A Different Airport Model

June 23, 2009
Branson’s new privately funded commercial airport offers a unique economic structure

BRANSON, MO — In an effort to increase the city’s tourism base, further establish a nationally valued destination, and turn a profit, a group of investors has funded the construction and operation of the new Branson Airport. Independence from government red tape allows the airport to operate as a private business free to negotiate with tenants in a unique way; that is, free from being subject to the federal grant assurances required by publicly owned and operated airports. Says airport director Jeff Bourk, “As a private entity airport, we are driven to enhance the traveler experience by providing top quality service coupled with low-cost fares.”

Located on 922 acres in the Ozark foothills of Taney County, Missouri, the privately funded commercial service airport opened to the public May 11. With air service initially provided by low-fare carriers AirTran and Sun Country Airlines, airport investors seek to capture a sizable portion of the 5.4 million leisure travelers who drive 300 miles and more to Branson each year.
With a population of just 7,500, Branson sees some eight and a half million visitors to the region each year. “Branson is a year-round valued family destination,” says Bourk, executive director of Branson Airport LLC. According to Bourk, leisure travelers flying in to reach Branson must land at airports in Kansas City, St. Louis, or Tulsa, and then drive a good distance.

Fayetteville and Springfield airports are the closest to Branson and are great airports, says Bourk, but they serve a business market and offer higher fares.

“Branson is the 20th largest tourism destination in the country by nights’ stay, and there is no airport here able to handle that market,” says Bourk.

Absolutely no federal grant money was used in the construction of the airport, which began in 2007. According to Bourk, that makes Branson Airport the first fully privatized commercial service for-profit airport in the country.

“This airport is the first where the runway, control tower, ILS approach, lead-in lights, and all other Airport Improvement Program (AIP) eligible projects were paid for by the investing group and revenue bonds. All of the rules that exist when accepting federal grant money do not apply to this project; no grant assurances apply to us.

“Grant assurances tie an airport’s hands in many ways, including the way deals and negotiations are made with airlines and venders. Here, deals offered to each airline will be dependent on the merit of the market.

“What does apply are all FAA safety standards, and all TSA security requirements; all of those aspects are done exactly the same as any other commercial airport in the U.S.,” says Bourk.

The financing
The total investment of the Branson Airport comes to $155 million; $115 million in publicly traded tax-exempt revenue bonds through Citigroup, and $40 million in private equity.

While federal, state, and local taxpayers paid nothing for the construction or operation of the airport, the City of Branson has agreed to pay Branson Airport LLC $8.24 for every passenger the airport brings into the region.

“It’s a great deal for the city,” says Bourk. “They don’t have near the risk that our business holds, whether we succeed or not. They make that back on sales tax and such that the visitor spends while in town.

“It’s a great investment for them, and it’s a major factor in our ability to complete and open this project; it’s a revenue stream that we wouldn’t otherwise have.”

The financial commitment of the City is capped at $2 million per year, and no more than $500,000 per quarter.

The main assets of the airport, which were funded and built with the tax-exempt bonds, will eventually be owned by the county, explains Bourk. The land was gifted to the county, which in turn leased it to a transportation development district in Taney County. The transportation development district, a political subdivision of the state of Missouri, issued the revenue bonds for the construction of the airport’s main assets, and leased the property to Branson Airport LLC for 45-50 years, says Bourk.

“So when that time is up, Taney County will own this airport,” relates Bourk. “That was something we had to give up, but at the same time, we were able to get tax-exempt funding.”

Freedom from the feds
There are many differences in the way the Branson Airport can be operated compared with that of the common municipality-run airport. The way negotiations with carriers are worked out is a prime example.

Branson Airport has the ability to work with airlines on a case by case basis with regard to rates and charges; and it can offer carriers exclusivity rights to specific markets for a period of time.

“How airline rates and charges are traditionally structured is completely different than what we have going on here,” says Bourk. “While the idea of rates and charges is to take airfield expenses, and pass them onto the operators (carriers); basically, we work with each airline and we negotiate a deal, with the market as the major determining factor.

“Our rates and charges schedule is very simple. We charge a per passenger fee to the airlines; there are no landing fees here. Airlines pay ‘X’ per passenger, and we are incentivized by that to help the airline fill its seats.”

It is for that reason the Branson team says it can enhance the passenger experience by treating each customer as a VIP traveler.

“Because many municipal airports are owned by government agencies,” says Bourk, “they don’t have the incentive to improve the customer experience. Many airports are viewed as a public utility rather than a service.

“We view the airport as a business which provides a service to the customer. By providing a great level of customer service, we want to build a loyal customer base that wants to use this airport.”

The airport staff is an integral part of all of the airport’s operations, from baggage handling to ticketing. Relates Bourk, if a passenger needs assistance with bags, parking, or finding their way, any airport employee can help. If a passenger rents a car, they don’t even have to touch their bags; the airport staff facilitates the service process at every step.

Apart from being able to offer carriers unique rate agreements, the airport can also grant developmental rights to airlines without the hindrance of a municipal process.

“We are a start-up business,” says Bourk, “and we are permitted for a period of time to give a vendor the opportunity to come into this business as a partner, and build its business free from direct competition.

“We want to have airlines strategically serve different parts of the country, and allow them to serve those markets exclusively without major crossover of feeder traffic to their hubs, to allow them to build those markets,” says Bourk.

John Kirby, AirTran Airways director of strategic planning and scheduling, says Branson is a virgin market, and the carrier is working with the airport as a partner to develop the market. “As a low-cost carrier, it works well for us to come into a market and have the staff supplied by the airport,” says Kirby.

Bourk says he doesn’t see Branson in competition with the Springfield Airport market, 55 miles north of Branson, because it primarily serves the business community, and Branson is looking to serve the entertainment and leisure market. “The Springfield Airport is set up to receive the business traveler, with higher fares. Its fare structure doesn’t match up with what the leisure traveler looks for,” he says. [For more on developments at Springfield, see In the Ozarks, A New Front Door.]

Bourk says the goal for the airport is to get to 250,000 enplanements during the first year. He says there is potential for enplanements to grow to 5 or 600,000 and beyond. The terminal is designed to comfortably accommodate up to 750,000 deplaning passengers per year. “Our goal is to build the service,” he says.

The airport has also set up a unique agreement with Enterprise Rent-A-Car, which is the only rental car company serving the airport. According to Bourk, there are controls for pricing in place so that the rental car agency cannot overprice the customer; but by having a single agency, it doesn’t have to compete with other companies at the airport for the business.

A reflection of the region
Building an airport that reflects the flavor of the community and the region was a very important part of the design process, relates Bourke. However, because the airport is a business, he says they needed to build a low-cost facility. The total construction cost of the steel-framed 58,000-square foot terminal was some $15 million.

“It’s a pre-manufactured metal building; a low-cost facility that we have dressed up to look great and provide a comfortable atmosphere,” says Bourke.

“We have wood out of an 1871 buggy factory from Indiana all over the place; we have 200-year old wooden beams, and water features consisting of the region’s native stone.

“It was important to keep the cost down; but this is also a tourist destination, and this airport is the first impression of Branson that travelers experience. We think we have done a good job to reflect that.”

The construction and equipment required for the air traffic control tower, a contract tower, was also paid for by Branson Airport LLC.

The airport is complete with comprehensive general aviation facilities which offer fuel service, deicing, and private and community hangar space. The Branson JetCenter FBO, owned by the Branson Airport LLC, features a 3,600-square foot executive terminal with pilot lounges and a kitchen/vending area, WI-FI access, and a computerized weather and flight planning station.

Airport officials are currently working with the state tourism board and local businesses on advertising and marketing efforts to promote the airport.

A model to consider
“There are more than 40 countries around the world with privatized airports; we are not the first to think of this,” says Bourk. “It’s being done all over the globe; it’s just never been done in the U.S.

“This group here has decided to build everything, own everything, and operate like a business, without the restrictions and limitations that exist at other airports.

“I certainly believe there are things that can be learned from this project that can be applied to other airports. When this project proves itself, many municipalities will have to look at this model; and airlines will be interested in it as well.

“We strongly believe in the success of this model, and believe we are going to prove to the world that a private entity can run an airport, run it well, and be profitable at the same time.”