Module 1 Flashcards
In 1970, Congress established the
user supported Airport and Airway Trust Fund.
Aviation Trust Fund - A federal reserve of tax monies levied on airline tickets and operations and set aside to improve the U.S. air transportation system.
The Aviation Trust Fund provided 100% of the funding for FAA grants (AIP), facilities and equipment, and research, engineering and development. Funding from the Trust fund as well as an appropriation form the General Funds supports FAA Operations.
Trust Fund revenue is currently supported by
ten dedicated excise taxes:
As of 2007, the most current information from the FAA website
- 5% tax on the price of domestic airline tickets
- 5% tax on the value of awards of free or reduced rate airfares (frequent flyer tickets)
- 5% tax on the price of domestic airline tickets to “qualified rural airports” (flight segment fees do not apply if this tax is levied)
$3.70 on each flight segment, indexed to inflation
- 25% tax on the price charged for transporting cargo by air
- 3 cents per gallon - commercial aviation jet fuel
- 3 cents gallon - general aviation gasoline
- 8 gallon - general aviation jet fuel
$16.30 tax on international arrivals & departures - indexed to inflation
in response to the need for additional capital funding sources to expand the national airport system Congress enacted this act:
PFC’s: Congress enacted the Aviation Safety and capacity Expansion Act (ASCEA) of 1990. ASCEA allowed public agencies controlling commercial air service airports enplaning more than 2,500 passengers annually to charge each enplaning passenger a $1, $2, or $3 charge in accordance with FAA regulations.
The ASCEA included a stipulation that the maximum PFC charge on one passenger travel ticket is $12. In 2000 this limit was increased to $4.50 per segment, with a round trip cap of $18.
A project for a medium or large airport is eligible for $4 or $4.50, only if the projects will make a significant contribution to; improving air safety and security, increasing completion among air carriers, reducing current or anticipated congestion; or reducing the impact of aviation noise on people living near the airport.
In 2007 the Airport Council International-North America recommended to Congress PFC’s should be raised to $7.50.
PFC Application; what is the process?
Public Comment / Federal Registrar (add more)
What are the Grant Assurances?
5 Preserving rights and powers
Key grant assurances
* Prohibits airport operators from taking action that would deprive it of properly managing airport.
* Requires that the airport be operated in safe and serviceable condition at all times in accordance with Minimum Standards. * Minimum Standards protects the airport operator and their tenants * Airport-safe operating environment * Tenant-protects from devaluation; level playing field * Minimum standards must be uniformly applied and relevant to the activity * Airports may impose conditions (rules and regulations) on users and tenants to ensure safe and efficient operation.
* airport is required to take action to protect the airspace around the airport.
* attempt to restrict land use adjacent to or in the immediate vicinity of the airport.
* Airport must be available for public use, on reasonable terms, and without unjust discrimination for all types of aeronautical activities.
* cannot give any tenant the exclusive right to conduct an aeronautical activity (except if the airport operator actually does the aeronautical activity]
* requires airport to set rates and fees to make the airport as self-sustaining as possible.
* Airport revenue must be used at the airport or within the airport system, this includes: * Land sale, leases and equipment sales * taxes on aviation fuel * operating fees, landing fees, access fees * airport parking revenue, concessions * Approved Revenue use * Capital or operating costs * promotionalexpendatures * airline-airport marketing co-op agreement * reimbursement of capital costs * community support related to the airport operations * certain mass transit access * cost incurred by government officials for services to the airport * lobbying and attorney fees * NOT APPROVED FOR revenue use: * General economic development * marketing and promotional activities not related to the airport * payments to the municipality in lieu of taxes * direct or indirect payments of revenue without a benefit
* Airport operator must dispose of land purchased for noise, airport development or other (such as RPZ) when it is no longer needed. To be done at fair market value.
* For medium or large hub airports who cannot accommodate access or additional gate requests by an air carrier to allow or expand service
DBE Reporting, when is it required?
Capital Budget Projects
Concessions
Define revenue diversion and how to avoid it.
Revenue Diversion includes direct or indirect payments to those who services and facilities are not provided, or whose service is not reflective of airport use
Airport & Airway Improvement Act (AIAA) and Grant Assurances require all revenues generated by a public use airport be expended on:
Capital or operating cost of the airport
Local airport system
Local Airport facilities
List the various types of airport ownership.
City / Municipal County Authority State Private
Which type of airport ownership do you prefer?
Authority – Authority Boards are typically made up of members who may have backgrounds & skills which add to the airport operation. Members tend to be appointed for longer terms which promote consistency within the airport organization. Additionally Authority Board members are somewhat distanced from the bureaucracy of local governments and have the best intentions of operating the airport.
Define compensatory and residual airline agreements
Compensatory agreement the airport assumes the underlying risk but retains all profits for its own use by charging users the actual cost and services they use.
Benefits:
Allows airport to manage facilities as a business enterprise striving for profit
Provides incentives and financial reward
Permits discretionary use of surplus monies within limits
Provides a greater degree of management flexibility
Compensatory allows for airports to raise and lower landing fees to cover operating cost
Residual agreement, airlines collectively assume significant financial risk by agreeing to pay any residual cost of running the airport – cost that are not allocated to other users or covered by non-airline sources.
List the types of insurance coverage typically held by an airport
Airport Liability Insurance Director& Officers – Professional Liability Insurance Commercial Property Insurance Equipment Floater Insurance Commercial Auto Insurance Health Insurance Workers Compensation Insurance Business Income Insurance Terrorism Insurance
Name the parties to a bond sale?
Lender Borrower Underwriter Bank Institution Legal Counsel Rating Company Financial Advisor Bonding Company Insurance Company
What types of airport services / functions may airport out sourced?
Custodial
Airport Parking
Snow plowing
Property Development / Lease Rates
Appraisal
Review Appraisal
FAA Concurrence
Typical rule of thumb is annual lease of 10% of land value
Example:
Appraised land value: $500,000
$50,000 / year for term of lease – 20, 30 years, etc
Explain the Essential Air Service (EAS) Program
EAS Program established in 1978 after Deregulation as a way to ensure rural airports would retain a certain level of air service.
Before deregulation, air carrier operating certificates required air carriers to provide a minimum of two daily round trips. During the inception of the EAS program, certain criteria were established for a community to, be listed as eligible for air service under the EAS. Communities must meet three general requirements:
1. Must have received scheduled commercial passenger service before October 1978.
2. May be no closer than 70 highway miles to a medium- or large-hub airport.
3. Must require a subsidy of less than $200 per person (unless the community is more than 210 highway miles from the nearest medium- or large-hub airport, in which case no average per-passenger dollar limit applies). 4
The Department of Transportation determines the “minimum level of service required” at each eligible community by “specifying a hub through which the community is connected to the national network, a minimum number of round trips and available seats that must be provided to a hub, certain characteristics of the aircraft to be used, and the maximum permissible number of intermediate stops to the hub.” Congress initially authorized the program for a ten-year period, through October 1988. In order to ensure that service at small communities remained strong, Congress in 1987 enacted the Airport and Airway Safety and Capacity Expansion Act, which extended the program for another ten years, and in 1998, it eliminated the sunset provision, thereby permanently authorizing EAS. 5
List the different methods of concession management.
a) Standard approach involves airport management leasing and managing space
b) A development company or retail expert can be engaged to provide management services overseeing rental and concessionaire development in lieu of the airport
c) An institutional operator (e.g., Host and Paradise) can be engaged as a master lessee and given responsibility for providing all required concessions or / for subleases to other concessionaires.
What types of airport services are frequently provided by contractors?
Typical concessions at an airport are food, beverage, retail, newsstand, shoe shine, duty-free shops, businesses services including telephone, and car rental.
What’s the difference between accrual and cash accounting?
Accrual accounting means revenues and expenses are recorded at the time a transaction takes place. Revenue is recorded when earned and expenses are recorded when incurred.
Cash accounting method, revenues and expenses are recorded when actually received or paid.
What are the funding mechanisms for capital projects?
FAA AIP Funds State Funds Third-party funding PFC Customer facility charge Local Funds
What are the types of Bonds?
Bonds General Obligation Revenue Special Facility IDB
General Obligation Bonds – are issued only by states, municipalities, and other authorized general-purpose governments. Usually require voter approval, pledge the full faith and credit of the bond issuer as security to the investor.
Revenue Bonds - are issued only by states or local government, airport authority or other unit having the required statutory authority.
Revenue Bonds are payable from specific sources of revenue other than property taxes, and are not backed by the full faith and credit of the issuer.
AIP FUNDS derived from:
1970 – Congress established the user supported Airport & Airway Trust Fund which required the collections of taxes or user fees to be added to passenger tickets, domestic air cargo way bills, and non-commercial aviation fuel
16) Describe methods for allocating airline gate usage.
Joint use
Exclusive use
Preferential use
17) Describe the typical airline contract negotiation process
Airline Objectives
Minimize cost of rental and landing fees
Avoid absorbing cost of other airlines
Establish rates by formula on periodic basis
Ensure preferential treatment of incumbents over new tenants
Obtain benefits of concession revenues
Airport Objectives
Provide for full cost recovery
Obtain discretionary cash flow
Provide financial incentives for revenue development and cost control
Assure equity among airlines; avoid penalizing new entrants or small carriers
Provides for adequate reserves (emergency, operating, debt service)
Control airport facilities
18) Describe some non-traditional sources of revenue.
Oil & gas development
Timber management
Rental income such as residential, storage units, etc
Airport Industrial Parks
19) What are the types of concession leases that can be negotiated?
Fixed rate
% of gross
% of net
Hybrid or combination
Would an FBO get the same rate as a restaurant? Why?
A particular business may assume a higher or less rate due to the nature of and revenues of the operation
20) Organization structure. Describe a typical organizational structure for an airport. What would the variables be? What would indicate the need for a different structure?
Most Common Organization structures – Simple, Functional, Divisional, Conglomerate, and Matrix structures
Simple – small airport – one manager with several employees
Functional – job specialization and a resulting economy of scale – example is the creation of a specialty area with dedicated personnel such as ARFF or building maintenance
Divisional – advantages – clear line of accountability
Conglomerate – composed of a set of unrelated businesses and operated independently of each other – normally not associated with the management of airports
Matrix – is an overlay of the functional structure with product or project orientation – rarely found among airports
21) Describe how you create and monitor an operating and capital budget. Describe the various types of budgeting methods.
An Operating Budget provides an estimate of revenues and expenditures of the airport for a future time, rarely more than a year
Capital Budgeting is the process of evaluating proposed long-range airport projects or courses of future activity of allocation resources to those projects deemed desirable and important
Traditional Budgeting provides a lump-sum approach to budgeting, whereby all airport operating revenues are placed into a single airport account
Performance based budgeting, resources an allocated to traditional cost needs but on the basis of goals, outcomes, or activities deemed most important to the airport
Zero-based budgeting requires a budget unit to completely reexamine its operational and capital needs annually as if it were starting operations for the first time.
Target based budgeting allows a manager more what can be cut or funded
22) Describe the progressive discipline process.
Progressive discipline is a process for dealing with job-related behavior that does not meet expected and communicated performance standards. The primary purpose for progressive discipline is to assist the employee to understand that a performance problem or opportunity for improvement exists.
The process features increasingly formal efforts to provide feedback to the employee so he or s can correct the problem. The goal of progressive discipline is to improve employee performance.
23) How do you evaluate employee performance?
Quarterly reviews based on established performance goals
Name the key Grant Assurances
5 Preserving rights and powers
Key grant assurances
* Prohibits airport operators from taking action that would deprive it of properly managing airport.
* Requires that the airport be operated in safe and serviceable condition at all times in accordance with Minimum Standards. * Minimum Standards protects the airport operator and their tenants * Airport-safe operating environment * Tenant-protects from devaluation; level playing field * Minimum standards must be uniformly applied and relevant to the activity * Airports may impose conditions (rules and regulations) on users and tenants to ensure safe and efficient operation.
* airport is required to take action to protect the airspace around the airport.
* attempt to restrict land use adjacent to or in the immediate vicinity of the airport.
* Airport must be available for public use, on reasonable terms, and without unjust discrimination for all types of aeronautical activities.
* cannot give any tenant the exclusive right to conduct an aeronautical activity (except if the airport operator actually does the aeronautical activity]
* requires airport to set rates and fees to make the airport as self-sustaining as possible.
* Airport revenue must be used at the airport or within the airport system, this includes: * Land sale, leases and equipment sales * taxes on aviation fuel * operating fees, landing fees, access fees * airport parking revenue, concessions * Approved Revenue use * Capital or operating costs * promotionalexpendatures * airline-airport marketing co-op agreement * reimbursement of capital costs * community support related to the airport operations * certain mass transit access * cost incurred by government officials for services to the airport * lobbying and attorney fees * NOT APPROVED FOR revenue use: * General economic development * marketing and promotional activities not related to the airport * payments to the municipality in lieu of taxes * direct or indirect payments of revenue without a benefit
* Airportoperator must dispose of land purchased for noise, airport development or other (such as RPZ) when it is no longer needed. To be done at fair market value.
* For medium or large hub airports who cannot accommodate access or additional gate requests by an air carrier to allow or expand service
What is the PFC process and timeline?
…
What projects can be used for PFCs?
.
When is PFC published in federal register?
.
Explain DBE Process
.
What are the types of fees?
.
What are CFC-Customer facility charges?
.
What are the types of liability?
.
What are the components of a Master Plan?
- Public involvement-outreach
1. 1. 1. Reach out to all stakeholders 2. Stakeholder input has to be at the beginning of the study before key decision making plans are made and invested in. 3. Public awareness campaign- Environmental Considerations
- Existing conditions (aka inventory)
- Airfield/airspace
- Terminal facilities
- GA facilities
- Cargo facilities
- Support facilities, such as ARFF
- Airport Access
- Utilities
- Non-Aeronautical facilities (industrial parks, retails businesses)
- Aviation demand forecasts
- Operations, pax enplanements, aircraft (i.e. critical aircraft, aircraft mix)
- Facility requirements
- Alternatives
- ALP
- ALP Drawing Set
- Cover sheeet
- ALP sheet
- Data Sheet runway data tables and windrose
- Facilities layout plan-existing and future facilities
- Terminal area plan
- Airspace drawing Part 77
- Inner portions of approach surface
- Land use drawings
- Airport property map (aka Exhibit A)
- ALP Drawing Set
- Runway departure surface drawing
- Utility drawing
- Airport access plans-modes of transport in/out of airport
- Facilties implementation plan
- Financial feasibility-Analysis; where will money be acquired from from, such as public private partnership.
