AAAE Follow-Up

SEATTLE -- American Association of Airport Executives' vice president Spencer Dickerson says the primary issue for airports remains "security, security, security." At AAAE's 77th annual Conference & Exposition held here in May, the discussion proved to be as much about the state of the airline industry and its impact on, well, virtually everything else - airport revenues; planning; trust fund dollars; and on down the chain. The discussion was about the need for airports to continue to find ways to decrease costs to the carriers. Regarding security, the focus was primarily on how to fund what's been mandated by Congress. Then, there's the funding discussion related to FAA operations and the system as a whole.

Interestingly, one issue not prominent at this year's event was the recent decision by the Environmental Protection Agency to require secondary containment for airport refuelers when they are parked. A concern for many airports and their tenants, the decision is being fought via a potential legislative solution by the National Air Transportation Association.

Explains Dickerson, "Things like environmental issues or FAA regulatory issues get put down the priority list, or don't have the light shining on them, because all of the focus of our members is on dealing with security.

"That doesn't mean those issues aren't important."

AAAE's highest security priority, he says, is to get funding for the passenger screening systems at U.S. airports. The target of discussion is Congress, which needs to appreciate the connection between funding in-line systems and ultimately reducing costs for the Transportation Security Administration.

Says Dickerson, "There are significant savings to the TSA personnel costs by going in-line. You need fewer screeners; you have less workman's comp; you have more efficiency in terms of getting bags and passengers processed. You end up saving the government money by going 100 percent in-line.

"Obviously, the money that has been appropriated is woefully inadequate."

Dealing With a Bankrupt Airline Industry

Robert A. Hazel, senior vice president of the Reston, VA-based Eclat Consulting, who spearheaded a session on airline bankruptcies and airport management, says that while the fate of the carriers is forcing airports to react, the financial state of the latter is much brighter than for the carriers. "Even troubled U.S. airports are financially healthy," says Hazel.

According to Hazel, Wall Street projects that Southwest Airlines has a 7 percent chance of defaulting on its debtload within the next five years - very low. The most likely to default, he says, is Delta - Wall Street puts its likelihood at 83.5 percent.

Hazel points out that 23 U.S. airports have lost all commercial air service since 2000; the number would be higher, he says, if not for the Essential Air Service program.

Other recommendations for airports from Hazel:

• Monitor any assets at the airport which the carriers have agreed to maintain, and expect them to begin to deteriorate.
  
  
• Capital expenditures by airlines are deteriorating "dramatically."
  
  
• It may make sense to purchase assets currently owned by carriers, such as boarding bridges, and arrange a sale/leaseback as a way to help a carrier's finances. [Hazel says this was a tactic used successfully at Lambert St. Louis International, which he cites as the best example of how an airport can weather the bankruptcy storm.]
  
  
• Don't allow carriers to get behind on payments. Otherwise, the airport could find itself as an unsecured creditor in a bankruptcy. United Airlines has been in bankruptcy for more than 30 months, and many lease issues at airports remain unresolved.

Airline Perspectives

Offering the air carriers' perspective during a session featuring airline properties were representatives of Southwest, American, and UPS.