Let’s Work Together

Aug. 29, 2013
Airport Business checks in with Gregory Principato as he steps down as president of ACI-NA, with advice that the more aviation industry works together the better off we’ll be

Gregory Principato might aptly be referred to as a member of the dead president’s club, not because he’s read the Harris Baseman novel of the same name, but because he is a student of history and his hobby is to visit the gravesites of dead presidents; something he hopes to complete before his life journey gets too complicated.

While this hobby isn’t the reason Principato, who succeeded David Plavin in the ACI-NA hotseat in July 2005, recently stepped down as president of ACI-North America, it is the pursuit of his personal passions that made it the right time for him to do so. He states it is time for him to "seek new challenges and opportunities” and to travel the world “without having to pack a suit.”

“I just didn’t want to wake up some morning at a certain age and say ‘Gee I wished I’d taken a step back,’ ” he explains.

Airport Business recently caught up with Principato before he closed the chapter on his eight-year ACI-NA term to tap into his insight about the future of the association and the aviation industry in general.

Your plans to retire came out at about the same time as a memo about the ACI-NA’s intent to explore a possible partnership/joint venture with AAAE. What is the possibility of this happening in the near future?

One of the first things my predecessor handed me was a briefing book (from the 80s) about the relationship between the two organizations. The book posed questions like: Should we work more closely together? Should we merge?  With Chip Barclay’s retirement, and mine as well, there is a unique opportunity to look at this again.

 Both airports and the airport business community are asking if there is a better way to do things, a more streamlined way. It makes sense to  look at whether  there should be two organizations, with duplication on  the meeting side, the training side and for sponsorships. On the policy side, there is a sense among members that if we could present a more unified front in Washington, it would benefit the industry in achieving its objectives.

What do you see as the biggest issues facing the aviation industry?
I think the over-arching challenge is that people don’t really understand how important the aviation industry is for our economy. In other parts of the world-- Asia,  the Middle East, Latin America, and parts of Africa--aviation is not taken for granted because they know what it’s like not to have a successful industry. And they are making smart decisions on how to invest in the infrastructure, looking at their place in the world and how to make the best use of it. Here in the United States, and to an extent in Canada as well, the entire aviation industry (airlines, airports, manufacturers) is totally taken for granted and as a result the policy choices we make are often short-sighted.

Frankly, this challenge is one of the reasons I’m very concerned about the paths that Airlines for America (A4A) and the Air Line Pilots Association (ALPA) are going down. They are advocating a national airline policy and “leveling the playing field”, and it seems to me that they’re doing what the steel and automobile industries did after World War II when people said, ‘Oh my goodness, other countries are eating our lunch; they’ve got more efficient ways to make cars and to make steel, we need to protect ourselves and we need special favors.’ It was only after the auto and steel industries stopped whining about protection and started investing and competing they did well. I think we need to go that direction in aviation. The best way to beat foreign competition is to make strategic smart policy decisions and invest in modernizing infrastructure.

How do you get around the mindset that the government owes the industry special favors?

It’s hard to change that mindset, and it’s a work in progress.

We did an economic impact study a year ago, to show the economic impact that airports have in the United States. At the same time, A4A did their own economic impact study and their numbers were similar to ours. But when I asked them to work with ACI-NA to jointly message this to the Department of Commerce and others, they did not respond to the idea. I think that’s a shame. The entire aviation industry needs to get together. Yes we have some differences among us but we agree on most things so let’s come together and present a unified front.

What needs to happen to get airports the financing they need to update their infrastructure?
Right now we have an out-of-date financing framework and an out-of-date governance framework.

Everywhere you turn, there is a constraint, with federal grant programs coming down and debt piling up. In order to globally compete U.S. airports need the ability to generate their own resources in the way that airports around the world do.

A lot of airport investment comes from bonds, which is debt, and U.S. airports are carrying about $150 billion in debt. Even with the low cost of capital and their excellent credit ratings, that makes them vulnerable.

If you travel to places like Dubai and others, a lot of the financing comes from passenger user fees, similar to the U.S. passenger facility charges (PFC) mechanism. In Dubai, however, there is no cap on it. The PFC there is $20. In Canada there is no cap either, and on average its $20. I am not saying U.S. airports should raise these fees to $20 immediately; most of them won’t go up much at all. But currently there is a federal limit on the amount that can be charged.  Rather than the U.S. government making that decision, the airport and its local governing body should determine that amount.

It’s time to give airports the financial freedom to generate the resources they need and use the PFC mechanism for the benefit of passengers and the community. But in order to best use  this financial freedom, airports need to work more closely with airlines. They need to say: Here’s our capital plan. What do you think? How can we work together on this? And, ultimately, if an airport and an airline want to work together to put a project in place, and finance it a certain way, the federal government should have nothing to say about it as long as there is full disclosure.

What’s ACI-NA’s stance on privatization?
ACI’s position has always been if an airport wants to privatize, it should be allowed to, and if it doesn’t want to it shouldn’t have to. When I arrived at ACI-NA, the intellectual momentum in the U.S. industry was going in the privatization direction. Now that intellectual momentum has stopped. There are still people interested in it as a concept. But if you look around the world, a growing number of airports are run on some kind of private concession and a more business-like model.

The United States has a pilot program for privatization but it’s proved very hard to participate largely because of the requirement for 65% of the airlines to approve filing the application. We need a better program for privatization. The San Juan project is a good development, but I’m not sure how much affect it will have on mainland airports. If Chicago-Midway was to have privatized a few years ago, and the Mayor had held up a check for $2.5 billion, I think a lot of other mayors around the country would have said: ‘Maybe we should get a piece of that.’ It would have really opened the program up. We will have to see what happens with the current Midway proposal underway at FAA.

Why the renewed emphasis on customer service and the passenger experience in today’s airports?

It used to be if there was a delay or cancelled flight, the airlines would take pretty good care of you. Now if the delay was due to weather or air traffic control issues, and the regulations don’t require the airlines to provide assistance to passengers, they don’t. But the customer still has to be taken care of so airports have had to step in to fill the gaps, especially at large connecting hubs where passengers can experience long delays during severe weather events.

For many people, traveling is a daunting experience. You spend a lot of time in the aluminum tube. When you’re in the tube, it’s just a tube with seats, but when you get to the building and all it has to offer is a hot dog stand, it makes the travel experience even worse. Today you get a real sense of the community when you arrive at the airport, with  local restaurants and amenities providing a great experience for  the travelers … and it makes them want to come back. If you’re the airport operator, you recognize people have a choice and you want people to want to come back … and that’s why you invest in improving  the passenger experience.

TSA and airports seem to have a love-hate relationship. Where does that relationship stand today?

When I first got the job, three-quarters of the calls I got from airport directors were to complain about the TSA security situation at their airports. That’s changed. I’m not going to say airport directors think the TSA is a model government agency but things are much better. People were worried that some of the new technologies in use would mean a return to long lines but they have not, which can be attributed to the TSA and airports working together.

However, Custom and Border Protection remains a very difficult problem to solve. In a lot of larger international gateways, it has become the No. 1 problem, with long lines and waits in the customs hall. The use of technology in the CBP process, which ACI-NA has long championed, has huge opportunities.  I’m  optimistic things will change for the better here as well.

When you think back on your tenure with ACI-NA, what are you most proud of?

You should leave things better than they were when you found it. I think I’ve done that. By every measure, whether it’s the financial health of the organization, reforms made in the committee structure, bringing airport and business members into fuller participation, or work on the regulatory and legislative side, we have made great progress and have built much stronger relationships.

Finally, I’m proudest of the ACI-NA staff we’ve assembled … We have a really talented, diverse group of people. I’ve been on some good teams but this one is the best.