Engineering Inc. - July/August 2015 - (Page 4)

MarketWatch BY G E R RY D O N O H U E Turbulent Times Ahead For Aviation Construction O Airport Capital Development Cost Estimates by Year and Airport Category (Millions of Current Year Dollars) 4 ENGINEERING INC. Airport Category 2015 2016 2017 2018 2019 2015- 2019 Percent Large Hub 8,560 9,462 9,132 7,225 5,705 40,083 52.9% Medium Hub 1,740 1,865 1,995 1,887 1,609 9,096 12.0% Small Hub 1,422 1,176 1,126 1,436 2,497 7,656 10.1% Non Hub 1,037 1,052 1,068 1,084 1,100 5,340 7.1% Other 2,633 2,672 2,712 2,753 2,794 13,564 17.9% Total 15,391 16,227 16,033 14,384 13,705 75,740 100.0% Source: Airports Council International-North America and Federal Aviation Administration tion (FAA) reauthorization discussions and the Passenger Facility Charge (PFC) cap debate, we should know more later this year. "I don't really see the market dropping, but I think it's more likely to be steady than up." Funding Difficulties Airport funding comes from three main sources. The largest federal program is the FAA Airport Improvement Program (AIP), which provides grants of up to 90 percent of the cost of airfield capital improvements or repairs. In the four-year FAA Mod- MARTIN BARRAUD/GETTY IMAGES ver the next five years, nearly 3,400 U.S. airports will require an estimated $75.7 billion in infrastructure investment, according to analysis by Airports Council International-North America (ACI-NA). That's $15.1 billion a year to accommodate passenger increases, maintain and upgrade aging facilities, and meet enhanced safety and security requirements. Like so many other U.S. infrastructure sectors, needs far outpace resources. ACI-NA estimates that available funding is just $6 to $8 billion per year-about half of what is required. How well that gulf gets bridged will determine the strength of the airport design and construction market over the coming years. "It all depends on funding," says Gary Luczak, aviation market sector leader and senior vice president for TranSystems in Philadelphia. With the ongoing Federal Aviation Administra- JULY / AUGUST 2015 ernization and Reform Act of 2012, the AIP was authorized at approximately $3.5 billion annually, but getting that money to airports has proved problematic. Congressional gridlock has disrupted the appropriations process and delayed the distribution of already approved funding. "The grants haven't been reaching our clients until August, September or October, which is too late in the year for airport construction in the Mountain states," says Chuck Larson, chairman of J-U-B Engineers, Inc., in Salt Lake City. "Congress needs to get in gear and get those grants out on time." The second big funding source is the PFC, which totaled $2.8 billion in 2014 and accounts for about 30 percent of U.S. airport capital investment. The PFC is funded through the collection of $4.50 from each departing and connecting passenger at an airport. "Because it's based on passenger totals, the PFC doesn't provide much benefit to smaller, regional airports," Luczak says. "It really comes into play in the top 30 airports, providing them with a steady stream of income." U.S. airline passenger traffic is projected to increase from 700 million to 1 billion annually within the next 10 years, which means PFC totals will continue to grow. But because the levy hasn't been increased since 2000, inflation has cut its purchasing power to the equivalent of $2.42. Current FAA funding expires in September 2015. ACEC is advocating for a long-term FAA reauthorization bill that increases airport funding through the AIP in addition to raising the cap on PFCs. Further compounding the PFC funding shortfall, many airports have pledged large percentages of their current and future PFC revenue streams to service bond offerings for past projects, significantly decreasing the amount available to fund new infrastructure. The third major source of airport funding is non-aeronautical revenue generated at each airport, primarily fees collected from concessionaires, such as retail and rental car companies. "The concessionaire market has been really strong for us over the past five years," Luczak says, "because the airports have been looking there as a way to bring in new revenue."

Table of Contents for the Digital Edition of Engineering Inc. - July/August 2015

Engineering Inc. - July/August 2015
From ACEC to You
Market Watch
Legislative Action
Secrets of the Centenarians
State of the Industry
Reshaping Cities
2015 Professional Liability Insurance Survey of Member Firms
Girl Empower
2015 Fall Conference
Guest Column
Guest Column
Guest Column
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - July/August 2015