FBO: Government Vying With Business Hurts Taxpayers

Private business is the backbone of the economy, and private business owners work hard to meet their bottom line. When they succeed, they create jobs and expand the economy. That is why the situation at the Chattanooga Metropolitan Airport Authority is so unsettling: The authority, a government entity, is using taxpayer money to compete directly with private enterprise.

An FBO, or fixed-base operator, provides aircraft services such as fueling, maintenance and hangaring. Years ago, there were four FBOs at the airport. Changing market forces caused the entire FBO industry to experience consolidation. Chattanooga was no exception and for years has had only enough aircraft activity to support one FBO.

Six years ago, at the height of the economic boom, the airport issued a request for proposals seeking a second FBO. When only two responses were received, this indicated that private industry knew Chattanooga Airport could not support a second FBO even when the economy was favorable. In other words, no private company was willing to take the risk of investing its own money.

Such an investment became

even less appealing when the city of Cleveland made plans to develop its own airport. Many companies based in Cleveland would relocate their aircraft to the new Cleveland Airport, further eroding the already depressed activity at the Chattanooga Airport. Nevertheless, the CMAA marched forward with its plans for a second FBO.

In 2010, the CMAA received approximately $3.5 million from the Tennessee Department of Transportation, which it does not have to repay, to build a new FBO. Because there is no accountability associated with this "free" money, the airport is under no pressure to generate a return on the investment. This is like giving someone $1,000 to gamble at a casino: They have no motivation to make sound gambling decisions since it is not their money.

The CMAA contracted with a private business, Wilson Air Center, to operate the facility under a management contract, leaving the risk with the airport. The CMAA chose not to lease the facility to the private operator, which would have shifted the financial risk to the operator.

Now, TAC Air competes directly with its landlord. This set such a dangerous precedent in the industry that it caught the attention of U.S. Rep. John Duncan, R-Knoxville, who authored legislation called the Freedom from Government Competition Act. Several members of the Tennessee legislative delegation, including Congressman Chuck Fleischmann of Chattanooga, have supported this bill.

Legislators are concerned. In the first six months of operation, the airport's FBO has lost $317,000 in taxpayer money, not including startup costs and the cost of the facility. At this rate, the airport's FBO will lose nearly $750,000 in its first year. Over five years, this could amount to a mind-boggling $5 million. Shockingly, a third-party business valuation firm conducted a study prior to the opening of the FBO and projected the financial losses to be almost exactly what the airport is experiencing. The study is available at www.chattanoogansforfairaviation.com. Airports must be self-sustaining; otherwise, these losses are absorbed by the airports tenants -- many of whom opposed this project. Even commercial airline customers will share in these losses through increased airport fees included in their ticket prices.

The grant money and the project's ongoing losses would have been better spent on improving safety at the airport and lowering flying costs. (Half of the people living in the area drive to Atlanta or Nashville for cheaper public flights.) Instead, the CMAA chose to invest in services for private aircraft.

Instead of cutting its losses, the CMAA is considering using a state grant to build additional hangar space, even though TAC Air's hangars are currently 30 percent vacant. We can only hope that if additional taxpayer funds become available, the CMAA will have the forethought to look at its failing business model and decline.

The CMAA will say that TAC Air opposes the airport FBO because it's trying to eliminate competition and inflate prices (even though TAC Air's prices have always been competitive with neighboring airports). This savvy line is simply untrue. Artificial competition propped up with taxpayer dollars hardly protects the public's financial interest.

Please contact your elected officials and encourage them to support legislation that opposes government competition against private business. Chattanoogans should cast a wary eye at the situation. After all, the government could go into the hotel or cable business. Oh, wait. They did that, too.

Pam McAllister has been the general manager of TAC Air in Chattanooga since 2007. She began her career at Lovell Field in 1983 as a customer service representative. Reach her at [email protected] TAC Air is a division of Truman Arnold Companies, a family-owned business. TAC Air operates 12 FBOs throughout the United States. TAC Air is ranked as the No. 1 Large FBO Chain in the country.

Copyright 2012 Chattanooga Publishing Company