1. An Overview of how Airports Function
Airport financing
An Overview of how Airports Function

2. What makes an airport so great?
An economic cornerstone in our community
Job creation (KSLC is a perfect example)
Supports commerce
Is a creator of business
Encourages tourism
Ease of travel for members of the community
An economic cornerstone in our community: it creates jobs, brings in revenue for businesses, Allows for major events to take place such as the Olympics, not to mention the ease of travel. KSLC employs people directly (general rule of thumb for determining the number of jobs created indirectly such as cab drivers etc. is to times number of direct jobs by X3 = 39 thousand people indirectly employed by KSLC

3. Types of Airports Large and Small Rural and Remote Public and Private
Each serves a specific purpose in the Nation’s Air Transportation system
There are large and small airports, remote and rural, private and public; all of which serve a purpose, some more important to the public than others. In general, this report will be focusing more on the larger scale public airport facilities in the United States and how they serve as a major economic giant among some of the biggest industries in the world. Also, I will be focusing on how these airports are financed and what “makes them tic.”

4. Primary Commercial Service Airports
Divided into four groups
Large hubs: 33
Medium hubs: 35
Small hubs: 4
Nonhubs (between 2500
and enplanements)

5. What does my airport do for me
Transportation (fastest way of travel)
Makes the largest impact on intercity and interstate travel and commerce of any form of transportation
Economic growth
Competition
Expansion of markets
Generation of tax revenue which gives back to the community
The primary role of an airport is to provide means of transportation of persons and property. The airline industry is vital to America’s transportation system as a whole. Even though there are a number of different means of transportation, air travel has over the years made the most significant impact on intercity and interstate trade and commerce.
The next most recognizable benefit that comes from having an airport in a community is the stimulation of economic growth. Things like demand for products and services, competition between businesses and expansion of markets are examples of how this country could not operate the way it does with out a national aviation system.
Much of this money does not get circulated back into the airline industry but rather goes towards maintaining and improving surrounding communities.

6. Airport Expenses Operation and Maintenance Employee salaries
Maintenance of airport facilities
Payment for utilities
Purchasing of supplies
Dealing with accidents/incidents and other unexpected day to day expenses
In general, the two types of expenses that an airport encounters are capital improvement expenses and operation and maintenance (O&M). Most of the funds an airport receives after it has been established go toward maintaining and running the facility smoothly, safely, and efficiently. These expenses include but are not limited to: paying salaries and wages of airport employees, maintenance of airport facilities, maintenance of runways and other parts of the runway environment, payment for utilities (water, technical equipment, electricity etc.) and also the vast amount of disposable supplies.
airfield, terminal, hangars, and general administrative expenses. (four types of expenses)

7. Operating and Maintenance Expenses
Operating expenses fall into one of four categories
Airfield (runway maintenance, lights etc.)
Terminal (cleaning, plumbing, electricity etc.)
Hangars (includes all buildings)
General Administrative expenses (employee salary, leasing of land, liability insurance etc.)
All operating expenses are divided into four groups: airfield, terminal, hangars, and general administrative expenses.

8. Capital Improvement Expenses
Capital Improvement expenses are periodic expenses that tend to be very large
Expansion or building of a new terminal
Construction of new runways
Purchasing of large equipment such as fire trucks, tow trucks, and other ramp vehicles
Acquisition of land
Noise restraint equipment (insulation of housing)
Some examples of capital improvement expenses include but are not limited to: construction of terminal facilities, construction of new runways, purchasing large equipment such as fire trucks and tow trucks and also the acquisition of land for future expansion.

10. “If you’ve seen one airport…you’ve seen one airport.”
All airports are unique
Airport systems function differently
Geographical location
Organizational setup
Take Salt Lake International compared to Las Angeles for example; the population of Salt Lake is much smaller so they have less enplanements. Because of the large number of enplanements at LAX they receive more federal funding. On the other hand, if either airport wanted to buy more land surrounding their particular airport LAX would doubtlessly be paying a higher price. These differences in geographical location tie into how an airport functions within their organizational structure.
An airports budget has much to do with how it is structured. For example, larger airports have more personal, equipment etc. and they will also need a more complex administrative structure. Because of this need for a complex administrative structure, it becomes especially necessary for people in administrations to have good relations amongst themselves. To do other wise compromises the safety of the operation.

11. Budgeting
Because airports have a relatively inconsistent flow of funds, they have special forms of budgets.
Most airports operate on one of four forms of budgets.
Lump Sum Appropriation
Appropriation by Activity
Line-item Budget
Zero-based budget

12. Lump Sum Appropriation
Simplest form of budgeting
Is free of financial restrictions
Maximum flexibility is obtained and it is the job of the operator of the airport
Most commonly seen in general aviation airports with smaller budgets and less needs

13. Appropriation by activity
Uses a set of guidelines that directs how much money is allocated to various work areas
Examples of work areas are: Fire Department, Ground control, Terminal service, Security, bagage handling
Although there are limitations placed on various departments, those limitations are subject to change
The result is a moderate amount of flexibility

14. Line-item Budget Most detailed form of budgeting
Adheres to a strict set of rules
Every operating and capital expense is accounted for
Every item is given an numerical code
Constant tracking of each item is followed up with analysis and if necessary change to the budget

15. Zero-based Budget Growing in popularity Theory: “Don’t look back”
Programs are reviewed constantly and then ranked in degree of importance
Actual expenses are constantly being checked against budgeting expenses
This makes the department heads more accountable for what they spend

16. Airport Revenues Passenger Facility Charges (PFCs)
A uniform charge that many airports have adopted
Helps in aiding the airport to cover its O&M expenses
Current limit is $4.00
Expected to go to $7.00 in near future
Really a small price to pay when you think of all the free public services available at airports

17. Landing Fees A fee incurred by the airlines
Based on gross landing weight
Helps pay for ground personal and airfield maintenance
Used more extensively under a compensatory cost
This is one way that the airport recovers the actual costs of the facilities and services that the airlines use

18. Federal Funding / Grants
Federal Funding is a primary source of income for primary commercial service airports
Private investing is not unheard of but it is rare
There are a number of elegibility requirements for federal funding
Most of these requirements are tied to how large an airport is and how many annual enplanements it has

19. Airport Improvement Program (AIP)
There are three main goals of this program
maintain that airport system in its current condition
aims to bring all airport systems up to current design standards
expand the current systems
Things grant moneys can be spent on:
airport planning, airport development, airport capacity enhancement and preservation, and noise compatibility programs
Regardless of which category a given airport falls under, the NPIAS allocates funds primarily to maintain that airport system in its current condition. Secondly, the program aims to bring all airport systems up to current design standards and if there is many money left over expand the current systems.

20. National Plan for Integrated Airport Systems
Airports must be part of the NPIAS if they wish to receive funding from AIP
The AIP trust fund is made primarily from taxes
The specific moneys that go into the fund are collected from those who AIP benefits directly
10% airline ticket tax, a $6.00 international departure fee, a $0.15 tax on AvGas
Based on the number of enplanements funds are allocated accordingly

21. Concessions, Stores, and Specialty shops
Larger Airports have the luxury of space
“Prime business real estate”
Higher fees
Constant traffic
Makes for a great source of internal revenues
The more money an airport can produce internally the less they need federal funding
Reliever airports receive this “overflow”

22. An Airport’s Relationship with the Airlines
One cannot function without the other
Two basic approaches
Compensatory agreement
Residual cost approach

23. An Airport’s Relationship with the Airlines
It is very important that a sound relationship exists between the two counterparts if either is to survive.
Each has to give and each has to take.

24. Who is responsible for financial stability?
With a compensatory cost approach it is the airlines who assume the financial risk
With a residual cost approach one or more major air- carriers based at that hub accept responsibility
Residual cost approach normally found in long-term relationships
There is a gradual shift towards the compensatory cost approach
Residual cost approach is compensated for by airlines receiving either the deficit or the profit from the residual between revenues and expenses
With a compensatory approach…more traffic benefits the airport more than the airlines

25. Miscelaneous Parking fees Ground Transportation Luggage Carts
Sleeping rooms
VIP and rest lounges (some require membership)

26. Conclusion Communities need airports just like airports need airplanes
Many of the benefits of airports go unnoticed by the public
Communities with airports of substantial size are dependant on their airport even if they don’t know it
Nothing is for sure in the Airport industry
The key to running a financially sound airport comes down to proper planning, proper knowledge, proper resources (both people and supplies), and a willingness to take things as they come, realizing that that is the nature of the beast.