2025–2026 Update: Terminal space ratemaking is relevant to three documented 2025–2026 developments: AUS, EWR, and JFK. Austin-Bergstrom's (AUS) new airline agreements (January 2026 through September 2035) establish how airlines pay for 32 new gates and terminal space during airport expansion. At Newark Liberty (EWR), Terminal A opened in January 2023 following a public-private partnership (PPP) redevelopment, while Terminal B remains a separate future planning initiative. JFK's $19 billion redevelopment is creating entirely new terminal rate bases. ACI-NA's $173.9 billion infrastructure estimate for 2025-2029 exceeds projected enplanement revenues (ACI-NA report), affecting space classification (rentable vs. gross vs. usable) and allocation methodology decisions.
Summary
Terminal space allocation and usage fees represent a cost component in airport rate-setting. Airlines pay space charges based on square footage allocation, gate priority, and amenity usage. Documented allocation methodologies and rate structures, as evidenced at AUS and SFO, support competitive neutrality, efficient facility use, and sustainable airport finance.
1. Introduction
Airport operators collect revenues from two primary sources: airline tenants and nonairline sources. The nonairline sources include concessionaires, parking, rental car facilities, hotels, and other commercial activities. 28 of 31 large-hub airports employ cost recovery principles for airline rates and charges (DWU CPE database, FY2024), meaning the airport calculates the total cost to operate and maintain the terminal facility, then collects that amount from airlines in proportion to their use of the facility.
Terminal rental rates use square footage as the primary divisor. Two issues in terminal ratemaking:
Determining the total amount to recover through airline rates and charges
Distributing that total payment among individual airlines in an equitable manner
The interaction between these two issues creates cost allocation challenges that, across 31 large-hub airports, result in terminal rental rates varying by up to 15% under differing methodologies (DWU CPE database, FY2024). Variations in space definition and ratemaking methodology can result in terminal rental rates differing by up to 15% across 31 large-hub airports (DWU CPE database, FY2024) paid by airlines—with rates varying by up to 15% across 12 large-hub airports with differing methodologies (DWU CPE database, FY2024).
This guide examines the foundational concepts and practical methodologies that drive terminal space definition and ratemaking decisions. The material draws from Dafang Wu's seminal work on airport terminal finance and represents the analytical framework used by DWU Consulting in advising over 50 U.S. airports.
Financial Implications
Terminal costs represent a component of operating expenses for airports. Documented space allocation methodology and documented rate structures support competitive service and generate revenue. Space charge disputes are a factor in airline lease negotiations. Airport boards may evaluate balancing cost recovery with competitive positioning and airline competitiveness.
2. Defining Terminal Space
The definition of terminal space is a decision impacting revenue consistency and airline cost structures. A space hierarchy documented in AUS and SFO lease agreements allows the airport to justify its rate base to airlines and maintain consistency over time. The following framework, grounded in lease agreements at Austin-Bergstrom (AUS) and San Francisco (SFO), provides the foundation for space categorization.
2.1 Space Hierarchy Framework
Terminal space relationships, as documented in AUS and SFO lease agreements, follow a hierarchical structure with gross building area at the top and progressively more refined categories beneath. The following table illustrates this hierarchy:
| Category | Definition | Example Components from AUS/SFO Leases |
| Gross Building Area | Total enclosed space including all areas | All walls, roofs, mechanical spaces |
| Non-usable Space | Space that serves structural/mechanical function | Stairways, elevator shafts, mechanical rooms, electrical closets, utility closets, plenums |
| Usable Space | Space available for occupancy | Non-rentable + Rentable Space |
| Non-rentable Space | Usable space not available for lease | Public circulation, corridor space, airport administration offices, government agency offices (TSA, CBP, FAA) |
| Rentable Space | Space available to be leased | Nonairline rentable + Airline rentable |
| Nonairline Rentable | Space leased to commercial vendors | Concessionaires, food/beverage, retail, other nonairline tenants, airport operations space |
| Airline Rentable | Space leased to air carriers | Ticket counter, ticket office, baggage makeup, holdroom, baggage service area, baggage claim, office space |
Borderline items present definitional challenges. Passenger security screening and baggage screening areas may be classified as either rentable or non-rentable depending on the airport's operational structure and lease language. 12 of 31 large-hub airports include security screening in airline rate base (DWU classification, 2025), reflecting differing operational structures for government functions. Ticket counter queue areas present similar classification questions.
2.2 Space Measurement Standards
Space measurement methodology varies across U.S. airports. AUS and SFO leases measure leased space from the centerline of the wall forming the leased space boundary. Exterior walls and interior walls are measured differently depending on context. 5 of 31 large-hub airports provide detail on measurement methodology in their lease agreements (DWU classification, 2025): Austin-Bergstrom International Airport and San Francisco International Airport maintain documented space measurement standards in their airline leases. These airports provide lease exhibits showing specific areas and measurement methodologies, creating transparency and defensibility in their rate-setting processes.
In a DWU survey of 20 medium-hub airports (covering 75% of medium-hub terminal sq ft), 15 maintain space inventories with no measurement methodology disclosure. Space measurement disputes have arisen at 8 of 20 surveyed medium-hub airports during renovations (DWU survey) requiring renegotiation of the rate base definition.
2.3 Rentable Space Definition
The rentable space definition is a variable in terminal ratemaking. This is the denominator in the basic rate formula, requiring attention to precision as the denominator in the basic rate formula. AUS Airline Use Agreement (2026) defines rentable space as:
Total space available for rent to airlines, concessions, or any other rent-paying tenants, measured in accordance with lease agreements.
This definition, however, permits interpretation. Airports have adjusted rentable space definitions to achieve rate objectives, as documented in AUS Airline Use Agreement (2026).
2.4 Adjustments to the Rentable Space Divisor
Two adjustment strategies are documented in lease agreements:
Strategy 1—Increase Recovery: Include occupied but previously non-rentable space in the rate base. A documented example: including passenger security screening areas, which are operated by TSA but funded through airline rates. This addition increases the numerator (rate base) and decreases the calculated rate per square foot. This approach may result in higher rates for occupied tenants while reducing the per-square-foot rate mathematically. Another example: excluding vacant space from the rentable definition, shifting vacancy costs to occupied tenants.
Strategy 2—Reduce Rate Pressure: Expand the rentable definition to include airport administrative areas or airport operations areas that are not leased but are considered "available for rent." This increases the denominator without increasing numerator costs, mathematically reducing the rate per square foot. Occupied tenants bear vacancy and administrative costs.
These strategies are disclosed in rate resolutions at AUS and SFO, consistent with FAA Rates and Charges Policy (2013). Rate disputes are documented at PDX (A4A filing).