Airport Revenue Diversification (2010)

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TRANSPORTATION RESEARCH BOARD WASHINGTON, D.C. 2010 www.TRB.org A I R P O R T C O O P E R A T I V E R E S E A R C H P R O G R A M ACRP SYNTHESIS 19 Research Sponsored by the Federal Aviation Administration SUBSCRIBER CATEGORIES Aviation • Finance Airport Revenue Diversification A Synthesis of Airport Practice CONSULTANT LOIS S. KRAMER KRAMER aerotek inc. Boulder, Colorado

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in transportation of people and goods and in regional, national, and international commerce. They are where the nation’s aviation sys- tem connects with other modes of transportation and where federal responsibility for managing and regulating air traffic operations intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common oper- ating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Cooperative Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near-term solutions to meet demands placed on it. The need for ACRP was identified in TRB Special Report 272: Airport Research Needs: Cooperative Solutions in 2003, based on a study sponsored by the Federal Aviation Administration (FAA). The ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. It is modeled after the successful National Cooperative Highway Research Program and Transit Cooperative Research Program. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, maintenance, operations, safety, security, policy, planning, human resources, and administra- tion. The ACRP provides a forum where airport operators can coop- eratively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100-Century of Aviation Reauthorization Act. The primary participants in the ACRP are (1) an independent governing board, the ACRP Oversight Committee (AOC), appointed by the Secretary of the U.S. Department of Transportation with representation from airport operating agencies, other stakeholders, and relevant indus- try organizations such as the Airports Council International-North America (ACI-NA), the American Association of Airport Execu- tives (AAAE), the National Association of State Aviation Officials (NASAO), and the Air Transport Association (ATA) as vital links to the airport community; (2) the TRB as program manager and sec- retariat for the governing board; and (3) the FAA as program spon- sor. In October 2005, the FAA executed a contract with the National Academies formally initiating the program. The ACRP benefits from the cooperation and participation of air- port professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research organizations. Each of these participants has different interests and responsibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited period- ically but may be submitted to the TRB by anyone at any time. It is the responsibility of the AOC to formulate the research program by identifying the highest priority projects and defining funding levels and expected products. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport professionals, the intended users of the research products. The panels prepare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing coop- erative research programs since 1962. As in other TRB activities, ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the intended end-users of the research: airport operating agencies, service providers, and suppliers. The ACRP produces a series of research reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work- shops, training aids, field visits, and other activities to ensure that results are implemented by airport-industry practitioners. ACRP SYNTHESIS 19 Project 11-03, Topic S01-02 ISSN 1935-9187 ISBN 978-0-309-14312-7 Library of Congress Control Number 2010925480 © 2010 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB or FAA endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the Airport Cooperative Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the Airport Cooperative Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report. Published reports of the AIRPORT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national-academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished schol- ars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and techni- cal matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Acad- emy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achieve- ments of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academyís purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Acad- emy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scien- tific and engineering communities. The Council is administered jointly by both the Academies and the Insti- tute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transportation Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisci- plinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation depart- ments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

ACRP COMMITTEE FOR PROJECT 11-03 CHAIR BURR STEWART Seattle, Washington MEMBERS RANDALL P. BURDETTE Virginia Department of Aviation GARY C. CATHEY California Department of Transportation KEVIN C. DOLLIOLE Unison Consulting, Inc. JULIE KENFIELD Jacobs Engineering Group, Inc. CAROLYN MOTZ Hagerstown Regional Airport FAA LIAISON RANDY MOSENG ACI–NORTH AMERICA LIAISON A.J. MULDOON AIRCRAFT OWNERS AND PILOTS ASSOCIATION JOHN L. COLLINS TRB LIAISON CHRISTINE GERENCHER COOPERATIVE RESEARCH PROGRAMS STAFF CHRISTOPHER W. JENKS, Director, Cooperative Research Programs CRAWFORD F. JENCKS, Deputy Director, Cooperative Research Programs MICHAEL R. SALAMONE, Senior Program Officer EILEEN P. DELANEY, Director of Publications ACRP SYNTHESIS STAFF STEPHEN R. GODWIN, Director for Studies and Special Programs JON M. WILLIAMS, Program Director, IDEA and Synthesis Studies GAIL R. STABA, Senior Program Officer DON TIPPMAN, Editor CHERYL KEITH, Senior Program Assistant DEBBIE IRVIN, Program Associate TOPIC PANEL VOLODYMYR BILOTKACH, University of California–Irvine MARK EARLE, Colorado Springs Airport CHRISTINE GERENCHER, Transportation Research Board RICHARD GOLASZEWSKI, GRA Incorporated, Jenkintown, PA STEPHEN GORDON, Oakland International Airport ROBERT GRIERSON, Southern Illinois University, Carbondale J. DWIGHT HADLEY, Albany International Airport BILL JOHNSON, Florida Airports Council DEREK V. MARTIN, Klamath Falls Airport PAUL L. FRIEDMAN, Federal Aviation Administration (Liaison) KEN JACOBS, Federal Aviation Administration (Liaison) LIYING GU, Airports Council International–North America (Liaison) Cover figure: Collage—Toronto Pearson International Airport (lower left); International Terminal at San Francisco International Airport (lower right and upper left); Courtesy: The Woodland Trust, Lincoln- shire, U.K. Cover design: Annie Kitchen, Jviation, Inc.

Airport administrators, engineers, and researchers often face problems for which infor- mation already exists, either in documented form or as undocumented experience and prac- tice. This information may be fragmented, scattered, and unevaluated. As a consequence, full knowledge of what has been learned about a problem may not be brought to bear on its solution. Costly research findings may go unused, valuable experience may be overlooked, and due consideration may not be given to recommended practices for solving or alleviat- ing the problem. There is information on nearly every subject of concern to the airport industry. Much of it derives from research or from the work of practitioners faced with problems in their day- to-day work. To provide a systematic means for assembling and evaluating such useful information and to make it available to the entire airport community, the Airport Coopera- tive Research Program authorized the Transportation Research Board to undertake a con- tinuing project. This project, ACRP Project 11-03, “Synthesis of Information Related to Airport Practices,” searches out and synthesizes useful knowledge from all available sources and prepares concise, documented reports on specific topics. Reports from this endeavor constitute an ACRP report series, Synthesis of Airport Practice. This synthesis series reports on current knowledge and practice, in a compact format, without the detailed directions usually found in handbooks or design manuals. Each report in the series provides a compendium of the best knowledge available on those measures found to be the most successful in resolving specific problems. FOREWORD This synthesis study is intended to inform airport operators, stakeholders, and policy- makers about how airports are diversifying revenue streams. The report provides a brief discussion of different sources of revenue for airports, separating core aeronautical rev- enue from ancillary revenues. The report also provides a description and examples of ways that airports have diversified activities and a discussion of the challenges that arise when non-aeronautical activity is proposed on land that is subject to FAA grants obligations and assurances. Information used in this study was developed through a review of available literature and discussions with industry experts and airport operators. Lois S. Kramer, KRAMER aerotek inc., Boulder, Colorado, collected and synthesized the information and wrote the report. Members of the panel reviewed the original work plan and this document. The topic discussed is currently receiving extensive attention within the industry as airports strive to provide revenue consistency and self-sufficiency in an envi- ronment where both commercial aviation and general aviation is undergoing structural changes affecting the level of activity at individual airports and the financial agreements between airports and airlines, tenants, and other users. This synthesis strives to be immedi- ately useful with the knowledge that many airport operators are evaluating new options for revenue development and diversification. The ACRP program is committed to more exten- sive investigation of the topic through a fully funded research effort in FY 2010. PREFACE By Gail R. Staba Senior Program Officer Transportation Research Board

CONTENTS 1 SUMMARY 3 CHAPTER ONE INTRODUCTION Purpose of the Synthesis, 3 Study Methodology, 3 Report Structure, 3 5 CHAPTER TWO AIRPORT BUSINESS AND REVENUES Transformation of the Airport Business, 5 Federal Role in Shaping the Business of Airports, 7 Necessity and Opportunity for Revenue Diversification, 14 16 CHAPTER THREE PLANNING ISSUES Airport Planning Process, 16 Planning for Non-Aeronautical Development, 16 Dayton International Airport Strategic Business Plan, 17 20 CHAPTER FOUR LEADERSHIP, PARTNERS, ALLIANCES, AND INCENTIVES Importance of Airport Leadership, 20 Alliances and Partnerships, 21 Incentives, 22 25 CHAPTER FIVE AVIATION SERVICES Ground Handling Services, 25 Redevelopment of Airport Facilities, 29 32 CHAPTER SIX NON-AERONAUTICAL DEVELOPMENT Multi-Use Development, 32 Other Revenue Diversification Development, 37 41 CHAPTER SEVEN ANCILLARY LAND USE Advertising and Sponsorships, 41 Temporary Uses and Special Events, 41 Easements and Rights-of-Way, 41 Agriculture, 41 Mineral Extraction, 41 Renewable Energy, 42 Utility Services, 44 Precious Metal Storage, 45 46 CHAPTER EIGHT CONCLUSIONS

48 REFERENCES 49 BIBLIOGRAPHY 51 GLOSSARY 52 ACRONYMS 53 APPENDIX A AIRPORT CONTACTS 54 APPENDIX B EXAMPLES OF NON-AERONAUTICAL DEVELOPMENT