Airports Make Hay from Their Open Land

The Houston hay venture typifies a growing trend in airport management: looking beyond traditional aviation-related sources to bolster finances.

About a year ago, officials from Houston Bush Intercontinental airport huddled to tackle a persistent conundrum -- how to squeeze more money out of its 12,000 acres of land.

As part of an ongoing effort by the airport to increase non-aviation revenue, officials thought the land, which needed constant maintenance, could be put to more productive use.

From that meeting came Houston's latest money-making idea having nothing to do with airplanes or airline passengers: cutting and baling the grass on airport land and selling it as hay to cattle ranchers.

The city-owned airport formally launched its agricultural program this month by cutting some of the wild grass on its land.

Sales generated a modest $30,000. But the airport will broaden the program by sowing 2,000 acres later this year with Tifton 85 Bermuda, a protein-rich grass favored by livestock growers.

"The general sense in the business is that airlines are going to have ups and downs," says Richard Vacar, director of Houston Airport System. "And we're trying to find other sources of revenue so that we don't fully depend on airlines, particularly in a downturn."

The Houston hay venture typifies a growing trend in airport management: looking beyond traditional aviation-related sources to bolster finances.

After years of operating strictly as public agencies, airports across the USA are becoming more entrepreneurial. They're developing malls, office parks and golf courses. They are also pursuing agricultural projects, marketing consulting services and drilling for gas. In doing so, they're weaning themselves from over-reliance on the shaky finances of a struggling airline industry.

Also, they're improving their competitive positions against neighboring airports by keeping the costs low for airlines and retail tenants, and they're lowering borrowing costs by improving their bond ratings. Dallas/Fort Worth airport, for example, earlier this year trimmed 50 cents from its previous landing fee rate of $4.94 per 1,000 pounds of aircraft weight.

CEO Jeff Fegan says "a fair amount" of the cut was due to the revenue the airport has been able to raise from non-traditional sources.

In 2005, the airport generated $42 million of revenue from non-aviation activities that don't involve the typical airport revenue sources: concessions, retailers, parking and rental cars.

"Every major airport is motivated to drive (up) the revenue," Fegan says. "The cost is a factor for airlines in their choice of airports."

According to the Airports Council International-North America, U.S. commercial airports last year generated about $13 billion in operating revenue, more than half of it from landing fees and various services to airlines. Parking fees as well as rent from retailers and car-rental agencies accounted for a substantial portion, too.

No one has calculated how much comes from non-traditional sources such as farming and real estate development, but Mary Rose Loney, a consultant and former director of Chicago O'Hare and Philadelphia International, says entrepreneurial projects are growing and are "here to stay."

Real estate development

Dallas/Fort Worth and Denver International, two of the USA's largest airports in terms of land holdings, are moving aggressively into energy production and real estate development.

DFW sits on the Barnett Shale, one of the largest natural gas fields in the USA. It recently signed with Oklahoma-based Chesapeake Energy to drill for natural gas. More than 9,000 acres of its land will be available for drilling, which will begin next year. Chesapeake will pay DFW $181 million and a royalty of 25% on gas produced.

DFW -- bigger than the island of Manhattan, with 18,000 acres -- has one of the most ambitious real estate development programs.

In 2001, DFW opened a 400-acre commercial park of warehouses. It generated $3.4 million in rent for the airport last year. Online retailer Amazon became a tenant last year. And DFW has two Hyatt hotels on its property, one of which it owns.

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