ATENDIDO FINAL QUIZ

Question 1

An agreement used generically to include both legal contracts for the air carriers’ use of airfield facilities and leases for use of terminal facilities.

Answer 1

Airport Use Agreement

Question 2

An agreement that specifies the methods for calculating rates air carriers must pay for use of airport facilities and services.

Answer 2

Airport Use Agreement

Question 3

An agreement that identifies the air carriers’ rights and privileges, sometimes including the right to approve or disapprove any major proposed airport capital development projects.

Answer 3

Airport Use Agreement

Question 4

Common Forms of Airport Use Agreement

Answer 4

1. Residual Cost Approach
2. Compensatory Cost Approach

Question 5

One or more air carriers collectively assume significant financial risk - by agreeing to pay any costs of running the airport that are not allocated to other users or covered by all other sources of revenue.

Answer 5

Residual Cost Approach

Question 6

The airport operator assumes the major financial risk of running the airport and charges the air carriers fees and rental rates set so as to recover the actual costs of the facilities and services that they use.

Answer 6

Compensatory Cost Approach

Question 7

It represented the first residual cost contract.

Answer 7

O’Hare Agreement or United Contract

Question 8

Third form of airport use agreement.

Answer 8

Hybrid Cost Approach

Question 9

Any surplus revenues would be credited to the airlines and any deficit charged to them in calculating airline landing fees or other rates for the following year.

Answer 9

Residual Cost Approach

Question 10

It is the standard agreement between airports and air carriers in the years before airline deregulation.

Answer 10

Residual Cost Approach

Question 11

It still exists in the post deregulation era particularly at airports where the air carrier dominates in market share.

Answer 11

Residual Cost Approach

Question 12

agreement between an airport and a serving air carrier requires the air carrier to pay rates and charges equal to the costs of the facilities the air carrier uses, as determined by cost accounting.

Answer 12

Compensatory Agreement

Question 13

The airport operator assumes the financial risk of airport operations.

Answer 13

Compensatory Cost Approach

Question 14

The airline operator assumes the financial risk of airport operations.

Answer 14

Residual Cost Approach

Question 15

air carriers operating under a ______________________ provide no guarantee that fees and rents will be sufficient to allow the airport to meet its annual operating and debt service requirements.

Answer 15

Compensatory Agreement

Question 16

air carriers aren’t explicitly charged for public space within airport terminals, such as terminal lobbies.

Answer 16

Compensatory Cost Approach

Question 17

air carriers as well as all other tenants of the airport pay rent for space and use of facilities in proportion to their percentage of activity hosted at the airport

Answer 17

Compensatory Cost Approach

Question 18

does not offer airlines any reduced charges as a result of the airport generating greater revenues from non aeronautical uses

Answer 18

Compensatory Contract

Question 19

Residual cost and compensatory approaches help determine

Answer 19

1. Net Income
2. Majority-in-interest Clauses
3. Term of Use Agreements

Question 20

guarantees that an airport will always break even, thereby ensuring service without resort to supplemental local tax support, but it precludes the airport from generating earnings substantially in excess of costs.

Answer 20

Residual Cost Contract (Net Income)

Question 21

lacks the built-in security afforded by the air carriers’ guarantee that the airport will break even every year

Answer 21

Compensatory Approach (Net Income)

Question 22

total revenues are not constrained to the amount needed to break even

Answer 22

Compensatory Approach (Net Income)

Question 23

may earn and retain a substantial surplus, which can later be used for capital development because surplus revenues are not used to reduce airline rates and charges

Answer 23

Compensatory Airports (Net Income)

Question 24

a much more common feature of airport use agreements at residual cost airports than at airports using a compensatory approach

Answer 24

majority-in-interest clauses

Question 25

often exercise a significant measure of control over airport investment decisions and related pricing policy

Answer 25

air carriers that are signatory to a residual cost-use agreement (majority-in-interest clauses)

Question 26

give the airlines that represent a majority of traffic at an airport the opportunity to review and approve or veto capital projects that would entail significant increases in the rates and fees they pay for the use of airport facilities.

Answer 26

Majority-in-interest clauses

Question 27

typically have longer-term use agreements than compensatory airport

Answer 27

Residual cost airports (Term of use agreements)

Question 28

The vast majority residual cost airports have use agreements with terms of _______________ and ________________ is not uncommon.

Answer 28

20 or more years, 30 years or longer (Term of use agreements)

Question 29

By contrast, only approximately _______ of the compensatory airports have use agreements running for ________________.

Answer 29

half, 20 years or more (Term of use agreements)

Question 30

The private enterprise aspects of airport operation, the services and facilities furnished for non-aeronautical use, generally are priced on a _______________ .

Answer 30

market pricing basis

Question 31

The pricing of facilities and services for airlines and other aeronautical users is on a _______________________.

Answer 31

cost-recovery basis

Question 32

the landing fee for airlines is typically the item that balances the budget, making up the projected difference between all other anticipated revenues and the total annual costs of administration, operations and maintenance, and debt service (including coverage).

Answer 32

residual cost contracts

Question 33

If the non-aeronautical revenues are _______ in a given year, the landing fee for the airlines might be quite _____.

Answer 33

high, low