Private Ventures

June 8, 1999

Private ventures

New entrants see opportunity in the U.S. market

BY Monica L. Rausch, Associate Editor

June 1999

Does this scene sound familiar? A developer approaches a community about the multitude of opportunities for developing its airport — minus the runways and FBO. He possibly invisions the land housing an industrial park or cargo complex while the city leaders see a new stream of revenue.

More and more, U.S. airports are attracting companies that see the investment and business opportunities they offer. Among the newcomers are Avion Management Services, Inc., (AMS) an aiport contract management company, and Plane Stations, an aviation development firm.

Plane Stations is helping to carry out the business plans of its parent company, the Wiggins Group, PLC, a London-based real estate development firm. In the next seven years, says CEO Clinton Williams, the company plans to purchase/lease and develop sites at up to 20 airports in the United States. Its site at Smyrna Airport just outside Nashville, TN, is a pilot for this program.

Avion Management Services manages the day to day operations at the Oakland Troy Airport, 20 miles from downtown Detroit, and recently landed the management contract of Sandusky County Regional Airport, a new airport southeast of Toledo, OH. Anne Esposito, president of AMS, says management of other airports is also in future plans for the company.

Here's a look at what these two new players are doing and why they decided to enter the aviation arena.

From across the pond
Wiggins, PLC, got into aviation when they purchased the Manston Airport in England, some 60 miles southeast of London, according to Tony Freudmann, senior vice president of the company.

Right now the company is in the process of leasing some 300 acres in Smyrna, which will be a typical arrangement for the company with future airports. "Almost all of our activities in the States will be governed by some kind of a lease or a joint-venture partnership arrangement," says Williams.

If the company can land a contract for managing the airport, it will do so, says Freudmann, but developing land on an airport is its primary goal. Adds Williams, "We're not interested in running the day to day operations, as so much as we are developing the cargo and passenger services and doing retail and commercial development both on and off the airport."

In Smyrna, Plane Stations will build the structures, manage the cargo and passenger activities, and do "everything from from contracting all the way through flight deliveries," says Williams. Its primary customers on the passenger service end will be tourists out of Europe, say Williams and Freudmann. The company plans to use existing regional airlines and charter companies in the U.S. and Europe and act as the facilitator for both passenger and cargo transportation.

The majority of flights will be point-to-point, targeting a niche that doesn't exist right now for European travelers. Most flights on air carriers require changing planes both in Europe and the U.S., says Freudmann. "We're after an entirely new market; we're not trying to compete with the majors and take part of their marketshare away."

Adds Williams, "We don't have any intentions of setting up a hub and spoke system like major airlines...It will be charter work primarily into and out of the United States. And (with) some of that, we're going to transfer traffic to other airlines, so it's a complementary process rather than a competitive process."

The smattering of some 20 U.S. developments will complement the 80 or so airports or airport developments Wiggins is working on in Europe, says Williams. There Wiggins will either purchase the airports outright or have some type of lease arrangements. The company is currently in the process of aquiring a number of airports in Germany, France, and Italy, reports Freudmann.

Says Williams, "The company over time, in the next five to six years, will develop a series of these into a network in Europe and the United States. We'll probably end up going global at some point."

Part of the premise behind a network of developments at airports is to build a trade exchange for retail development, says Williams. Retailers in Europe would be able to bypass import/export companies to set up retail outlets directly on the airports in the U.S. Besides retail, the company will also facilitate the building of hotels and convention centers at certain sites. What the company chooses to develop will be driven by both demand and location restrictions, says Williams.

Promoting an Airport's Value
For Avion Management Services, the lure of a business opportunity wasn't the only draw to airports for the companies' founders. Anne Esposito, a corporate pilot and former instructor in aviation management at Easter Michigan University, says the number of airport closures was also an incentive for her and her husband, Nicholas, vice president of AMS, to get into airport management.

While working on various committees on saving airports for Michigan's Aeronautical Commission, Esposito found that airports are closing because small municipalities don't see their value. "The airport's neglected," says Esposito, "They don't know about the airport, they don't care about the airport...and therefore we lose an airport because it's gone by the wayside."

"As a private company," adds Esposito, "We can come in and educate those municipalities as to what's going on...and show them the economic importance of airports."

Esposito offers municipalities a turn-key solution for airport management with an emphasis on making the airport more profitable than it was under government management.

Part of that efficiency comes from being able to find the right staff, she says. As a private company, Esposito says she doesn't have to deal with all the red tape associated with hiring or terminating a government employee. "If someone works out or doesn't work out, it's very easy for us to put them in another situation or fire them."

A customized approach AMS tailors its services to fit the airport, says Esposito. At the new airport in Ohio, AMS will be responsible for more than just the day to day operations it manages at Troy.

At Sandusky, AMS has entered into two separate contracts with the airport's board authority: one for airport management and one for the building of facilities and the operation and ownership of an FBO.

The FBO's services will include charter and flight training and will cater to the main traffic on the airport, which will be corporate operators. "We're going to have every facility that we can there to encourage corporate traffic," says Esposito

As for running other airports, the company hasn't had a hard time selling its services to municipalities, says Esposito, but it approaches expansion with caution.

"We have municipalities knocking on our doors every day, and we have to be very careful what we accept," says Esposito. "We have about three or four other airports on the back boiler that we are negotiating and considering, but we are not going to jump into anything. I think it's fatal if you grow too fast, so we're taking out time with it."