. The $4 per person will come from airport income paid by passengers using the facility.
The airport's board of directors will consider the loan at a special meeting at 9 a.m. Monday.
The joint agreement notes: "The structure of the loan places the risk on the airline by linking repayment to airline performance and total passenger enplanements (boardings). Should enplanements cease, no payments are due."
Because Gateway is not in a financial position to offer security or guarantees, the loan is structured so that Gateway and its member governments assume no risk.
The agreement also points out the interest rate is between 10.3 percent and 12.6 percent if repayment is made between four and five years.
Tyri Squyres, spokeswoman for Allegiant, said the proposed loan is a positive for both the airline and the airport.
"It's based upon a successful first year in Mesa and reinforces our commitment and belief in the airport and the community," Squyres said.
Plans are to add 130 more parking spaces. The addition will increase the number of seats in the terminal from 300 to 467 and will add another gate, bringing the total to three.