22 Certified Member (C.M.) Finance and Administration of Airports PDF

Certified Member (C.M.) FINANCE AND ADMINISTRATION OF AIRPORTS MODULE 1 Certified Member (C.M.) 2022 SEVENTH EDITION @All Rights Reserved © 2022 American Association of Airport Executives By Jeffrey C. Price, C.M., and Dr. Jeffrey S. Forrest -- Leading Edge Strategies Jeffrey Price and Jeffrey Forrest are Professors of Aviation and Aerospace Science at the Metropolitan State University of Denver. Stephen M. Quilty, A.A.E., wrote the original version of the modules with periodic updates by the AAAE Board of Examiners, AAAE staff and industry experts. 2 / American Association of Airport Executives Module 1 AAAE C.M. Body of Knowledge Modules Module 1 Finance and Administration of Airports AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 3 Certified Member (C.M.) Table of Contents Introduction to the AAAE Certified Member (C.M.) Modules.................................................................................... 8 Focus of the C.M. Materials................................................................................................................................... 8 The C.M. Is Focused on The Art and Science of Airport Management................................................................ 9 Studying for and Passing the C.M. Exam............................................................................................................. 10 Module Objectives....................................................................................................................................................... 11 Airport Fundamentals.................................................................................................................................................. 12 The Origin and Evolution of Airports in the United States......................................................................................... 12 Introduction.......................................................................................................................................................... 13 Milestone Events in the Operation and Development of Airports.................................................................... 14 The Birth of Commercial Aviation........................................................................................................................ 14 Early Airport Development................................................................................................................................... 16 The Federal Aviation Administration................................................................................................................... 16 Industry Changes and Trends............................................................................................................................... 17 The Airport Environment and Its Stakeholders.......................................................................................................... 18 Airport Stakeholders............................................................................................................................................. 19 Aeronautical Users................................................................................................................................................ 19 Non-Aeronautical Users and the Community..................................................................................................... 22 Airport Categories........................................................................................................................................................ 22 The Aviation Industry............................................................................................................................................ 22 Airports in the United States................................................................................................................................ 23 Airport Types......................................................................................................................................................... 24 Commercial Service Airports................................................................................................................................ 25 General Aviation Airports..................................................................................................................................... 26 Military Shared- and Joint-Use Airports.............................................................................................................. 28 Understanding Flight Operations and the Aviation System...................................................................................... 29 Introduction.......................................................................................................................................................... 29 Flight Regulations.................................................................................................................................................. 29 Private Flight Operations...................................................................................................................................... 29 Commercial Flight Operations............................................................................................................................. 30 Busting Myths....................................................................................................................................................... 31 Flight Operations................................................................................................................................................... 32 Aerial Navigation................................................................................................................................................... 34 4 / American Association of Airport Executives Module 1 Runway Approaches............................................................................................................................................. 35 The Regulated Airport.................................................................................................................................................. 36 Introduction.......................................................................................................................................................... 36 The Airport Sponsor and Airport Management.................................................................................................. 36 Historical and Emerging Challenges to Airport Management............................................................................ 37 Airports Really Are Different................................................................................................................................ 39 Airport Sponsor Structures................................................................................................................................... 40 Municipality (city/county) Operated Airports..................................................................................................... 40 Airport Authority-Operated Airports................................................................................................................... 41 State and Joint City, or Joint State-Operated Airports........................................................................................ 43 Airport Privatization.............................................................................................................................................. 43 The Airport Executive (aka Airport Director, Manager, CEO, Director of Aviation)........................................... 45 Airport Organization............................................................................................................................................. 47 Federal Regulations Affecting Public-Use Airports............................................................................................. 49 FAA Regulations Pertaining to Airport Operators............................................................................................... 49 TSA Regulations Pertaining to Airport and Aircraft Operations......................................................................... 50 The Notice of Proposed Rulemaking (NPRM) Process....................................................................................... 51 The Role of the Federal Aviation Administration................................................................................................ 51 History and Structure of the FAA......................................................................................................................... 51 FAA: Airports District Office.................................................................................................................................. 52 FAA and ICAO: Policy Guidance and Direction.................................................................................................... 53 FAA Regulatory Enforcement............................................................................................................................... 54 FAA: Sponsor (Grant) Assurances: The Hidden Regulations............................................................................... 56 FAA: Regulatory Enforcement.............................................................................................................................. 59 FAA Regulatory Enforcement: Part 13 Complaints............................................................................................. 60 FAA Regulatory Enforcement: Part 16 Complaints............................................................................................. 61 Section II: Airport Administration............................................................................................................................... 63 Introduction.......................................................................................................................................................... 63 Airport Land Use.......................................................................................................................................................... 63 Federal Land Use Requirements and Restrictions.............................................................................................. 64 Off-airport Land Use............................................................................................................................................. 64 On-Airport Land Use (Aeronautical vs. Non-Aeronautical)................................................................................ 65 Grant Assurances related to Land Use................................................................................................................. 65 Mitigating Incompatible Land Use....................................................................................................................... 66 Residential Development on and around Airports............................................................................................. 67 AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 5 Certified Member (C.M.) Permitted Activities.............................................................................................................................................. 68 Rules and Regulations.......................................................................................................................................... 68 Minimum Standards............................................................................................................................................. 69 Economic Nondiscrimination............................................................................................................................... 71 Exclusive Rights..................................................................................................................................................... 72 Air Carrier Mandatory Access.............................................................................................................................. 73 Other Permitted Activities.................................................................................................................................... 73 Self-Fueling/Self-Service Fueling......................................................................................................................... 74 Through-the-Fence Agreements........................................................................................................................ 76 Airport Financial Management................................................................................................................................... 77 Introduction.......................................................................................................................................................... 77 Airport Accounting Functions.............................................................................................................................. 78 Airport Finance and Administration Functions................................................................................................... 78 Airport Budgeting................................................................................................................................................. 79 Budget Techniques................................................................................................................................................ 80 Budget Reporting.................................................................................................................................................. 81 Required Airport Financial Reports and Financial Performance Indicators....................................................... 83 Airport Revenues and Expenses.......................................................................................................................... 84 Airport Revenues.................................................................................................................................................. 84 Common Aeronautical Revenue Sources............................................................................................................ 86 Common Non-Aeronautical Revenue Sources................................................................................................... 87 Non-Operating Revenue Sources......................................................................................................................... 88 Airport Revenue Use Policy (Revenue Diversion)............................................................................................... 89 Federal Policies on Airport Rates and Charges Setting....................................................................................... 91 Fee and Rental Structure...................................................................................................................................... 91 Self-Sustainability.................................................................................................................................................. 93 The Rate Base........................................................................................................................................................ 93 Airport Business Operations........................................................................................................................................ 95 Introduction.......................................................................................................................................................... 95 Airport Strategic Business Planning..................................................................................................................... 95 Federal Procurement Requirements................................................................................................................... 96 Typical Procurement Steps................................................................................................................................... 97 Contract Type and Terms...................................................................................................................................... 97 Appropriation Selection Methods....................................................................................................................... 98 Disadvantaged Business Enterprise (DBE)........................................................................................................... 99 6 / American Association of Airport Executives Module 1 Airport Concessionaire Disadvantaged Business Enterprise (ACDBE).............................................................101 Information Technology............................................................................................................................................. 101 IT Vocabulary Lesson (this list is not testable)................................................................................................... 102 Critical Airport IT Systems................................................................................................................................... 103 The Importance of IT.......................................................................................................................................... 104 Airport Systems and Functions.......................................................................................................................... 105 Integrating Airport IT Systems............................................................................................................................ 107 Geographic Information Systems (GIS).............................................................................................................. 108 Future IT Innovations at Airports....................................................................................................................... 109 Cybersecurity...................................................................................................................................................... 110 Internet Threats................................................................................................................................................. 111 Airport Insurance and Liability........................................................................................................................... 113 Commercial Development, Leasing, and Property Management...................................................................115 The Sponsor’s Role in Airport Development..................................................................................................... 115 The Leasehold Agreement................................................................................................................................. 116 Various Airport Leases and Use Agreements.................................................................................................... 118 Concession Leasing............................................................................................................................................. 121 Airline/Airport/Aeronautical Use Agreements.................................................................................................. 124 Principles of Airport Development.................................................................................................................... 125 Airport Capital Funding.............................................................................................................................................. 126 Introduction........................................................................................................................................................ 126 The Airport Improvement Program (AIP).......................................................................................................... 127 AIP Funds............................................................................................................................................................. 127 Types of AIP Grants............................................................................................................................................. 128 Project Eligibility.................................................................................................................................................. 129 Allowable Costs................................................................................................................................................... 131 FAA National Priority System............................................................................................................................. 131 The Grant Process............................................................................................................................................... 132 Other Sources of Airport Capital Monies.......................................................................................................... 133 Passenger Facility Charges (PFC)........................................................................................................................ 133 Bonds................................................................................................................................................................... 135 Other Capital Funding......................................................................................................................................... 137 Summary.................................................................................................................................................................... 137 Acronyms................................................................................................................................................................... 139 AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 7 Certified Member (C.M.) Introduction to the AAAE Certified Member (C.M.) Modules The AAAE Certified Member Modules provide a summary of airport management as a practice and a profession. The material contained in each module provides generalized explanations and applications of airport management skills common to many domestic and international airports in the U.S. The materials can be used as a daily reference and field guide for the newly appointed airport executive but should not be considered the final authoritative document on any particular regulation, practice or guidance. Decision-making should not be based solely on the information in this course material. Furthermore, several management disciplines such as human resources, business communication, accounting, budgets, labor/employee relations, workforce diversity, project management and economics are referred to, but these modules are intended to focus more on airport-related management practices rather than strict management disciplines. Supplemental reading in these areas is recommended as a means of rounding out an airport executive’s knowledge of management. These modules do not represent the entirety of the material an A.A.E. candidate is expected to know for the final oral examination. Candidates are expected to conduct additional research and study in the subject areas to prepare for the oral examination. Periodicals such as AAAE’s Airport Magazine, FAA Advisory Circulars, FAA Orders, and research projects such as the Transportation Research Board/Airport Cooperative Research Program (TRB/ACRP) project listings are excellent resources for up-to-date application of this information and in-depth studies. “When you’ve seen one airport, you’ve seen one airport.” — Airport Industry Proverb A significant challenge in writing the Certified Member materials is capturing the policies and practices in use at airports throughout the U.S. Each airport has its own unique geography and operating characteristics, along with its own regulatory interpretations, local practices, and influences from state and local regulations. It is impossible to capture accurately how each public-use airport in the U.S. operates at all levels of its operation. The C.M. program attempts to tie all materials to industry regulations; legal decisions where applicable; FAA Advisory Circulars; FAA Grant Assurances; FAA Orders; FAA, TSA, and other relevant regulations; and, where possible, appropriate guidance documentation. Best practices often are tied into other published works, such as: Airport Cooperative Research Program studies; peer-reviewed research (where possible), such as the Journal of Airport Management and other academic journals; and accepted textbooks on various areas of aviation and airport management. Special thanks to: Rachel Barth, Jeannette Hilaire, Jeff Kohlman, Jackie Rodzen, Pat Rowe, and Dave Ulane for their contributions to certain sections of the C.M. modules. Thank you to the many C.M. candidates who have provided feedback, a huge thank you to Barbara Cook for copy editing the modules, and to Amy Calliari from AAAE for all of her support. SPECIAL NOTE: At the time of this writing the nation is continuing to emerge from the 2020 Covid pandemic. Many of the numbers related to passenger enplanements and flight operations, cargo, and concepts related to airport design that are affected by Covid are not reflected in this version of the modules, as it’s too early to identify the total impact of the pandemic on airports. Focus of the C.M. Materials The C.M. modules are drafted from an academic perspective. These are the baseline practices, procedures and polices most closely related to the content of the FAA, Transportation Security Administration (TSA), Environmental Protection 8 / American Association of Airport Executives Module 1 Agency (EPA) and other industry regulations; legal decisions; FAA Advisory Circulars; FAA Grant Assurances; FAA Orders; and publicly available TSA guidance and requirements. Where possible, we include best practices and the results of peerreviewed research projects, such as: the Airport Cooperative Research Program studies; Program for Applied Research in Aviation Security; peer-reviewed research (where possible), such as the Journal of Airport Management and other academic journals; and accepted textbooks on various areas of aviation and airport management. The C.M. Is Focused on The Art and Science of Airport Management The modules’ primary focus is on airport-related management practices rather than basic business management, such as human resources, business communication, accounting, budgets, labor/employee relations, workforce diversity, project management and economics. The authors recommend supplemental reading in business management and public administration principles to round out your knowledge of airport management. The C.M. materials serve as their own professional recognition, and the baseline knowledge for the Airport Accredited Employee (A.A.E.) process. The material within these modules is the entirety of what a C.M. candidate needs to know to pass the C.M. exam. However, for those of you who will take the next step to pursue your A.A.E., you will need to know the C.M. materials, plus additional information for the A.A.E. final oral examination. The insurmountable challenge in a body of knowledge, such as the Certified Member materials, is attempting to capture ALL of the policies, practices, regulatory interpretations, and dozens of other areas used by U.S. airports. A common refrain we hear is, “That’s not the way it’s done at my airport,” as if to say their way is the only way something can and should be done. Although airports operate with a common set of regulations and grant assurances, from there the variables from airport-toairport become exponential. Here is a short list of “why” there is not a C.M. course that addresses all aspects of airport management: Different regulatory interpretations by federal agencies, airport sponsors, airport personnel, etc. Personal agendas of the board or management. Airport resources, or lack thereof. Willingness to accept risk. Practical situations. Airport geometry and the surrounding terrain. State and local regulations, laws and policies. Cultural differences. Grandfather agreements. Sweetheart deals. Unchallenged airport leasing, rate setting and property management practices. Different types of commercial activities. Predominant, or most influential tenant(s). Regulatory inspector preferences and level of comfort in airport policies and practices. Commercial service airport sizes. Commercial service airport versus general aviation airport characteristics. Previous lawsuits or FAA Part 13 or 16 complaints, decisions and adjudications, settlements. Dominant (or reticent) personality of the airport director or board members. Relationship of the board to the elected officials. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 9 Certified Member (C.M.) Various aeronautical use agreements. Other characteristics such as joint or shared military/civil use airports, or proximity to certain areas of national interest, such as Washington, D.C. Charismatic and influential current or past tenants, board members, or members of the community. Importance or lack of importance of the airport to the community. Airports with unique tenants or operating characteristics such as Boeing Field or airports with fire-tanker bases. “It’s a mystery, we’ve just always done it that way.” Studying for and Passing the C.M. Exam You must score 70 percent or higher to pass the C.M. exam. The exam is 180 multiple-choice questions covering the entirety of the modules. The exam is equally weighted so that the number of questions correlates to the length of the section. Thus, longer module sections will contain more test questions on that topic. The authors made an effort to balance out the information throughout the modules. Still, some areas of airport management require more explanation than others, so some sections are in-depth. Types of Questions. The exam attempts to focus on the cardinal information for each section rather than minutiae. For example, the number of days an airport operator has to report a Part 139 deviation to the FAA is a valid question, whereas how many points a runway project is worth in the National Priority System is not. However, it is important to remember that the FAA, TSA, EPA and so forth are agencies of nuance. In some areas, what may appear to be minutiae is actually cardinal knowledge. For example, knowing that a primary commercial service airport is one that enplanes 10,000 or more passengers per year is critical in the Airport Improvement Program (AIP) funding process. We have made our best attempts to highlight what you need to know for the exam, and what is contextual. The C.M. exam does not test on: Dates Acronyms (except government agencies, such as the FAA and TSA). Abbreviations The only acronyms on the exam are those of government agencies. The test does not ask what each acronym stands for, but assumes the reader knows the basic government organizations by their three- or four-letter designators. Reasonable attempts have been made to draft straightforward test questions. Each question has only four answer choices. There are no “All of the Above” or “None of the Above” answer options. There are no combined answer choices such as “both A and C.” There are no computation questions on the C.M. exam. If you have your own methods of studying and taking exams, and they work for you, by all means continue to use them. Otherwise, current learning pedagogy recommends the following study strategies: Study With Perspective. Pretend you have to brief your board, your boss or a member of the community on a process, procedure or policy. You would not just read a book to them. You would review the material for the cardinal information that helps them understand the information you are trying to convey. If you were to properly prepare for the briefing, you would think of questions that your audience likely would ask, and be prepared with the answers. If you are highly experienced in specific C.M. topics, candidates are advised to review those sections to distinguish their “experiences” and personal truth from the information in the C.M. 10 / American Association of Airport Executives Module 1 Write Your Own Test Questions. Often, people use ineffective study techniques such as reading and re-reading information repeatedly without pausing for critical reflection. Eventually, you become bored, but sometimes you’re fooled into thinking that you’ve assimilated it because you’ve read the material over and over. What’s really happened is your brain has “seen this show before,” or mostly gone into cruise control, so, it glazes right over the information. Instead, test yourself on the information. Write your own test questions on index cards or an app. Review more frequently the cards you don’t know, and the cards you have down cold, less often. Some of the index or flashcard apps for your phone or tablet will do this for you, tossing you questions that you need to review more frequently. Use spaced recognition for your flashcard reviews. Spaced recognition scientifically is proven to help you remember the most information. Our brains learn more effectively when we space out our learning over time and your brain needs that time to process what it has learned so far. A typical spacing is to do a repetition of the information after first seeing it, after seven days, then after 16 days, then after 35 days. You will want to adjust these timelines based on how far away the test is scheduled. Essentially, right about the time you’re starting to forget the information, is the time to review it again. Teach Back. We always learn more when we teach. Many Certified Flight instructors will attest to this — they really didn’t start learning how to fly until they started teaching others. With your index cards prepared and practiced, get together with a study partner, or anyone willing to sit for a few minutes with you, and teach them the topic. If possible, have them ask questions and see if you can answer them within the module’s context. If you’re studying with someone else who is preparing for the C.M. exam, then swap index cards and see if you can answer their questions. Nomenclature The terms Airport Sponsor, Airport Executive and Airport Operator are used frequently throughout the modules. Unless otherwise noted: Airport Sponsor refers to the governing body of the airport, usually elected officials, or an appointed board. Airport Executive refers to a particular individual, such as the airport director, airport manager or chief executive officer (CEO); these terms are used interchangeably. Airport Operator refers to the overall airport management structure, including the sponsor, the executive, and other personnel essential to the airport’s operation. Module Objectives The learning objectives reflect the Revised Bloom’s Taxonomy phrasing that lists six levels of comprehension: (1) Remembering (recalling information, recognizing, listing, describing, retrieving, naming, finding); (2) Understanding (explaining ideas or concepts, interpreting, summarizing, paraphrasing, classifying, explaining); (3) Applying (using information in another familiar situation, implementing, carrying out, using, executing); (4) Analyzing (breaking information into parts to explore understandings and relationships, comparing, organizing, deconstructing, interrogating, finding); (5) Evaluating (justifying a decision or course of action, checking, hypothesizing, critiquing, experimenting, judging); (6) Creating (generating new ideas, products, or ways of viewing things; designing, constructing, planning, producing, inventing.) The material in the C.M. module is largely at the Remembering and Understanding levels. Airport executive candidates are expected to achieve higher levels of knowledge, up to the Creating level, in preparation for their oral board review. Objective 1: Describe the historical principles that have guided airport management, and identify the airport stakeholders, their primary functions, and their expectations for the airport. Objective 2: Obtain a basic understanding of how flight operations work in the U.S. airspace system. Objective 3: Know the various types of structures for an airport sponsor and the fundamental role and challenges of the airport executive, and understand the primary federal regulations and other documents that limit or mandate AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 11 Certified Member (C.M.) certain airport management and operational practices. Objective 4: Understand the definitions and restrictions of airport land use. Objective 5: Understand the federal requirements in airport financial management, and the federal policies that influence the setting of airport rates and charges. Objective 6: Understand the unique airport uses and concerns related to Other Related Airport Business Operations, key principles in commercial development and airport property management. Objective 7: Understand the Airport Improvement Program (AIP) process, how projects are evaluated, prioritized, and partially funded by the FAA, and other sources of capital development monies available to airports. Airport Fundamentals Introduction Module 1, Section I, Airport Fundamentals provides the airport executive a comprehensive description of three key areas: the process of how the U.S. airport and the National Airspace System were developed; understanding flying and flight operations in the U.S.; and airport organization and regulations. While historical references may seem inane, they actually are quite important to the airport executive. Many of the regulations and “the why of things,” can be found by looking to the past. Today’s airport is required to fulfill many roles. Airports can be simple systems, with a small runway and a few hangars, or they can be thriving, metropolis-like centers with thousands of employees and tens of thousands of passengers passing through on a daily basis. Understanding the activities that take place at an airport, the needs and desires of its stakeholders, and how the production side of aviation functions are important to operating a successful facility. Some people may attempt to categorize an airport as a business or as a public utility, but it is both. It is also a critical, symbiotic component of a worldwide system of airports. Airports have many customers but, ultimately, the airport first must serve the pilot. Understanding the pilot world is just as important as understanding the rules and regulations of airport management. One unique aspect of the operation of an airport is that it is heavily regulated by federal rules and by legal agreements that were made with the federal government in some cases over 60 years ago. The fact that local governments operate most of the public-use airports in the U.S. makes it difficult to put the operation of an airport into a set of rigid standard operating procedures because what’s true at one airport may not be at another. Understanding the various principles and background that have shaped airport management throughout history allows the airport executive to be flexible in an ever-changing world. Airport executives also should have a command of the essential core business skills, including strategy, marketing, finance and accounting, operations management (i.e., production management), organizational behavior and human resources. The Origin and Evolution of Airports in the United States Objective 1 Describe the historical principles that have guided airport management, and identify the airport stakeholders, their primary functions, and their expectations for the airport. 12 / American Association of Airport Executives Module 1 Why This is Important Many of the operating principles that guide and govern today’s airport management industry are deeply rooted and strongly held by the industry. Understanding government regulations and guidance and how they were developed helps airport executives to better understand policy decisions and explain these concepts to their boards. Airports provide the public the benefit of air transportation and also provide an economic benefit to the community. The revenue streams and employment of many individuals and companies in the community rely on the safe, secure and efficient functioning of the airport. Understanding the needs and operating essentials of airport stakeholders contributes to better meeting those needs, and overall, being a successful airport executive. Introduction “What once was a migration, is now a vacation.” — Harrison Ford in “Living in the Age of Airplanes. The airport runway has been called the most expensive piece of pavement in town. What began in December of 1903 by the Wright Brothers as a successful experiment has become the world’s fastest transportation industry and an essential component of the world transportation system. Airports are time machines, connecting any town or city to anywhere in the world. They provide the benefit of air transportation and bring goods, services, jobs and money into a community. During a natural or manmade disaster, airports are an essential lifeline. Distances that took mankind thousands of years to travel now can be crossed in a matter of hours. Aviation Is a Dynamic and Symbiotic System. The aviation system must operate symbiotically, with many organizations, people and entities working toward a common goal — to deliver passengers and cargo to their next destination safely, securely and efficiently. What began as a place simply for planes to take off and land has transformed into a multi-use facility, providing revenue for businesses, jobs for local residents, a source of pride for communities, and essential resources during national or local emergencies. It’s often said that an airport can function as virtually anything — a hospital, an airbase for evacuation, an emergency staging area, a morgue, a temporarily relocated center of government — but only an airport can be an airport. New stakeholders and new technologies, like Unmanned Aerial Vehicle (UAV) operations and spaceport operations, continue to expand both the number of people who rely on the airport and their expectations. To understand airport management properly, it is helpful to understand who the stakeholders are, what they expect from an airport, and the types of activities that are conducted on the property. “No two airports are exactly alike. They’re almost like fingerprints in that way. Each one has a different geometry, runway layout, and arrangement of taxiways and terminal buildings. Each one differs in its direction and distance from the city center and proximity to landmarks.” — Captain Chesley “Sully” Sullenberger III, pilot of U.S. Airways Flight 1549 Airports can be simple systems, with a small runway and a few hangars, or they can be thriving, metropolis-like centers, with tens thousands of employees and hundreds of thousands of passengers moving through on a daily basis. What follows is a description of stakeholders and activities at a large commercial service airport. Not every airport includes all of the activities that are described below, and there are tremendous differences from one airport’s structure to the next, but these descriptions provide us with a common frame of reference. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 13 Certified Member (C.M.) Milestone Events in the Operation and Development of Airports The Birth of Commercial Aviation It is common to observe a system, process or industry and assume that it came into existence through a previously wellthought-out plan that was carried out and the result is what was intended the entire time. However, most systems and industries on which we rely, including aviation, maritime, the power industry, cyberspace, the U.S. highway system, and so forth, have developed over time, shaped with the limited thinking and information available at the time and often to solve certain problems that were occurring at that time. The result is an imperfect, but functional system of compromises that, like the sand on a beach, continue to be reshaped by the tides, sometimes moderately, and other times by changes to its core structure. Understanding how the aviation and airport industry developed tells us a lot about why it operates the way it does. One of the early adopters of aviation was the U.S. government, and, specifically, the military that used airplanes on a limited basis during World War I, creating over 9001 airfields in the process. Soon thereafter, the government discovered that U.S. mail could be more efficiently delivered by air using U.S. Army pilots and thus built the first air route system. Ironically, it was a move by the railroad industry to thwart the growth of air transportation that helped usher in the age of commercial aviation. The railroad industry accused the government of creating a monopoly on carrying mail (by air) and convinced Congressman Clyde Kelly of Pennsylvania to sponsor the Air Mail Act of 1925. Commonly referred to as The Kelly Act, it authorized the postmaster general to contract for domestic airmail service with commercial air carriers. By transferring airmail operations to private companies, the government helped create the commercial aviation industry. Additionally, the Kelly Act contained language that set forth the precedent that only those who use aviation would pay for it, thus providing one of the airport industry’s first principles —aviation should pay for itself.2 With plenty of interested parties ready to bid on the airmail routes, commercial aviation in the United States, literally and figuratively, took off.3 Other commercial applications of the airplane soon followed, including the carriage of passengers, but in order to support the flight operations, airplanes needed places to land. Previously, “landing strips” were just long flat areas where an aircraft could set down. These landing strips soon became known as runways and operators of these facilities constructed infrastructure to support those flight operations. Early airports hardly are recognizable compared with what they have become today. The first airports weren’t much more than an improved, flattened field, usually operated by a private owner, the pilot, or in some cases, the early air carriers. The first airplane hangars were often barns modified to fit an aircraft. Aircraft in the 1920s and 1930s could not fly nearly as far as they can today, so numerous fuel stops were established at airports, in some cases, 25 times for a coast-to-coast flight. Soon, Fixed-Base Operators (FBO) were established to provide fuel for the plane, and a temporary rest stop for pilots and passengers. Some FBOs would become the first airline passenger terminal buildings, while others would remain FBOs, servicing the general aviation fleet. While formation of the first airline can be traced back to 1914, it was not until the Air Mail Act of 1925 that commercial Many were simply golf courses or open fields designated as an airport and later reverted back to their original use. In all, about 67 new airports were established by the end of World War I. 2 The Air Mail Act “permits the expansion of the air mail service without burden upon the taxpayers….” 3 Charles Lindbergh and Elrey Jeppesen are two of our country’s notable airmail pilots. 1 14 / American Association of Airport Executives Module 1 airlines became widespread. Many small air carriers that were already flying mail began consolidating, acquiring each other, or merging in order to start flying passengers. Pan Am, TWA, Delta, United, Northwest, American, Braniff, and Eastern were among the first of the U.S. airlines. While the Air Mail Act effectively created the commercial aviation industry, the Air Commerce Act of 1926 became the cornerstone of the federal government’s regulation of civil aviation. The legislation was passed at the insistence of the burgeoning airline industry itself, which felt that aviation could not reach its full commercial potential without federal regulations to establish and improve safety standards. The Air Commerce Act created a new Aeronautics Branch within the Department of Commerce and charged the agency with: fostering air commerce, issuing and enforcing air traffic rules, licensing pilots, certifying aircraft, establishing airways, and operating and maintaining navigational aids. These responsibilities still lie within the control of the federal government and are now the responsibility of the Federal Aviation Administration (FAA). Many parallels in the development of commercial aviation can be made to the regulation and development of today’s commercial space industry, but we will discuss this later on. By 1928, the first airport management trade organization also was established. The first meeting of the American Association of Airport Executives (AAAE) consisted of 10 airport directors attending the National Air Races at Mines Field (now Los Angeles International Airport). By 1954, AAAE adopted the first professional accreditation standards for its Accredited Airport Executives (A.A.E.) program (Price, Forrest, 2013). Throughout the 1930s, the Commerce Department’s Aeronautics Branch would be reorganized and restructured several times, eventually becoming the Civil Aeronautics Administration (CAA) but still under the Department of Commerce. In 1940, the CAA split its authority with the newly created Civil Aeronautics Board (CAB). The CAA retained its responsibility for Air Traffic Control (ATC), pilot and aircraft certification, safety enforcement and airway development, while the CAB was charged with making the safety rules, conducting aircraft accident investigations, and the economic regulation of the airlines (FAA, 2009, p. 1-2). Awarding new air routes, approving airline operating certificates, and regulating airfares were the primary duties of the CAB. By the mid-1970s, economic regulation was restricting the growth of the airline industry and airfares were beyond what most people could afford. The CAB wielded much control over the airlines, for example by the requirement for airlines to serve small communities that would not ordinarily support air service, if that airline wanted to keep its operating certificate. The CAB4 would control the economics of the airline industry for nearly four decades, until finally being dissolved by the Airline Deregulation Act of 1978.5 The airlines, the unions, and many safety proponents opposed deregulation, fearing competition and being concerned about job security and safety; however, the will of the public won out, and the act passed. Airlines and air cargo operators were free to raise or lower airfares and to expand or remove routes and destinations at will. The industry remains deregulated to this day. Airline deregulation forever changed the airport-airline dynamic. Once deregulated, airlines were free to move operations toward more profitable markets and routes and pull out of less profitable markets and routes. While some airports experienced a loss of air carrier service, others experienced massive expansion. Deregulation allowed a concept known as “hub-and-spoke” to take hold. The airlines adopted a model that was used 4 5 The CAB’s accident investigation function transferred to the National Transportation Safety Board in 1966. The Air Cargo Deregulation Act of 1976 previously had deregulated the air cargo industry. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 15 Certified Member (C.M.) in the air cargo community. The prior year, the Air Cargo Deregulation Act of 1976 allowed companies such as Federal Express (now FedEx) to implement a new method of shipping goods. Rather than point-to-point service, the hub-and-spoke system transports cargo to a central “hub,” where it is re-sorted and put on an aircraft heading to its final destination. The passenger carriers picked up on this concept as a more efficient method of moving passengers as well, and the system is still largely in place today. It is important to remember that today’s FAA has its roots in the Department of Commerce and originally was charged with fostering air commerce. Many FAA regulations, orders, and advisory circulars contain language that leans not just toward safe operations, but also toward supporting commerce functions within aviation. Early Airport Development The Great Depression in the early 1930s resulted in several government financial grant programs. The Works Progress Administration (WPA) — part of President Franklin D. Roosevelt’s “New Deal” to put Americans back to work — assisted in the funding of numerous new airports and expansion of existing facilities. In all, by 1939, the WPA funded the development or expansion of 852 airports in the U.S. (Prather, 2015, p. 18). However, since the WPA provided only 50 percent of the necessary funding for the airport projects, the airport operators had to provide the other 50 percent through bonds or other funds. This cost-share approach shaped another principle in the airport industry — federal government funding of airport improvement projects. The federal government funds public-use airport capital projects to this day but only a portion of the project’s costs are covered. Between 75 percent to 90 percent of certain eligible projects are covered by FAA monies, depending on several variables. World War II would provide another boost to both the airline and airport industries. Through the Development of Landing Areas for National Defense (DLAND) appropriation, the Secretary of War, the Secretary of Commerce and the Secretary of the Navy were allowed to acquire land in the U.S. for the development of airports needed for the war effort. A total of 986 airports were built under the DLAND program. After the war, 500 of those airports were declared surplus and handed over to cities and counties for civil use. However, for a municipality to accept an airport, it had to promise to make it available for public use without discrimination and to the government in the event of a national emergency. In 1946 the government passed the Federal Aid to Airports Act, which created the Federal Aid to Airports Program (FAAP). FAAP continued to provide grant funds for certain airport projects (mostly runway and taxiway development). To be eligible for funding, the airport had to be in the National Airport Plan (NAP), which listed recommendations for airport construction, maintenance and operations. The federal government still provided 50 percent of the funding with the airport sponsor (e.g., the airport owner) providing the other half. Airports that accepted grant money also were held to the earlier promises that the airport would be available for public use and without discrimination, and the expectation that public-use airports cannot deny civil aeronautical operations. These promises are another foundational principle of airport management, and today are known as the Sponsor Assurances (aka Grant Assurances). The Federal Aviation Administration As airline operations continued to increase and “the jet age” brought faster aircraft to the skies, safety become a significant concern. The mid-air collision over the Grand Canyon on June 30, 1956, of a TWA flight and a United Airlines flight, resulted in the deaths of all 128 people on board the two aircraft. The accident forced Congress to fund additional aviation safety improvements, including the hiring of more air traffic controllers. 16 / American Association of Airport Executives Module 1 The Federal Aviation Act of 1958 turned the CAA into the Federal Aviation Agency (FAA) and directed the FAA to take over safety rulemaking from the Civil Aeronautics Board. The FAA further would be responsible for developing a common civilmilitary system of air navigation and air traffic control. In 1966, the FAA was renamed the Federal Aviation Administration and brought under the newly created Department of Transportation. In 1970, the Airport and Airway Development Act (AADA) was passed to continue the flow of grant money to airports. As a result, two programs were established: the Airport Development Aid Program (ADAP) and the Planning Grant Program (PGP). ADAP provided funds for airport development projects (expanding the list of eligible projects), while the PGP provided funds for airport master plans and system plans. The act also created a certification program for commercial service airports and issued operating certificates. These standards are embodied today in Title 14 Code of Federal Regulations Part 139 Certification of Airports. Also passed in 1970 was the Airport and Airway Revenue Act, which created the Airport and Airway Trust Fund. Passed as part of the AADA, it required the collection of taxes or user fees from various segments of the aviation community. The purpose of the trust fund is to completely finance research and development projects, FAA capital improvement programs that include the Airport Development Aid Program and Planning Grant Program grants (later changing to Airport Improvement Program or AIP grants), and to fund the modernization of ATC facilities. At the time, the trust fund was financed by an 8 percent tax on domestic passenger airfares, a $3 surcharge on passenger tickets originating in the United States, a 7 cents per gallon tax on aviation fuel, a 5 percent tax on air freight, and an annual aircraft registration fee tied to the aircraft’s weight (Prather, 2015, p. 23). The trust fund was created on the premise that only those using aviation should pay for it — another important principle in the development of airports. In 1982, the Airport and Airway Improvement Act (AAIA) established the Airport Improvement Program (AIP) and continued to expand the list of airport projects that are eligible for federal funding. The act also reorganized the National Airport Plan as the National Plan of Integrated Airport Systems (NPIAS) and created a classification system for commercial service airports Since 1982, the AIP program has continued to be the FAA’s funding mechanism for capital projects at publicuse airports. The complete history of airport and aviation development in the U.S. is beyond the scope of these materials. The aforementioned historical milestones are significant due to the foundational principles that are still in use today. Throughout the modules, other milestones will be mentioned as they relate to the subject area. Industry Changes and Trends On September 11, 2001, terrorists overtook flight crews on four U.S. aircraft during transcontinental flights. Two aircraft were crashed into New York’s World Trade Centers 1 and 2, and a third was crashed into the Pentagon. The fourth aircraft crashed into a field in Pennsylvania when passengers attempted to retake the aircraft from the hijackers. The attacks resulted in the creation of a new agency, the Transportation Security Administration (TSA). Since its inception, TSA has become a highly visible part of the aviation operational infrastructure at commercial service airports. Numerous other areas of the aviation industry that were impacted by 9/11 include terminal design, the passenger experience, and the security screening process. As terrorist attacks on aviation continue throughout the world, the “new normal” that was established after 9/11 has become “normal.” But security was not the only significant change in the new millennium. With the widespread use of Global Positioning Systems (GPS) making ground navigation easier, their impact also has been seen on commercial aviation. In 2003, The Vision 100 — Century of Aviation Reauthorization Act was signed into law, AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 17 Certified Member (C.M.) endorsing the concept of a Next Generation Air Transportation System (NextGen). NextGen is a multi-faceted series of initiatives designed to make air travel more efficient, more secure, and safer overall. GPS is at the root of many NextGen initiatives. However, with these long-anticipated changes to the U.S. air traffic control system, a new aeronautical operation also has been introduced — commercial and private Unmanned Aerial Vehicle (UAVs) operations. This technology provides challenges and opportunities, as the FAA determines how to best fit UAVs into the National Airspace System (NAS). Space commercialization is very much in a place where commercial aviation was back in the 1920s, and similarities already are being seen. In July 2011, Space Shuttle Atlantis landed at the Kennedy Space Center, officially ending the National Aeronautics and Space Administration (NASA) space shuttle program. The private space commercialization industry picked up where NASA left off. NASA went from becoming a provider of launch services to a consumer of launch services. It is now routine for rockets operated by private industry to make deliveries to resupply the International Space Station, launch satellites, and conduct space tourism flights. Spaceplane development is affecting the airport industry as several airports in the U.S. already have approval or have applications on file with the FAA to receive Spaceport designation. Currently (2022), the aviation and aerospace industry is transitioning and developing in a variety of ways. The development of sustainable aviation fuels, electric aircraft, Urban Air Mobility and Advanced Air Mobility are at the forefront of aviation’s future. Other innovations are the result of improvements to the security screening process and technologies, and challenges, such as the Covid-19 pandemic. The Airport Environment and Its Stakeholders Many agencies, businesses and organizations rely on a local commercial service or general aviation airport. Additionally, airports affect the communities that surround them both in terms of economic benefit and noise impact. The following list includes the majority of airport stakeholders and their involvement with the airport: Government Entities: Federal agencies can include the FAA, TSA, Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Federal Protective Service (FPS), and the Department of Agriculture (USDA). State and local agencies include the airport operator and police and fire personnel. Typical government functions at the airport include air traffic control and maintenance of navigational aids (from the FAA), providing passenger and baggage security screening (under TSA), processing incoming international passengers and their belongings (under ICE and CBP), and helping to control wildlife populations on the airport (under the USDA), to name a few. Aeronautical Users: This category includes the airlines; corporate flight departments; private aircraft operators and hangar lessees; FBOs; Specialized Aviation Service Operators (SASOs), such as flight schools, aircraft maintenance repair shops, and aircraft charter operators; the U.S. military; and industrial users, such as aircraft manufacturers, helicopter operators, and soon, large UAV operators. Non-Aeronautical Users: These include concessionaires, vendors, contractors, non-aeronautical tenants, rental car and parking lot operators, advertisers, and certain land lessees (e.g., golf course operations, industrial parks, agriculture or mining operations). The Community: This includes passengers; air cargo shippers; surrounding developments that rely on the airport, including hotels and restaurants; industrial parks/corporations that have located near the airport specifically for the benefit provided by being near an airport; and residential homeowners within the airport’s influence area. From the list above, we can determine the specific types of operations each of these entities is conducting and their 18 / American Association of Airport Executives Module 1 operational characteristics (e.g., what they require of the airport operator). It’s assumed that all aeronautical users require a safe and secure operating environment.This includes good runway conditions, meaning free of debris and good pavement, and, ideally, air traffic control service, aircraft rescue and firefighting services, and, where appropriate, snow removal. The requirements listed below are common, but by no means represent the entirety of what each entity desires in an airport. It can be safely assumed, however, that all tenants and users of the airport desire that the airport be open and available for use as much as possible. When the airport closes, everyone starts losing money. Airport Stakeholders At the airport, federal agencies primarily desire that the airport operator, air carriers and others comply with the laws of the U.S. Government. They also desire the necessary space to carry out certain functions such as processing international passengers and passenger and baggage screening. Aeronautical Users Airlines primarily make their money from the movement of cargo and passengers. They are often the most significant tenants at the airport due to the numerous revenue sources they generate (concessions, commercial vehicle access fees, parking lot revenue, rental cars, aircraft landing fees, and gate, ticket counter, administrative and hangar rental space). To the community, airlines represent air service for passengers and cargo, and local economic stimulus through jobs, plus local hotel and restaurant development. The airlines typically desire efficient passenger, baggage, cargo and aircraft throughput, which is determined by the airport’s design and nature of flight operations. Airlines also desire adequate maneuvering space for their aircraft, sufficient office and administrative facilities within the terminal building, and amenities for their passengers. A Fixed-Base Operator is a business granted the right by the airport sponsor to operate on an airport and provide aeronautical services such as fueling, hangaring, tie-down and parking, aircraft rental, aircraft maintenance, flight instruction, etc. Put simply, an FBO is a terminal for private and charter aircraft operations. FBOs can provide a variety of services to the private aircraft industry, including aircraft handling, pilot lounge and flight planning, rental car and passenger services. Many FBOs also provide charter services, flight training and aircraft maintenance, either through their own personnel or through contracts with other on-airport providers. The FBO is usually in a stand-alone facility that acts as the terminal for private and chartered aircraft. FBOs prefer the fewest private/corporate fuel farms on the airport as these directly cut into their primary revenue stream. However, under sponsor assurances, an airport operator cannot deny a tenant the right to operate their own fuel farm, with their own equipment, fuel and personnel. Specialized Aviation Service Operators (SASOs) are sometimes known as single-service providers or special FBOs. These types of companies differ from a full service FBO in that they typically offer only a specialized aeronautical service such as aircraft sales, flight training, aircraft maintenance and avionics services. SASOs include flight schools, aircraft Maintenance Repair and Overhaul (MRO) i.e., repair stations, charter operators, commercial hangar rental companies, agriculture, aircraft sales, avionics repair, skydiving, glider, firefighting, medical transport, helicopter, and other similar operations. FBOs and SASOs desire an airport that is “good for business,” which can have multiple meanings depending on the activity. Businesses also desire a level playing field. FBOs and SASOs have leases with the airport and must comply with the airport’s AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 19 Certified Member (C.M.) minimum standards, so operators of such facilities often are concerned with other entities providing similar services on the airport that do not have a lease or are not adhering to the minimum standards. Aircraft Charter6 and related options. Other than owning an aircraft, there are a variety of ways that individuals and companies can fly privately. Charter operators often are underrated but can bring an extraordinary level of activity to an airport. Charter operators provide commercial air service transportation, both cargo and passenger, but in a variety of ways that benefit the airport operator. It is not unusual for any of the programs listed below to be combined in various ways. For example, many fixed-fleet operators also have Jet Card programs. There are also pricing schemes to accommodate a variety of budgets, with options similar to ride-sharing or shared airplane use. Fixed-Fleet Operators: these private charter operators, sometimes called air taxis, operate under Part 135 and conduct non-scheduled commercial flight operations. Clients contact fleet operators directly to secure flights. Rather than selling individual seats on a scheduled service airline, air charters rent an entire aircraft, along with crew, fuel, maintenance and other necessary elements. Many charter companies offer Aircraft Management services. Instead of chartering their own aircraft, an existing aircraft owner seeks the services of the charter operator to manage their aircraft by overseeing maintenance and leasing the aircraft out to the public when the owner is not using it. This allows the owner to recoup some of the costs of owning an aircraft. It also removes the liability from the owner and places it on the operator in case of a major FAA safety violation. The charter operator markets the aircraft based on industry rates and retains a portion of the revenue made on the charter trip, splitting the revenue with the aircraft owner. Typically, most contracts will allow for the owner to receive up to 80 percent of the revenue from charters sold. The company receives the remaining portion and charges the owner a management fee. The reason charter operators diversify their fleet with owner aircraft is because in the case of a major maintenance event, the cost reverts to the owner. Fractional Ownership: fractional operators sell shares of the total hours an airplane can fly per year, and often have the ability to upgrade or downgrade to other types of aircraft. Shareholders usually buy in increments of time such as 25 hours. Fractionals operate under Subpart K of Part 91 and are considered a type of private flight operation. Jet Card Programs: providers sell blocks of retail flight hours on a specific type or class of aircraft. On-Demand Charter (i.e., Broker): on-demand providers do not operate or own aircraft, but instead function as a broker to provide planes for clients on a per-trip basis. Cargo Feeders: some charter companies transport both passengers and cargo, while others are subcontractors providing cargo to major cargo operators such as FedEx, UPS and DHL. Aircraft charter operations experienced a significant increase during the Covid-19 pandemic, and by 2022 the use of charter aircraft has continued to rise. In 2021, the FAA updated the Airport Compliance Manual to address illegal air charters. An illegal charter operates without meeting the regulatory requirements under Part 135 or other required regulation(s), nor meeting the safety requirements of a certified air carrier. For example, an aircraft owner allowing their aircraft to conduct a charter operation, but the owner does not possess an appropriate air carrier certificate, or allowing its use by an aircraft management company without meeting the FAA requirements, would be an illegal charter. Airport sponsors who suspect illegal charter activities should discuss their concerns with the local Flight Standards District 6 Special thanks to Jacqueline Rodzen for drafting the Part 135 portion of the C.M. 20 / American Association of Airport Executives Module 1 Office and allow the FSDO to take any appropriate investigations or actions. The FAA does not want airport sponsors to investigate suspected illegal aeronautical activities but instead defer the investigations to the FAA. Some airport sponsors have incorporated language in their leases, rules, regulations and minimum standards that prohibit the illegal use of commercial (or non-commercial) aircraft activities and require all uses and tenants to abide by all existing rules and regulations, etc. Some airport sponsors require charter operators and other tenants to provide a list of aircraft used for commercial activities and require copies of the air carrier operating certificate. Maintenance, Repair and Overhaul (MRO) broadly describes a variety of aircraft maintenance activities. Repair stations run the gamut from large companies with numerous repair station authorizations to perform work on airline transportcategory aircraft, to small repair stations performing specialized services such as welding, general maintenance, avionics, fuel systems, engine repair and replacement, etc. MROs are regulated under FAR Part 145 Repair Station Operators and TSR Part 1554 Aircraft Repair Station Security. Flight training facilities provide pilot training in single-engine and multi-engine aircraft, and sometimes flight simulators, plus provide pilot testing services and pilot store products. Flight training is conducted under either Part 61 or Part 141. FAR Part 61 Certification: Pilots, Flight Instructors, and Ground Instructors is “flight instructor centric,” and establishes eligibility, aeronautical knowledge, and minimum flight time requirements to obtain various pilot licenses. FAR Part 141 Pilot Schools regulate pilot school certificates, along with pilot certification requirements for schools operating under this part. Training under Part 141, which entails classroom facilities, certified instructors and lesson plans, is, in general, more regimented than under Part 61. Both Part 61 and Part 141 flight training programs are regulated further by the TSA, under TSR Part 1552 Flight Training. Airline Fuel Providers (aka “Into-Plane Fueling Agent”). There is not an industry-wide term describing contract airline aviation fuel providers, and the FAA is rather vague in its description.7 Technically, under the guidance of the airport’s minimum standards, only fixed-based operators can sell fuel. Other tenants, such as corporate operators, charter operators, etc., can conduct self-fueling using their own fuel, their own equipment, and their own personnel to fuel their own aircraft. However, an exception is made in the case of the air carrier. Air carriers obviously can self-fuel as well, but the FAA allows the airlines as much flexibility as possible in operating at an airport, and thereby allows the airline to use contract fuel providers. The FAA does allow for the development of Airline Fuel Providers, which usually incorporates the standards under the National Fire Protective Association 407 Standard for Aircraft Fuel Servicing, and ATA Specification 103 (published by Airlines for America) that provides guidance for the safe storage and distribution of jet fuel at airports as currently practiced in the commercial aviation industry. Air carriers often insist, as a standard condition in their Use Agreements with the airport, the ability to select a third-party fuel provider. In some cases, this may be an on-airport FBO, or an independent fuel provider. Other aeronautical use tenants include the business/corporate aircraft operators that operate their own planes for a more effective use of management’s time and to maintain a great degree of confidentiality and discretion in their business dealings. For security and protection of intellectual capital, corporate operators appreciate a great deal of privacy and anonymity at the airport. They, too, desire exceptional pavement and maintenance as corporate operators often spend tens to hundreds of millions of dollars on their aircraft. Corporate operators often have a strong desire to own their fuel farm, which can be problematic with local FBOs. Private fuel farms reduce FBO profitability, but are allowed by the FAA. Private aircraft operators (e.g., non-corporate) commonly are characterized by their smaller aircraft, either single-engine or 7 Special thanks to Jeff Kohlman, Managing Principal of Aviation Management Consulting Group, for his guidance in this section. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 21 Certified Member (C.M.) light-twin engine aircraft. They may have their aircraft tied down on ramp space, or in small hangars, such as t-hangars, Porta-Ports™, or small box hangars. It is also common for an aircraft to have multiple owners and for some private aircraft tenants to spend their off-time “hanging out” at their hangar (known as “hangar flying”). Private aircraft operators tend to be long-time tenants and/or users and may not always be open to change but they also can be strong allies of the airport director. They desire affordable hangar and tie-down facilities, the ability to have visitors to their facility, and 24/7 access to the airport. They also desire affordable fuel and the ability to perform light maintenance work on their aircraft. NOTE: The lists above do not represent every user and activity at a commercial service or general aviation airport but are reflective of many common activities at airports. Non-Aeronautical Users and the Community Non-aeronautical users, such as concessionaires, desire good passenger traffic and good positioning in the terminal for maximum visibility. The desires of other non-aeronautical users are as varied as the businesses that often occupy nonaeronautical space. It is important that the airport executive understand the needs and concerns of these operators. Fundamentally, non-aeronautical users desire to make money in some method, through the sale of products, services, or both, at the airport. The community can represent a wide range of stakeholders. Homeowners near the airport desire quiet neighborhoods not affected by aircraft noise and expect the airport to take the necessary actions to reduce the effects of the noise. Other community members may desire an airport that produces jobs such as hotel and restaurant operators. There may be some unique elements of the community such as surrounding industrial parks or office buildings, golf courses or public parks, and even some incompatible land uses, such as schools, hospital or health care facilities, and places of worship. Airport Categories To describe one airport would simply be to describe one airport. Airport operational activities and characteristics vary widely with some airports focused more on commercial service, some focused on general aviation, and still others focused on cargo operations. The variables continue in numerous directions from this point on, but there are enough similarities that a general description of airport operational activities can be identified, particularly if the airports are broken down further by classification. The Aviation Industry Aviation is a crucial driver of global economic development. Over a third of all trade by value is sent by air. The industry supports over 65 million jobs worldwide, including $2.7 trillion in global gross-domestic-product, making aviation a critical business component worldwide. The speed and reliability of aviation enables “same-day,” and “next-day,” product delivery. The United States is the largest e-commerce market globally, and nearly 90 percent of business-to-consumer e-commerce parcels are carried by air, making the U.S. highly dependent upon the aviation industry. Worldwide, the airlines transport over 4 billion passengers annually. The U.S. accounts for slightly over 22% of the world’s scheduled passenger traffic. The second-largest passenger market is Europe at 26%, and massive growth in aviation in China pushed Asia/Pacific passenger traffic levels to over 34%, making it the top aviation market in terms of passenger traffic in the world.8 There are approximately 610,796 active pilots and 213,050 general aviation aircraft in the U.S. 8 IATA. (2018). Traveler Numbers Reach New Heights. Retrieved October 12, 2020, from https://www.iata.org/en/pressroom/pr/2018-09-06-01/ 22 / American Association of Airport Executives Module 1 The NPIAS is published every two years and is a five-year projection that includes eligible airport development projects that the government considers necessary to provide a safe, efficient and integrated system of public-use airports adequate to meet the needs of national defense, the U.S. Post Office, and civil aeronautics. The NPIAS identifies airports within the national airport system, the roles they currently serve, and the amounts and types of airport development eligible for federal funding under the AIP over the next five years. In 2019, the NPIAS identified 3,328 public-use airports (3,321 existing and seven proposed) that are important to national air transportation, and, therefore, are eligible to receive AIP grants. Airports in the United States There are an estimated 19,627 airports in operation in the U.S. However, of those only an estimated 5,099 are available for public-use — the remaining 14,528 airports are private-use and closed to the public. Of the 5,099 public-use airports, approximately 506 are classified as commercial service and thus the only airports required to be regulated under Federal Aviation Regulation Part 139: Airport Certification. About 65 percent (3,321) of the public-use airports are in the NPIAS, leaving 1,778 public-use airports ineligible for AIP funding. These airports must rely on their operating revenues, state grant money, and other sources of money to finance their capital improvement projects. Airports that are not included in the NPIAS generally do not meet the minimum entry criteria, are located at inadequate sites, cannot be expanded and improved to provide a safe and efficient airport, or are located within 20 miles of another NPIAS airport.9 An airport can be included in the NPIAS if it is: Publicly owned or privately owned but is either a commercial service airport with scheduled air service of at least 2,500 annual enplanements, or designated as a general aviation reliever airport by the FAA. A general aviation reliever airport. Receives scheduled air carrier transport to where a freight forwarder, FBO, etc., is under contract with the U.S. Postal Service (i.e., a mail contract). A public-use airport where a unit of the Air National Guard, or a reserve component of the Armed Forces, operates aircraft and is either permanently based on, or located adjacent to, the airport. Other airports that do not meet the above criteria may be included if they are: Part of a state airport system plan. Serving a community more than 30 minutes from the nearest NPIAS airport. 9 FAA. (2018). National plan of integrated airport systems 2019-2023. Washington, D.C.: FAA. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 23 Certified Member (C.M.) Forecast to have 10 or more based aircraft within the next five years and currently being considered by an eligible public sponsor that is willing to undertake ownership and development of the airport. Airports that do not meet any of the aforementioned criteria still may be included through special justification, such as isolated airports, airports serving Native American communities and airports needed to support or protect important national resources. Other criteria can be found in the NPIAS. The FAA uses three primary measurements to gauge airport activity: enplanements, operations and cargo tonnage (or pounds). An enplanement is defined as a paying passenger boarding a commercial flight — every time a passenger boards equals one enplanement. However, airports often report total passenger traffic, which means the airport also is including deplaned passengers in their count. Thus, an airport that reports its annual passenger traffic as 80 million means that, from the FAA’s perspective, perhaps 40 million were enplaned. An enplanement also is counted if a passenger transfers from one flight to another at the airport. Another statistic the FAA uses to measure airport activity is operations. Strictly speaking, an operation is either a takeoff or a landing, or, for purposes of determining the busyness of an air traffic control tower or radar center, an aircraft conducting an instrument approach that does not land. General aviation airport activity often is measured by the number of annual flight operations, while commercial service airport metrics are tracked by enplanements, operations and air cargo. A third statistic used in measuring airport activity is “landed weight,” which measures cargo tonnage. While this statistic does not specifically relate to airport categories, it is used in airport funding, planning and design considerations. Airport Types Under the NPIAS, airports are landing areas for fixed-wing aircraft, helicopters and seaplanes. Airports in the U.S. can be categorized a variety of ways, but the most common classifications are public-use commercial service and general aviation airports, and military and private-use airports. Military and private-use airports exclusively are used by the airport owner and are not open to the public. Essentially, there are five types of airports in the United States: private, commercial service, general aviation, cargo service and military. The FAA does not include private-use, private-owned airports in its planning or funding decisions, unless they are publicly accessible. Nor does the FAA financially support military airports unless they also host civilian flight operations. These classifications are not always mutually exclusive as commercial service airports also accommodate general aviation operations, and there are various mixes of civilian and military shared or joint-use operations. Although general aviation airports may experience some levels of commercial service, these are usually unscheduled air charter or air taxi operations. Fairbanks International Airport (FAI) is a good example of the wide variety of activities that can take place on an airport. FAI has a terminal building for domestic and international passenger service, which hosts 13 different airlines, and an air cargo facility with three major cargo operators on the field. In addition to the primary commercial service runway, FAI has two additional runways, one gravel and one paved, and, a float pond for seaplane operations. In 2015, FAI had 457,372 enplanements and 119,898 flight operations. On the other end of the spectrum is an airport like Atlanta/Hartsfield International Airport (ATL), which is the busiest airport in the United States and in the world. ATL has five runways, serving over 800,000 flight operations per year, and over 100 million passengers (45,308,407 enplaned passengers) moving through the airport, with commercial service operations being the vast majority of its air traffic. 24 / American Association of Airport Executives Module 1 While not an official classification, some airports are characterized by significant industrial operations, such as aircraft assembly, fabrication and manufacturing, and large aircraft MRO facilities. Boeing Field/King County International Airport in Seattle, Washington, and Phoenix-Mesa Gateway Airport in Arizona are examples of industrial aviation airports, as recognized by the AAAE Industrial/Military Relations Committee. Commercial Service Airports A commercial service airport is a publicly owned airport that receives scheduled passenger service and has at least 2,500 or more enplanements per year. These are divided into two categories: primary and nonprimary. A primary commercial service airport has 10,000 or more enplanements per year. Primary commercial service airports receive a greater allocation of federal funding than non primary. There are 380 primary airports according to calendar year 2020 data from the NPIAS. Primary airports are grouped into four categories. These are defined in statute as large, medium, small and nonhub. Primary airports are eligible to receive an annual apportionment of AIP funds based on their number of enplaned passengers. The FAA under Title 14 CFR Part 139 regulates commercial service airports. General aviation public-use airports are not regulated per se, but if the airport sponsor has accepted federal grant money under AIP, it is obligated to grant assurances (explained later). Nonprimary airports mainly are used by general aviation aircraft and include 126 nonprimary commercial service, 261 relievers, and 2,554 general aviation airports. Included in the nonprimary category are nonprimary commercial service airports (public airports receiving scheduled passenger service and between 2,500 and 9,999 enplaned passengers per year), general aviation airports, and GA reliever airports. There are 2,942 nonprimary airports. The largest commercial service airports, “the big 30,” are known as large hubs10 and serve at least 1 percent or more of total U.S. passenger enplanements. Using 2015 statistics, there were 895 million passenger enplanements in the U.S., which means that for an airport to achieve large hub status, it would have had to serve at least 8,950,000 enplaned passengers. Although there are only 30 large hub airports in the U.S., they account for more than 70 percent of all passenger enplanements. Large hubs tend to have more commercial airline and air cargo operations and only limited amounts of general aviation activities. Due to the number of connecting flights at the large hub airports, many air traffic delay problems tend to be concentrated at large hub airports. When one airport shuts down due to weather, it has a ripple effect and can delay or cancel flights throughout the national airspace system. Examples of large hub airports are: John F. Kennedy International, Atlanta/Hartsfield International, Miami International, Dulles International, Los Angeles International, and Denver International. The 33 medium hub airports each enplane 0.25 percent to 1 percent of total U.S. passenger enplanements (an estimated 2,237,500-8,950,000 yearly enplanements). Combined, medium hub airports account for 17 percent of all U.S. enplanements. Medium hub airports usually have sufficient capacity to accommodate air carrier operations and a substantial amount of general aviation activity (FAA, 2015, p. 5). Examples of medium hub airports include: Pittsburgh International, Portland International, Lambert-St. Louis International, Cleveland-Hopkins International, Dallas Love Field, and John-Wayne Orange County. Small hub airports each enplane 0.05 percent to 0.25 percent of total U.S. passenger enplanements (an estimated 2,237,500-447,500 annual enplanements per airport). There are 76 small hub airports accounting for 9 percent of all 10 The “hub” category is not a reference to an airline hub. An airline hub refers to an airport at which an airline has chosen to concentrate its flight operations to serve as a transfer point to get passengers to their final destinations. AAAE Certified Member (C.M.) - Module 1: Finance and Administration of Airports / 25 Certified Member (C.M.) enplanements in the U.S. At most small hub airports, commercial airline operations account for less than 25 percent of the runway use, so small hubs typically have higher levels of general aviation activity (FAA, 2015, p. 5). Examples of small hub airports include: Pensacola International Airport (Florida), Will Rogers Field (Oklahoma), El Paso International (Texas), Birmingham/Shuttlesworth International (Alabama), and Albany International (New York). Nonhub primary commercial service airports are those that total less than 0.05 percent of all commercial passenger enplanements, but at least more than 10,000 annual enplanements (an estimated 447,500-10,000 annual enplanements). There are 251 nonhub primary airports accounting for 3 percent of all commercial airline enplanements in the U.S. Nonhub primary airports have low levels of commercial service operations but high numbers of general aviation aircraft (FAA, 2015, p. 6). Examples of nonhub primary airports include: Abilene Regional (Texas), Kodiak (Alaska), Aspen-Pitkin County (Colorado), Columbia Regional (Missouri), and Northwest Beaches International (Florida). Nonprimary hub airports include commercial service airports with scheduled passenger service and between 2,500 and 10,000 annual enplanements, general aviation reliever airports, and general aviation airports. General Aviation Airports General aviation airports are public-use airports that do not have scheduled service or have fewer than 2,500 annual passenger enplanements. A general aviation reliever airport is designated by the FAA to relieve congestion at commercial service airports and to provide improved general aviation access to the community. In addition to the commercial service airports, there are 2,553 other landing facilities (including airports, heliports and seaplane bases) that host general aviation operations such as corporate and business travel, flight schools, aircraft rental and charter operations, aeromedical flights, aerial firefighting, law enforcement and disaster relief, and provide access to remote communities. These landing facilities are referred to as general aviation airports. The FAA now identifies nonprimary airports with less than 2,500 enplanements per year as either general aviation or general aviation reliever. In General Aviation Airports: A National Asset, the FAA further clarified the roles of these general aviation facilities. Airports that do not receive scheduled commercial service or that do not meet the criteria for classification as a commercial service airport may be included in the NPIAS as general aviation airports if they account for enough activity (having usually at least 10 based aircraft) and are at least 20 miles from the nearest NPIAS airport. These airports (2,553) average 29 based aircraft per airport and account for 36 percent of the nation’s general aviation fleet. General aviation (GA) airports are the largest subcategory of airports in the United States. They can be publicly or privately owned and operated and can have up to 2,500 annual commercial service enplanements without being classified as a commercial service airport. The benefits of commercial service airports are apparent as many members of the general public use commercial air travel while conducting business or recreation. The benefits of GA are not as clear to those outside of aviation. In 2010, the FAA began a study of the roles general aviation airports play in the national airport system. At the time, general aviation airports had not been studied thoroughly at the national level for more than 40 years. The FAA released the results in the ASSET report in May 2012. The report identified several benefits of GA airports: emergency preparedness and response, such as law-enforcement, firefighting, disaster relief and aeromedical flights; critical community access to remote populations; essential air and cargo service; air taxi service; commercial, industrial and economic activities, such as agriculture, oil and mineral exploration survey, pipeline patrol, executive business travel, express delivery cargo, and low orbit space launch and landing; special events such as airshows, aviation open houses, skydiving, tourism, and intermodal connections; and other specific functions, such as self-piloted 26 / American Association of Airport Executives Module 1 business flights, flight instruction, aircraft storage, and aerospace engineering/research. General aviation reliever. Due to different operating requirements between small general aviation aircraft and large commercial aircraft, general aviation pilots often find it difficult to use a congested commercial service airport. In recognition of this, FAA has encouraged the development of high-capacity general aviation airports in major metropolitan areas. These specialized airports, called general aviation reliever airports, provide pilots with attractive alternatives to using congested hub airports. Reliever airports are those designated by the FAA to relieve congestion at commercial service airports and to provide improved general aviation access to the overall community. These may be publicly or privately owned and serve as an outlet for general aviation traffic to avoid the congestion of the commercial service facility. GA relievers also provide general aviation access to the surrounding area. To be eligible for reliever designation, these airports must be open to the public, have 100 or more based aircraft, or have 25,000 (or more) annual itinerant operations. The 264 reliever airports host an average of 177 based aircraft, which in total represent 23 percent of the nation’s general aviation fleet. Examples of well-known GA relievers include Teterboro Airport in New Jersey, Van Nuys Airport in California, and Centennial Airport in Colorado. General aviation airport categories. The GA Asset Report divided GA airports into five categories based on activity measures such as the number of annual operations and the types of aircraft based at the airport. The four new categories are national, regional, local and basic: GA National Airports (84) are located in metropolitan areas near major business centers and support flying throughout the nation and the world. Located within 31 states, they support operations by the most sophisticated aircraft in the general aviation fleet. Many flights are conducted by jet aircraft to include corporate and fractional ownership operations as well as air taxi services. Heliports and seaplane bases are not included in this category. GA Regional Airports (467) are located in metropolitan areas in 49 states and serve relatively large populations. These airports support both interstate and intrastate flying. While there is a substantial amount of charter, jet flying, and rotorcraft flights, there are no heliports or seaplane bases in this category. GA Local Airports (1,236) are considered by the FAA to be the backbone of the general aviation system with at least one local airport in virtually every state. These airports typically are located near larger population centers but not necessarily in metropolitan or “micropolitan” areas. Mostly serving piston aircraft in support of business and personal needs, these airports also accommodate flight training, emergency services, and charter passenger service. The flying involved both to and from these airports tends to be within a state or immediate region. There are no heliports, but there are fou

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