Airport Operations and Management

1. Airport Operations and Management

2. Overview of Industry • Air • Air (planes)- Privately owned • Air (ways)- Federal ownership • Air (ports)- Local government

3. 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

4. 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

5. 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

6. 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.

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. Structure of Relationships: Airlines • Compensatory (Larger airports) • Cost-based pricing • Airport in Control • Shorter term • Risk/Reward- Airport

16. 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

17. 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

18. 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

19. Structure of Relationships: Insurance • Other insurance coverage: • Property • Boiler • Automobile • Rent • Contractor liability

20. Structure of Relationships: Insurance • Final note: what’s it all about • First, reduce the risk • Second, transfer the risk • Finally, insure what remains

21. 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

22. 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

23. 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)

24. Capital Funding • How does bond market work? • show slide!

25. 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

26. 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

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

28. Budgeting • Importance to Airports • no profit motive • set goals • reveals problems • grants authority for action • busting your budget is a symptom of problems

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

30. 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

31. Operations • Pavements- what the do • Provide a rideable surface • Bear (or transfer) the load

32. 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

33. Operations • Enemies list: • Moisture (leads to potholes) • Time • Lack of attention • Lack of traffic

34. Operations • The hydroplaning Problem • Dynamic (surf city) • Viscous (bug juice) • Solutions: • Grooving (best) • Porous friction course • Rubber removal • High pressure water • solvents • beads (glass)

35. 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)

36. Operations • Notes: • Equipment is expensive and specialized • Ice is worse than snow

37. 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)

38. 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

39. 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)

40. 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

41. 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

42. 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

43. 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

44. 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

45. Public Relations • The principles • Believe it, Love it, Live it • BUT, DON”T STAND TOO CLOSE TO THE DREAM

46. Public Relations • The target audiences • External • business public • general public • Internal • Business public • Employee public

47. Public Relations • The objectives • Build an image • Keep communicating • Answer complaints • Network in airport community and city community • Don’t forget your own employees

48. 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