A Guidebook for Airport-Airline Consortiums (2014)

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50 Terminal and Equipment Consortiums The general success of terminal and equipment consortiums is often discussed, but the mea- sure of success is difficult to define. As indicated in the Illustrative Examples and Observations section in Chapter 7, performance criteria have not been established for most terminal and equipment consortiums. An example of a consortium subject to defined performance criteria is Detroit Airlines North Terminal Consortium (DANTeC). The DANTeC Consortium Agreement with the WCAA includes Minimum Service Levels that clearly and concisely describe maintenance responsi- bilities, frequencies, and performance metrics. It has been reported that DANTeC has met all, and exceeded most, of the Minimum Service Levels requirements. The WCAA had enough confidence in DANTeC’s performance to significantly expand DANTeC’s scope during 2012, and extended the Consortium Agreement for another 5-year period. To illustrate defined per- formance criteria, the DANTeC Consortium Agreement Exhibit D Minimum Service Levels is included as Appendix F of this Guidebook. While empirical performance data does not exist for most consortiums, other observable indicators of consortium success are available. One visible indicator of the lack of consortium success is that a consortium may cease to exist if it is not performing to expectations. An example of this is the South Terminal Corpora- tion (STC), which formerly operated at BOS to maintain a portion of Terminal B. The airport received complaints regarding STC’s maintenance performance in public areas of the airport. As a result, the scope assigned to the STC was greatly reduced and the STC now provides limited functions to a single airline. Another visible indicator of the lack of consortium success may be when a consortium changes its name. LAX Terminal Equity Corporation (LAXTEC) had operated at the TBIT at LAX since 1982. LAWA indicated in 2009 that it would not issue a new lease and license agreement to LAXTEC. LAWA continued to be in favor of an airline consortium for operation and maintenance responsibilities at TBIT, but would no longer do business with LAXTEC because of LAXTEC’s involvement in a rates and charges action against LAWA and the City of Los Angeles. As a result, the LAXTEC member airlines changed the consortium’s name to the TBITEC and adopted a new member agreement. LAWA approved the TBITEC member agreement and issued a new 5-year lease and license agreement to TBITEC in 2011. LAWA had enough confidence in the re- constituted consortium to amend the lease and license agreement in 2013 to increase the term to 10 years and expand TBITEC’s scope of operations and maintenance responsibilities to include LAX Terminal 2. This scope expansion is an indicator of TBITEC’s success. C H A P T E R 1 0 Consortium Success Metrics

Consortium Success Metrics 51 ACRP Synthesis 31 included a survey of airports, airlines, and consortium operators regard- ing consortium requirements and expectation achievement. The data shows 90% of the airport respondents, 100% of the airline respondents, and 100% of the consortium operator respon- dents indicated that the consortiums they are involved with met or exceeded expectations from a contract compliance perspective, overall performance perspective, and an airport-airline rela- tionship perspective. Also, the following quotations were reported at the Airport Planning Design & Construction Symposium that was hosted by the American Association of Airport Executives and the Airport Consultants Council in February 2009: • Midway Airlines’ Terminal Consortium: “The MATCO consortium has allowed for flex- ibility to address operational issues in our ever-changing aviation environment and helped Midway Airport achieve the 2008 JD Powers award for customer service excellence in a mid- sized airport.” by the City of Chicago, Department of Aviation. • Terminal One Group Association, L.P. “We have maintained an excellent working relation- ship with TOGA these last 15 years. It is a successful business model that has met both airline and airport needs.” by the PANYNJ Aviation Department. • SFO Terminal Equipment Company: “SFOTEC has proven itself to be a strong and effective organization in both representing the interests of the international airlines and in maintaining the airport-owned common use baggage and passenger processing systems at SFO.” by the San Francisco International Airport. The following quotations were collected as part of the research for this Guidebook: • Atlanta Airlines Terminal Corporation: “AATC is a significantly efficient consortium that keeps ATL costs low.” by Delta Airlines • CICA Terminal Equipment Consortium: “CICA TEC has provided reduced operating costs, more efficient operations, and better control of airline support equipment.” by Consortium Operator • Oakland Fuel Facility: “OFFC has been diligent in meeting the terms and conditions of the Lease, including investing in the capital improvements necessary and cooperating fully with environmental remediation on the leasehold.” by the Port of Oakland In spite of the lack of empirical performance data for most terminal and equipment consor- tiums, observable indicators show that airports and airlines actively evaluate the performance of their consortiums. Consortiums that are not performing well are dissolved or modified, while those that are meeting or exceeding expectations have satisfied customers and may be provided opportunities to expand their scope and responsibilities. Fuel Consortiums The most common use of a consortium at an airport location is the typical fuel consortium. Fuel consortiums have been around for a number of years and, to a large degree, have enjoyed substantial success. The typical fuel consortium at an airport consists of a legal entity, the members of which are the major airlines operating at that airport. The assets that the fuel consortium operates consist of the jet fuel storage and distribution system at the airport. These fuel systems typically consist of a so-called “tank farm”—an area of land containing above ground storage tanks for fuel at the airport. The tank farm also includes underground pipelines connecting the storage tanks, as

52 A Guidebook for Airport-Airline Consortiums well as pumps to pump the fuel to the various terminals and concourses. Tank farms typically contain a bank of fuel filters to ensure the fuel is at the prescribed quality before it is pumped for use in aircraft. In addition to the tank farm, fuel distribution pipelines are employed to transport the fuel from the tank farm to the terminals and concourses. At most major airports, a hydrant system is in operation, which provides access to fuel at each gate at the airport, thus eliminat- ing an operational requirement for fueling trucks. At each gate, there is a hydrant pit, which is accessed through a manhole cover. The hydrant cart or hydrant truck connects to the hydrant pit to access the fuel and another hose from the hydrant cart is inserted into the wing of the aircraft. There are several reasons for the general success of fuel consortiums. From an economic viewpoint, if each airline were to own and operate its own fuel storage tanks and fuel system, the resulting overall fueling cost at the airport would be significantly higher than the cost of a joint use consortium facility. Also, from the viewpoint of the airport and the traveling public, a single fuel system provides greater assurances with respect to fuel quality and safety. If there were multiple fuel systems at the airport, the chances for fuel quality concerns would likely increase compared with a single system that is subject to daily fuel quality monitoring and checks. In addition, each member airline typically inspects the fuel consortium system on an annual or semi-annual basis. Another reason that fuel consortiums have enjoyed success is that, at most airports, there typi- cally is not significant fuel expertise within the airport staff. Many airport directors and airport staff have come to rely on the services provided by the fuel system operator who manages and operates the fuel system on behalf of the airline fuel consortium. In addition, some airports that previously operated fuel systems were required to conduct environmental remediation efforts that were very time-consuming and costly. By delegating the fuel system operation to the airline fuel consortium, the airport can avoid the environmental liability and pass that on to the fuel consortium members. The airlines’ primary trade organization, A4A, has for many years promoted the use of fuel consortiums and has published a fuel committee handbook for use by those airports and airlines that implement a fuel consortium. The position of the airlines’ trade organization favoring fuel consortiums has facilitated the widespread use of the consortium model for operating jet fuel storage and distribution systems at airports in the United States and is therefore also a factor in their success. The use of fuel consortiums at major airports in the United States has a long tradition. Gener- ally, these fuel consortiums have been very successful in providing adequate fuel at the requisite quality. To summarize, the principal reasons for the success of fuel consortiums include the following: • Fuel consortiums promote economic efficiency by consolidating all fuel storage and distribu- tion systems in one unified system and location. • Fuel consortiums promote safety by promoting fuel quality through the elimination of mul- tiple, smaller fuel systems. • Airport staffs often lack substantial expertise in fuel management issues and the fuel consor- tium provides a service to the airport by managing the fuel systems using qualified operators. • Fuel consortiums provide a benefit to the airports by shifting responsibility and liability for environmental issues that may be associated with airport fuel storage, distribution, and hydrant systems. • The long history of fuel consortiums and their success have been promoted by the airlines’ principal trade organization.