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.
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