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7 History and Development of PPPs in Transportation Infrastructure PPPs are often thought to be a recent development in the infrastructure delivery space; however, examples of such partnerships date to the 1800s with both road and rail projects. During the 20th century, full public-sector funding for transportation was the norm because of declining interest by the private sector to provide investment. However, as the public pay- as-you-go method failed to keep pace with the current demand for transportation infrastruc- ture, PPPs have again found a place as a project delivery tool in this area. To date, state laws in 33 states, the District of Columbia, and Puerto Rico allow for the usage of PPPs in some capac- ity (5). Many cities and counties also have the ability to participate in private infrastructure development. The scope of PPP arrangements includes contracting, financing, and project delivery methods, with the accountability for the project largely resting with the government entity. PPPs provide benefits to the public sector through investment of capital and often risk transfer through longer- term contracts or leases. Principles of PPPs for Real Estate and Economic Development Aviation PPPs share certain similarities with real estate and economic development PPPs, often because of the land available to airports for development or leasing. Additionally, airport property can be a PPP asset through innovative leasing and management contracts that provide a form of real estate investment. Therefore, it is necessary to consider the benefits and barriers to real estate PPPs as they may relate to similar agreements that could be entered into by general aviation airports. Although many of the principles and risks for horizontal and vertical PPP deals may overlap, the principles for real estate or economic development PPPs may differ from more traditional transportation PPPs (6). In terms of best practices for real estate PPPs, the public sector must understand the goals and ensure that the private-sector partner shares that understanding. This circumstance will involve the right development team to provide expertise across the length and breadth of the project; this team will also need to engage in predevelopment activities to lay the groundwork for the partnership. The activities must be transparent between all parties to the agreement and the public, while private-sector issues with disclosure requirements are navigated (7). One clear way to gain buy-in from the public and remain transparent is to explain the benefits of the project, often in economic and financing terms; this action will reduce public wariness toward private-sector involvement in a public project. The development team must fully C H A P T E R 2 Private Investment at General Aviation Airports: A Review of the Literature
8 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships understand these benefits and the life-cycle costs to ensure that they are secured from the pri- vate sector and reduce any unnecessary risks. Finally, the public-sector partner should document and monitor the agreement throughout its term in order to ensure that the public is receiving the promised benefits and that the project is proceeding appropriately (6). Potential PPP investors in an airport, whether in the land, property, or both, could be real estate developers, such as the PPP to revitalize JFKâs Terminal 4 or the building and development of Alliance Airport in Fort Worth (2). Therefore, airport officials and staff should understand the real estate model so as to understand their private-sector partnerâs needs from a project. This factor will also help airport staff understand the risks and rewards for both themselves and the private developer. On the private side, the partner will need to do the necessary homework to navigate the public environment; trust and communication are essential for the private sector to benefit (6). Trust and communication between the key stakeholders and the public again pro- vides transparency and ensures buy-in from all groups. Strong leadership is vital in facilitating this communication between all parties and building that trust into all aspects of the agreement. Overall, successful real estate PPPs share similar characteristics with transportation-related PPPs, as the partnership between the developer and the public entity is key in both types of arrangement. Strong leadership, communication, and a genuine, trustworthy partnership are the main keys to success (6). Partners should understand their role, their goals, and the goals of the other partners. Since PPPs can sometimes be viewed with skepticism by the public, the public owner should ensure equitable and reasonable sharing of the costs, risks, and responsibilities associated with the project. Common PPP Delivery Methods in U.S. Aviation Industry One characteristic of PPPs is the method used to deliver the project. Delivery methods can be best thought of on a continuum: nearly exclusive public control to entire private control. Table 3 presents a summary review of the spectrum of PPP methods based on the level of control by the public or private sector. PPPs can have both perceived benefits and limitations associated with them. Table 4 provides a brief overview of PPP benefits and limitations, with an emphasis on some of their trade-offs based on previously conducted studies (9). Some of these concerns can be managed through the contract process itself; this process can mitigate many of these perceived limitations and concerns. The benefits of PPPs can, in some cases, include cost and time savings, improved project quality, and project life-cycle efficiencies. The following list summarizes studies conducted regarding benefits that PPP agreements can provide: â¢ Private financing and project acceleration. Some have argued that through innovative financing mechanisms, a PPP can help expedite the delivery of a project that might otherwise not have been completed in a timely manner or even at all. A recent report by FHWA found that completing a PPP project can minimize public inconvenience and traffic disruption as well as produce public safety benefits (10). A common example would be terminal redevelop- ment projects, such as those undertaken at JFK, LaGuardia, and McCarran airports. Private financing allowed the projects to move forward earlier and work with an expedited timeline as the government entity had access to the necessary capital from the private investor (2). â¢ Monetization of existing assets. Some have argued that PPPs that involve up-front pay- ments or revenue-sharing agreements could be used to extract value from existing trans- portation infrastructure to raise additional funding for other projects. For example, a recent
Private Investment at General Aviation Airports: A Review of the Literature 9 Term Definition Designâbidâbuild (DBB) This is the traditional method of project delivery in which the design and construction are awarded separately and sequentially to private firms. Designâbuild (DB) DB is similar to DBB but combines design and construction phases into a single fixed-fee contract. Operations and maintenance (O&M) contract This contract refers to a standalone agreement (i.e., the operator is contracting directly with the grantor) rather than part of a concession arrangement whereby the obligations of the concessionaire during the operating period are subcontracted to an operator. Designâbuildâoperateâ maintain (DBOM) This term refers to the design, construction, operation, and maintenance of a facility by a selected contractor for a specified period with specified performance requirements met. Designâbuildâfinance (DBF)/designâbuildâ financeâoperate (DBFO), designâbuildâfinanceâ operateâmaintain (DBFOM) The variations of the DB or DBOM contracting method for which the private partner provides some or all project financing. The project sponsor retains ownership of the facility. There is an important difference between these methods with and without traffic risk. Long-term lease concession This method involves the long-term lease of existing, publicly financed toll facilities to a private-sector concessionaire for a prescribed concession period during which the private party has the right to collect tolls on the facility. Buildâtransferâoperate (BTO) BTO refers to when a private owner builds an infrastructure facility, transfers it to another entity, and then operates it on a contractual basis for a specified period. Leaseâbuildâoperate (LBO) LBO refers to sequence in which a private party designs and builds a complete project, sells it to the government or consortium, and leases back and operates the facility. Buildâoperateâtransfer (BOT)/buildâownâ operateâtransfer (BOOT) BOT and BOOT refer to models whereby the public-sectorgrantor grants to a private company the right to develop and operate a facility or system for a certain period. After a certain period, the private entity then transfers the facility back to the public sector. Buildâownâoperate (BOO) BOO refers to the right granted to a private company to develop, finance, design, build, operate, and maintain a project; the public sector can provide tax incentives to make a project worthy of pursuing. Private-sector owns and operates (PSOO) PSOO refers to a model whereby a private company is granted the right to develop, finance, design, build, operate, and maintain a project, usually without financing assistance from the public sector. Asset sale Asset sale refers to a sale of a transportation facility by the public sector to the private sector for one lump-sum amount. Buyâbuildâoperate (BBO) BBO refers to a model whereby government sells an asset to the private- sector entity, which then can make improvements necessary to operate the facility in a more cost-effective manner. Note: Delivery models in italics are generally considered purely public or private models and are not always defined as PPPs. Source: J. N. Buxbaum and I. N. Ortiz, NCHRP Synthesis 391: Public Sector Decision Making for PublicâPrivate Partnerships, 2009. Table 3. Transportation PPP project delivery models. Potential PPP Benefits Potential PPP Concerns â¢ Private financing and project acceleration â¢ Monetization of existing assets â¢ Cost and time savings â¢ Life-cycle efficiencies â¢ Improved project quality â¢ Risk transfer â¢ Public control, accountability, and flexibility â¢ Possible loss of public control and flexibility â¢ Possible unreasonable private profits at the publicâs expense â¢ Perceived loss of future public revenues â¢ Risk of bankruptcy or default â¢ Accountability and transparency â¢ Environmental issues â¢ Foreign companies â¢ PPP toll road issues and accountability â¢ Specific contract terms Source: Table adapted from information provided by Rall et al., PublicâPrivate Partnerships for Transportation: A Toolkit for Legislators, 2010. Table 4. Potential PPP benefits and concerns to consider.
10 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships GAO analysis found that in 2005 the City of Chicago received about $1.8 billion by leas- ing the Chicago Skyway to a consortium for 99 years. The city in turn used the lease pay- ments to pay off the remaining debt on the Chicago Skyway and some of the cityâs general obligation debt. The Skyway Concession Company, LLC (SCC) assumed operations on the skyway on January of that year; as part of this deal, SCC was responsible for all operating and maintenance costs but had the right to all toll and concession revenue. In June 2015, a consortium of three Canadian pension funds agreed to purchase the lease from Cintra and Macquarie, holders of the SCC, for $2.8 billion. As part of this 2015 sale, the City of Chicago collected $20 million and the Chicago Transit Authority $8 million in real property transfer taxes (11). In another example, in 2006, the state of Indiana signed a 75-year, $3.8 billion lease of the Indiana Toll Road (12). The proceeds of this transaction primarily were used to fund other highway infrastructure projects in Indiana. In terms of aviation, the agreement between Morristown Municipal Airport and a private company, DM Airports, allowed the local government to shift its debt burden and start receiving revenue from the airport. This deal shifted the debt burden to the private company as part of the agreement, as well as DM Airports investing in the airport infrastructure to make the facility profitable again (2). â¢ Cost and time savings. Recent academic literature and policy studies make note of the time and cost savings that can be attributed to the PPP approach to highway delivery. Although academic evidence of PPP performance in the United States is limited, a recent academic study examined 12 North American PPPs and found that the PPP sample cost overruns aver- aged 0.81 percent and schedule overruns averaged â0.30 percent, compared with 12.71 per- cent cost overruns and 4.34 percent schedule overruns for publicly financed large-scale DBB highway projects (13). Possible reasons for time and cost savings include â Direct incentives to the private contractor for on-time delivery, â Proper use of performance-based contracting, â Competition between bidders, â Transfer of risk to the private sector, and â Life-cycle efficiencies. According to Chasey et al., with a relatively small universe of completed construction phase efforts to examine, it may be premature to draw explicit conclusions based on a single study of PPP delivery methods (13). However, the results reported in this study do point to tighter control of highway construction costs and delivery schedules when projects are delivered by the PPP method. Furthermore, Chasey et al. note the need for additional empirical research to be conducted to assess better what specific aspects of a project delivered conventionally by the public sector versus the PPP method matter in influencing whether a project is delivered on time and within schedule (13). â¢ Life-cycle efficiencies. In an approach such as DBOM, a sole contractor is responsible for several project stages; such responsibility gives the private contractor the incentive to lower costs throughout the facilityâs life cycle and reduces possible collaboration delays. According to a 2004 U. S. Department of Transportation (USDOT) report to Congress, âpublic-private partnerships can save from 6 to 40 percent of the cost of construction and significantly limit the potential for cost overrunsâ (10). â¢ Improved project quality. Several studies have found that PPPs can improve the quality in the delivery of a highway project. Although little quantitative evidence exists, in its survey of transportation PPP agencies the University of Minnesota found that the use of a PPP contract method had been effective at encouraging innovation with private expertise and state-of-the art technologies (14). â¢ Risk transfer. In some cases, a PPP contract can allow for the transfer of risk from the public sector to the private sector. Some experts believe that this risk transfer can actually encourage the public sector to reduce its own risk and potential financial losses. Furthermore, the up-front consideration of possible risks in a PPP arrangement can facilitate more timely (and
Private Investment at General Aviation Airports: A Review of the Literature 11 less costly) risk mitigation. A recent UK National Audit Office (NAO) study, however, found that these potential risk transfer benefits can depend on careful project analysis and public- sector enforcement of the PPP agreement (15). â¢ Public control, accountability, and flexibility. Although some transportation experts have warned that PPPs could reduce public control over public assets, others have argued that these contracting methods could enhance public accountability and control over transportation infrastructure. For example, Leonard Gilroy of the Reason Foundation notes that most PPP negotiations tend to be based on a âstrong, performance-based contract that spells out all of the responsibilities and performance expectations that the government will require of the contractor. The failure to meet any of the thousands of performance standards specified in the contract exposes a contractor to financial penalties.â He concludes that âthe public interest is protected by incorporating enforceable, detailed provisions and requirements into the contractâ (16). Other experts have noted that under a typical PPP agreement, the public sector does not lose ownership of a facility and that well-crafted agreements, along with proper enforcement of those contract terms, can ensure that the public is protected (8). According to the literature, limitations and concerns regarding PPP contract methods have also emerged (9). Some of these concerns are summarized here: â¢ Possible loss of public control and flexibility. Some have argued that PPPs, if not structured to protect the public interest adequately, result in a loss of public control and flexibility. Some of this risk can develop because it is difficult to predict the publicâs need far into the future. For example, some European Union countries have limited PPP contracts in term length to a maximum of 35 years (although some such as the Channel Tunnel project have been as long as 99 years) (17). Morristown Municipal Airport provides another example of such a long-term agreement: the airport entered into a 99-year lease agreement with DM Airports. However, this is not common practice, as most airport lease agreements do not extend past 40 years. In this case, Morristown benefited from the longer term, as DM took on the airportâs debt obligation as well as providing payments to the local governments (2). Others argue that these limits should be decided on a project-by-project basis; concerns surrounding public control are typically addressed in PPP contracts that are written to stipulate how each party may amend a contract (17) (8). â¢ Possible unreasonable private profits at the publicâs expense. Some claim that private companies may make profits at the publicâs expense by exerting high tolls and fees, over- looking maintenance concerns only to boost profits, or requiring compensation for lost revenue due to competing facilities (8). Although standards and clauses may have been outlined in a contract, some claim that contractual restrictions on tolls and fees allow private entities more than enough discretion to raise rates. Others argue that unsolicited bids also are thought to allow the private developer to design a project that may place profits ahead of the public good (8). At the same time, others have argued that unsolicited proposals can encourage project innovation. A 2004 USDOT study found that a variety of PPP stake holders (including state representatives, law firms, private companies, and trade associations) recommended elimination of state prohibitions on accepting unsolicited proposals (10). â¢ Perceived loss of future public revenues. Some criticize PPPs because of the perception that these contracting methods could result in a loss of future public revenues. According to a GAO analysis, the higher private-sector financing costs relative to public-sector financing costs may result in higher overall project costs (12). Conversely, others assert that many of these issues can be addressed through careful asset valuation and risk-sharing agreements (9). â¢ Risk of bankruptcy or default. Some project stakeholders have expressed concern that a pri- vate partner could default on a project and thus affect the public sector in a negative way. This concern is especially directed toward agreements in which the public sector is at financial risk
12 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships or otherwise could be owed money at the time of default. Others find that PPPs are nearly always designed with minimal risk to the public sector (16). â¢ Accountability and transparency. Although maintaining confidentiality during the PPP proposal process can be important for several reasons, some expressed concerns about the openness and accountability for PPP projects relative to the traditional highway procure- ment process (18). For example, in a recent survey of state DOTs, 70 percent of respondents considered transparency an important measure to protect public interest (8). Several studies found that PPP agreements completed without public oversight and opportunities for input can hurt public opinion toward these agreements. The available evidence shows that con- cerns about transparency and accountability can be mitigated through an open process that gives all stakeholders opportunities to provide input (8). â¢ Environmental issues. Concerns have been raised by some that PPP agreements may be tempted to choose possibly less environmentally friendly methods to save on cost. How- ever, in recent years PPP contracts have been written to include environmental performance standards (8). â¢ Foreign companies. Concerns related to foreign companies involved with PPP contracts in the United States include foreign control of domestic assets, national security issues, and potential federal preemption of state and local authority in projects involving trade. The lines are blurred between foreign and U.S. investment companies as many foreign companies may include U.S. investors and many U.S. pensions are invested in non-U.S. investment funds. â¢ PPP toll road issues and accountability. Some say that roads that received some funding through traditional transportation funding mechanisms (e.g., gas taxes, vehicle registration fees) should not be tolled. To gain public support, some say that benefits to using the toll facility need to be clearly articulated (10). Other issues for public and private toll roads include the rerouting of traffic to toll-free routes, removal of tolls upon termination, and toll rate control. Many of these toll road issues can be addressed in PPP contract provisions or enabling legislation. â¢ Specific contract terms. Other concerns have emerged regarding specific PPP agreement terms. Concerns regarding maintenance standards, hand-back provisions, commercial devel- opment rights, data ownership, and other issues can be identified (and dealt with) within PPP agreements (8). Although PPPs have been utilized for more than a century, state and federal legislation had not enabled or regulated the usage of these types of agreement until recently. As PPPs became more popular over the past decade, states started to pass legislation either to provide broad authorization or to restrict the usage of PPPs to certain projects (19). The two common types of PPP can be referred to as vertical and horizontal PPPs. Currently, 33 states, the District of Columbia, and Puerto Rico have enabling legislation for transportation PPPs. Horizontal PPPs are perhaps the most common; this terminology refers to most transportation projects that involve both public- and private-sector entities. Vertical PPPs are commonly termed as âsocial infrastructureâ; these involve private-sector investment in building education, public works, or general government facilities. The development of airports involves both horizontal (i.e., pave- ments, runways, etc.) and vertical infrastructure (terminal building, hangar, etc.) PPPs. The majority of states with PPP legislation enable both vertical and horizontal agreements. If a state provides only limited authorization for the use of PPPs, it tends to be for horizontal, or transportation, PPPs, because those are the more common arrangements. This factor could restrict the usage of PPPs for aviation in some states, as many agreements would require some form of vertical infrastructure, such as facility development. There is no broad enabling federal legislation for general PPPs, since this area has largely been left to the states to decide. However, federal legislation and regulations do specifically affect
Private Investment at General Aviation Airports: A Review of the Literature 13 aviation projects. The Airport Privatization Pilot Program (APPP), originally established under the 1996 Reauthorization Act, and the Airport Improvement Program (AIP), origi- nally established under the Airport and Airway Improvement Act of 1982, provide entries and barriers into the PPP market for airports (20; 21). In 2017, Senator James Inhofe introduced legislation to provide an avenue for smaller airports to enter into PPPs with the help of federal dollars (22). The legislation is intended to give general aviation airports greater flexibility to use federal funding to attract investment, as well as provide resources to airports that aid in disaster relief. Airport PPPs in Context Full airport privatization has been difficult to achieve in the United States largely because of federal grant assurances that restrict airports from generating profit or redirecting airport rev- enues if those airports received funding from FAA (23). FAA did set up a privatization program, the Airport Privatization Pilot Program (APPP), in 1996, but so far only one airport, Luis Munoz Marin International Airport in Puerto Rico, has successfully utilized this program and remains under private operation (23). Stewart International Airport was the first airport to complete the APPP process in 1999 when it was sold to the National Express Group (NEG), a transportation management company based in the United Kingdom. The agreement was for a 99-year lease; however, in 2007, NEG sold the remaining 91 years of the lease to the Port Authority of New York and New Jersey and thereby ended Stewart International Airportâs participation in the program (2). The pilot program has 10 spots for differing categories of airport; there is only one spot available for large hubs, and one spot must be taken by a general aviation airport (24). Under this program, general aviation airports can be sold or leased while commercial service airports are restricted to leases only. Currently, Hendry County Airglades Airport in Clewiston, Florida, holds a general aviation spot in the program. In August 2014, FAA authorized the use of a management contract between the county and the private operator, and as of this year, the county and private operator are working to finalize the application (25). The APPP provides additional benefits through the relaxation of certain restrictions under AIP funding, such as clauses that state that all revenue must be used for airport-related purposes, as well as the repayment clause that requires the return of federal grant funding upon priva- tization. Through this program, the private operator takes on the responsibility of fulfilling the FAA grant requirements and remains eligible for AIP funding at a reduced rate (26). The complexity of the requirements and the length of time to go through the program have been cited as potential barriers to full privatization through the APPP. So far 12 applicants have applied, but only two have completed privatization; the remaining 10 airports withdrew their application or were removed for failing to meet deadlines (25). Despite this lack of success for the pilot program, an airport can still pursue private-sector involvement as opposed to full privatization. Three common models in aviation can be used for such an arrangement: service contracts, management contracts, and developer financing/ operations (2). Service contracts involve the outsourcing of noncore operations to a private company; this area can include maintenance services, airline equipment, shuttle bus operations, and many other services that the airport provides. Management contracts tend to be a level higher, with an airportwide system or just specific facilities contracted out to be managed by a private entity. One common example of management contracts at airports is a parking facility. Management contracts will be discussed in greater detail later in this section as they are pertinent to many aviation PPPs. Finally, developer financing/operation is perhaps the most common PPP: it involves partnering with a developer to finance and operate a facility. In terms of aviation, this mostly involves special purpose facilities for multi- or single-tenant use, such as an airline or
14 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships cargo tenants (2). These facilities can include terminals, fuel storage, cargo buildings, and even consolidated rental car facilities (2). Overall, examples of PPPs at general aviation airports are limited. However, agreements at Gary/Chicago International Airport; Monroe County Airport, Indiana; and Coastal Carolina Regional Airport provide a basis for understanding how these are applied in a general aviation context. In addition, older agreements in the style of PPPs can enhance understanding of the benefits and costs of using such a model. Further lessons can be learned from agreements at smaller commercial service airports, which could inform best practices for attracting invest- ment at these airports. Gary/Chicago International Airport embarked on a PPP after losing its only airline in 2013. The agreement involved Aviation Facilities Company (AFCO) and the airport authority. The agreement involves a 40-year contract to manage and operate the airport, as well as providing $100 million for investment into the airport. The management firm AvPORTS, an AFCO sub- sidiary, currently holds the management contract, which is set to 10 years with the possibility of six 5-year renewals (23). The airport authority retains ownership and provides for the operating costs, set at $120,000 per year, as well as allocating 20 percent of the facilityâs profits to AFCO (27). The airport authority hopes that these investments will once again attract an airline to the airport and eventually provide a third option for the Chicago region. In the early 1980s, development began to slow at the Monroe County Airport, and officials sought out opportunities for private investment and rehabilitation of facilities. The airport board reached out to local investors and aviation partners in the hopes of securing leases for the hangar facility that was completed in 1994. Private investors were offered a unique lease deal that would involve them developing and maintaining their own facilities and then leasing them for 20 years with the option of a 10-year renewal. The private developers would initially retain ownership of the facilities, with the airport becoming vested at 2.5 percent each year (28). At the end of the 20-year term, the private developer would still retain 50 percent ownership of the facility; if the 10-year renewal option were used, the developer would control 25 percent at the end of 30 years. The unique structure of the agreement is cited as one of the main incentives for private inves- tors to build the facilities at Monroe County (28). Retaining a stake in the property allowed investors to gain more revenue and provided them with an incentive to maintain the facility over the course of the lease. This situation in turn benefited the airport, as there was no fear that the property would revert to them in substandard condition; the revenue from the rental rate allowed the airport to build enough capital to buy back the facility at the end of the lease. The airport has gained an additional 100 jobs and 22 based aircraft since the beginning of the agree- ment, as well as the additional facilities and rental revenue due to improvements (28). Overall, the Monroe County Airport project provides an interesting example of using private investment to spur growth and increase revenues; the innovative model ensured that the necessary invest- ment would be attracted to cover the cost of the hangar development. The Coastal Carolina Regional Airport is a small primary commercial service airport in New Bern, North Carolina. During the early 2000s, the airport board, local community members, and airport officials all raised concern over the state of repair of the Tidewater Air fixed base operator (FBO) (28). Because the current condition of the airport could not handle the number of pilots or business passengers per day, an agreement was reached to revitalize the FBO. This agreement entailed the private FBO owner, Tidewater Air, paying for the vertical components of the new FBO and the public entities providing funding for the horizontal elements. Therefore, Tidewater built the structure, and the public entities paid for the paving and land preparation. The public entities included the airport authority, the county, and the state; the county waived property taxes on the facility and the state provided some funding for the horizontal elements
Private Investment at General Aviation Airports: A Review of the Literature 15 of the project. Additionally, local businesses donated the fixtures and interior, amounting to $35,000; this aid allowed Tidewater to focus on construction (28). The partnership between the private company and the airport allowed for the revitalization of a major piece of property, which is seen as the face of the airport. After the completion of the facility, the airport extended Tidewaterâs lease term for 25 years, which provided the company with land rental payments and allowed Tidewater to regain their investment through generated revenue (28). In addition to rental payments, Tidewater pays a fuel flowage fee each month. Therefore, the airport benefits from increased revenue and an improved FBO that can meet the needs of the aviation community. PPPs have the ability to provide investment for general aviation airports that need additional revenue or capital. The previous examples show that airports often benefit from partnering with a private developer by reduced risk, because construction and maintenance can be completed by the private entity, and increased revenue through new leases, increased rental payments, and fuel fees. The ability to combine construction, as in the case of Coastal Carolina, allowed for a faster completion of the project as less funding from the airport was required; the waiving of fees incentivized the FBO owner and allowed it to complete the project for less money. Common General Aviation Airport Revenue Stream and Financing Methods Although several revenue streams are available to airports, most capital funding for general aviation airports relies on federal funding from FAA under AIP. The remaining major funding sources are from state and local tax revenue and grant money (29). A major source of revenue for most commercial service airports is the passenger facility charge, which is based on enplaned passengers; this fee was approved in 1990 to provide capital funds for airports (26). However, general aviation airports largely deal with business, charter, and recreational operations, rather than passenger service, and derive their revenue from business activities at the airport. Regard- less, general aviation airports still generate revenue outside of direct funding. Outside sources include fuel sales and fuel flowage; a number of leases; hangar, land, and building, as well as spe- cial events and FBO agreements (29). These revenue and funding sources will be explored below. General Aviation Airport Funding FAA provides grant funding for airports through its AIP. This money is largely allocated for public agencies that own airports, but there are cases of private owners or entities being allocated funding. The AIP supports planning and development of public use airports that are included in the NPIAS. Available funding is typically apportioned into entitlement categories including primary, cargo, and nonprimary entitlement programs (30). Primary airports are those catego- rized as large, medium, small or nonhub airports. Nonprimary airports are mainly used by general aviation aircraft, but also include nonprimary commercial service airports, which typi- cally enplane between 2,500 and 10,000 passengers. Nonprimary airports also include reliever airports and general aviation airports including those categorized as national, regional, local, and basic under the FAA Asset Study. The nonprimary entitlement program, first introduced by the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21), currently provides $150,000 for each general aviation airport included in the most recently published NPIAS if Congress appropriates $3.2 billion or more in airport improvement funds (31). Although this is not a large sum when the costs associated with airport improvements are considered, the funding can be banked or rolled over for up to 4 years.
16 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships For large and medium primary hub airports, the AIP covers 75 percent of the total costs. For small primary, reliever, and general aviation airports, AIP funds cover 90% to 95% of eligible costs (29). Eligible projects include improvements relating to airport safety, capacity, security, and environmental concerns. Additionally, funding is granted for those projects that cover noise compatibility. If an airport chooses to accept funding under the AIP, they must adhere to certain conditions called grant assurances. Airport owners, sponsors, planning agencies, and other organizations that accept FAA-administered funding under the AIP, agree to certain obligations, in this case assurances, which may affect a potential PPP deal. In total, there are 39 grant assurances, but only 14 have been identified as potentially affecting PPPs. Grant Assurance 5 concerns the pres- ervation of rights and powers for the public owner of the airport; this assurance prohibits an airport from ceding control of airport development or selling property that would essentially release the airport from grant obligations. Similarly, Assurance 23 prohibits an airport from allowing one operator to be granted exclusive rights over a service (7). This assurance is intended to promote competition for aeronautical services at airports. Several assurances deal with soliciting input or requiring consistency with plans and land use. Assurances 6 and 7 concern local input and plans; Assurance 6 requires a consistency with local agency plans, especially surrounding the airport, and Assurance 7 adds a requirement for public comment on airport plans and development for the local community. Assurance 8 requires a solicitation of input, this time from any stakeholders before any airport development takes place (32). Grant Assurance 21 restricts development that is not compatible with current land uses around the airport. The airport and developer have the opportunity to work with local agencies to ensure their usage will be compatible, but the airport must also ensure that it updates the airport layout plan (32). The plan is submitted to, and approved by, FAA, and developers must not conflict with these plans unless the airport is aiming to resubmit. These conditions are elucidated under Assurance 21. In terms of operations and maintenance, FAA sets requirements for minimum service and staffing levels under Assurance 19; this assurance can affect PPPs that might be beneficial for airport maintenance or operations, but would provide less revenue generation (7). Assurance 20 is concerned with hazard removal and mitigation; this assurance would mainly affect develop- ment in terms of construction. Both the developers and airport officials would need to ensure that the construction or development would not impede airport operations or cause any hazard to operations (32). Potential PPPs also need to pay attention to the four assurances that concern economics or monetary affairs. The broadest assurance set out by FAA is Assurance 22, which concerns eco- nomic nondiscrimination. The main takeaways for airports considering PPPs are that all agree- ments must include language that supports economic nondiscrimination, as well as including clauses for the reasonable allocation of rates and fees (32). Assurance 24 adds restrictions onto fees by requiring that any change to the fee or rental structure be clearly documented and explained in case of FAA review. Finally, Assurance 25 restricts airport revenue from being diverted from its core purpose; this restriction must be understood by any developer or private partner (7). Last, Assurance 30 covers civil rights and provides a clearer nondiscriminatory requirement than economic nondiscrimination. In entering PPPs, airports should ensure that all necessary measures are taken to avoid discrimination on the grounds of race, creed, color, national origin, sex, age, and disability. In addition to the grant assurances, FAA requires mandatory contract language in any agree- ment at an airport using AIP funds. This language must be included in any airport sponsorâs
Private Investment at General Aviation Airports: A Review of the Literature 17 contract and involves a subordination clause and a long list of contract clauses that cover labor relations and civil rights. These provisions are uncommon in most private-sector contracts and essentially act as a barrier to investment from the private sector into an airport (33). There is currently no guidance from FAA on how these provisions may apply to PPPs or even more generally for private-sector contractors that do not necessarily need to adhere to these contrac- tual obligations. General Aviation Airport Revenue Streams General aviation airports rarely focus on revenue generation or marketing strategies as their main concern is the maintenance and operation of the airport and its services. However, gener- ating additional revenue through different or innovative strategies can aid airports in supporting those functions. The typical revenue generation strategies employed by general aviation airports surround fuel sales and flowage and often the leasing of land or facilities. Many general aviation airports derive revenue from their fuel services; these services include fuel flowage fee, fuel taxes, and often fuel sales. Some airports rely on an FBO to operate the fuel facility, but revenue still flows toward the airport through the above-mentioned fees. How- ever, relying on fuel revenue can be dangerous because of price volatility; this factor can affect a huge range of airport and airline operations and can cause a dip in fuel sales and therefore fuel flowage. Another major source of revenue for general aviation airports is derived from land and hangar leases; land leases are considered the most common in aviation and are often leased for the purpose of building or renovating facilities (28). Leasing land to a private entity or developer provides the airport with a steady stream of rental revenue and potential added investment because of development on the land. These types of arrangements delve into the realm of real estate management and development, which are a key area for PPP deals. To execute a successful lease, an airport must understand the requirements for length of lease, allow for revenue streams to the private entity, and ensure that any new facilities built will revert to the airport. Innovative approaches have allowed private developers to maintain a stake in any property that they developed, such as at Moore County Airport, so as to incentivize the developer to maintain the facilities throughout the lease term (28). Overall, leases provide a stable revenue stream for many airports, and general aviation airports often require such leases to maintain FBOs, provide additional revenue to support operations and maintenance, and develop new facilities on airport land. Airport Management Contracts While not new, contracting out the management of the airport to a private third party has been of growing interest to many local governments. More specifically, these arrangements call for the use of a third-party company to manage a local governmentâs airport facilities while maintaining ownership, setting overall policy, and retaining control, risk, and financial obliga- tions associated with capital investments. These companies typically provide a range of services that include airport management, facility management, facility development, and airline sup- port, depending on the size, scope, and needs of the airport. Consequently, on the privatization spectrum, these contracts fall between service contracts and full privatization. Management contracts can be helpful to both small and large general aviation airports. Smaller airports often struggle with financial self-sufficiency and can benefit from the opera- tional efficiencies that professional airport management provides, but are not available within the local municipality. Larger airports can benefit from those same efficiencies, but also from a
18 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships range of expertise that may be needed at a large facility, particularly regarding real estate and land development. Typically, these services are provided for a set period and a fixed fee. However, the fees may be tied to performance incentives for increasing activity and/or revenue at the air- port. The length of the contract ranges, but typically is approximately 5 years with the potential to extend the contract for additional time periods. In some instances, contract arrangements are for longer periods, with some as high as 40 years and even 99 years, although FAA typically discourages leases in excess of 40 years. According to the FAAâs Airport Compliance Manual, âleases that exceed 50 years may be considered a disposal of the property in that the term of the lease will likely exceed the useful life of the structures erected on the property.â The compliance manual further notes that FAA offices âshould not consent to proposed lease terms that exceed 50 yearsâ (34). The longer-term contracts are likely related to the specific needs and goals of a particular airport property and the related challenges and risks associated with investment returns. While airports can and do pursue public-private partnerships outside of an airport manage- ment contract, such arrangements are a common way for such partnerships to be established due to the accessibility of a range of services and expertise. Goals, Objectives, and Benefits Airports may choose to enter into a contract for the management of their airport for a variety of reasons to achieve any number of goals. As concisely outlined in ACRP Report 66: Consider- ing and Evaluating Airport Privatization, management contracts are a vehicle for airport owners wishing to pursue the following goals and objectives (2): â¢ Maintain community control of airport operation and development decisions, â¢ Secure operating efficiencies, â¢ Introduce innovative revenue enhancements, â¢ Eliminate airport subsidies, â¢ Convert underutilized facility into economic catalyst, â¢ Depoliticize airport decisions, â¢ Address identified deficiencies in airport management, â¢ Advance ideological interest in private-sector participation, and â¢ Address improper conduct (e.g., corruption). The benefits that management contracts can provide are also numerous. These include (2) â¢ Reduction in operating expenses because of lower employment and overhead costs, â¢ Local procurement regulations not being applicable to contractor, â¢ Streamlining of certain processes, â¢ Access to private-sector expertise for specialized functions and development, â¢ Potential for new revenue and economic development initiative, â¢ Potential to impose contractual obligation for contractor to achieve performance targets, and â¢ An opportunity for staff to gain management expertise. Advantages and Disadvantages Ernico et al. explain the advantages and disadvantages of an airport management contract. They identify seven main advantages and disadvantages (2): Advantages â¢ Provides opportunity for airport to be managed and operated as a business; â¢ Streamlines day-to-day operational decision making; â¢ Affords potentially lower operating expenses from private-sector employment practices and efficiency initiatives;
Private Investment at General Aviation Airports: A Review of the Literature 19 â¢ Brings increased emphasis on revenue enhancement, and commercial and economic development; â¢ Reduces ongoing municipal employee compensation, including postretirement expenses (pension, medical, etc.); â¢ Provides greater incentives for management and employees to perform better; and â¢ Provides more commercial and operational freedom for contractor. Disadvantages â¢ Involves considerable time and effort for the bidding process; â¢ Could involve buyouts and compensation for existing public workers; â¢ Could involve organizational disruption (i.e., reassignment or termination of existing employees); â¢ Difficult to measure efficiencies accurately for justifying compensation; â¢ Can discriminate against government departments competing in managed competition efforts, as regulations generally prevent them from partnering with private firms or guaranteeing performance; â¢ Requires careful tracking of contract compliance, which can be a time-consuming and sub- stantial undertaking for the airport owner; and â¢ Becomes increasingly difficult to attain further improvements and realize the full value of the management fee once initial efficiencies are attained. As noted, airport management contracts are arrangements that allow airport owners to con- tract out the management and operation of part or all of a general aviation airport operation for a set period. These contracts are a form of partnership with a private-sector entity. In return, management companies receive a fee for their service for a predetermined period stipulated in the management contract. Such arrangements may allow for development opportunities that may provide additional revenue streams. As with any type of contractual arrangement, however, the advantages and disadvantages of airport management contracts must be carefully considered. Regulatory Considerations and Compliance In considering management contracts, airport sponsors need to be cognizant of the regulatory considerations. FAAâs guidance on this matter can be found in both the airport sponsor grant assurances and FAAâs Airport Compliance Manual. FAA Grant Assurance 5 (f) states the following: If an arrangement is made for management and operation of the airport by any agency or person other than the sponsor or an employee of the sponsor, the sponsor will reserve sufficient rights and authority to insure that the airport will be operated and maintained in accordance with Title 49, United States Code, the regulations and the terms, conditions and assurances in this grant agreement and shall insure that such arrangement also requires compliance therewith. (32) FAAâs Airport Compliance Manual also addresses airport management contracts in Chapter 6: Rights and Powers and Good Title. Section 6.13 Airport Management Agreements specifically addresses airport management agreements: 6.13. Airport Management Agreements a. Responsibility Under Airport Management and Operations Agreements. Although the sponsor may delegate or contract with an agent of its choice for maintenance or supervision of opera- tions, such arrangements do not relieve the sponsor of its federal obligations. Such arrange- ments also have a high potential for a conflict of interest where the tenant provides aeronautical services itself and at the same time can exercise some control over access and competition at the airport. Consequently, any agreement conferring such responsibilities on a tenant must contain adequate safeguards to preserve the sponsorâs control over the actions of its agent. In
20 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships addition, to avoid conflicts with a sponsorâs federal obligations, the FAA strongly encourages a management contract to be a separate agreement from leases or airfield use agreements held by the agent of the sponsor. This makes the respective responsibilities for each activity clear, and also enables the sponsor to deal with a possible default in one activity (i.e., management agreement) without terminating a second, separate activity not subject to a default, such as an unrelated land lease. b. Total Delegation of Airport Administration. In certain cases, a sponsor may consider contract- ing with a private company for the general administration of a publicly owned airport. Whether this is done by lease, concession agreement, or management contract, it has the effect of placing a private entity in a position of substantial control over airport decisions that may affect the pub- lic sponsorâs grant compliance. This kind of agreement should include provisions adequately protecting and preserving the ownerâs rights and powers to assure grant compliance. c. Lease of Entire Airport. If the sponsor grants a lease for the entire airport, the lease will gener- ally include the right to sublease airport property to third-party tenants for aeronautical services and development. In such cases, the lessee may have the right to conduct a commercial business on the airport directly and also to control the granting of such commercial rights to others. This situation creates a high potential for violating Grant Assurance 23, Exclusive Rights, unless mitigated, and the lease should provide for the sponsor to retain sufficient rights to prevent and reverse the granting of any exclusive rights on the airport. d. Lease Terms That Protect the Sponsorâs Rights and Powers. In cases where a management con- tract or general lease provides a private operator with the ability to make decisions on access by other aeronautical tenants, the inclusion of contract provisions similar to the following can assure that the public sponsor retains the ability to prevent a violation of the grant assurances: (1). The lessee (second party, manager, etc.) agrees to operate the airport in accordance with the obligations of the lessor (public sponsor) to the federal government under applicable grant agreements or deeds. The lessee agrees to operate the airport for the use and benefit of the public; to make available all airport facilities and services to the public on fair and reasonable terms and without unjust discrimination; to provide space on the airport, to the extent available; and to grant rights and privileges for use of aeronautical facilities of the airport to all qualified persons and companies desiring to conduct aeronautical operations on the airport. (2). The lessee/management firm specifically understands and agrees that nothing contained in the lease shall be construed as granting or authorizing the granting of an exclusive right within the meaning of 49 U.S.C. Â§ 40103(e) and Â§ 47107(a)(4) (3). The lease/management agreement is subordinate to the sponsorâs obligations to the federal government under existing and future agreements for federal aid for the development and maintenance of the airport. (34) Airport sponsors should also comply with any local or state regulations that may impact management contracts. Familiarity and understanding of the legal, regulatory, and business environment are paramount. This area includes the FAA Airport Compliance Manual, all grant assurances, local and state laws, environmental regulations, liability and insurance issues, and safety regulations. ACRP Research Report 176: Generating Revenue from Commercial Develop- ment on or Adjacent to Airports is a resource that addresses these concerns in more detail. Airport Management Companies The descriptions of the four aviation management companies provided below are included to illustrate the range of services that can be provided to airports as well as the various types of airports that utilize such services. Airports across the country have participated in such arrangements to add aviation expertise to their airport, facilitate development, and increase activity and revenue at their airport. The four companies have been identified and highlighted in other publications as leaders among airport management companies. Their inclusion does not constitute an endorsement, but, rather, is used to illustrate the existence of such com- panies and the range of services that they provide, as well as to whom and where they provide them. Some examples of these companies are provided in the subsections that follow.
Private Investment at General Aviation Airports: A Review of the Literature 21 AFCO/AvPORTS Management, LLC Based in New Jersey, AvPORTS is one of the largest airport management companies in the country, with 90 years of experience (35). The company manages a diverse group of 16 airports, including general aviation airports, small and medium hub airports, and military bases. These include â¢ Newark Liberty International Airport (EWR), â¢ Albany International Airport (ALB), â¢ Gary/Chicago International Airport (GYY), â¢ Moffett Federal Field (NUQ), â¢ Republic Airport (FRG), â¢ Stewart International Airport (SWF), â¢ Teterboro Airport (TEB), â¢ TweedâNew Haven Regional Airport (HVN), and â¢ Westchester County Airport (HPN). The company uses a collaborative process to work closely with individual airports to identify priorities and create value for the airport and utilizes its experience and expertise to improve operations and management. This process is accomplished by (35) â¢ Improving cost management and operational efficiencies; â¢ Performing more services and functions in-house; â¢ Leveraging economies of scale with aviation suppliers; â¢ Developing air service and new/expanded airport demand; â¢ Implementing green practices and energy efficiencies; â¢ Investing in airport infrastructure that improves efficiencies and/or generates new/expanded revenues; â¢ Engaging the local community to form expanded partnerships; â¢ Increasing customer satisfaction with improved service, accountability, and transparency; â¢ Professionalization of airport management; and â¢ Developing the available real estate on and around the airport. While these functions provide a blueprint from which AvPORTS operates, they are included here because they also provide a framework for other airports to consider. AvPORTS provides professional expertise in a variety of areas beyond that of the typical general aviation airport manager. These areas include all aspects of airport management, airline support, financial engineering, franchising/concessions, facility management, and facility development. American Airports Corporation Founded in 1997 and based in Santa Monica, California, American Airports Corporation (AAC) is one of the largest general aviation airport management companies in the country. AAC develops and owns aviation facilities and FBO facilities. AAC partners with airports to bring efficiency and cost-effectiveness to airport operations. AAC provides a comprehensive program that focuses on underutilized assets that offer an opportunity for improved efficiencies, increased returns, and expanded economic opportunities. The company also provides financing and development to joint venture partners (36). AAC manages five airports and one FBO. The airports include all airports owned by Los Angeles County. The airports managed by AAC include â¢ Brackett Field Airport, California (POC); â¢ Compton/Woodley Airport, California (CPM);
22 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships â¢ San Gabriel Valley Airport, California (EMT); â¢ General William J. Fox Airfield, California (WJF); â¢ Whiteman Airport, California (WHP); and â¢ Clinton National Airport, Little Rock, Arkansas (LIT). AACâs primary focus is threefold (36): 1. Enter into a long-term lease or management contract for an existing airport, 2. Acquire individual land parcels and buildings at airports, and 3. Acquire existing single and multilocation FBO facilities. To accomplish this, AAC can either (1) enter into a long-term lease agreement, (2) enter into an operating agreement, or (3) purchase the facility outright. AAC has provided profiles or criteria for both airports and individual properties on which they focus. The airport profile consists of the following characteristics: â¢ Reliever and general aviation airports in metropolitan areas with a population of 50,000; â¢ Areas with demonstrated growth in population, business, and/or aviation needs; â¢ Resort areas with commuter or corporate aviation services; â¢ Airport sizes of 100 acres; and â¢ Runway lengths of 5,000 feet or more or the ability to acquire additional land to extend the runway. The characteristics of individual properties and FBOs that AAC is looking for include â¢ Long-term land leases for all types of aviation properties; â¢ Terminal and FBO buildings; â¢ Executive and corporate T-hangars; â¢ Maintenance and business-related hangars; â¢ Cargo and other aviation support facilities; and â¢ Any development opportunities related to the above. AAC makes clear that its main goal is to enhance the value of the airport through â¢ Rehabilitation/upgrades of existing structures, â¢ Development of vacant or underutilized land, â¢ Promotion of aviation and aviation services, and â¢ Actively seeking acquisition opportunities. Texas Aviation Partners Texas Aviation Partners was founded in 2007 and is based in San Marcos, Texas, south of Austin (37). Texas Aviation Partners works with airports to provide personalized and efficient services through its team of proven, experienced leaders. The company currently manages three airports and an FBO facility: â¢ San Marcos Regional Airport (HYI), â¢ Pearland Regional Airport (LVJ), â¢ North Texas Regional AirportâPerrin Field (GYI), and â¢ GTU Jet, Georgetown, Texas (GTU). Texas Aviation Partners works with its partner airports and facilities to promote self-sufficiency through planning, business recruitment, privatization, use of grant funds and increased efficien- cies using airport management practices. In the companyâs work with the airports that it man- ages, Texas Aviation Partners has increased revenue, coordinated events at the airport, recruited
Private Investment at General Aviation Airports: A Review of the Literature 23 businesses that subsequently made investments in the airport, secured instrument approaches, and worked with governmental agencies to provide grant funds to the airports. TBI Airport Management, Inc. (Airports Worldwide) Airports Worldwide, a privately held, multinational company with investments and opera- tions in airports in the Americas and Europe, was founded in 2008 as ADC & HAS Airports Worldwide. Rebranded in 2014 to Airports Worldwide, the company has its origins in a partner- ship between Airport Development Corporation (ADC), a pioneer in airport privatization, and HAS Development Corporation (HASDC), the private development affiliate of the Houston Airport System (HAS). In 2002 they created a joint venture company, ADC & HAS Manage- ment, to operate the Mariscal Sucre International Airport and build and operate the New Quito International Airport (renamed Mariscal Sucre) in Quito, Ecuador. In October 2013, Airports Worldwide acquired global airport assets in Northern Ireland, Sweden, and the United States from Abertis Airportsâ TBI Limited (38). Airports Worldwideâs staff has 25 years of experience in global transactions that include PPPs and active asset management at several significant airports in Europe, Australia, South America, and the Caribbean. Airports Worldwide has a large and complex profile in airport operations with expertise in operational and commercial turnarounds, development, and finance/investment. The company currently manages airport investments of $400 million at 10 airports that serve 35 million passengers and are served by 35 airlines that fly 290 routes to 40 countries on three continents. These airports also have staffs of more than 700, terminal space in excess of 150,000 square meters, and capital projects of $300 million underway. The company has either management advisory agreements or operations and management agreements at all its airports. Airports Worldwide currently has equity participation in the following airports: â¢ Belfast International Airport (BFS), Belfast, Northern Ireland; â¢ Daniel Oduber QuirÃ³s International Airport (LIR), Liberia, Costa Rica; â¢ Juan SantamarÃa International Airport (SJO), San JosÃ©, Costa Rica; â¢ Orlando Sanford International Airport (SFB), Orlando, Florida; and â¢ Stockholm Skavsta Airport (NYO), Stockholm, Sweden. Additionally, the company owns TBI Airport Management (TBI AM), which has operating and management contracts with the following U.S. airports: â¢ Atlantic City International Airport (ACY), New Jersey; â¢ Burbank Bob Hope Airport (BUR), California; â¢ HartsfieldâJackson Atlanta International Airport (ATL), Georgia; â¢ Middle Georgia Airport (MCN), Georgia; â¢ Macon Downtown Airport (MAC), Georgia; and â¢ RaleighâDurham International Airport (RDU), North Carolina. The two airports in Georgia are both general aviation airports according to the FAA Asset Study. Middle Georgia Airport is classified as a regional airport while Macon Downtown Air- port is classified as a local airport. Middle Georgia Airport has had some commercial passenger service in recent years. The company provides management services to operate, administer, maintain, and supervise on behalf of the City of Macon. The company, knowing that airports have multiple functional areas with numerous sources of revenue and costs from a diversity of stakeholders, works to create value through active asset
24 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships management. To accomplish this, Airports Worldwide implements an active asset management approach to its investments. This includes â¢ Revenue enhancement with emphasis on air service development and marketing and com- mercial income development; â¢ Cost optimization, operational expense management, and efficiency capture; â¢ Capital structure optimization; â¢ Capital program management; â¢ Project and asset financing; and â¢ Risk management. Understanding that airports tend to be more complex than other classes of infrastructure, the company brings specific areas of expertise focusing on an airportâs value drivers to create value. Because of its global and multifaceted experience, Airports Worldwide can tailor its solutions to the development and operational needs of each individual airport. Their areas of expertise include â¢ Ability to deliver across all major airport functions, â¢ Strong airline relationships, â¢ Emphasis on commercial development, â¢ Optimization of operations, â¢ Focus on customer service, and â¢ Promotion of a culture of safety and security. Through its leadership roles in the industry, Airports Worldwideâs staff has developed signifi- cant relationships with airlines, commercial, facility equipment and service providers, regula- tory agencies, governments, and advisers. These relationships enhance the companyâs ability to understand an airportâs needs, develop an appropriate business plan, and execute against it (38). Summary Airport management companies present a range of valuable services that offer the potential to create and add value to airport properties and facilities. From basic airport management opera- tions to more complex development projects, these firms offer experience that can be leveraged through their business models to increase performance of an airport in different ways. This opportunity is particularly compelling for general aviation airports as all but the largest, busiest facilities are not often in a position to have such a range of expertise on staff at the airport or at the local government that owns the facility. The cross-trained range of expertise beyond what municipalities have available as well as the ability to address specific and unique airport needs are typical of airport management compa- nies. These companies are typically compensated through fee-for-service arrangements with incentives for performance including attracting new businesses, increasing existing businesses, and implementing cost-saving measures. Of particular note regarding attracting investment at general aviation airports is the expertise in real estate development and private-sector finance in conjunction with airport operations experience; this combination is rare but needed for successful PPPs.