As EPA and industries around the nation began a soul search on the extent of the problem, one sector that quickly rose to the forefront was airports. Most of the nation’s airports were created in response to the World War II effort, using steel tanks (which corrode) for fuel storage. By the time the ‘60 Minutes’ segment aired, many of these tanks had corroded and were leaking. In many cases, they were totally unaccounted for at airports and when found were indeed leaking.
This in time led to a confrontation – when a leaking tank was found at an FBO, who was responsible? Airports claimed that since the FBO was the owner/operator of the tank, it had the liability. FBOs argued that since ownership of its facilities, including the fuel farm, reverted to the airport when the lease was up, the airport was accountable. The debate wound up in court. Airports eventually won the argument in court but it didn’t settle the issue. It still needed to be resolved on a local level. In a way, it became a moot point.
Meanwhile, around 1991 NATA conducted a survey of its FBO and other tenant members that sought to reveal how many airport/tenant leases were scheduled to be renegotiated by the year 2000. It turned out that almost half of all leases in the U.S. were up for renegotiation. Many of the long-term leases from the post-War era, or those subsequently negotiated in the 1960s, were up for renewal.
In time, as we considered the best way to approach this situation from an AIRPORT BUSINESS publication point of view, we came to ask the question, “Who will still be around in the year 2000?” Through our experience with FBO magazine, and through our research with Airport Services, we did an analysis. Turns out, there were airports and tenants around the country who were moving on and had resolved the fuel storage issue through various means, and had renegotiated leases.
The lesson to be learned was that these airports and their tenants had resolved these issues because they recognized a bigger trend — that the business of airports was changing. In time the light went off and we got the concept, which became AIRPORT BUSINESS.
And, as we came to understand the business of commercial aviation, we came to recognize that the business of airport/airline relationships was changing radically as well. As was the business of the terminal itself.
Northwest Airlines vs. Kent County, MI
The changes happening between airports and tenant airlines is perhaps no better exemplified than by a lawsuit, Northwest Airlines vs. Kent County, MI that ultimately went to the U.S. Supreme Court and which was decided for the airport. At the center of the case was the issue of residual versus compensatory lease agreements.
Historically, to build the infrastructure necessary to finance airline terminals, air carriers were given long-term leases, or monopolies, on portions of an airport or on entire terminals based on the fact that they were the ones backing the bonds that would pay for the infrastructure. The airport sponsor may have owned the terminal, but in essence the airline owned the actual operations and controlled, or kept out, the competition. Of course, this was before mechanisms such as the Airport Improvement Program or passenger facility charges (PFCs) came to play such a predominant role as they do today. Airlines shared in the cost of the development, and shared in the profits.
Kent County sought to change that, by charging an airline ad hoc for space occupied and services needed. This came at a time when the concessions revolution inside airport terminals, imported from Great Britain when BAA oversaw the making of a mall in the new Pittsburgh International terminal, began to get a foothold at U.S. airports.
Essentially, the airport in Grand Rapids, MI sought to take over control of its airport and gate operations, and keep the profits, which in turn could allow for it to finance its own future infrastructure improvements, while attracting new airline tenants (competition) and broader air service options for its community. If the airport had more revenue in its coffers it could reduce the rates and charges to new entrants, and thus encourage more air service. Today, this is a common concept at U.S. airports. Then, it was revolutionary.
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