Airports Seek Economic Freedom

Nov. 28, 2011

SAN DIEGO — During a press conference at the annual Conference & Exhibition here put on by Airports Council International-North America, chair Frank Miller, director of the San Antonio International Airport, spoke of “Operation Moses” — ACI-NA’s initiative to “set airports free” of regulatory overburden and historic ways of conducting business at U.S. airports.

Incoming chair Thella Bowens, CEO of the San Diego airport system, echoes the sentiment, saying that it is time to move away from the “stereotypical” governing structure of airports by cities or counties and allow them to operate more as business enterprises. “The focus needs to be on the business that we’re running everyday,” she comments.

During the conference, ACI-NA officials outlined a new four-part campaign to heighten the visibility of the role airports play in the U.S. economy. The four parts include ...

- a new policy initiative, in coordination with the American Association of Airport Executives, to bring one voice for airports to Capitol Hill;

- investment in research to support policy proposals;

- a public relations strategy to get the word out; and

- the creation of a network of civic and business leaders with whom to partner to make the role airports play higher profile locally and nationally.

ACI-NA president Greg Principato says the airport sector is once again in a defining moment, one which the airport community needs to seize.

“This defining moment is different though,” says Principato. “Let me speak plainly: The airports of this country are held back because the U.S. government regulates the financial lives of U.S. airports through a Nixon-era regulatory framework that pre-dates airline deregulation and has long since lost its relevance. And we are going to lose the international race until that changes.

“The airlines have long fought any meaningful change to this out of date regime because they want airports regulated like utilities to help keep out competition and retain control.

“And general aviation is satisfied to benefit from facilities built with PFCs [passenger facility charges] and to benefit from facilities built with money sent back to the trust fund by larger airports through the PFC turnback; but they are unwilling to join the chorus of voices calling for us to bring our airport financial framework into the 21st century.”

Further, Principato expresses skepticism about Washington’s ability to keep airport infrastructure in step with the industry’s needs. In fact, ACI-NA and its larger airport contingent have proposed pulling out of the Airport Improvement Program; instead, they seek to remove the cap on PFCs — much like the Canadian model, in which airports set the level of their Airport Improvement Fee locally, depending on local needs.

Says Principato, “So, let’s stop going, hat in hand, begging their indulgence. Let’s just tell them to get out of the way and free airports to generate their own resources, in their own communities, to build and modernize their own facilities with money that stays at the airport and is not sent to Washington. This is the way to build infrastructure; this is the way to create jobs; these are the tools those places around the world are using to beat our brains in. Want to create jobs? Want to build 21st century infrastructure?

“Set airports free, give us the tools in use all over the world, remove the Nixon-era, job killing, shackles and watch what we can do.”

FAA/system reauthorization

The airport sector continues to call for a long-term reauthorization bill to fund the Federal Aviation Administration and system infrastructure. The system is operating under its 22nd continuing resolution to keep it funded, which was brought to national attention when it was essentially shut down this past summer.

Christa Fornoratto, FAA’s recently appointed associate administrator for airports, relates that the funding uncertainty has caused the agency to “dial back” numerous programs, including its development of guidelines for safety management systems (SMS) for airports. “It was not a graceful end of the fiscal year” for FAA, she says.

When asked if he was optimistic that a long-term reauthorization bill is on the horizon, Principato comments, “No. I’m more optimistic we’re not going to have a shutdown. That didn’t cover anybody in glory. But I’m not optimistic about a long-term extension – a brand new reauthorization bill.

“We’ve been pushing for just a straight two-year extension. Then after the next election we’ll come back and start again. If you do a straight two-year extension there’s nothing to stop the powers that be on the Hill sometime next year to come to an agreement and passing it.

“It’s kind of sad to think that we were celebrating a four-month extension – the longest extension in over a year and a half. In the system that is set up, so many have to depend on Washington. Airports like Kalispell, MT losing a whole construction season just because of a few-week extension. The northern half of the country has really taken a beating there.

“The FAA’s taking a beating too. I don’t know how they’re doing their job; it’s terrible.”

Safety Management Systems

Meanwhile, among the conference sessions, FAA’s pending guidelines on SMS continues to be a hot topic.

David Bannard, a partner at Foley & Lardner LLP, says safety management systems will be one of the most significant regulatory changes for airports in the last 20 years. The ‘substantial’ new regulatory requirements mean a potentially heightened liability for airport sponsors, he relates.

According to Bannard, SMS will require a cultural change as well as a significant commitment of resources by airport sponsors, including: development and implementation of a complex new program; use of additional resources and staff; an exercise in identifying and mitigating potential safety hazards; and coordination with disparate SMS programs on the airport setting.

Despite industry concerns, says Bannard, SMS is still coming. What can airports do to prepare? Bannard offers the following advice:

- Perform due diligence review and revise as necessary with regard to rules and regulations; leases and other agreements; organizational structure (How will SMS fit into existing organization?); use or obtain authority to indemnify accountable executives.

- Incorporate safety risk analysis into project planning and design at early stages.

- Consult with counsel regarding ways to protect SMS data from inappropriate disclosure.

- Identify resources required to implement SMS, both internal and external.

- Strengthen relationships with FAA, develop budgets, and begin to implement SMS now.

Cyber Security

On the topic of cyber security, Los Angeles World Airports’ chief information officer Dom Nessi provides information regarding how vulnerable airport IT systems can be.

Cyber security is “the protection of personal or sensitive information, or any form of digital asset stored in a computer or a digital memory device,” comments Nessi. “It is also the protection of physical IT assets from random attacks targeted to destroy or disable computing power.”

According to Nessi, airports need to protect against simple malicious codes called malware and spyware, and serious viruses that can wipe out a system. Because aviation continues to be the target of terrorists, and it is highly dependent on and driven by computer systems, e-enabled aircraft will present a new challenge.

From an airport standpoint, “Imagine the ripple effect at a large hub airport if someone could work their way into the baggage transition system and reroute luggage all over the world,” remarks Nessi. “It could bring the system to a grinding halt with both economic and security consequences.”

Four components – the network, the device, the application, and the back-end system - are vulnerable and each requires a different approach to security, he adds. Airports can be proactive by getting configuration management under control; installing anti-virus software and keep it updated; launch a ‘social engineering awareness’ campaign; and test your own systems often, explains Nessi.