{"id":909,"date":"2016-10-13T16:29:14","date_gmt":"2016-10-13T16:29:14","guid":{"rendered":"http:\/\/crp.trb.org\/acrp0331\/?page_id=909"},"modified":"2016-10-20T18:52:03","modified_gmt":"2016-10-20T18:52:03","slug":"develop-strategies-for-new-airport-generated-revenue","status":"publish","type":"page","link":"https:\/\/crp.trb.org\/acrpwebresource1\/develop-strategies-for-new-airport-generated-revenue\/","title":{"rendered":"Develop Strategies for New Airport-Generated Revenue"},"content":{"rendered":"

Develop Strategies for New Airport-Generated Revenue<\/h1>\n
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Airport revenue typically comes from rents and leases of property and facilities. This topic is currently being explored in ACRP<\/span> 03-39, Generating Revenue from Commercial Development On or Adjacent to Airports<\/i> (under development) but an overview is provided here. Additional revenue may come from user fees (such as facility charges), fuel flowage fees, and sales of goods and services provided by the airport such as food and beverage sales, aeronautical charts and deicing services. Historical financial performance can provide insight on areas where the airport generates revenues, and how sensitive these revenues are to fluctuations in aviation activity and economic conditions. Airports looking to increase revenue have several options to explore, including raising rates and charges, developing revenue-producing facilities, encouraging private development on vacant land, and attracting operators that will pay facility charges.<\/p>\n

Airport Revenue Growth Strategies<\/h4>\n

An airport’s ability to grow revenue will depend on the location of the airport, available property, the economic climate, competition, and consumer demand and price sensitivity. Ideally, airports can meet their operating costs through revenues generated by aviation uses. If costs are higher than revenues, airports may consider conducting a rates and charges survey to see how their prices compare to other airports in the region. An overview of this process can be found in ACRP<\/span> Report 36 Airport\/Airline Agreements—Practices and Characteristics<\/i><\/a>, Section 2.3, Types of Business Arrangements and Rate-Setting Methodologies<\/i>. The process is regulated through rate-setting policy per the U.S. DOT<\/span>’s Policy Regarding Airport Rates and Charges. Consideration must be given to keeping the airport price-competitive, and setting rates and charges proportionally to what level of service is offered. This is termed a “compensatory” approach. Airports with convenient access to surface transportation networks, near business centers, and with aviation facilities that support all-weather use and have room for hangar development can generally charge more than those without. Conversely, airports that set rates and charges too high risk losing tenants to more competitively priced airports. Commercial service airports may also risk legal challenge from airlines operating at the airport.<\/p>\n

Airports experiencing high levels of aviation demand can develop hangars and market property to aviation service providers like FBOs<\/span>. FAA<\/span> funding may not be used for revenue-producing investments. Therefore, sponsors must first evaluate whether it makes more sense to proceed with a revenue-producing development and then decide whether to “self-fund” the development, or attract a private developer and lease the land. In the most general terms, airports face higher costs and risk with the self-fund and build option, but will keep all of the revenue produced. Cost and risk are lower when a private developer builds, but airports receive either a flat rate lease per square foot, or a fraction of the revenue.<\/p>\n

In many instances, airports augment aviation-related revenues with non-aviation leases, such as warehouses, manufacturers, multi-modal transportation facilities and even oil wells on airport property. When airports recruit non-aviation tenants, they compete with other available properties in the region. The challenge with this type of competition is that other sites may have existing infrastructure and appropriate zoning, in the case of urbanized settings. However, in rural settings the opposite could true, especially from the infrastructure standpoint as many times airports have better access to utilities than surrounding under developed properties. Further, FAA<\/span> grant assurances prohibit airports from charging less than fair market value for non-aviation uses on airport property and this must be factored in your competitive analysis of the situation.<\/p>\n

Airports located in areas where developable land is scarce, or expensive, may be able to release airport property from aviation use and lease the land to developers. This is a complex proposal but information about land releases can be found on the FAA<\/span>’s Release of Airport Property Website<\/a>. In general, considerations for this process include:<\/p>\n