Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
25 The purpose of this chapter is to provide a brief summary of industry practices associated with private investment in general aviation airports. On the basis of a review of the literature, a few findings have emerged. First, increased policy efforts are clearly being undertaken to help encourage more airports, specifically commercial service, to consider exploring new partner- ships with private-sector partners. In fact, a few studies have attempted to study the outcomes of airport privatization, with most finding at least project construction schedule benefits when a private-sector entity takes on a greater role in integrating design and construction practices. However, relatively fewer studies have examined whether the experiences seen in commercial service airports can be applied to general aviation airports, and if so, whether involving the pri- vate sector results in any new investment. Methodology For this study, the research team developed and administered two surveys. First, researchers administered a screening survey and a detailed survey to gain more information about perspec- tives from general aviation airport officials. From there, researchers selected five case examples from key airport officials and conducted in-depth interviews with those officials. The first survey, a preliminary screening survey, aimed to determine whether airport officials had completed a PPP within the past 5 years and was distributed via e-mail to the general avia- tion community. In addition, this screening survey gathered contact information and other data helpful to gain additional context on the experience that airport had with PPPs. When the contact list was being assembled, all 50 state aviation directors and all FAA Air- port District Office (ADO) managers were contacted. Researchers reached out to the broader general aviation community, including airport managers, and other professionals, through a variety of avenues. These included relevant committees of the American Association of Air- port Executives, general aviation industry groups, and state aviation associations. The research team also developed a list of state aviation/airport associations along with contacts for each one. In some cases, the contacts were the elected board members who were also airport managers. In other cases, the contacts included a staff person. Three airport management/development companies were also included in the contact list. A list of Base Realignment and Closure (BRAC) airports was developed from information from Appendix J of the FAA Airport Compliance Manual (34). All BRAC facilities that were then operating as general aviation or nonprimary commercial service airports were contacted. In addition, several officials from the State of Alaska were contacted as the state is home to nearly half of the nonprimary commercial service airports. C H A P T E R 3 Industry Practices for Attracting Investment at General Aviation Airports: Survey Results
26 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships Several states and associations responded by further distributing the screening survey link to airports in their states and their member airports, respectively. This distribution provided a broader reach than the initial e-mail distribution. As shown in Table 5, the screening survey was sent to 664 airport managers and aviation pro- fessionals with the intent of reaching out to a broad and diverse general aviation community to seek input on airports that have been involved in projects with private partners. The research team received input from several state directors, FAA ADO managers, and individual airport managers and professionals. Some respondents sent names of airports for follow-up while others completed the screening survey, which was included in the initial con- tact email. Thirty-nine airports participated in the screening survey with 26 completing it. The research team also reached out to and conducted interviews on the topic with industry experts in privatization, airport law, and airport management/development. Following a review of the screening survey results, researchers sent the more detailed pri- mary survey to those airports completing the screening survey that (1) indicated that they had experienced a PPP within the past 5 years and (2) indicated that they would agree to participate in the study. Twenty airports were sent the primary, more detailed survey. As with the screening survey, this second survey was provided to them online with an option to receive one in the mail. Of the 20 airports sent the primary survey, 12 completed it to some extent. Eight completed it in its entirety. The case example airports were selected from the group of respondents with the intention of including representation from the various asset categories of airports. These results are shown in Table 6. The screening survey was the initial effort to cast a wide net. The number of people receiving the screening survey link is not discernable because original recipients for- warded the link to colleagues and airports; the survey was designed for that purpose. As discussed, the screening survey was developed with web-based software. Once the survey was developed, it was distributed via e-mail to addresses provided by key aviation associations, panel members, and other contacts within the U.S. airport industry. Completed responses from airport executives from around the United States and from different FAA airport types are shown in Figure 2 and 3, respectively. e-mail Contact Group Number of e-mails Sent State aviation directors 50 FAA ADO managers 24 Industry Groups AAAE chapter 20 AAAE General Aviation Committee 169 AAAE Finance Committee 102 AAAE Corporate Committee 54 AOPA 7 NATA 2 NBAA 6 State airport groups 83 BRAC airports 18 Nonprimary commercial service 66 Alaska (nonprimary commercial service) 60 Airport management/development companies 3 Total 664 Table 5. Screening survey e-mail contacts list.
Industry Practices for Attracting Investment at General Aviation Airports 27 Regarding the level of experience of general aviation airport managers with PPPs, results from the screening survey show at least some experience with administering these projects. For example, researchers asked the following question to study participants: âWithin the past 5 years, has your airport or airport sponsor entered into a PPP agreement with a private- or public-sector entity?â Approximately half, or 56 percent, of respondents answered âyes,â while 30 percent answered âno,â with 13 percent of respondents answering âunsure.â Regarding the motivation for pursuing a PPP, airport officials provided a number of rea- sons, with a fairly even distribution of both management and operations motivations. Of the respondents who replied âyesâ to experience with PPPs, researchers asked whether the purpose of that PPP was the construction of facilities (e.g., terminal buildings, FBO buildings, hotels, commercial/office buildings, etc.). Other common responses included the operation of an FBO, service contracts, the management and/or operation of one or more specific airport-owned facilities, and the management of the airport itself. Parking services received the lowest number of responses. A summary of the response to why general aviation airports pursued a PPPâ specifically responses to the question âWhat was the subject/purpose of the PPP? (Check all that apply.)ââis shown in Figure 4. Survey Type Surveys Sent Surveys Completed Partial Completed Screening 664a 39 26 Primary 19 4 8 aThis number represents the number of contacts sent as outlined above. The actual number of those receiving the screening survey is larger because others forwarded the screening survey link. Table 6. Survey distribution and completion results. Figure 2. Map of completed screening survey responses.
28 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships Finally, regarding the drivers for why airport officials decided to pursue a public-private partner ship, responses varied significantly. The final question of the screening survey asked the following: âWhat was important in terms of driving your decision for pursuing a PPP or arrange- ment at your airport? (Check all that apply.)â The results to this question are presented in Table 7. A plurality of responses indicated âaccess to private capital for developmentâ and the ability to âsecure long-term efficiencies in operation and maintenance and enhance customer service.â The screening survey results from Figure 4 and Table 7 suggest that, broadly, while PPPs were sought for a variety of reasons, they were mostly driven by management and operational needs. The section that follows provides additional information on reasons why general aviation airports decided to pursue a PPP. Consolidated Survey Results This synthesis report relied, in part, on the results of a two-step survey process that was designed to help identify general aviation airports that have participated in PPPs in the past 5 years. The screening survey identified airports in which a more detailed survey was sent. While the number of airports that ultimately completed the primary survey was small (12), the results undoubtedly provide valuable information as to the purpose, benefits, and value of engaging in PPPs. The following insights were provided by the responses to the survey. 6.5% Unsure 25.8% Local 25.8% National 41.9% Regional Figure 3. Screening survey responses by FAA airport category.
Industry Practices for Attracting Investment at General Aviation Airports 29 Response Number Access private capital for development 9 Secure long-term efficiencies in operation and maintenance and enhance customer service 9 Stimulate airport activity, including air service (e.g., charter and/or scheduled, if applicable) 7 Increase airport revenue/funding 7 Introduce more innovation and creativity 5 Shift the risk of debt, capital development, and/or operations to private sector 5 Accelerate project delivery and reduce construction costs 3 Extract up-front or ongoing payment for the airport asset (i.e., asset monetization) 2 Reduce reliance on general tax levies/traditional sources of funding 2 Increase airport staff capabilities/manpower 2 De-politicize airport decision-making 1 Other 2 Table 7. PPP motivations screening survey responses. management of airport parking services operation of the FBO other, please specify:management and/or operation of one or more specific airport-owned facilities (e.g., terminal building, FBO services/hangars, hotels, industrial facilities, restaurants, commercial/office buildings, etc.) service contracts (i.e., concessions, maintenance, fuel, custodial, ARFF, security, etc.) construction of facilities (e.g., terminal buildings, FBO buildings, hangars, hotel, industrial facilities, restaurants, commercial/ office buildings, etc.) 60 40 20 0 Pe rc en t Figure 4. Subject/purpose of PPP agreement from screening survey responses. The primary, more detailed survey was completed by primarily airport managers from an even distribution of national, regional, and local airports. For the respondents, the pri- mary purpose of the public-private partnership was for the management of the airport, the construction of facilities or the management or operation of a facility. The project delivery methods used were primarily characterized as management contract, build-operate-maintain, or build-to-suit. The type of contracting process used was most typically a one-step process;
30 Attracting Investment at General Aviation Airports Through PublicâPrivate Partnerships competitors submitted all information at one time, and a bid was selected. The procurement method most utilized was the best value approach, followed by qualifications-based. The FAA grant assurances were an important consideration and were frequently incorporated into lease agreements. The respondents provided several reasons for pursuing a PPP. The most prominent (more than 50 percent of the respondents) reasons given were â¢ Access to private capital for development; â¢ Securing long-term efficiencies in operation and maintenance; â¢ Improvement of operational efficiencies; â¢ Stimulated airport activity; â¢ Introduction of more innovation and creativity; â¢ Enhanced customer service; â¢ Reduced reliance on general tax levies and other traditional sources of airport funding; and â¢ Better use of limited airport resources. Other reasons that are worth mentioning but indicated by slightly less than 50 percent of the respondents include â¢ Shifting of the risk of debt, capital development and/or operations to the private sector and â¢ Increased airport revenue and funding. The most common methods used to attract or identify potential investors were the request for qualifications and the request for proposals. Incentives offered to the private partners included the following: â¢ Long-term lease, â¢ Nontraditional grant funds (other than FAA/aviation department), â¢ Contractor use of hangar revenue for airport maintenance, and â¢ Business model changed from a fuel-centric business to a real estateâcentric model. The airport respondents also structured the partnerships in different ways. The following approaches were utilized: â¢ Paying down the total cost of the project (sharing the financial risk); â¢ Using typical real estate investment strategies; â¢ Utilizing a state grant to offset total costs of construction for the tenant, with resulting increased revenues for the airport and lower rent for the tenant; and â¢ Meeting in the middle and providing incentives based on the current supply/demand situation. The airports also provided insight into the benefits of the partnership. Those most men- tioned were â¢ Innovative infrastructure solutions and â¢ Transfer of project-related risk, increased quality, and increased efficiencies. The limitations most noted by the airports include â¢ Greater possibility of unforeseen challenges, â¢ Limited government flexibility, and â¢ Perception of private-sector takeover by the public. The survey sought to address several questions pertaining to various types of risk including those associated with financing, design and construction, operations and maintenance, and rev- enue. Because of the small number of respondents and varying types of partnerships, there was not enough information provided to include additional meaningful discussion on risk. While
Industry Practices for Attracting Investment at General Aviation Airports 31 various risks were noted in the responses, these risks were dependent on the structure of the particular partnerships entered into, which varied across a small number of respondents. Airports also indicated to what extent certain factors played in the success of the partner- ship. Those factors determined to be very important or somewhat important to more than 50 percent of the respondents include (in order of importance) â¢ Airport rules, regulations, and minimum standards; â¢ Local design and building requirements; â¢ Federal design and building requirements; and â¢ FAA grant assurances. Survey participants were also asked to provide the three most important factors or elements of their particular project that contributed its success and those that impeded or threatened its success. These were open-ended questions and no choices were given from which to select. The unedited responses for each of the questions are as follows: Factors/elements of success â¢ Transparency â¢ Financial imperative â¢ FAA willingness â¢ Funding â¢ Communication â¢ Having goals â¢ Financing â¢ Full-service development â¢ Product quality â¢ Selection of engineering consultant Factors/elements that impeded or threatened success â¢ Grant match loan â¢ City council approval â¢ Tenant negotiations â¢ Historical losses â¢ Old leases â¢ Old school government mindset â¢ Working in silos â¢ Private entity proceeding without approvals â¢ Last minute requests by private entity â¢ Gaining trust â¢ Weather Using the responses from the primary survey, the research team developed more detailed case examples of PPPs at selected general aviation airports. This task was done to provide a more detailed understanding of projects that were initiated or completed and engaged a private partner in the development or operation. Five case examples are presented in the following chapter.