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24 On the completion of the feasibility study, the stakeholders must caucus to determine if there are sufficient compelling reasons to proceed with the formation of the proposed consortium. The airport and the airlines should work together to confirm the consortium purpose, scope, and objectives. If the stakeholders determine that the purpose, scope or objectives for the pro- posed consortium must change from the general agreement achieved prior to the feasibility study, they may also determine that the feasibility study should be updated to reflect the new conditions. Issues and obstacles will have to be identified, addressed, resolved and/or mitigated before the consortium formation can proceed. This would include issues or concerns raised by the airport after consultations among the consultant, sponsor, and the airport. If there is consensus to proceed with the formation of the consortium after the completion of the feasibility study and the resolution of all significant issues that would stop the formation process, it is possible to begin the preparation of the documents necessary to implement the consortium. It will be necessary for the stakeholders to dedicate attention and funding to the documentation process to ensure its success. Illustrative Examples and Observations 1. Terminal One Group Association, L.P. The participating airlines commenced the initial TOGA financial feasibility study in 1990, and the TOGA consortium was finally formed in 1994. During that period, the feasibility of the TOGA venture was repeatedly re-evaluated as the JFK Terminal One project knowledge base was developed and refined. For example, the initial feasibility study assumed an overall project capital cost based on order of magnitude estimates. Subsequently, however, TOGA engaged an architect who developed preliminary plans for the proposed terminal. These plans provided for more definitive cost estimates, which allowed the capital cost estimate to be refined and the feasibility of the TOGA enter- prise confirmed. Further, TOGA also engaged a team of banks that prepared detailed esti- mates of project financing and debt service costs, which also served to confirm the financial feasibility of the TOGA enterprise. During this process, the number of TOGA participating airlines increased and decreased as they re-evaluated the feasibility of the TOGA venture. The benefits of new terminal facilities and an airline controlled terminal operation were evaluated against the risks of a significant irrevocable debt obligation and a 25-year commitment to a single facility. Ultimately, four of the participating airlines individually decided to proceed, if there was sufficient âcritical massâ in airline participation. As a result, there was not clear direction that the TOGA ven- ture would proceed until all four participating airlines made their decisions known. C H A P T E R 5 Consensus to Proceed
Consensus to Proceed 25 2. CICA Terminal Equipment Corporation. During the planning and design of the new inter- national terminal with the City of Chicago, there was early consensus among Chicago Inter- national Carriers Association participating airlines to form the CICA TEC consortium. However, during the consensus building process, it was unclear which airlines would actually join the consortium. The individual commitments to become consortium members were not made known by the participating airlines until the consortium documents were distributed for execution. Non-member airlines are required to pay the CICA TEC member rates, plus a non-member surcharge. As a result, the decision to join the consortium was largely an economic decision weighing the payment of a membership fee to join the consortium versus the payment of non- member surcharges. 3. DEN Consortium, LLC. As reported above, various financial and business analyses were per- formed for DENCO to help the airlines compare and analyze the business options available to them for jointly holding a common deicing fluid supply contract. The participating airlines expressed a preference for non-consortium approaches. However, after due consideration and analysis over a 6-month period, the participating airlines agreed that the consortium approach was the most economical, and flexible, and would position them as a group to pur- sue additional scope with the airport in the future. 4. LAX Shared Use Lounge Company, LLC. The LAXSUL premium passenger lounge was con- ceived as a common use facility that would be developed and operated for the benefit of its member airlines. The member airlines did not belong to airline alliances. However, the stra- tegic decision to join an allianceâwhich would require the airline to leave the consortium and use an alliance premium passenger loungeâwas controlled by the individual airlineâs headquarters and was always a possibility. As a result, none of the individual participating airlines wanted to hold a long-term lease or sponsor the project financing for the benefit of the unaligned airline group. The participating airlines chose to proceed with the LAXSUL consor- tium because the structure served the airlines by holding the long-term lease, sponsoring the project financing, and allowing the membership to change over time. As indicated by these illustrative examples, the consensus to proceed with a new consortium (1) is subject to many factors, (2) may be achieved early in the process, (3) may not be achieved until after the feasibility study has been revised to incorporate all stakeholder concerns, or (4) may require an extended period to achieve. After a consensus to proceed has been achieved, documents must be prepared and approved to implement the terms agreed to by the stakeholders. Chapter 6 describes the preparation of the various agreements that are necessary to make a proposed consortium a reality.
