Airport Operations and Management

Overview of Industry

Air Air (planes)- Privately owned Air (ways)- Federal ownership Air (ports)- Local government

Overview of Industry

Airports and airways provide infrastructure Airports are very size diverse/activity is highly skewed Each community is unique; therefore, each airport is

unique Airport is a machine, not just a place Airports can be a capital good and/or a consumer good US airports are operated in a different manner from

those in the rest of the world. Airport Industry is a small one in terms of total

employment

Organization

Organization chart defines relationships, not job descriptions

No two airports are organized in the same manner, but... The work relationships are frequently organized in these

basic groups:

» Operations and Maintenance» Finance and Administration» Planning and Engineering» Marketing and Public Relations

Organization

The organization chart is a snapshot, it is only accurate at a point in time.

The organization chart does not show the informal relationships that exist in all organizations

The organizational chart may provide an insight into management's priorities

Ownership

Common forms of airport ownership» City/County» Airport Authority» Multipurpose authority» State» Federal

Know the advantages of the authority method of ownership Most common method of public airport ownership is the

City/County. However, there is a slow transition to the authority.

Economic Structure

The costs of running an airport can be grouped into two categories:» Operating Expense (and Maintenance) includes:

– Salaries/Benefits (takes up about half of costs)– Utilities/supplies (tales up other half)

» Capital Expense

– Depreciation/Interest most City/County airports don’t include this area, but

authorities do

– Equipment replacement Understand the definition of depreciation and operating expense &

capital expense

Economic Structure

The total cost of running an airport is equal to operating expense plus capital expense

Question: How much revenue does an airport need?

Answer: The BREAK-EVEN NEED

Economic Structure

The sources of airport revenue can be grouped in two categories» Operating Revenue includes rents, landing

fee,et.» Non-operating Revenue includes interest

earned Airport revenue base varies significantly

by airport size

Structure of Relationships

Airport executives manage multiple relationships, primarily based on persuasion rather than command

The contract only summarizes the relationship

The relationships are most workable when risk/reward and authority/responsibility are balanced between the parties

Structure of Relationships: Concessionaires

A business relationship wherein the airport extends a franchise

A management contract is different-this is a method to hire a firm to perform a specific service

Customary financial mechanisms include:» minimum guarantee and/or» % of gross income

Structure of Relationships: General Aviation

Primarily conducted through a Fixed Based Operator (FBO) that provides services to GA users, such as:» parking and storage» fuel and oil» maintenance and repairs

An alternative method is for the airport owner to provide these services directly to GA users (if so, service can be monopolized)

Customary financial mechanisms include:» land rent» fuel flowage fees (5 cents/gal delivered)

Relationship with GA is difficult to characterize and different from other segments of aviation

Structure of Relationships: Airlines

As much our partner as our tenant The ground rules for this relationship was

significantly altered by the 1978 Airline Deregulation Act and the relationship continues to evolves

Customary financial mechanisms include:» charging building space based on -per square

foot per year

» $/1000 maximum gross landing weight

Structure of Relationships: Airlines

Calculation of airline fees patterned after one of these methods:

Traditional:» Residual (Chicago contract)» Majority in interest» Longer Term» Risk/Reward -Airlines

Structure of Relationships: Airlines

Compensatory (Larger airports) Cost-based pricing Airport in Control Shorter term Risk/Reward- Airport

Structure of Relationships: Airlines

If full airport residual, landing fees are frequently the balancing mechanism

Definition of cost still open to debate Instead of negotiated agreement, airport can set

compensatory rates by ordinance, either as a total policy or as a short term option for non-signatory carriers

Trend in industry:

» Compensatory

» Shorter term agreements

» Revenue diversification

Structure of Relationships: Insurance

Liability- three main areas where litigation arises» aircraft operations (accidents)

» premises operations (slip and falls)

» sale of products (food and beverages) Liability concerns, frequently insured by

separate endorsement:» hangerkeepers, airshows, garagekeepers

» officers and directors, environmental

Structure of Relationships: Insurance

Generally speaking: Airport insures itself Airport requires tenant to insure themselves

with minimum limits Airport requires the tenant insurance name the

airport as additional insured Airport requires tenant sign a hold harmless

agreement, backed by contractual liability insurance

Structure of Relationships: Insurance

Other insurance coverage: Property Boiler Automobile Rent Contractor liability

Structure of Relationships: Insurance

Final note: what’s it all about First, reduce the risk Second, transfer the risk Finally, insure what remains

Capital Funding

Internal money on hand (smaller projects) Airport Improvement Program (AIP)

» applies to QUALIFIED PROJECTS» Requires some local matching funds» AIP program has two types of funds

– Entitlement– Discretionary

» can not be used in rate-base» Requires signing of grant agreement with certain grant

assurances to government AIP is predominant source of capital for smaller airports

Capital Funding

Borrow the funds: Government Obligation Bonds

» backed by the full faith and credit of taxpayers» may require voter approval» may be subject to debt cap (City/County)

Revenue Bonds » backed by pledged revenues» a riskier investment, thus, pays a higher rate of

interest

Capital Funding

Self-liquidating bonds » combination of the above» sometimes used to avoid a G.O. bond cap

debt, yet, pay lower interest rate Private Sources (hard to come by but

could include airlines)

Capital Funding

How does bond market work? show slide!

Capital Funding

How is interest rate determined? Risk perception of the airport

» financial performance» strength of market demand» contract with airlines

Market condition at the time of sale Since the 1978 Airline Deregulation Act

» rating agencies have focused greater attention on local economic strength

Accounting

External Accounting (info for outsiders)» Municipal Fund

– like a checkbook– purpose is accountability

» Enterprise Fund– like a business– purpose is to reveal financial condition through

a standardized format

Accounting

Internal Accounting (info for decision makers known as cost accounting)» project accounting» activity accounting» pricing information

Budgeting

Importance to Airports» no profit motive» set goals» reveals problems» grants authority for action

busting your budget is a symptom of problems

Budgeting

Budgeting methods» lump sum (most flexibility)» activity (terminal, airfield)» line item, more detailed computer coding)

Budgeting

Approaches to preparing budgets:» add a little each year» zero based (pure, prepared from the

ground up each year) May need a occasional variance to keep

operating

Operations

Pavements- what the do» Provide a rideable surface» Bear (or transfer) the load

Operations

Asphalt vs. concrete (and its concrete not cement!!!)» cost to build - concrete most $$$ to purchase but

longest life» cost to maintain - asphalt highest cost to maintain» ease of maintenance- asphalt easiest to maintain» more fuel resistant- concrete» higher load bearing - concrete » expands/contracts with temperature changes-

concrete» built with joints- concrete

Operations

Enemies list: Moisture (leads to potholes) Time Lack of attention Lack of traffic

Operations

The hydroplaning Problem Dynamic (surf city) Viscous (bug juice) Solutions:

» Grooving (best)» Porous friction course» Rubber removal

– High pressure water– solvents– beads (glass)

Operations

Snow removal- not an ad hoc process-

» a statement of purpose) Removal priorities

» active runway, taxiway,ramp Removal methods

» mechanical, chemical Mechanical removal procedures

» move it to the edge (Blade)

» remove the windrow (blower)

» Clean up (brush)

Operations

Notes: Equipment is expensive and specialized Ice is worse than snow

Operations- Inspection Program

The life of an operations inspector is:» inspect-detect-report

Part 139 requires airport inspections:» daily, during usual conditions, after

accident/incident A specific inspection requirement: Birds

» Problem with birds: engine ingestion» Solutions: eliminate food source, habitat,

noisemakers, firearms (least appropriate)

Operations: ARFF (formally CFR)

There is a need, airports can expect an aircraft accident expect...» every 77,000 ops» accident w/fire every 200,000 ops» accident w/death every 345,000 ops

of course, real world not this predicable

Operations: ARFF

Rapid Intervention Vehicle (RIV)» gets there first and holds the fire a bay -

briefly Pumpers with AFFF (used in huge

quantity) Proximity suits and handliners TRIAGE (prioritize the injured)

Operations: ARFF

The regulation: FAR Part 139 Sets minimum equipment needs Sets minimum response times Sets minimum training Aircraft fires very different from

structural fires

Operations: Security

Equal to city police size at larger airports Smaller airports may have little to no on-airport police presence Includes:

» beat duties» specialized services» anti-hijacking program» Support passenger screening process (Part 107)» Responds to airfield operations area (AOA) trespass

FAR Part 107 deals only with security as it effects safety of flight

Airport Noise

Things to do about airport noise:» quiet the aircraft

– who: airline

» move the aircraft– who: ATC

» move the people– who: airport with federal help ($)

curfew is avoiding the issue

Airport Noise

Noise management Single event (dBA) is inadequate Cumulative noise profile (LdN) is

preferred because it quantities these “irritants”» frequency, intensity, time of day, duration

Airport Noise

FAR Part 150 System Survey aircraft mix and traffic patterns Calibrate with field measurements Input data to computer model (INM) Draw Noise Exposure Map (NEM) Determine noise control alternatives Develop Land Use Plan Purchase homes and property or soundproof Noise Compatibility program/noise maps

Public Relations

The principles Believe it, Love it, Live it BUT, DON”T STAND TOO CLOSE TO

THE DREAM

Public Relations

The target audiences External

» business public» general public

Internal» Business public» Employee public

Public Relations

The objectives Build an image Keep communicating Answer complaints Network in airport community and city

community Don’t forget your own employees

Who is the Airport Manager

Profession has evolved over the years Many skills, communication is important Airport manager always caught in the middle

» board and staff» aviation interests and community» national issues and local issues» promotion of the public good with the need to

balance the budget