Considering and Evaluating Airport Privatization (2012) / Chapter Skim
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Pages 28-41
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From page 28... ...
28 5.1 Specific Strategies Traditional Approach U.S. airports have traditionally financed airport improvements with a combination of federal and state grants, PFC revenues, customer facility charge (CFC)
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29 responsible for all aspects of day-to-day parking operations, including shuttle buses, facility maintenance, and fee collections. As payment for their services, the contractor receives a percentage of the gross revenues from parking operations, but is required to pay the greater of this percentage amount or a minimum annual guaranteed amount to the airport owner.
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30 retains no contingent liability for the bonds because the bonds are secured solely by special facility rentals and sometimes a corporate guarantee by the tenant. Airline special facility bonds have been used to finance hangar and maintenance facilities, cargo buildings, and ground equipment support facilities for the exclusive use of an airline.
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31 power for the airport's use and the airport owner agrees to purchase the power at a fixed rate for the period of the contract through a power purchase agreement or PPA. Airports can realize significant reductions in power costs under these arrangements, although some airports have undertaken solar development themselves to realize these gains, which include renewable energy credits or RECs.
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32 TOGA. These airlines are ultimately responsible on a joint and step-up basis for paying all of the facility's fixed and variable costs, including debt service on the special facility bonds that financed the terminal.
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33 5.2.4 Third Party Cargo Development Cargo facility development can be accomplished by (1) the airport owner, (2)
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34 until years 16 through 24 when the developer was in a position of making a profit on the development. 5.2.5 Private Development of Low-Cost Airline Terminal Development In 2007, the City of Austin, the owner and operator of AustinBergstrom International Airport, recognized an emerging niche and marketing opportunity and set out to attract an ultra-lowcost Mexican airline, after seeing the implementation of this successful airline business model in Europe (Ryanair)
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35 to avoid the need for busing of rental car customers and to reduce the need for the rental car companies to ferry vehicles back and forth between the terminal and the remote service centers. The rental car companies requested permission to take the lead on this project, using a public–private partnership business model.
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36 The lease provides that APCOA make scheduled minimum annual payments to the state and additional payments based on performance. Under the terms of the parking lease, APCOA has guaranteed payment of the debt service from the parking garage bonds and the scheduled annual payments to the state.
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37 Regarding grant assurances and the rates and charges policy, the following requirements are relevant: 1. Assurance 22 requires the airport sponsor to make the airport available for public use on reasonable terms and without unjust discrimination.
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38 5.4 Evaluation of Developer Financing and Operation The reasons why an airport might consider developer financing and operation include: • Preserve financial capacity for other essential airport development (e.g., terminals, runways, taxiways, and roadways) • Avoid unnecessary risks (economic and political)
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39 on the outcome of negotiations between Delta and JFKIAT, two parties with competing financial interests. • Loss of flexibility to change land uses over period of lease • Less control over types of activities and quality and appearance • Involves considerable upfront planning, time, and expense • Involves moderate implementation risk • Less control of facility utilization especially under airlinefinanced terminals that run the risk of inefficient utilization of gates and associated terminal space • Could involve organizational disruption and need to reassign or terminate existing employees • Could involve buyouts and compensation for existing public workers • Involves long-term risk if the project encounters financial problems, i.e., the airport may need to step in (even though it is not financially obligated to do so)
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40 construed as a loan (often called a disguised financing lease) then the airline can default on the debt.
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41 Other Considerations • Public–private partnerships raise questions about the role of the airport owner and what functions are most appropriate for it to perform. The questions revolve in part around who can produce a service or product more economically.
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