Evolving Pan Am

Sept. 8, 1999

Evolving PAN AM

A forerunner in contracting airport management sees British parent as a catalyst for growth — including the FBO services market

BY John F. Infanger, editorial director

September 1999

ATLANTIC CITY, NJ — In airport management circles, they are seemingly pervasive: Managers who earned their stripes with Pan Am World Services, a company which was one of the early players during the 1970s for private contracting of airport management. They have an industry kinship, are part of a fraternity.

John Harden is one of them. Today, he is vice president of business development for AMPORT, the former Johnson Controls aviation division and the once-Pan Am World Services. Says Harden of one of his company's sponsors, the Port Authority of New York and New Jersey: "All of the people that are there now, we were all Pan Amers originally. So, we have a close working relationship with the staff there."

The history and name are not lost on the new owners, who state in the current company literature, "Formerly Pan Am World Services, and more recently as part of Johnson Controls..."

The company mission statement, however, has been expanded beyond airport management to include airport development, fixed base operations, and other aviation and airline services.

A British, intermodal connection
AMPORT, based at Teterboro, NJ, is a division of American Port Services, Inc., which in June, 1998, was acquired by Associated British Ports. ABP, says Harden, is the equivalent of the British Airports Authority, which evolved out of a privatization effort with London's airports. ABP develops and operates 23 seaports in the United Kingdom.

Explains Harden, "They see the U.S. as a target of opportunity, and saw the acquisition of airports (from Johnson Controls) as a good fit for them. There's a logic to that; they already have rail lines to ports. There's an interconnectivity; there are prospects for bringing the different sides together."

Expanding Aviation Services
Meanwhile, AMPORT has been building on the interconnectivity of services at the airport, moving significantly into the FBO arena. It's in the third year of an FBO leasehold at Louisville International, where it has opened an 84,500-sq.ft., $7.6 million business aviation complex, and recently broke ground on a 10,000-sq.ft. business aviation center at Pittsburgh International (after withstanding a drawn out debate over what to do with the old airline terminal). In 1995, the company moved into ground handling with contracts at Birmingham, AL, and Maui, HI. Earlier this year, it announced the acquisition of Dawn Aero at New Castle County Airport in Wilmington, DE.

"Dawn was a new direction for us," explains Harden. Particularly attractive, he says, was that Dawn Aero had moved into the business aviation arena (Atlantic Aviation is headquartered across the field), as well as handling cargo for nearby automotive manufacturing facilities.

"Dawn had acquired an existing cargo business, providing just-in-time services and arranging the movement of cargo from 737s to Learjets. It's no-nonsense. We own a fleet of trucks and we literally transport all those parts to the assembly line. We do it on call, 24 hours a day."

With growth occurring in the business aviation segment and at a time when FBOs are frequently being bought and sold, there's opportunity for a company like AMPORT to continue to expand, says Harden.

AMPORT will continue to pursue other FBO opportunities and could take the acquisitions to what Harden terms "another level" — that is, get in on bidding for more prominent, higher end operations. The new parent, he says, has the capital to back up such moves.

At the same time, AMPORT plans to remain aggressive in pursuit of additional airport management contracts, according to Harden. "We're giving equal weighting to both sides of the business," he says. "Both are very, very competitive. The airport side, however, has a little bit of a different angle to it because ... you are going through these intensive, challenging processes. On the FBO side, you have a little bit more control over the arena because in addition to competing, you also have the acquisition option available to you."

Airport Management, Development
The company currently has airport management contracts at six airports, including here at Atlantic City International where its contract runs through 2011. Most of the contracts are for five years, which are rebid at term. ("I'd like to think that in some respects tenure speaks to the quality of a company's performance," laments Harden of the rebid process.)

In 1996, AMPORT signed a contract with Tweed New Haven Airport (CT) to provide management and consulting services as the airport was transfered to authority control. A key focus at New Haven is on commercial air service development, with current service from one carrier (U.S. Airways Express). "This is more of an integral relationship," says Harden of the contract, which runs for ten years and links performance to compensation.

"In exchange for a longer term, we became more of stakeholder. We're taking our earnings and plowing some back for long-term growth.

"There are provisions in the arrangement that allow for us to be rewarded when a trigger occurs. For instance, if an airline does come in, there's a part of the renumeration packet that allows to share in the benefit with the authority. In many respects, it's an incentivized contract; so we're motivated."

Where Pan Am was once one of only a few players pursuing airport management contracts, there is today a heightened level of competition for the business. "It's changed the dynamic of our business," says Harden.

"One of the interesting perspectives I've gotten in this business is, there's no one set mold or formula. There are different ways to package deals and arrangements with airport owners.

"And some are beginning to emerge as stakeholder interests, and that's very much a part of our strategic vision — to identify where those opportunities are," he says. In line with that investment strategy, AMPORT is in negotiations on airline terminal and cargo development projects.