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Airport Operations and

Overview of Industry

 Air
 Air (planes)- Privately owned
 Air (ways)- Federal ownership
 Air (ports)- Local government
Overview of Industry

 Airports and airways provide infrastructure

 Airports are very size diverse/activity is highly
 Each community is unique; therefore, each airport is
 Airport is a machine, not just a place
 Airports can be a capital good and/or a consumer
 US airports are operated in a different manner from
those in the rest of the world.
 Airport Industry is a small one in terms of total

 Organization chart defines relationships, not job

 No two airports are organized in the same manner,
 The work relationships are frequently organized in
these basic groups:
» Operations and Maintenance
» Finance and Administration
» Planning and Engineering
» Marketing and Public Relations

 The organization chart is a snapshot, it

is only accurate at a point in time.
 The organization chart does not show
the informal relationships that exist in all
 The organizational chart may provide an
insight into management's priorities

 Common forms of airport ownership

» City/County
» Airport Authority
» Multipurpose authority
» State
» Federal
 Know the advantages of the authority method of
 Most common method of public airport ownership is
the City/County. However, there is a slow transition
to the authority.
Economic Structure

 The costs of running an airport can be grouped into

two categories:
» Operating Expense (and Maintenance) includes:
– Salaries/Benefits (takes up about half of costs)
– Utilities/supplies (tales up other half)
» Capital Expense
– Depreciation/Interest
 most City/County airports don’t include this area, but
authorities do
– Equipment replacement
 Understand the definition of depreciation and operating expense
& capital expense
Economic Structure

 The total cost of running an airport is

equal to operating expense plus capital
 Question: How much revenue does
an airport need?
Economic Structure

 The sources of airport revenue can be

grouped in two categories
» Operating Revenue includes rents, landing
» Non-operating Revenue includes interest
 Airport revenue base varies significantly
by airport size
Structure of Relationships

 Airport executives manage multiple

relationships, primarily based on
persuasion rather than command
 The contract only summarizes the
 The relationships are most workable
when risk/reward and
authority/responsibility are balanced
between the parties
Structure of Relationships:

 A business relationship wherein the

airport extends a franchise
 A management contract is different-this
is a method to hire a firm to perform a
specific service
 Customary financial mechanisms
» minimum guarantee and/or
» % of gross income
Structure of Relationships:
General Aviation
 Primarily conducted through a Fixed Based Operator (FBO) that
provides services to GA users, such as:
» parking and storage
» fuel and oil
» maintenance and repairs
 An alternative method is for the airport owner to provide these
services directly to GA users (if so, service can be monopolized)
 Customary financial mechanisms include:
» land rent
» fuel flowage fees (5 cents/gal delivered)
 Relationship with GA is difficult to characterize and different
from other segments of aviation
Structure of Relationships:
 As much our partner as our tenant
 The ground rules for this relationship
was significantly altered by the 1978
Airline Deregulation Act and the
relationship continues to evolves
 Customary financial mechanisms
» charging building space based on -per
square foot per year
» $/1000 maximum gross landing weight
Structure of Relationships:

 Calculation of airline fees patterned

after one of these methods:
 Traditional:
» Residual (Chicago contract)
» Majority in interest
» Longer Term
» Risk/Reward -Airlines
Structure of Relationships:

 Compensatory (Larger airports)

 Cost-based pricing
 Airport in Control
 Shorter term
 Risk/Reward- Airport
Structure of Relationships:
 If full airport residual, landing fees are frequently the
balancing mechanism
 Definition of cost still open to debate
 Instead of negotiated agreement, airport can set
compensatory rates by ordinance, either as a total
policy or as a short term option for non-signatory
 Trend in industry:
» Compensatory
» Shorter term agreements
» Revenue diversification
Structure of Relationships:

 Liability- three main areas where

litigation arises
» aircraft operations (accidents)
» premises operations (slip and falls)
» sale of products (food and beverages)
 Liability concerns, frequently insured by
separate endorsement:
» hangerkeepers, airshows, garagekeepers
» officers and directors, environmental
Structure of Relationships:

 Generally speaking:
 Airport insures itself
 Airport requires tenant to insure
themselves with minimum limits
 Airport requires the tenant insurance
name the airport as additional insured
 Airport requires tenant sign a hold
harmless agreement, backed by
contractual liability insurance
Structure of Relationships:

 Other insurance coverage:

 Property
 Boiler
 Automobile
 Rent
 Contractor liability
Structure of Relationships:

 Final note: what’s it all about

 First, reduce the risk
 Second, transfer the risk
 Finally, insure what remains
Capital Funding
 Internal money on hand (smaller projects)
 Airport Improvement Program (AIP)
» Requires some local matching funds
» AIP program has two types of funds
– Entitlement
– Discretionary
» can not be used in rate-base
» Requires signing of grant agreement with certain grant
assurances to government
 AIP is predominant source of capital for smaller airports
Capital Funding

 Borrow the funds:

 Government Obligation Bonds
» backed by the full faith and credit of taxpayers
» may require voter approval
» may be subject to debt cap (City/County)
 Revenue Bonds
» backed by pledged revenues
» a riskier investment, thus, pays a higher rate of
Capital Funding

 Self-liquidating bonds
» combination of the above
» sometimes used to avoid a G.O. bond cap
debt, yet, pay lower interest rate
 Private Sources (hard to come by but
could include airlines)
Capital Funding

 How does bond market work?

 show slide!
Capital Funding

 How is interest rate determined?

 Risk perception of the airport
» financial performance
» strength of market demand
» contract with airlines
 Market condition at the time of sale
 Since the 1978 Airline Deregulation Act
» rating agencies have focused greater
attention on local economic strength

 External Accounting (info for outsiders)

» Municipal Fund
– like a checkbook
– purpose is accountability
» Enterprise Fund
– like a business
– purpose is to reveal financial condition through
a standardized format

 Internal Accounting (info for decision

makers known as cost accounting)
» project accounting
» activity accounting
» pricing information

 Importance to Airports
» no profit motive
» set goals
» reveals problems
» grants authority for action
 busting your budget is a symptom of

 Budgeting methods
» lump sum (most flexibility)
» activity (terminal, airfield)
» line item, more detailed computer coding)

 Approaches to preparing budgets:

» add a little each year
» zero based (pure, prepared from the
ground up each year)
 May need a occasional variance to keep

 Pavements- what the do

» Provide a rideable surface
» Bear (or transfer) the load

 Asphalt vs. concrete (and its concrete not cement!!!)

» cost to build - concrete most $$$ to purchase but
longest life
» cost to maintain - asphalt highest cost to maintain
» ease of maintenance- asphalt easiest to maintain
» more fuel resistant- concrete
» higher load bearing - concrete
» expands/contracts with temperature changes-
» built with joints- concrete

 Enemies list:
 Moisture (leads to potholes)
 Time
 Lack of attention
 Lack of traffic
 The hydroplaning Problem
 Dynamic (surf city)
 Viscous (bug juice)
 Solutions:
» Grooving (best)
» Porous friction course
» Rubber removal
– High pressure water
– solvents
– beads (glass)

 Snow removal- not an ad hoc process-

» a statement of purpose)
 Removal priorities
» active runway, taxiway,ramp
 Removal methods
» mechanical, chemical
 Mechanical removal procedures
» move it to the edge (Blade)
» remove the windrow (blower)
» Clean up (brush)

 Notes:
 Equipment is expensive and specialized
 Ice is worse than snow
Operations- Inspection Program

 The life of an operations inspector is:

» inspect-detect-report
 Part 139 requires airport inspections:
» daily, during usual conditions, after
 A specific inspection requirement: Birds
» Problem with birds: engine ingestion
» Solutions: eliminate food source, habitat,
noisemakers, firearms (least appropriate)
Operations: ARFF (formally

 There is a need, airports can expect an

aircraft accident expect...
» every 77,000 ops
» accident w/fire every 200,000 ops
» accident w/death every 345,000 ops
 of course, real world not this predicable
Operations: ARFF

 Rapid Intervention Vehicle (RIV)

» gets there first and holds the fire a bay -
 Pumpers with AFFF (used in huge
 Proximity suits and handliners
 TRIAGE (prioritize the injured)
Operations: ARFF

 The regulation: FAR Part 139

 Sets minimum equipment needs
 Sets minimum response times
 Sets minimum training
 Aircraft fires very different from
structural fires
Operations: Security
 Equal to city police size at larger airports
 Smaller airports may have little to no on-airport police presence
 Includes:
» beat duties
» specialized services
» anti-hijacking program
» Support passenger screening process (Part 107)
» Responds to airfield operations area (AOA) trespass
 FAR Part 107 deals only with security as it effects safety of flight
Airport Noise

 Things to do about airport noise:

» quiet the aircraft
– who: airline
» move the aircraft
– who: ATC
» move the people
– who: airport with federal help ($)
 curfew is avoiding the issue
Airport Noise

 Noise management
 Single event (dBA) is inadequate
 Cumulative noise profile (LdN) is
preferred because it quantities these
» frequency, intensity, time of day, duration
Airport Noise

 FAR Part 150 System

 Survey aircraft mix and traffic patterns
 Calibrate with field measurements
 Input data to computer model (INM)
 Draw Noise Exposure Map (NEM)
 Determine noise control alternatives
 Develop Land Use Plan
 Purchase homes and property or soundproof
 Noise Compatibility program/noise maps
Public Relations

 The principles
 Believe it, Love it, Live it
Public Relations

 The target audiences

 External
» business public
» general public
 Internal
» Business public
» Employee public
Public Relations

 The objectives
 Build an image
 Keep communicating
 Answer complaints
 Network in airport community and city
 Don’t forget your own employees
Who is the Airport Manager

 Profession has evolved over the years

 Many skills, communication is important
 Airport manager always caught in the
» board and staff
» aviation interests and community
» national issues and local issues
» promotion of the public good with the need
to balance the budget