Austin pays $88 million to settle legal fight over ABIA’s South Terminal demolition

The city of Austin will shell out $88 million to Lonestar Airport Holdings, the company running the South Terminal at Austin-Bergstrom International Airport. The move paves the way for the terminal’s demolition and construction of a new concourse capable of accommodating 10 to 40 gates.

The South Terminal, while on airport premises, is a stand-alone facility with its own entrance and parking lot, separate from the main Barbara Jordan Terminal. Discount airlines Allegiant and Frontier fly out of the South Terminal largely because of its lower landing fees.

A legal dispute was sparked in 2021 when Austin unveiled plans for a new concourse connected to the Barbara Jordan Terminal.

Lonestar said it was left in the dark.

“No communication and then out of the blue,” is how Lonestar Airport Holdings CEO Jeff Pearse told KUT he found out about plans to raze the structure. “It was a bit insulting, honestly.”

Last year, City Council moved to seize the South Terminal’s lease rights in a novel use of eminent domain powers. The city offered Lonestar $2 million to vacate, an amount the company called “objectively offensive.”

Lonestar sued for damages in federal court while fighting the eminent domain process in Travis County courts. In federal court filings, Lonestar said it has invested more than $20 million in the South Terminal and claimed “one market participant” had valued the company at over $300 million. A Travis County probate court would later award Lonestar $90 million, 46 times what the city had originally offered.

City Council put an end to the legal tussle Thursday by approving the $88 million settlement.

As part of the deal, Austin will take over operation and management of the South Terminal this fall. Airlines, food vendors and other businesses will still be able to operate out of the facility until it gets demolished in 2025.

Airport officials say they want to relocate Allegiant and Frontier to the Barbara Jordan Terminal. KUT has reached out to both airlines. Allegiant declined to comment.

The plan to erect a new concourse is part of a broader scheme designed to manage ABIA’s record-breaking passenger volumes. The airport regularly handles 50,000 to 70,000 passengers a day – more than the number of daily visitors to Disneyland.

The hefty $4 billion expansion includes a project to add three gates to the Barbara Jordan Terminal, construction of a 90,000-square-foot cargo facility and a quarter-billion-dollar upgrade of the baggage handling system.

In preparation for the transformation around the South Terminal, ABIA has already hired a company to demolish 39 buildings near the facility. NTP Construction is currently obtaining demolition permits for these older structures, some of which date back to ABIA’s time as an Air Force base.

This story was produced as part of the Austin Monitor’s reporting partnership with KUT.

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