National Academies Press: OpenBook

Airport Revenue Diversification (2010)

Chapter: Chapter Seven - Ancillary Land Use

« Previous: Chapter Six - Non-Aeronautical Development
Page 41
Suggested Citation:"Chapter Seven - Ancillary Land Use." National Academies of Sciences, Engineering, and Medicine. 2010. Airport Revenue Diversification. Washington, DC: The National Academies Press. doi: 10.17226/14386.
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Page 42
Suggested Citation:"Chapter Seven - Ancillary Land Use." National Academies of Sciences, Engineering, and Medicine. 2010. Airport Revenue Diversification. Washington, DC: The National Academies Press. doi: 10.17226/14386.
×
Page 42
Page 43
Suggested Citation:"Chapter Seven - Ancillary Land Use." National Academies of Sciences, Engineering, and Medicine. 2010. Airport Revenue Diversification. Washington, DC: The National Academies Press. doi: 10.17226/14386.
×
Page 43
Page 44
Suggested Citation:"Chapter Seven - Ancillary Land Use." National Academies of Sciences, Engineering, and Medicine. 2010. Airport Revenue Diversification. Washington, DC: The National Academies Press. doi: 10.17226/14386.
×
Page 44
Page 45
Suggested Citation:"Chapter Seven - Ancillary Land Use." National Academies of Sciences, Engineering, and Medicine. 2010. Airport Revenue Diversification. Washington, DC: The National Academies Press. doi: 10.17226/14386.
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Page 45

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41 Land use at airports is subject to FAA Grant Assurance 21, Compatible Land Use, and local zoning ordinances that strive to protect airport approaches and to ensure that development is compatible with aircraft operations and noise. Within the land use framework, airports are pursuing interesting ways to generate alternative revenue. This chapter highlights ancillary land uses at airports that generate additional operating revenue. ADVERTISING AND SPONSORSHIPS Much has been written about revenue generation through advertising in terminals. Media opportunities are plentiful within the terminal. Today, airports have taken steps to increase advertising and sponsorships beyond the terminal through selling (see Figure 38): • Advertising on unpaved land on the airfield or approaches to the airport • Banners on sky bridges • Naming rights on airport buildings • Road cleanup sponsorships. In 2004, Toronto Pearson International Airport embarked on an ambitious advertising program inside and outside the ter- minal. The Greater Toronto Airport Authority (GTAA) recog- nized the revenue potential, but had many concerns about the negative impacts of such advertising. In 2004–2005, GTAA introduced inside the terminal large LCD (liquid crystal dis- play) screens at baggage claim and on the walls in gate areas; other screens broadcast news programs. In 2005–2006, GTAA focused on industry displays. Several car companies displayed new models. American Express and CIBC set up kiosks. In 2006–2007, Intel introduced pole wraps and wall advertising, and Cisco set up a specialty display. In 2007–2008, Samsung put up a large cell phone display outside the terminal, and HSBC advertised on jet bridges. The airport also sold advertis- ing space on elevator doors and banners in the Grand Hall. In 2009, a panoramic glass mural was installed (see Figure 39). Gross sales from advertising at the airport have grown from $6 million in 2004 to more than $16 million in 2008. TEMPORARY USES AND SPECIAL EVENTS Airports provide land and facilities for many temporary uses on the airfield, in parking areas, and in unused buildings or land. Government agencies use airports as staging areas to fight fires, respond to other emergencies, test equipment and aircraft, and carry out training sessions. Airports serve as sets for television and movies. Van Nuys Airport and Bob Hope Airport (Burbank) are regular filming locations. Airports can also lease out land for temporary storage of vehicles and equipment or event parking. Open houses, air shows, rodeos, fundraisers, and fairs are all special events that take place at many general aviation and some commercial ser- vice airports on the airfield, on open land, or in vacant hangars. Annual air shows such as the Experimental Aircraft Associa- tion AirVenture at Wittman Regional Airport in Oshkosh, Wis- consin, or the Fly-in at Kissimmee Gateway Airport in Florida attract a significant amount of aviation activity and commerce. EASEMENTS AND RIGHTS-OF-WAY Easements for utilities and roads as well as water rights are other potential sources of income for airports. There are a large number of legal decisions involved in these matters; however, most fees and agreements are handled on a case-by-case basis. Both Colorado Springs Municipal Airport and Albany Inter- national Airport have recent experience negotiating easements or rights-of-way. AGRICULTURE Many airports lease out land for agricultural use. Denver Inter- national Airport leases out approximately 16,000 acres of farmland on a per acre basis to local farmers (see Figure 40). Under the lease program, farmers raise such crops as wheat, sunflowers, millet, and corn. Farm revenue from the sale of crops is divided, with one-third going to the airport and two-thirds to the farmers. In 2007, farmland leases brought in $300,000 in non-aeronautical operating revenue. MINERAL EXTRACTION The Dallas–Ft. Worth International Airport (DFW) has leased 18,000 acres of airport land to the Chesapeake Energy Cor- poration. The company will pay a one-time bonus and yearly royalties to the airport. The initial term of the lease is two years to allow time to commence production. The lease thereafter remains in effect as long as there is drilling and extraction of natural gas. The two-year lease is expected to produce non-aeronautical operating revenue of approximately $180 million and royalty CHAPTER SEVEN ANCILLARY LAND USE

payments of 25% of natural gas revenues. The DFW oil and gas program was modeled after a similar project at Fort Worth Spinks Airport. In 2007, 68 oil and gas wells were in operation at Denver International, generating revenue of $2.5 million. In 2008, nine more wells were added. In 2008, Greeley–Weld County Airport Authority, one of the largest general aviation airports in Colorado, entered into an agreement with Petro–Canada Resources to explore for oil, gas, and minerals on airport property. This arrangement provided for an initial payment and royalty interest in pro- duction. Up to 20 wells can be drilled on the airport. Much research went into where the exploration could take place so as not to disturb the airfield. The Authority is reserving revenues from oil and gas to pay for equipment replacement, building maintenance, and pavement repairs. Operating costs of the airport will continue to be funded from aviation activity, ground leases, and hangar rentals. RENEWABLE ENERGY Airports are now taking the lead on renewable energy projects. Renewable energy has many positives for an airport because it tends to be low impact, good for airport public relations, and an alternative source of power to operate the airport. Although most renewable projects are undertaken to save costs, excess 42 power can be sold back to the utility company or to other airport tenants. Solar Several airports have demonstrated the viability of photovoltaic systems. In 2008, Denver International completed a 2 mega- watt system using more than 9,200 Sharp solar panels. The solar panels are ground-mounted arrays that use a single-axis tracking system that follows the sun during the day. The instal- lation is located on 7.5 acres of airport property. The airport had no capital costs for the system as it entered into a Power Purchase Agreement. The system will generate more than three million kilowatt hours (kWh) of electricity each year. In August 2009, the airport asked the Denver City Council to approve construction of a second solar system that will power the airport’s fuel storage and distribution facility. This project will cost $7 million to develop a 1.6 megawatt system on approximately 9 acres north of the airfield. The new system is expected to provide 100% of the fuel farm’s electricity consumption. This system will also be financed through a Power Purchase Agreement with Xcel Energy. Fresno Yosemite International Airport has also completed a solar installation. Fresno’s solar system is located on a FIGURE 38 Outdoor advertising at Johannesburg Airport. Source: Szizuo Kambayashi, Associated Press. FIGURE 39 Panoramic glass mural at Toronto Pearson International Airport. Source: Greater Toronto Airport Authority. FIGURE 40 Farming at Denver International Airport. Source: Denver International Airport.

43 20 acre site that had few other alternative uses. The system has a 2.4 megawatt capacity and produces 4.2 million kWh of electricity per year. Originally the projected energy savings was $13 million over the next 25 years; however, the savings are anticipated to be considerably more (Widmar 2009). Oakland International Airport partnered with SunEdison to construct a 756 kW ground-mounted solar power system. The photovoltaic system will deliver approximately 1 million kWh per year. All of the power will be consumed by the air- port under a long-term lease. In addition, the Federal Express west coast hub facility at Oakland is 100% powered by a roof-mounted solar array. Other solar projects are planned for Hawaii and California. Hawaii’s projects involve 34 megawatts on 12 sites with rooftop installations at the following airports: Kona, Honolulu, Lihue, Kahului, Molokai, and Lanai. Los Angeles airport officials are considering using 4,000 acres at the undeveloped Palmdale Regional Airport for a 100 megawatt solar power facility. Wind Boston’s Logan International Airport installed twenty 10-ft-tall wind turbines on the roof of its offices that airport officials expect will generate about 100,000 kWh a year, or approxi- mately 2% of the building’s monthly energy use (see Figure 41). The turbines could generate an annual savings of $13,000 per year in energy costs, paying for themselves within ten years. Massport is considering the installation of turbines at its other airports in Bedford and Worcester. Wind turbine technology has improved, resulting in smaller turbines. The Greater Rochester International Airport [(GRIA) Rochester, New York] will install wind turbines on the roof of the airport. Wind turbines, usually quite large, would normally disrupt radar signals for incoming and out- going airplanes; however, the proposed turbines are smaller, no larger than 6 ft tall. The Green Energy Initiatives Project at GRIA will include the installation of two dozen, 1000-watt wind turbines and 50,000 square feet of photovoltaic sys- tem solar panels. The wind turbines are projected to generate 121,000 kWh and the solar panels 60,000 kWh of energy annually. To finance the project, Monroe County applied for a grant from the New York State Energy Research and Development Authority, an Incentive Award from the NYS Solar Electric Incentive Program, and other available energy incentive awards to pay for a significant portion of the project. The remainder will be funded by the airlines operating at the GRIA through the Monroe County Airport Authority’s Renewal and Replacement Fund. Geothermal In 2007, a Massachusetts Institute of Technology research study found that mining heat that resides as stored thermal energy in the Earth’s hard rock crust could supply a substantial portion of the electricity in the United States, probably at competitive prices and with minimal environmental impact. The first geothermal heating and cooling system at a U.S. airport will support the police annex at John F. Kennedy Airport. This project was announced in September 2007 and is still in the planning and design stage. Plans call for thirty-five 500-ft- vertical geothermal wells. A closed-loop system circulates a propylene glycol solution through the geothermal wells. In the winter the solution transfers heat from the earth to the building. In the summer the system is reversed, carrying heat away from the building and placing it in the ground, cooling the facility. Project sponsors estimate that the system could save $100,000 a year in fuel oil and electricity costs. Another airport geothermal project is scheduled to be operational in 2011 at Paris–Orly Airport. The Orly system is designed to take advantage of a large cache of hot water directly underneath the airport. Two 1,700 m shafts will be driven underground at the perimeter of the airport. Water heated by the earth’s core will be drawn up by means of natural pressure, reaching the surface with a temperature of about 165°F. It will be circulated through the airport’s heating system, heating the Orly–Ouest terminal, part of Orly–South, the airport’s Hilton Hotel, and the Coeur d ‘Orly business center. The hot water will then be returned back into the earth through the second shaft. The system as planned will circulate 250 cubic meters (327 cubic yards) of water per hour and supply 35% of the airport’s heating demand. Second Generation Biofuels The use of sustainable biofuels for aviation is attracting sig- nificant attention. In December 2008 and January 2009, Air New Zealand, Continental Airlines, and Japan Airlines flew test flights with biofuel mixes in at least one engine (see Figure 42). Front Range Airport and Centennial Airport in Colorado are considering production of biofuel feedstock on airport property. The production of first generation biofuels such as ethanol and biodiesel came from food crops such as sugar cane, rapeseed, and corn. These biofuels raised questions because if produced in large quantities they would adversely affect the price of food and compete for the use of agricul- tural lands. For aviation purposes, biodiesel and ethanol showed promise in replacing 100LL Avgas, but did not meet FIGURE 41 Wind turbines at Boston Logan International Airport. Source: www.capecodtoday.com, Walter Brooks, Mar. 5, 2008.

the high performance standards or safety specifications for jet fuel. The next generation of biofuels is under develop- ment and has the attention of ACI, the major airframe and engine manufacturers, and the National Renewable Energy Laboratory based in Golden, Colorado. The second generation of biofuel feedstock includes Jatropha, Camelina, Algae, and Halophytes. These feedstocks can grow in many parts of the world in non-arable areas and do not compete as a source of food (see Figure 43). Cultivation on airport property makes for an interesting synergy, assuming availability of adjacent refining capacity. UTILITY SERVICES The development of utility systems and services on the airport holds promise for generating electricity or providing water and sewer services for airport tenants and the surrounding areas. Many of the renewable energy systems proposed or now operational involve long-term purchase agreements at favorable rates. Geothermal heating and cooling solutions lend themselves to serving large portions of airport property. Airports can also purchase utilities wholesale from local providers and resell to airport tenants. 44 FIGURE 42 Sequence for development and use of biofuels. Source: Air Transport Action Group, Beginner’s Guide to Aviation Biofuels. FIGURE 43 Optimum locations to grow aviation biofuels. Source: Air Transport Action Group, Beginner’s Guide to Aviation Biofuels. Front Range Airport recently completed a wastewater treat- ment facility with reuse capabilities. The water is not suitable for human consumption; however, a project is proposed to use the water in a pilot program to produce biofuel. More than half of the airport’s 3,900 acres are planted in wheat by tenant farmers. The test program would use “field trash,” the part of wheat left after harvesting, and pine trees killed by beetles. The

45 plant material would undergo a thermal chemical process called pyrolysis, which uses heat to speed up decomposition. The project financing will hinge on funding from a DOE grant. PRECIOUS METAL STORAGE In September 2009, Hong Kong International Airport (HKIA) opened the HKIA Precious Metals Depository. This 340 m2 (3,660 ft2) vault will be used to provide secure storage and physical settlement services to central banks, commodity exchanges, bullion banks, precious metal refineries, and issuers of exchange traded funds. In addition to safety and security, the Hong Kong airport location was selected to help reduce transportation costs and settlement risks for precious metals including gold, silver, platinum, and palladium. The selection of HKIA also solidifies the airport’s position as a gateway to the Chinese Mainland, an international financial center, and logistics hub for high-value cargo.

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TRB’s Airport Cooperative Research Program (ACRP) Synthesis 19: Airport Revenue Diversification explores the different sources of revenue for airports, separating core aeronautical revenue from ancillary revenues. The report also examines ways that airports have diversified activities and highlights the challenges that arise when non-aeronautical activity is proposed on land that is subject to Federal Aviation Administration grants obligations and assurances.

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