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Originally Posted by GoldenBoot
Leasing, or even selling ABIA, is a brilliant idea. The city should have done this a long time ago!
It would be a huge advantage to have our airport run by a free market corporation who has experience in running medium-to-large airports. By allowing ABIA to enter the free market economy, those who run it should be more inclined to listen to their “customers” and make necessary changes to please said customers – a lot quicker that the City of Austin would!!!!
Expansion of facilities and routes would occur in a much shorter timeframe that the City of Austin can accomplish. Having ABIA run by an outside corporation will free-up many more avenues to funding project than are open to a municipality-run facility
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I'm still neutral on the idea. On the one hand, I do agree that expansion of facilities and routes would most likely occur more quickly, but on the other hand, I think Macquarie would be more inclined to listen to their shareholders rather than their customers. Understandable, since they're a business and in it for the profit.
What if they decide they can get a better return on their investment by putting up all the concessions for rebid and some company like Aramark or Host International wins with a lower bid than whoever operates the concessions now? Do we say goodbye to Maudie's, Amy's Ice Cream, Schlotzky's, Matt's El Rancho, and The Salt Lick and hello to McDonald's, Burger King, Popeye's, Cinnabon, and Starbucks?
Or what if they decide the airport needs more retail kiosks (to maximize their profits) and the only place to put them is where the live music stage is now? I'd hate to see AUS become just another generic airport and lose its character.
I'm still not convinced on this idea just yet, because some things still aren't clear to me.
First of all, the headline of the Austin Business Journal story was:
Could ABIA be privatized? Australian powerhouse mulls the option
Proponents of leasing all
or part of ABIA say the newfound revenue could pay for projects such as light rail.
How does this deal work if we only lease part of the airport? Let's say the city decided to just lease the cargo part of the airport to Macquarie for $100 million. Does that $100 million get to go to the city's general fund, and the rest of the revenue earned from the remainder of the airport that the city would still own have to be used only at the airport?
The Austin Business Journal notes that
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Under a 1996 federal pilot program, U.S. airports can apply for an exemption from the Federal Aviation Administration. Under that program, up to five U.S. airports can be leased to a private company if the FAA and 65 percent of airlines using the airport give their approval.
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If we wind up leasing only part of the airport to this private company are we still eligible for this program? My guess is no because the Austin Business Journal notes that
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"We are entirely at a very, very conceptual level about how this might work," says a source familiar with Macquarie's conversations in Austin. "Plus, while the big banana might be to go for an FAA exemption ... there are many other steps short of that that Macquarie may be willing to talk to the city about. [Possibilities] run all the way from a management contract to turn over airport operations through a contractual arrangement ... to having them come in and manage one piece of the airport. There's all kinds of ways the city could unload some of the headaches of operating the airport, short of privatization."
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It sounds to me like anything less than leasing the whole airport to an outside firm falls short of privatization, and wouldn't qualify for the program that allows the profits to be used outside the airport, but I don't know for sure. Also, it seems like we
couldn't lease the land that houses the low-cost terminal, because we've already leased it to GECAS, so how does that play into things?
Second - Isn't this (leasing part of the airport) already what we're doing with GECAS? We leased 40 acres to them and now
they own and operate the low-cost terminal & the parking over there until the end of their 30 - year lease. Can the money the airport gets from GECAS for the lease and the city's portion of the profits (if there are any) from the low-cost-terminal go into the city's general fund? (Again, my guess is no, because under this privatization program the airport has to apply for an exemption to the FAA and I don't think the city has done that, plus I think the whole airport has to be leased to qualify.)
Also, If we lease the airport to Macquarie, would it be structured like our lease with GECAS? Remember, in that deal, GECAS pays for the design and construction of a more permanent 8-gate low-cost terminal if the temporary facility does well, and at the end of the 30-year lease, it reverts back to the city.
Would whatever Macquarie builds on airport property revert back to the city at the end of the lease? If Macquerie paid for the design and construction of the East Concourse expansion and later, the South Terminal and we got to keep it after a thirty-year lease, that might convince me that this was a good deal for the city.
Third - the article in the Austin Business Journal said:
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Proponents of a leasing deal say that leasing ABIA could add up to $500 million to the city's general fund annually, but acknowledge that the road to privatization is fraught with hurdles and public wariness of putting public infrastructure into private hands.
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A different version of the story
from KXAN says:
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The Macquarie Group is lobbying City Council members to consider a deal that would allow the company to enter into a long-term lease agreement with Austin. The agreement could result in a $500 million payout. The company would pay the one-time lump sum to the city in return for the rights to operate ABIA.
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So which is it? A one-time payment or an annual payment.?
I'm thinking it's only a one time payment, because the Austin Business Journal also noted that
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ABIA's total operating revenue for the 2007 fiscal year was $81.9 million, and $17 million of that revenue went back into the airport's capital fund, says ABIA spokesman Jim Halbrook.
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That makes it sound the like airport made a $17 million profit last year. If that's the case, I don't see how a private company would be able to give us $500 million on an
annual basis. If the $500 million is a one-time payment over the life of - say a 30-year lease - that's only 16.67 million per year to the city on an annualized basis. That's less than our $17 million profit last year and one would hope - going forward - that our future profits would grow as our passenger and cargo traffic increased over the next thirty years. Is this really a good deal for the city just to be able to get all this money up front? It sounds like a great idea as a short-term solution for the city's current financial needs, but what are the long-term ramifications?
Last, if we keep things the way they are now (no privatization) and later decide to build light rail from the airport to downtown, UT, and out to Mueller, can the part of the light rail that's on airport property be paid for with revenue generated by the airport?
Whatever happens, it sounds like it's going to be a long process and hopefully we'll get answers to these questions somewhere along the way. Until then, I don't know enough about it to know whether it's a good idea or not.
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So won't that leave just 5 daily Expressjet departures? 2 to ABQ, 2 to MSY and 1 to ONT?
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