Explore How Airports Manage Financial Decisions and Learn about Their Revenues and Expenses

Historical review of revenues and expenses is an important step in future budgeting. Historical financial information is often used to identify areas for improvement (cost reduction and revenue growth), and to advise the airport sponsor of expected operational costs. Historical financial records also help airport management and consultants perform sensitivity tests to see how the airport has fared during different economic periods of growth and decline, which can be used for contingency planning and capital investment planning.

Financial management feeds into other elements of airport management – such as marketing, property development, and capital investment. Understanding airport cash flows will better prepare sponsors to meet the requirements of federal and state grant matches, or to find alternative funding mechanisms.

Projected revenues and expenses by category can be used for pro-forma (or future) financial projections. Pro-formas are scenario-based planning tools that can be used to estimate future revenues and expenses, evaluate the return on investment of capital projects, and perform a sensitivity analysis on how variations in revenue and expense may impact airport finances. Pro-formas are typically prepared by taking historical finances by category (such as the categories used on the airport balance sheet), and then using a spreadsheet program to project balances for future years by shrinking, maintaining, and declining each category. Using this tool, airport managers can introduce scenarios (e.g. what’s the impact of a $0.10/square foot rent hike or what’s the expected revenue and expense of a new T-hangar building) to gauge how changes will impact future finances.

Understanding airport finances should go beyond an individual airport. The FAA historical financial reports, and rates and charges surveys that may be included in state system plans, are useful tools for benchmarking expenditures with nearby competitors and similar airports. It is recommended that sponsors understand the differences and similarities of local economies and airport management structure before benchmarking their own airport’s performance against others. Benchmarking can help management set financial goals and objectives, ideally to make the airport more fiscally healthy, and reduce reliance on the sponsor for operating funds.

Resources

  • ACRP Report 77 Guidebook for Developing General Aviation Airport Business Plans

    Chapter 11, Financial, discusses the fiduciary responsibilities of airport managers and policymakers and provides information to facilitate the development of financial statements, budgets, and performance measures which are considered essential tools for achieving goals and realizing the mission and vision for the airport.

  • ACRP Report 47 Guidebook for Developing and Leasing Airport Property

    Chapter 5, Finance Overview, Section 5.1.2, Quantifying Benefits—Pro Forma Analysis discusses how utilizing a Pro Forma Analysis while looking at future development for your airport looks at the pros and cons of the development and could benefit your airport both directly and indirectly.

  • CATS

    The CATS program was created to gather and disseminate congressionally mandated airport financial information. This information may be used by airport personnel, and FAA staff, and is open to the whole public to view.

Tools