A Guidebook for Airport-Airline Consortiums (2014)

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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 REPORT 111 TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2014 www.TRB.org Research sponsored by the Federal Aviation Administration Subscriber Categories Aviation • Terminals and Facilities A Guidebook for Airport-Airline Consortiums Paul B. Demkovich Airport & AviAtion professionAls, inc. (AvAirpros) Naples, FL and Jeffrey J. Crosby AvAirpros services, inc. Chicago, IL Daniel L. Muchow QuArles & BrAdy llp Phoenix, AZ Gloria G. Bender trAnssolutions Fort Worth, TX Jerome A. Copelan copelAn consulting llc San Antonio, TX

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in trans­ portation of people and goods and in regional, national, and inter­ national commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal respon­ sibility 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 operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Coopera­ tive Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near­term 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 spon­ sored 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 Coopera­ tive Highway Research Program and Transit Cooperative Research Pro­ gram. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, mainte­ nance, operations, safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport opera­ tors can cooperatively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100­Century 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 industry organizations such as the Airports Council International­North America (ACI­NA), the American Associa­ tion of Airport Executives (AAAE), the National Association of State Aviation Officials (NASAO), Airlines for America (A4A), and the Airport Consultants Council (ACC) as vital links to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. 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 airport professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research orga­ nizations. Each of these participants has different interests and respon­ sibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited periodically 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 iden­ tifying 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 pro­ fessionals, the intended users of the research products. The panels pre­ pare 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 cooper­ ative 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 end­users 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 airport­industry practitioners. ACRP REPORT 111 Project A01­21 ISSN 1935­9802 ISBN 978­0­309­28430­1 Library of Congress Control Number 2014946497 © 2014 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 not­for­profit 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 not­for­profit 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.national­academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon 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 technical 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 Academy 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 achievements of engineers. Dr. C. D. Mote, Jr., 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, upon its own initiative, to identify issues of medical care, research, and education. Dr. Victor J. Dzau 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 Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, 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 scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. Mote, Jr., 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 Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, 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 departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org

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 S CRP STAFF FOR ACRP REPORT 111 Christopher W. Jenks, Director, Cooperative Research Programs Michael R. Salamone, ACRP Manager Theresia H. Schatz, Senior Program Officer Terri Baker, Senior Program Assistant Eileen P. Delaney, Director of Publications Kami Cabral, Editor ACRP PROJECT A01-21 PANEL Field of Administration Timothy Karaskiewicz, General Mitchell International Airport, Milwaukee, WI (Chair) Rochelle L. “Chellie” Cameron, Philadelphia International Airport, Philadelphia, PA Viji Prasad, Los Angeles World Airports, Los Angeles, CA Kofi Smith, Atlanta Airlines Terminal Corporation, Lithonia, GA Amy C. Weaver, J.A. Watts, Inc., Atlanta, GA Geoffrey A. Wheeler, Ricondo & Associates, Inc., Alexandria, VA Kathleen Brockman, FAA Liaison Liying Gu, Airports Council International–North America Liaison Christine Gerencher, TRB Liaison

ACRP Report 111: A Guidebook for Airport-Airline Consortiums provides guidance for airport operators and airline representatives who are responsible for agreements related to facilities, equipment, systems, and services and who may be interested in evaluating, advo­ cating, or forming consortiums to provide needed services. The Guidebook provides a dis­ cussion of the structure, organization, governance, membership provisions, scope, admin­ istrative and operational staffing; presents best practices for the preparation of consortium agreements and performance standards, capitalization, and cost allocation methodologies; and identifies areas that have been most challenging in the operation of consortiums from the airport’s, airline’s and operator’s perspectives. The Guidebook provides decision­making guidance on a variety of issues including the benefits and risks of establishing consortiums for both airports and airlines; information needed to establish a consortium; organizational and management structures; standard lev­ els of services; financial considerations (e.g., capital and operating costs); federal, state, and local regulatory requirements; and the common problems relative to the formation and operation of consortiums. Airports and airlines continue to work together to deliver cost­effective and quality ser­ vices to passengers. Together they seek new and effective strategies to better manage airport facilities, equipment, systems, and services. Generally, the airport operator or individual airlines maintain these facilities, equipment, systems, and services. Occasionally, they are managed and maintained by airport­airline consortiums. Airports and airlines would benefit from additional information to increase their under­ standing and evaluation of airport­airline consortiums. ACRP Synthesis 31: Airline and Airport-Airline Consortiums to Manage Terminals and Equipment recently described several current consortium arrangements and concluded that the consortium model is flexible and can be adapted to fit many circumstances and requirements. This research was conducted under ACRP Project 01­21 by Airport & Aviation Profes­ sionals, Inc. (AvAirPros) in association with Copelan Consulting LLC, Quarles & Brady LLP and TransSolutions. As part of the research, the team conducted interviews of airport and airline staff and consortium operators and developed in depth cases studies of six consortiums. F O R E W O R D By Theresia H. Schatz Staff Officer Transportation Research Board

Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions. 1 Summary 3 Chapter 1 Introduction 6 Chapter 2 Initial Consensus 10 Chapter 3 Feasibility Study 14 Chapter 4 Business Entity Selection 24 Chapter 5 Consensus to Proceed 26 Chapter 6 Prepare Agreements 30 Chapter 7 Implementation 35 Chapter 8 Decision-Making Guidance and Considerations 44 Chapter 9 Existing Consortiums 50 Chapter 10 Consortium Success Metrics 53 Appendix A Frequently Asked Questions 56 Appendix B Glossary of Terms, Abbreviations, and Acronyms 58 Appendix C Bibliography 59 Appendix D Case Studies 82 Appendix E Feasibility Study—Illustrative Example 104 Appendix F Minimum Service Levels—Illustrative Example C O N T E N T S