Preparing Your Airport for Electric Aircraft and Hydrogen Technologies (2022)

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132 Financial Planning Full implementation of any project must include an extensive look into a project’s financial aspects required to develop, operate, and maintain the associated infrastructure and labor. Airports should develop or obtain a feasible or realistically attainable financial plan to help implement projects such as electric aircraft. A financial plan comprehensively evaluates an airport’s current financial structure, future financial situations, and funding sources to achieve the growth of the airport. The level of detail and complexity of a financial plan vary from one airport to another and reflect signi- ficant factors such as the size of the airport. The three main factors of financial planning (per the FAA AC 150/5070-6B on Airport Planning) are funding sources, financial feasibility, and revenue enhancement. 15.1 Funding Sources Airport Improvement Program A primary source of federal grant funding for airport infrastructure planning and devel- opment projects is the FAA’s AIP, funding for which is allocated annually from the AATF. The U.S. national airport system includes about 3,300 airports that are eligible for AIP funding for projects intended to improve airport safety and infrastructure. AIP grant assurances ensure that airport revenue can only be used to support the capital or operating costs of the airport. AIP recipient airport sponsors typically contribute a matching percentage of project costs. AIP grants prioritize safety improvements and thus often represent airfield projects. Currently, electric aircraft projects (including charging stations) are not eligible for funding through the AIP. Passenger Facility Charges PFCs are local user fees collected by commercial airports regulated by public agencies. They can be used for infrastructure repairs and improvements at airports, typically supporting airside and terminal projects and, under special conditions, ground transportation projects. PFCs have remained capped at $4.50 per flight segment for the past 20 years. PFCs are not likely to be affected by the integration of electric aviation into airport infrastructure and operations. Voluntary Airport Low Emissions Program In 2004, the VALE Program was created to help airports comply with state air quality require- ments under the CAA. It is specific to commercial service airports that are in areas where air C H A P T E R   1 5

Financial Planning 133   quality is compromised according to EPA standards, and about 125 U.S. airports are eligible for this program. The VALE Program funds projects that reduce on-airport emissions but that have historically focused on gate electrification and eGSE. Between 2015 and 2018, the program funded projects for electric shuttle buses, GPUs, and preconditioned air units to support gate electrification, charging stations and ports for eGSE, and solar panels to support airport energy flows. The Vision-100 measure requires the EPA to assign airport emission reduction credits for VALE Program projects. Making electric aircraft charging infrastructure projects eligible for VALE Program funding would require a change of policy. It is not clear if there is a case for the VALE Program under current rules, since the funding would require justifying that these electric chargers would significantly reduce emissions directly attributed to airport activity. Green Revolving Funds Sustainability investments can complicate airport financial planning because they are one- time investments (rather than recurring investments) and can have unknown cost efficiency and revenue enhancement impacts. In addition to capital budgeting, airports can receive funding toward sustainability from grants and subsidies or rebates from utility providers. GRFs have been introduced to create a dedicated funding stream for sustainability improvements. GRFs—which are used by states and universities—monitor cost reductions and savings that result from sustainability implementations and then transfer these savings to a dedicated fund for sustainability projects. This allows projects to become self-funded and facilitates repayment of loans and initial investments in projects. By collecting data on investment in and returns from sustainability measures, GRFs force airports to improve their performance tracking. GRFs are a proven mechanism to coordinate with airlines. Increased data sharing incentivizes airlines and other tenants to collaborate on sustainability initiatives and investments, with the knowledge that they have a recurring, independent funding source that is not volatile to fluctuations in other funding streams. The GRF, as a commitment to sustainability, enhances an airport’s ability to promote a sustain- able culture. GRFs are ideal at airports that can commit resources 6 to 18 months in the future and that require airport stakeholders to be educated on the fund’s mechanics. They work best at airports that use a compensatory rate model, where airports determine the rates and charges issued to airlines and retain the financial risk of operating the airport. This leaves the airport with greater flexibility to designate savings to the GRF, as opposed to the residual rate model, where airlines bear the responsibility of covering the airport’s operating costs. The GRF also needs a sufficient scale to provide a high return upon starting and can be ineffective for airports whose annual utility cost is under $200,000. ATL was the first airport to adopt a GRF, which began in 2016 (ACRP Report 205). Smaller airports that would not be positioned to start a GRF can participate in collective GRFs (such as Virginia’s Airports Revolving Funds) from which they can obtain attractive financing and financial education. Other U.S. Department of Transportation Programs The U.S. DOT is supervising the selection of grant programs or credit assistance to support an efficient and economical national transportation system. Although these programs are not

134 Preparing Your Airport for Electric Aircraft and Hydrogen Technologies specific to aviation and concern the enhancement of regional transportation systems, they could include funding the integration of electric aircraft at this regional infrastructure: • The Better Utilizing Investments to Leverage Development Transportation Discretionary Grant program was created in 2009 as an incentive to enhance environmental problems and reduce the U.S. dependence on energy. Between 2009 and 2017, the program provided $5.1 billion to 421 projects across the United States. • The Infrastructure for Rebuilding America grant program is another discretionary grant program to fund major strategic infrastructure projects, such as highways, ports, bridges, and railroads. For 2021, the U.S. DOT is seeking projects that address climate change and environmental justice. The funding available is up to $889 million this year. • Created in 1998, the Transportation Infrastructure Finance and Innovation Act program provides credit assistance for qualified transportation projects of regional and national significance, such as highway, transit, railroad, intermodal freight, and port access projects. The benefits of this credit are to offer low interest rates, with a flexible amortization of up to a payment period of 35 years. Over $31 billion in loans have been delivered since the program’s creation. • The Congestion Mitigation and Air Quality Improvement program provides funding to states for transportation projects designed to reduce traffic congestion and improve air quality, particularly in areas of the country that do not attain national air quality standards. Over $8.1 billion has been provided since 1991. State Funding Programs In the United States, most states have various programs that are regulated or managed by state agencies to aid in airport capital development in the form of, but not limited to, grant funding, loans, and tax incentives. These funds are usually provided to cover the non-federal parts of FAA-supported projects that are in the state airport or aviation system plan. The management of these funds varies from state to state. For example, the WSDOT, in its electric aircraft feasibility study, says that the state of Washington purposely provides the following three grant programs for regional infrastructure project funding that could affect projects associated with introducing electric aircraft at the state’s airports: • Airport Aid Grants Program supports projects on safety, pavement, maintenance, opera- tions, and planning capabilities. This grant program could cover the installation of electric charging stations, acquiring electronic components, and other related electric aircraft airport planning activities. • Regional Mobility Grants assist with improving the connection between state counties and populated areas to reduce transportation delays. Since the use of electric aircraft would improve the regional connectivity of people and also cargo, electric aircraft operations may qualify under this grant funding. • Green Capital Opportunity Grant Program primarily focuses on capital projects that aim to mitigate or minimize the carbon emissions in Washington state. Most electrification projects, including, but not limited to, electrification of vehicles, electric transmission upgrades, and charging station construction, qualify for this grant funding. Private Sector The private sector usually involves the funding support of third parties for incentivized projects. Electric aircraft projects—which could include some research and development that

Financial Planning 135   covers the introduction, development, and implementation of electric aircraft and its components such as battery pack development—are considered incentivized projects because they support current efforts for a greener environment. WSDOT’s electric aircraft feasibility study points to the Seattle-Tacoma International Airport as becoming one of the first potential airports to provide biofuels to its customers. This project is supported by Boeing and Alaska Airlines, which partnered with the Port of Seattle to help the state in reducing transportation emissions to have a greener community. In addition to the different funding or credit programs, local and state governments can issue a tax-exempt private activity bond (PAB) to attract private investment in transportation infrastructure by offering special financial benefits. In 2020, approximately $13.27 billion in PABs have been issued to several U.S. transportation infrastructure projects, including Maryland’s Purple Line light rail system. Electric aircraft integration could be eligible for these PABs. 15.2 Financial Feasibility Financial feasibility involves identifying and assessing the level to which the potential project wanting to be developed is financially viable, practical, and desirable. According to the FAA AC 150/5070-6B on Airport Planning, the following two actions are involved with an airport financial feasibility study. Review the Airport’s Financial Structure Reviewing the airport’s financial structure involves identifying and establishing the structure and makeup of all the airport’s finances to be able to determine its effect on the airport’s cash flow. Per the FAA AC 150/5070-6B on Airport Planning, the parts of the airport that are known as the revenue-producing areas that form the financial structure include airfield movement areas, aprons, terminals, ground transportation, parking, maintenance facilities, cargo buildings, and other leased areas of the airport. The incorporation of electric aircraft could pave the way for additional revenue-generating areas for the airport over time. Prepare a Capital Improvement Program Funding Plan The capital improvement program funding plan, according to the FAA, “serves as the primary planning tool for identifying and prioritizing critical airport development and associated capital needs for the National Airspace System.” The funding plan should spell out the proposed projects and the phases of the project development. In addition, a corresponding source of funding should be identified for each phase of the project development. The project in this case—which is the development, operation, and maintenance of electric aircraft facilities—would not happen all at once. The market assessment forecast shows less than 2 percent of the total fleet mix going electrical over the short-term horizon with projected small fleet sizes. The takeaway from this assessment is that the full implementation of a higher percentage of the electrical aircraft fleet would be over a long-term horizon; thus, a phasing for an electric aircraft facilities project would be necessary. 15.3 Revenue Enhancement Airports are expected to have a reasonable user cost. To be able to achieve that reasonable cost, their finances and revenues must be constantly improved in order not to face significant losses. Airports are recommended to explore all other options as far as practicable to achieve

136 Preparing Your Airport for Electric Aircraft and Hydrogen Technologies an increase in revenues. Some of these airport revenue-generating sources include concessions, parking fees, fueling operations, airlines’ landing fees, etc. Although the main impacts with the introduction and growth of electric aircraft are expected in the long term beyond 2030, airports—as well as FBOs and fueling service providers—could begin to experience reduced revenue from aircraft fueling operations. The costs that come with placing and installing electric charging equipment at specific locations also could be a potential revenue dip. To counter the potential significant decrease in revenues with regards to fuel operations, FBOs could provide aircraft charging services to airlines and private owners and pass a portion of the revenue to the host airport. The airport could also gain potential fee-charging revenue opportunities for airports that could pay for the chargers. Additionally, cleaner sources of power could reduce costs or provide revenue. For example, due to their clean nature, fuel cells (both hydrogen and natural gas) could be run 24/7 and could produce a strong payback. Natural-gas generators could be built that would help airports meet fast-ramping markets in the evening hours when power prices are highest. This could be a reliable revenue source in certain markets, especially California, currently.