No RFP and More Taxes

It is no surprise that in the vast majority of cases NATA believes that aeronautical services at airports are best provided by private enterprise. Many, if not most, airport sponsors agree. Across our nation, billions of dollars of private capital have been invested at municipally owned public use airports to build and operate FBOs, maintenance facilities and other aeronautical service operations. This investment has relieved public budgets of the need to establish and maintain aeronautical service facilities while also ensuring that quality aeronautical services are available at our nation’s public use airports.

As NATA has discussed before, we now are seeing a trend of airport sponsors considering replacing private enterprise and private investment with government-run facilities and public funding. With the current economic instability and tightening local and state budgets, airport sponsors are drawn toward options that offer greater revenue. Consultants promise greater control over pricing, higher service levels and a positive impact to the budget’s bottom line when airport sponsors replace private business with government-owned and operated “businesses.” However, reality often doesn’t live up to those promises. In one of the most highly publicized recent cases of an airport sponsor venturing into providing aeronautical services, the Chattanooga Metropolitan Airport Authority has experienced losses between 200% and 500% greater than expected in the first nine months of operation of its government-owned and financed FBO. These losses, already swelling to more than a half a million dollars, are occurring despite the fact that the FBO building, hangar and ramp were all built using government grants. The CMAA isn’t even having to use any of its FBO revenue to begin paying on construction loans as a private business would.

The case of Chattanooga is an example of an airport sponsor using its position as a governmental entity to compete unfairly directly with private business. There are other issues involved with airport sponsors entering into the provision of commercial services. The latest example occurred in Hickory, North Carolina, at Hickory Regional Airport (HKY). The city of Hickory has taken over the FBO after disputes led to the ousting of the former FBO operator. Rather than following the proven method of securing another FBO operator by issuing an RFP and evaluating candidates, the city decided to place the burden of owning and operating the FBO directly on the residents of Hickory. In a budget just passed by the city council that included $250,000 of property and sales tax increases, the council approved the hiring of four additional city employees to work at the city-owned FBO. These new taxes and increases in city government costs all occur without the city evening knowing if there are interested private parties willing to make the investment to own and operate the FBO.

As the owner of the airport, local governments have the option of being the exclusive provider of aeronautical services, but to take on additional costs, increase taxes on residents and increase city exposure to liability without first finding out if there are private businesses willing to step in and invest their own capital is unwise. NATA will continue to advocate that the best path for airport sponsors needing to provide aeronautical services is the issuance of an RFP that provides the opportunity for private enterprise to bring its expertise and capital onto the airport. 

As far as Hickory Regional Airport goes, for the sake of the airport and the city’s residents, I hope their government-owned FBO experiment is more successful than Chattanooga’s.

3 Responses to No RFP and More Taxes

  1. Moe says:

    Looking forward to your next update on this matter.

  2. Victor says:

    We can only hope that it all works out.

  3. Some interesting details here.

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