Some 80 years ago, it was named Pan Am World Services, a division of Pan American Airlines that provided airport managment services under contract — the U.S. version of privatization. Then came new ownership with Johnson Controls, followed by American Port Services, which gave it the Avports label. Recently the company and the name — and seven airport management contracts — were sold by Macquarie Aviation North America, which also owns the Atlantic Aviation chain. The new owner, Aviation Facilities Company (AFCO) of McClean, VA, is seen as a ‘strategic owner’ by Charles V. Stipancic, Jr., executive vice president and COO of AFCO, and John Harden, vice president and COO of AFCO AvPORTS Management LLC. Together, they say, the companies can offer both management and development capabilities to airports.
Avports’ seven management contracts are at Albany, Stewart, Republic, and Westchester County in New York; Atlantic City and Teterboro, New Jersey; and, New Haven, Connecticut.
AFCO, started in 1992, is a real estate firm specializing in airport development, from financing to hangars to cargo, and operates some eight million square feet of facilities and aircraft aprons at 29 airports in the U.S. and the U.K. It is also overseeing the construction of the new privately funded airport in Branson, MO.
Stipancic and Harden recently discussed the new partnership with AIRPORT BUSINESS. Here are some edited excerpts ...
AIRPORT BUSINESS: John, how has the company changed, if at all, since you started there in 1982?
Harden: It almost is the same company. The thing I’ve enjoyed with this company is that with all the changes the culture of the company has been sustained. The management team has stayed in place; all employees have stayed in place under all these transactions.
But of course, we’re constantly growing our credential. We’ve added on a couple of strategic projects that have made us notable beyond previous levels. Now we’re aligned with a strategic owner who understands the challenges and the opportunities that we face day to day.
We’ve landed in the past few years two contracts to manage small hub airports at Albany International in 2006 and Stewart International last year. We’re now competing for a longer term contract there.
On January 1 we were fortunate to get appointed to manage the maintenance functions at Terminal A at Newark Liberty International Airport. We’re overseeing all the contractors that maintain that 600,000-square foot terminal.
We’re moving the credential. If you look at the landscape that AFCO has at 29 airports, at hub airports, we’re talking about a very substantial company that can move into new projects.
This is seen as an acquisition with sustainability. They’ve come into this with the idea that we’re blending two complementary credentials and we’re doing it for the long term. We’re not looking to leverage the value and sell it off at some point. Ours is a long-term relationship. That’s a mindset that’s important.
AB: What does Avports bring to the AFCO table?
Stipancic: What was appealing to us is you had a company that is very rich in history, has been around since the Pan Am days; it’s extremely well run and profitable. From a strategic standpoint, what we have with AFCO is primarily a development company focused on aviation. Avports is more of an operational company. So, you marry the development with the operations. We think it fits nicely together.
It’s an opportunity for us to assist the airports that they manage with potential development opportunities, whether it’s terminals or runways or cargo buildings. Vice versa, where we have facilities at airports it gives us an opportunity to sell the management capabilities of Avports. We’re jointly on the prowl for new airport opportunities, whether it’s development and/or management.
We can do soup to nuts; or we can do pieces. We can offer a full range of services, from the financing to development and design, construction, marketing, to leasing and property management, and now the operational aspect as well.
AB: The purchase of Avports meant getting the OK from seven airports. How did that process go?
Harden Every process had its own path and some of them were a little more extensive than others. It was just the assignment of the existing management contracts.
The contracts have relatively stable terms, for the most part five-year agreements. Two contracts have a longer term because the company made investments and was given an extended term. They’re all flavored the same.
When I’m talking with prospective airports, I like to point to tenure. We’ve been at Westchester since ’77; Teterboro off and on since ’70; Atlantic City since 1986. Through it all, we have been tested through competitions and re-competitions and successful in maintaining our position.
Stipancic: In my prior life with US Airways, I dealt with airports around the world — how they’re managed and how they’re financed. Some of the things we see at Avports are literally cutting edge, best practice type of things. At Westchester County they’re doing things that a lot other airports aren’t doing — perimeter protection; at Republic they’re doing things with how services are procured and administered.
Harden: One of the advantages you get with Avports is that you link to other airports. We like to view it more as a system rather than a one-off management contract. We interchange employees; have peer group reviews on a regular basis. The pistons all fire in proper order.
AB: What does the Branson experience tell you about privatization?
Stipancic: In the United States — whether it’s next month, next year, or five years from now — privatization is going to happen. To me it’s not a question of if, but when. With Avports being a leader at managing airports in this country, we think this puts us ahead of the power curve.
Our focus is not like Chicago Midway; it’s not our sweet spot. We’re really focused on small or medium-sized airports, like what’s in the Avports portfolio now. At Midway there’s nowhere to grow, and the airlines will have a say in what the rates and charges are going to be. How much can you sell a hot dog for, or charge for parking?
I think it’s going to be more pronounced with some of the difficulties governments are facing right now.
We want to build on the Branson experience, but it’s not easy to build an airport. Where there are opportunities to build airports, absolutely; we’ve done it.
AB: AFCO also owns three FBOs — Byerly Aviation in Peoria, IL; Metro Flight Services in Detroit; and, American Flight Services in Reading, PA. Do you foresee opportunities in the FBO arena as well?
Harden: We were also a fairly substantial player in the FBO arena [with Macquarie]. AFCO is also in the FBO business. So, while our focus is on airports, we also can become an avenue to be involved with FBOs. It allows us to be more diverse.
Stipancic: We absolutely want to grow; the objective is to become a player. Valuations have come down as well; so there may be less people trying to sell now. The values aren’t what they once were.
AB: How would you characterize the investment climate?
Stipancic: I would sum it up as challenging right now. A couple of recent things I would point out: We acquired Avports and closed January 1, and we raised that through all-equity financing. We also acquired 47 acres of land at the Indianapolis airport, through a combination of debt and equity. So, we were successful in the last quarter of last year in one of the most challenging times to raise debt.
We’re trying to be selective in our opportunities, and there are opportunities out there. What you’re finding is there are people willing to lend or invest in sound projects. Gone are the days of doing spec type of development.