The MSP Debate
By Ralph Hood
Anyone interested in rental rates on airport property — and aren’t we all? — should closely watch current negotiations in the Minneapolis/St. Paul area. Decisions made there may influence airports across the country for years to come.
You know the basic story: Northwest Airlines (NWA) claims property rental rates at MSP are too high, and that rent collected thereon — much of it paid by NWA — subsidizes reliever airports in the area. Tenants on reliever airports say it ain’t so. NWA is hurting badly at the moment and, as Jerry Clower used to say, wants some relief. The reliever airports are fighting back.
The Metropolitan Airports Commission (MAC) manages MSP and six reliever airports: Crystal, Lake Elmo, Flying Cloud, St. Paul Downtown, Anoka County, and Air Lake. Until 1999, rental rates had not been adjusted in over 30 years. A big revamp was certainly due and was undertaken. As Gary Schmidt, MAC’s director of the reliever airports, told me, it would have been a lot easier if they had raised rates a little bit over the 30 years rather than all at once.
Michael Hodges, a consultant with Airport Business Solutions, was involved in that 1999 study and rate adjustment and agreed to meet with me to fill in the blanks of my ignorance of things Minnesotan. It should be noted at this point that 1) Mike is working with MAC on the current issues; and 2) I have good friends and customers on the reliever airports, so I am not totally unbiased.
Mike and I met at the Downwind Restaurant at Atlanta’s PDK airport. (It was like old times. I got my private license at Epps Aviation at PDK. In the early '70s my office was at PDK, and I ate at the Downwind often. It still stands out as one of the few good airport restaurants extant today.)
Mike Hodges first pointed out that the six reliever airports are not insignificant. More than half of the aircraft based in Minnesota are based at those six. They are of great importance to the area. (NWA first maintained that the relievers were of no value to NWA, but Gary Schmidt told me that NWA has recently reversed that position somewhat.)
Mike, Gary, et. al. are once again trying to reach a solution that will be acceptable — if not appealing — to all parties. That includes storage and commercial tenants. The issue is complicated by the fact that hangars are owned by the tenants but stand on leased airport property. A further complication: The tenants went through all this in 1999 and figured they were through with the issue for awhile. (Gary Schmidt tells me it was always understood that another look would be taken within five years.)
Should rent at relievers be just enough to recover airport maintenance and operation expenses (M&O)? Or should it recover M&O plus depreciation? How about capital costs? How will all of those be determined? What rights are held by the respective parties? Do the relievers contribute to the value of NWA’s business at MSP? If there were no reliever airports at all, what would NWA have to pay at MSP?
Ralph Hood is a Certified Speaking Professional who has addressed aviation groups throughout North America. A pilot since 1969, he’s insured and sold airplanes at retail and distributor levels and taught aviation management for Southern Illinois University. Reach him at firstname.lastname@example.org