Phoenix-Mesa Turns Corporate

MESA, AZ — Lynn F. Kusy, C.M., C.A.E., executive director of the Phoenix-Mesa Gateway Airport, and his staff have ambitiously sought to develop the former Williams Air Force Base since the latter’s closure in 1993. They’ve had some success and their share of misses, like opening their initial airline terminal in mid-2001. Over time, however, three community colleges have made a foothold in aviation training, and all are situated on or across the street from airport property. That success, along with the airport’s decision to invest in infrastructure on the north side of the airfield for development, have put Kusy’s crew in the corporate aviation driver’s seat — almost overnight.

Kusy came to the airport in March 1993 and vowed to have a public use facility open six months after the Air Force Base closure, which he did. Recalling the journey since that time he says, “I felt like we started off like the cowboy who jumped on his horse and rode off in all directions. We were trying to sort of test the market in a variety of areas and see where we attracted some attention.

“We wanted to be a commercial service airport; we wanted to support manufacturing and training, and aircraft testing.

“One thing we did was we filled all the buildings that the Air Force had left us. We filled about 300,000 square feet of existing space. We did that without having a fire sale.”
In April 2001, the airport finished creating a small passenger terminal, converting a former military facility. After 9/11, says Kusy, the carriers lost interest. Since then, airline service has been sporatic; however, Allegiant has come and stayed and is having success bringing tourists to the Phoenix area from Northwest and Midwest markets.

In the interim, the Williams-Gateway Airport Authority brought on the City of Phoenix, operator of Sky Harbor International, as a member, signaling a regional approach to air service development. In fact, Phoenix provides subsidy funds to Phoenix-Mesa.

Explains Kusy, “The Williams Gateway Airport Authority is comprised of five local governments — Mesa, Gilbert, Queen Creek, Phoenix, and the Gila River Indian community.

Those five governments contribute to our budget each year — about $3.9 million this year. Part of that goes into our capital budget, but about $2.5 million supports our operating budget.”

He says the annual deficit has held steady at some $2.5 million, despite a growth in revenues. The airport’s ops budget for 2009 is $9.17 million; expenses are $12.2 million, according to Kusy.

“We’re developing a strategic financial business plan right now, looking at all of our projected needs and revenues and our funding sources out to 20 years,” says Kusy. “We don’t have a good handle yet on when we’ll break even, but we’re expecting that study will show us how to get to that point.

“We’re also doing a peer review to make sure that we’re in line with other airports in terms of our expenses and our revenues.”

The role of training
As the airport looked for new opportunities, the success of the local colleges began to influence development decisions. “We turned our attention to the north industrial area, and worked with the city to get the infrastructure in there,” explains Kusy.

“Chandler-Gilbert Community College does flight training and A&P maintenance; and has a new facility under construction. They’ve been operating out of a hangar, renting it from us for ten years. Now they’re building their own facility on the flightline.

“Their main campus is right across the street. The fact that we have Chandler-Gilbert Community College onsite is the main reason that we’ve landed the Cessna, Embraer, and Hawker-Beechcraft service centers. That’s the training ground for their employees.”

Arizona State University offers flight training at the site, via an agreement with Mesa Air Group. The airport built ASU’s flight training center with a loan from the Arizona Department of Transportation, according to Kusy.

Mesa Community College also offers flight training here, with the University of North Dakota as the training provider.

Comments Kusy, “We’re really happy to get all three of them in this spot. And again, kudos to Chandler-Gilbert Community College for providing the trained, skilled workforce that these guys need. Chandler-Gilbert has a tremendous reputation nationally.”

Cessna, Embraer, Hawker-beechcraft
Business jet traffic was practically non-existent at Phoenix-Mesa two years ago. “We get about 80 business jets a month in and out of here now,” comments Kusy.

“Our first success was with Cessna,” he says, with initial contact made with the bizjet manufacturer in the mid-90s. The two parties didn’t sit down to actually negotiate a deal until 2001, he says. “It was a long and arduous process. We got the lease in place in 2004; construction started in 2006 and will be finished in 2008.

“What that did for us is it caused us to have to develop the infrastructure to support the Cessna project in that industrial area. We built the fire suppression system; two taxiways, one specifically for them. Because we had the success with Cessna and we had the community college right across the street, we attracted the attention of the others.

“Embraer came to us looking for a location for their Southwest Service Center, one of four in the U.S. Their business plan was to have these service centers built and ready to run when they rolled their first aircraft off the assembly line, which is scheduled for later this year.

“They move very quickly. Within two and a half months we had the deal fully negotiated and signed.”

The arrival of Hawker-Beechcraft was a whole different situation, he says. A developer had built a 25,000-square foot spec hangar; Hawker-Beechcraft was looking for a location for a service center in the Southwest. “This hangar was available along with some option land, and after some negotiation they bought the hangar from the private developer,” explains Kusy.

“Three different scenarios; three different companies; three major service centers.”

Kusy relates that one of the reasons the Cessna lease was so hard to negotiate was because the OEM initially wanted the airport to issue airport revenue bonds to support that facility. “There was a lot of technical language in the leases with respect to the issuance of bonds,” he says. “We did not issue the bonds, as it turned out. They decided not to ask for it and to go with private financing.”

Leases for the corporate tenants are similar to most on the airfield, says Kusy — 30 years with two five-year options. Rates run 30-35 cents per square foot, although Cessna pays somewhat less because it signed on earlier and has a larger footprint. All leases at Phoenix-Mesa have CPI (Consumer Price Index) and market adjustment clauses, says Kusy.

All three corporate tenants — Cessna, Embraer, and Hawker-Beechcraft — have expansion options on adjacent acreage.

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