Centerlines - June 2008 - (Page 18)

REVENUE ARENA REVENUE G BUILDING NON-AERONAUTICAL Innovative ideas for the bottom line B Y JE A N F E I NG OL D iven the financial pressures on the airlines, the last thing an airport will want to do to cover its own rising energy bills would be to hike the landing fees and other charges. Airports can try some different routes to generate more non-aeronautical revenue as better budget balancing alternatives. Real Estate Income PARKING revenue may be enhanced by offering varied parking products rather than just traditional terminal area and economy or remote lots. Often airports own more land than required for their aeronautical needs. That land can be developed, explained Charles Erhard, Federal Aviation Administration airport compliance division manager and former manager of airport administration at Washington Dulles International Airport, to generate discretionary revenue or to lower the rates and charges of aeronautical users. Erhard said airports must ﬁrst determine how much risk they are willing to take. He stressed the importance of careful negotiating for any deal: “Never go to the table unless you know what your ‘must haves’ are and what you think the other side’s ‘must haves’ are.” In taking a discretionary revenue development approach, an airport spends its own money on developing infrastructure and facilities. Because it is taking all the risk, the airport gets all the rewards. A third-party development approach lets an outside entity ﬁnance and construct facilities and then pay fair market ground rent to the airport. While there is no out of pocket cost to the airport, it may have to make infrastructure investments to attract developers. “What I tell airports is what they need to get up front is a good ground rent and whatever else they need to cover their costs, and what they get on the back end is the residual value of the structures,” Erhard explained. The airport’s goal is to gain title to functional structures when the lease ends so it can then enjoy tenant rents from a debt free building. 18 CENTERLINES | JUNE 2008

Table of Contents Feed for the Digital Edition of Centerlines - June 2008

Centerlines - June 2008 Contents President’s Message Canadian Airports Associates’ Corner Guest Column On the Hill and On the Stump Policy Center Cover Story: Hotter Than Last July? Revenue Arena: Building Non-Aeronautical Revenue Environment: Wind Turbines at Boston Logan Passenger Focus: Des Moines Deals with the Iowa Caucuses Safety and Security: Inline Explosives Detection Systems Air Service Recruitment: Holding on to What You’ve Got On Management: Managing Capital Programs Now Underway Grand Opening Conference Previews and Reviews New Members Index of Advertisers/Advertiser.com Box Scores

Centerlines - June 2008

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