An Airport Is Worth How Much?
The question of how much an airport is worth seems to be coming up with more and more frequency. Unfortunately the reality is that most do not raise this question or even think about it until such time as the airport comes under threat of closure or restriction of services.
May 20, 2009 By Rob Seaman
The question of how much an airport is worth seems to be coming up with more and more frequency. Unfortunately the reality is that most do not raise this question or even think about it until such time as the airport comes under threat of closure or restriction of services. Such has been the case far too often in recent years – many smaller regionally important
| Regional airports have huge economic generation capacity within their communities.
airports that were cast upon their new owners through the national airports policy of the 1990s are now facing the realities of increasing operational costs and monetary inefficiencies that have accumulated over many years. The unfortunate truth is that these airports have been operated in an underfunded manner for far too long and now as the infrastructure support systems and equipment become worn, used up or even inoperable, the monies are not in place to have improvements, repairs or even rudimentary support systems put into play.
The national airports policy was a concept by a government looking to divest itself of costs and programs that it deemed to be burdensome or unnecessary to its bottom line. Many communities were suddenly faced with their airports either closing altogether or being given the option to take them over for a nominal fee – one that usually was far lower than the airport was realistically worth but that made it a viable business transaction. The problem in many cases was that the people acquiring the airport did not necessarily fully understand the value of the airport to their community or the actual cost of keeping and maintaining it. For many, the simple fact that there was an airport that was operational and had always been there meant they needed to retain it and keep it for their use. Little business planning or future exploration went into the big picture decision to acquire and operate these airfields.
For its part, when the government handed these facilities and operations over to the new owners, it did so inclusive of equipment and in some cases personnel and operating systems that were current at the time.
Spending had been such that these airports worked well for the day, and continued to work well without their new owners having to be overly aware of operational issues for years to come. It was something akin to going to the pet store with your kids to buy a new low-cost pet. The fish or bird purchase is nothing in the big picture. It’s the tank, cage and other things that wind up costing money. The problem is, few realize at the time what they’re getting into. Such was the case as the federal government turned over ownership and control of many regionally important and sensitive airports to the unsuspecting communities or private corporations who took them on.
As with anything, time means wear and tear – especially on equipment.
For example fire tenders, ground grooming equipment, runways and taxiways, and even buildings and terminals have all started to show signs of time and in many cases have become inoperable. The question then becomes has the airport been planning for such a day and collecting the money necessary to advance or maintain the services and infrastructure – or has it been working day-to-day without consideration or planning for future needs? In many cases it would appear that even with proper planning and foresight, significant monies required to maintain (let alone update) are simply not there. Add to that the recent demands for enhanced security and there are significant costs coming into view for airport operations.
For its part, the Canadian Owners and Pilots Association (COPA) has long been warning of problems on the horizon in this area. Its publication, Guide To Public Airports, the 19th edition of which was published in January 2008, contains some important information and well thought out concepts and current issues. As the report notes, successful airports do not have to be big to succeed; however, they are a boon to the communities they serve because they are transportation infrastructure – just like highways, roads and sidewalks – that government money in some form goes to support and maintain. The key to an airport being measured as successful, according to COPA, and those it surveyed for its report, is the ability to provide, participate in or support the following:
- medevac flights
- firefighting equipment
- business and commerce for the community
- courier operations
- alternative field facilities for aircrafts
- a base for agricultural aviation, flight training, charter operations, goods and services coming to and from the community and search-and-rescue operations
- a needed adjunct for an industrial park providing just-in-time delivery for manufacturing and executives coming and going from the facilities
- a facility for population evacuation in the event of a natural disaster
- a facility to bring disaster relief supplies when a natural disaster strikes the area
- a place for scheduled airline service to bring business into the community and goods and services out
- a recreational facility
- a focal point for community events
- a destination for school and educational field trips
- a community link to the outside world.
One distinction that COPA makes in its report is that airports are not big business! It points out that airports are part of the transportation infrastructure; how-ever, some communities in Canada have had attempts made to treat them as if they are big business unto themselves. The difference is important. Communities that believe the airport is a business have different expectations, which may include:
- the airport should be self-supporting financially just like a commercial shopping mall factory shoe store
- the airport should be taxed as a commercial venture based on its occupied space and land footprint including the runways, taxiways and infield space
- the airport should bring goods, services, visitors and commerce in at no cost to the community.
The report further notes that more enlightened communities have long since realized that airports are not big business; they are, however, transportation infrastructure and need to be treated like any other form of transportation infrastructure. Nobody expects roads and sidewalks to be self-supporting! This does not mean that communities need to totally fund their airports. It does mean there should be some sensitivity and responsibility to participate in funding assistance.
Airports do have ways and means to raise monies for basic day-to-day operational expenses, as we all know. Landing fees, services, goods purchased, and rents or ramp access charges all provide daily income to an airport for its operational expenses and basic cost of business.
However, this is frequently not enough to sustain and support the longer-term picture that would include upgrades, maintenance, equipment procurement and expansion.
Many studies have shown that regional airports have huge economic generation capacity within their communities. COPA has at least six studies posted to its website illustrating how much business and prosperity airports can and do bring to a community. The basic rule of thumb is that for every one direct employee of an airport, there are six indirect jobs tied to or related to that employee. What that means is that even a small airport employing some 300 people will in effect have influence and impact on some 1,800 jobs within the community.
The most recent airport funding issue to come to public light was the decision by the Greater Toronto Airports Authority to cease its funding agreement with the Toronto Buttonville Municipal Airport. At press time, the final decision regarding the closure of Buttonville was being made (for current news, visit www.wingsmagazine.com.)
That raises the question, without funding why stay in that business? The answer in this particular case is simply that the owners of this airport have a particular love for and devotion to the business and they have a commitment to try to maintain it for as long as possible. However, without support and funding outside of the direct operational and tenant costs they are able to raise, there is serious concern about this airport’s ability to not only continue safe and responsible operation, but to provide improvements in infrastructure development as required.
As many know, one of the key issues around Buttonville has always been the proposed development of Pickering. You don’t have to be a rocket scientist to figure that the government and private sector are not about to invest major money into developing an airport of that sort in this current economy. Therefore, the need for Buttonville is static for the immediate and longer-term future. However, to make this airfield more secure requires funding and support above and beyond that which the airport owners are currently able and willing to provide. Simply put, the governments of the federal, provincial and municipal levels must help if they wish to reap the benefits of the relationship.
While general aviation as a whole has come under increasing public scrutiny and criticism – especially in the United States – the simple fact remains that private and corporate aviation will continue to be an important part of the global transportation network. Coupled with that, there is no logical replacement for the services that this industry provides to the communities and businesses that it supports. In addition, the aviation industry at all levels collectively provides significant employment and monies to the economy at large. To compromise or sacrifice this could be just as detrimental as losses in the auto sector, forestry, or many other segments of the Canadian business community. We simply must find a solution to this situation not only for Buttonville, but for all airports across this country. Hopefully, the most recent government budget will address this. As members of the aviation community, we owe it to ourselves and our industry to continue pressure and awareness campaigns on the government to make sure that this happens. It’s in the best interest of all of us.