12th Annual U.S. Central EuropeEurasia Airport Issues Conference

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12th Annual U.S./ Central Europe/Eurasia Airport
Issues Conference

• Maximizing Non-Aeronautical Revenue Development
  at Airports
• Bobbi Thompson
• Special Projects Manager
• Airport Business Solutions International

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The Importance of Non-Aeronautical Revenues

• Reduces costs to airlines
• Diversification of revenues
• Provides a more stable revenue source (does not
  usually vary with passenger volumes)
• Generates revenue from properties which may be
  needed for aeronautical purposes in the future

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Non-Aeronautical Opportunities

• Public/Private Partnerships
• Non-essential property development
• Internal service providers

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Public/Private Partnerships

• Public/private partnerships can provide the
  airport with revenue opportunities not generally
  available due to various influences.
• Political
• Financial
• Practical (Not your core business!)

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Partnership Agreements

• Public/Private Partnership for development and
  operation of specific airport sectors
• Airport provides land and/or facilities
• Private entity usually provides
• Capital investment
• Development expertise
• Marketing
• Risks and rewards are generally shared equally,
  but can be negotiated depending upon each partys
  contribution to the project

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Important Issues

• Is this a long-term solution to a short-term
  problem?
• What can a third party do that cannot be done
  internally?

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Successful Partnership

• Fixed Base Operations (FBOs) at San Francisco, CA
  and Charlotte, NC
• Airport owns the land and facilities
• Chose operator through an RFP process
• Shared revenue structure
• FBO gains a high revenue, high exposure location
  with minimal capital outlay
• Airport maintains control over facilities, as
  well as the FBOs operational environment
• Revenues to the airport are significantly greater
  than could be generated under a traditional lease
  arrangement

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Successful Partnership

• Natrona County International Airport Casper,
  Wyoming
• Air Service Development effort with Big Sky
  Airlines after discontinuation of service by
  United Airlines after their 2002 bankruptcy
• The Airport was not interested in funding revenue
  guarantees
• Big Sky Airlines did not have the aircraft to
  service the market
• The County bought an aircraft and leased it to
  Big Sky for 1.00 per year, which would continue
  as long as Big Sky served the market
• Big Sky later discontinued service, but was
  obligated to continue to lease the aircraft for
  14,000 per month

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Non-Essential Property Development

• Golf Courses
• Driving Ranges
• Commercial/Retail Developments
• Industrial Parks
• Hotels
• Automobile Dealerships

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Successful Development

• Page Field Airport Fort Myers, Florida
• Small general aviation airport in Southwest
  Florida owned and operated by the Lee County Port
  Authority
• Non-aviation land along a major thoroughfare
  paralleling the Airport, but separated from the
  Airport by a road
• Authority leased the land to a shopping center
  developer for the development of a large
  multi-tenant project including several big box
  retailers, restaurants, and other retail outlets
• Original agreement provided that the Authority
  received a base ground lease payment and a
  percentage of the developers profits above a
  certain threshold, plus 25 of the equity
  proceeds of any sale or refinancing
• Authority gets ownership of the development at
  lease termination
• Agreement was restructured in recent years to
  provide a more steady income stream to the
  Authority

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Airport as Service Provider

• Revenue generation opportunity
• Control over service levels
• Air carrier service marketing
• Airline cost control

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Airport as Service Provider

• Airport as the FBO
• DuPage Airport West Chicago, Illinois
• Sacramento International Airport Sacramento,
  California
• Airport as the Ground Handler
• Abraham Lincoln Capital Airport Springfield,
  Illinois
• Jacksonville International Airport
  Jacksonville, Florida
• Chattanooga Metropolitan Airport Chattanooga,
  Tennessee (Also serving as ticket agents)

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Keys to Success

• Be Creative!
• Objectively analyze the market
• Remain flexible (ability to adapt to market
  changes)
• If you choose a partnership arrangement
• Develop the right agreement!
• Enforce the agreement!
• Provide clear and concise expectations and
  default provisions
• Negotiate from a point of strength, not weakness
  (Remember, you are likely providing the most
  valuable assets in the deal . . . property and
  people!)

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For More Information

• Airport Business Solutions International
• 10014 N. Dale Mabry Highway, Suite 101
• Tampa, Florida 33618-4426 USA
• 1-813-269-2525
• bthompson_at_airportbusiness.net or
  mhodges_at_airportbusiness.net
• http//www.airportbusiness.net