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10 Guidebook for Developing and Managing Airport Contracts Many agreements condition the approval and sublease on the existence or lack of various conditions: · Adequate space available for lease from the airport sponsor · A sublease of greater than 50% of sublessor's leasehold · Assignee is not as credit worthy as the signatory airline · Assignee or sublessee is not willing to become a signatory Some agreements state that an assignment or sublease may be rejected if the signatory airline has previously failed to accommodate another carrier when requested. See CRP-CD-81 (enclosed herein), Appendix to Chapter 1, Airline Agreements, for excerpts from the MWAA and PIT Airline Agreements for provisions regarding assignment and sublease of premises. 1.15 Handling Agreements Airline agreements generally give the airline the right to handle or be handled by other airlines or other entities. A significant number condition this right on either notice or approval by the airport sponsor and require the handled airline to have an agreement with the airport. Many airports require the handling airline to pay a fee, which ranges from 5% to 15% of gross revenues; however, some agreements exclude the handling of affiliates from the fee. See CRP-CD-81 (enclosed herein), Appendix to Chapter 1, Airline Agreements, for excerpts from the BWI and PDX Airline Agreements for provisions regarding ground handling services by airlines. 1.16 Rate Making The rate-making methodology varies considerably from airport to airport. However, the methodology can generally be classified in the following categories: Residual (consisting of two distinct approaches to residual rate making), Compensatory, and Hybrid. · Airport System Residual Cost Center. Frequently referred to as the "single cash register approach," this methodology adds all airport expenses and deducts all revenues to arrive at the airline rates and charges. This methodology has fallen out of favor primarily because airports want to control revenue and have flexibility on capital improvements. · Cost Center Residual. This methodology calculates all the expenses allocable to the particular cost center (e.g., terminal, ramp, and landing area) and deducts the revenues that are allocable to or sourced from that particular cost center. The net requirement is then divided by the appro- priate divisor (e.g., square feet and landed weight) to derive the rate or fee. Most airline agree- ments characterize the landing area as cost center residual, with the total allocated cost offset by non-signatory landing fees, fuel flowage fees, GA landing fees, and apron fees (if apron is con- sidered part of the landing area). Many agreements classify the terminal as cost center residual, with allocated costs offset by ancillary fees and non-airline revenues (primarily concession rev- enue) specific to the terminal. · Compensatory. Compensatory cost centers are those that calculate all expenses for the spe- cific cost center and divide that cost by the applicable divisor (e.g., square feet or landed weight). The divisor for the terminal in a compensatory methodology is generally rented space. Revenues are not deducted in this methodology to calculate rental rate or landing fee.