Airports Eye Service Sector

SAN ANTONIO — It’s often about air service development; other times it’s about opportunity, or ensuring a level of service. The reasons some U.S. airports are getting — or considering getting — into the airline services business are varied, and were the center of the discussion at the first annual Aviation Ground Handling Initiatives Workshop, held here in late February. An insurance rep was on hand to discuss liabilities, although for airports the exposure is less in some states. The bottom line message of the meeting may be: It’s a new operating environment, and ya gotta do what ya gotta do.

The workshop was hosted by the Aviation Ground Service Association, an affiliate of the American Association of Airport Executives. AAAE organized AGSA in response to an initiative by smaller commercial airport members. Two driving forces were a need to reduce costs to airlines as an air service development tool, and a desire to cross-utilize and train personnel, thereby creating efficiencies. Standardization of procedures is a goal.

Michael Landguth, A.A.E., CEO/president for the Chattanooga Metro Airport Authority, relates, “There is no one right answer for an airport.” The San Antonio meeting was more about who is doing what, and why. The reasons vary; to wit ...

• Bruce Carter, A.A.E., director of aviation at the Quad Cities International Airport in Moline, IL set up an independent LLC to provide airline refueling when the previous provider pulled out of the market and the local FBO, Elliott Aviation, declined to enter the business. Carter says his LLC pumped 5.3 million gallons in 2007, best in four years. The airlines buy the fuel; the airport handles administrative and storage [commingled]. His hook-up fee is $40; the into-plane service rate is some five cents/gallon.

Carter has established a capital fund to expand and upgrade the fuel farm, and QCIA is exploring getting into baggage handling.

Comments Carter, “Remember, laws vary in different states on forming an LLC [limited liability company].”

• Bob Uhrich, A.A.E., director of air service development at Savannah/Hilton Head International Airport, previously worked setting up ground handling operations for charters into Europe where, he points out, the “airports did everything.” The airport saw airline services as an opportunity to cross-train staff and generate revenue. The launch customer is AirTran, which is being charged on a per-turn basis. AirTran’s goal was 25-minute turns on a Boeing 717; Uhrich says his crew is averaging 16. SAV’s Airport Ground Support Services is now looking at refueling.

Uhrich says a key to the airport seeking the opportunity was its very positive cash flow. He cautions others to consider the costs of training and equipment — don’t go cheap, he says — and maintenance costs. His insurance runs $1,107/month.

• Daytona International recently got into ground handling, a situation in which AirTran couldn’t agree on terms with the sole on-airport provider. So the airport got into the business, and has since added USAir.

• Landguth relates that Chat-tanooga got into airline services because “we decided to control the passenger experience.” The airport staff also had explored new opportunities and ranked them, deciding ground handling might be a business to explore. American Eagle was the launch customer.

Landguth says airports he used as his starting points for lessons learned included Springfield, MO and Augusta, GA. He says he followed advice from Springfield’s director to purchase state surplus equipment. Regarding insurance he says, “Ask what’s the total coverage, not just what you’ll be paying.”

Insurance; AMR eagle
Jerry Ruth, vice president for insurance provider ACE USA-Aerospace, says his firm previously had refused to get into airline handling insurance until the Mobile airport and subsequently other airport customers requested quotes. Globally, ramp damage is about $5 billion annually, he says.

Ruth explains that some states afford public entities such as airports sovereign immunity, which can significantly reduce liability exposure. He cautions that if an airport provides refueling it will need environmental liability coverage as well.

Meanwhile, Ed Jacob, regional director of customer services for American Eagle in Chicago, has been a key advisor for AGSA from the outset. With the [expected] divestiture of American Eagle from parent AMR/American, he says the regional carrier is “very interested” in pursuing ground handling opportunities for other airlines, and suggests that there may be an opportunity to partner with airports, with the latter providing equipment maintenance and GSE procurement.