MADISON, WI - The Airport Council International-North America (ACI-NA) Airport CFO Summit, held here in July, drew some 30 industry professionals. Airport Business caught up with a group of finance executives to discuss how the airport finance arena has changed over the years.
Included in the conversation were Deborah McElroy, executive VP, policy and external affairs, ACI-NA; Chris Poinsatte, executive VP and CFO, Dallas/Fort Worth International Airport; Cindy Nichol, finance director, San Francisco International Airport; Borgan Anderson, manager of aviation finance and budget, Port of Seattle (2011 Chair of the ACI-NA finance committee); and Kimberly Jones, finance and administration director, Dane County Regional Airport in Madison.
Comments Nichol, “It’s funny when you go back and look at articles of even 40 years ago, much less 25 … I think the fundamental pressures have remained the same.
“The airlines are trying to operate on a margin in a deregulated market, and that’s tough. What it does is put pressure on rates and charges for us.”
The Airport Improvement Program (AIP) came into being in 1982, and passenger facility charges (PFCs) and policies on rates and charges and airport revenue really spell out more clearly what the options and requirements are, she relates.
“I think we’ve done a lot in terms of really changing the face of non-airline revenues, especially with regard to the terminal; it’s now a marketplace,” adds Nichol. “There’s a huge diversity.”
Says Poinsatte, “If you go back to deregulation — what you’ve seen happen over the last 25 years is a shift in responsibilities; the airlines really managed everything at the airport. The airport is now more focused on the customer.
“Over the last 25 years we’ve seen a huge focus on that, and now we are shifting into what I would call the new business model that we’re all trying to figure out, which is to operate more like a business.”
It takes a balanced approach to focusing on the customer, the employee, and operational excellence, he adds.
On 9/11 and security, says Poinsatte, “Over time we have had to develop a very close relationship with the TSA and actually help them figure how to serve the customer better.
“Our security costs have probably doubled over the last ten years … I know our police and security force has. That has put a large burden on us, but we really try to work very hard on making the customer experience through security less inconvenient.”
Remarks McElroy, “The biggest change is the fact that airports are no longer just facilities. An airport is a hugely complex business.”
Operating like a business
“The importance of developing the non-airline side of the business is clear; airports are increasingly acting in a business-like way ... I would even use the term ‘entrepreneurial way’,” says Anderson.
“In Seattle, we went from a long-term residual agreement to more of a hybrid/compensatory, which made the airport completely responsible for the non-aeronautical side of the business — and gave us incentive to really improve that and make business decisions about the kind of concessions we have, and the business arrangement over those concessions.
“We also operate our own parking garage; we are constantly looking at different ways to price our products to both meet the needs of our customers and to improve the bottom line.”
Another factor that has always been there but is even more important now, says Anderson, is the recognition that a healthy airport is critical to communities and regions in terms of both domestic and global economic connectivity.
“In Seattle, we’ve seen quite a bit of growth in international direct flights in recent years; that’s very important to our entire region,” he explains.
“What we are faced with now is the need to make investments to accommodate future growth. That’s something the domestic carriers really aren’t all that excited about. It does create a situation where the airport is looking long-term at what benefits the region.
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