Northwest Florida Beaches International Airport inks pact with airlines

April 06--WEST BAY-- When John Wheat hit town, things started to pop.

Since taking office as airport executive director a year ago, Wheat has continued to knock down the problems that had bedeviled the newly opened Northwest Florida Beaches International Airport (ECP), such as the sale of the old Panama City field, paying off a $52 million Regions Bank loan and settling the Phoenix lawsuit.

The latest domino to fall in place is inking the final version of a four-year pact with the airport's two major carriers that will keep Southwest Airlines and Delta Air Lines flying into the facility for years to come. The announcement came last week.

Wheat said Thursday the intense negotiations finally birthed an airport/airline use agreement that will enable the airport to build up cash reserves while allowing revenue sharing with the airlines. The financial plan allows both the airlines and the airport to better plan for the future, such as designing new airline routes and contemplating new airport capital projects.

"It's a cornerstone," Wheat said. "It brings certainty to us as well as to them."

Wheat says the accord will allow the airport to make an average profit of $1.5 million during the last two years of the four-year agreement, with revenue sharing divided 60 percent to the airlines for 2012, and 50 percent for 2013 through 2015.

The revenue sharing kicks in after the airport has paid all operating expenses, capital equipment, capital reserve and debt service, Wheat said.

The new agreement has the airlines paying a landing fee that equals the total cost of operating and maintaining the airfield and the debt service for constructing the airfield.

The airlines also pay an annual terminal rental of $50 per square foot for their total terminal space. The money represents their fair share of the operating and maintenance cost of the terminal as well as its debt service, Wheat said.

New biz model

Shortly after Wheat came on board last year, the airlines agreed in September to change the airline rates from that paid at the old airfield inPanama City. The new rates matched the new business model at ECP, which opened in May 2010.

Paying the new rates helped the airport's financial picture beginning in September, but the airlines were shy about signing a formal agreement until the airport was able to solve its other problems, all of which injected financial uncertainty into the picture, Wheat said.

Those problems and financial uncertainties included the sale of the old airport, paying off the Regions loan and reaching a fair settlement withPhoenix, Wheat said.

"All of this solidifies our relationship with our carriers and encourages us to keep our costs down," Wheat said Thursday. "People have to understand it's a competitive market."

Now that the new agreement is in place, new carriers will know what to expect when planning to open operations at ECP, Wheat said. They will have to sign the same agreement if they want to participate in the revenue sharing.

The new agreement also contains a clause that Wheat explained Thursday allows the carriers to veto any capital improvement projects that would cost the airport more than $2 million above federal/state grants and other funding sources.

"It's very normal; it's very standard in these agreements," Wheat said. "They want to have a say in any expansion of the airport. The air carriers are just protecting their investment."

The clause, called a Majority In Interest (MII), is really there to forestall a large and unnecessary Taj Mahal-type expansion built for the vanity of local officials, Wheat said.

Putting in new terminal gates would not trigger an MII disapproval, for instance, he said. And one airline could not stop another from expanding its space.

"In my experience, I've never had the airlines disapprove an MII," Wheat said. "Airlines very rarely invoke the MII unless it's something really crazy."

An earlier version of this story appears below:

PANAMA CITY BEACH -- Airport Authority board members have inked the final version of a four-year pact with the airport's two major carrier that will keep Southwest Airlines and Delta Air Lines flying into the facility.

Airport Executive Director John Wheat said negotiations have finally provided a airport/airline use agreement that will enable the airport to build up cash reserves while allowing revenue sharing with the airlines.

The financial plan allows both the airlines and the airport to better plan for the future, such as designing new airline routes and contemplating new airport capital projects.

"It's a cornerstone," Wheat said. "It brings certainty to us as well as them."

Wheat says the accord will allow the airport to make an average profit of $1.5 million during the last two years of the four-year agreement.

Copyright 2012 - The News Herald, Panama City, Fla.