Tucson Way: Unique authority structure enables measured growth at TUS

June 8, 2004

Cover Story

The Tucson Way

Unique authority structure enables measured growth at TUS

By Jodi Richards

June 2004

TUCSON ­— In 2001, Tucson International Airport (TUS) embarkedon a three-phase improvement program, its first major program since1985, according to Suzanne McLean, VP planning and development. “Wehave the history of doing massive upgrades, and then we leave everythingalone for about 15 years,” she says. “Which is not like most airports, because they’re always under construction. I like our way better.” This wave of improvements will set the stage for Tucson’s growth for years to come.

McLean has been with the Tucson Airport Authority for some 19 years.

Airport president/CEO Bonnie Allin, A.A.E began her airport career at TUS in 1976. After eight years, she moved to Texas to take a position at Corpus Christi International Airport. In the summer of 2000, she returned to Tucson as vice president of aviation services, ultimately stepping into her current position upon the retirement of long-time head, Walter Burg.

TUS is governed by the Tucson Airport Authority. Established in 1948 by state charter, according to director of information/government affairs Paula Winn, the authority is a nonprofit organization, comprised of more than 100 local businesspeople. “It’s a model envied by all airports,” says Winn. “It’s very efficient and totally apolitical.”

Suzanne C. McLean (left) and Bonnie A. Allin, A.A.E.

Adds Allin, “It’s a great way to do business as an airport.”

A joint-use facility, TUS is also home to the largest Air National Guard training base in the country, and some 63 percent of the traffic at the airport is general aviation traffic.

TUS is the only commercial airport serving Southern Arizona, and even considers parts of Mexico in its catchment area. One of the fastest growing areas of the country, Allin says the airport is striving to be proactive in addressing future growth. “We’re actually behind the power curve on our terminal,” she says, “and we’re playing a little bit of catch-up.

“We are just completing the benefit/cost analysis of expanding our third runway to accommodate commercial carriers versus just GA (general aviation), and we are starting the environmental next fall. Because when the FAA came out with their forecast study, we were on their list. We’re one of the ones that are on the top of the lists as being a congested airport; if we don’t have this runway in place by 2013, we’re going to experience significant delays.”

Long-term, the airport has land adequate for a fourth runway, “Which will take this airport out 70 to 100 years, whatever may be,” says Allin.

The development project begun in 2001 is divided into phases, explains McLean. The first phase includes an 18,000-sq.ft. consolidated rental car facility, a 2,200-car parking garage, and revamping the landside of the terminal, which involves adding 56,000 sq.ft. in the baggage claim area, and 27,000 sq.ft. in the ticketing area.

“We were way over capacity in our bag claim area,” explains Allin. “And we had congestion in our ticket lobby.”

McLean adds the HVAC system was in dire need of upgrades, and there was no flight information display system throughout the airport. “We had no fiber optic system, everybody was running their own individual lines to their own individual electronics systems,” says McLean.

This portion of the project is expected to be complete by January 2005 and capable of handling 7.5 million passengers annually. Currently, TUS has some 3.6 million annual enplanements.

McLean says the total tab is running some $83 million thus far. The next phase, which is still in the planning stages, will address the needs of the concourses. “We have to see what would have to be done to the concourses, the outbound baggage systems, restrooms, and concessions to help them match the capacity of the front part of the terminal,” she says. “It doesn’t necessarily mean we’ll launch into building it to full capacity, but we’ll at least have a footprint of what we plan to ultimately do.”

The Tucson Airport Authority has invested
some $83 million in landside improvements.

She agrees that the plan is quite ambitious, but adds that the airport’s current master plan tells them that the airport will hit seven to 7.5 million passengers in some 25-30 years. “Yes, it’s kind of an aggressive program, and yet we didn’t have a whole lot of options,” she says. “We really needed to upgrade our systems and the only way to do that was to tackle a big chunk of the building; and that’s what we’ve done.”

The rental car facility is a self-supporting facility, says McLean, through rates and charges and use agreements with the rental car companies. The terminal work is funded primarily through passenger facility charges, which TUS has at $3. “Now that we think we will be moving toward some concourse expansion,” she says, “our intention is to file a second application for an extended collection.”

McLean explains the airport board would make the decision whether or not to increase the PFC to the current maximum, $4.50. According to Winn, TUS was one of the last U.S. commercial airports to begin collecting PFCs in 1998. “We could well be the last one to go for the extra $1.50 as it turns out,” she adds.

The concourse development portion of the expansion will have some differences in funding sources, says McLean. “We will have some elements that are not eligible, like concession modifications, that we will do as probably a two-funded part project. The public spaces are all PFCs, but the concessions enhancements will be paid for through rates and charges.”

According to McLean, the airport has been involved in a very active land acquisition program, which now puts TUS at some 8,000 acres. “We’ve almost acquired all of the buffer land that we’ll need to protect our current and future runways from encroachment and noise issues,” she says.

Much has been made about the advantages and disadvantages of common use terminal equipment (CUTE). According to McLean, airlines at TUS, including dominant carrier Southwest Airlines, are not eager to make the move toward CUTE. “We have installed a common use backbone system,” she says. “We will no longer allow our airlines to provide their own fiber optic cable and systems. They must tie into our backbone system, but they still have the ability to have their own programs and function autonomously.

Along with all the improvements the airport has planned, McLean says there is a fine balance between a state-of-the-art terminal and giving the airport the low-profile, hometown atmosphere the community desires. “Our community is very concerned that we not become just the typical, big, massive, hard to get to airport. They love our small town airport. They love feeling like they’re coming home. So in this expansion we tried to stay somewhere in the middle of enhanced, improved, bigger, state-of-the-art, but it’s still Tucson’s hometown airport.”

The landside portion of the terminal is designed
to handle nearly 7.5 million passengers.

TUS was fortunate enough to be among the first airports to meet the December 31, 2002 deadline for 100 percent baggage screening with what they call an “almost in-line” system. The Transportation Security Administration (TSA) built five houses for explosives detection system (EDS) machines, all at TSA’s expense. “It’s not a full in-line baggage system because there’s some manual transference that has to occur,” explains McLean.

McLean says so far the system has worked quite well, but there is some concern that TSA only built what was necessary at the time, without any potential for growth. “Part of our concourse work is going to be to see what modifications or additions we might need to grow that space,” she says.

Like most commercial airports, TUS is dealing with its share of unfunded security mandates. So far, the airport has invested some $3.4 million in security enhancements, much of that going toward manpower, such as additional officers required to comply with TSA requirements. McLean says some $340,000 has been reimbursed by TSA, leaving the airport with a $3 million balance.

McLean explains the airport has been trying to absorb the increased security costs by “being much more frugal in our operations. We did not raise the landing fees; we did not do any layoffs, but we have a lot of unfilled positions through attrition. We’re working harder, smarter, with fewer people.”

Recently, airport officials met with the airline representatives to discuss this challenge. “Recognizing that we’re not seeing any big source of reimbursement coming back for these security costs,” says McLean, “we needed to start to tackle this with our airlines as partners.” She adds that the airport has considered raising landing fees, as many airports have done, or charge the airlines an additional security fee that would allow the landing fee to remain the same.

Diversifying Revenue Fueling Development

Tucson Airport Authority president/CEO Bonnie Allin, A.A.E., says much industry talk revolves around airport/airline economics, particularly with current and potential bankruptcies. One major question Allin poses, “How do you diversify your revenue base as an airport so you’re less dependent on airline revenue?”

While still related to the health of the airlines, airline servicing is being looked at as a possible revenue source for airports and unburdening for airlines.

TUS is one of the few remaining airports in the country still providing fueling services for the airlines. According to Allin, many airports left the fueling business because of Environmental Protection Agency regulations, and other associated costs.

Allin says Tucson has a fueling consortium. “We provide the service to the airlines who purchase the fuel and we pump it,” she says. “We are competing just like other private entities that compete at other airports and provide the service. And if we weren’t providing outstanding service, the airlines would go to someone else for their contract.”

According to Paula Winn, director of information/government affairs, the airport pumps some 33 million gallons of jet-A and some 199,000 gallons of Avgas. TUS generates some $1.5 million from fuel flowage. “For revenue from all resources pertaining to fuel sales, the amount is about $5 million,” she adds.

As for going beyond fueling to provide ground support services for airlines, Allin says there isn’t a need at TUS. However, “at a smaller airport it might be a very good source of revenue. It would depend on the airport and the cost structure.”

Allin says TUS has also been working to develop the industrial/commercial side of the airport. “We are fortunate that we have quite a bit of land,” she says. Airport officials are looking to attract more aviation-related tenants to the airport. “We have over 100 tenants, including Bombardier, Learjet, and Raytheon.”