In this issue:
- Remote towers: hope for smaller airports
- Airport terminal P3s proliferate
- Fort Lauderdale fiasco worse than reported
- Airports short-changed in FAA bills
- Alternative to lap-top ban is much higher costs
- News Notes
- Quotable Quotes
Remote Towers Offer Hope for Smaller Airports
Small airports and lawmakers from rural states have expressed great concern about proposals for reform of the air traffic control system, fearing that a cost-conscious ATC corporation might eliminate night shifts at control towers, shut down “marginal” towers, or not add such towers at airports that need them. “I would rather put my eggs in the basket of Congress rather than a 13-member private board making decisions nationwide,” Sen. Jerry Moran (R, KS) told a reporter from The Hill recently.
To be sure, small airports today face reduced airline service and an FAA moratorium on any additions to the contract tower program (which allows smaller airports to have a control tower at far-lower cost than a conventional FAA tower). If and when FAA lifts its moratorium, small airports will only get a tower if FAA detrermines that its benefits (to FAA and the airspace system) exceed its costs.
But there is another possible future. In a new report, airports expert Steve Van Beek explains that Remote Towers offer a new alternative for America’s small airports. In contrast to a conventional tall structure with a control cab on top, a Remote Tower puts the control cab on the ground (at lower cost) and relies on an array of high-tech cameras mounted on one or more tall poles at the airport. Because the cameras include infrared, they provide better views at night, in rain, or in fog than the out-the-window view from a conventional tower. And the controllers’ equipment and displays can include object tracking and alerting, both in the nearby airspace and on the airport surface, increasing safety.
Remote towers are already certified and in operation at small airports in Sweden and Norway, and similar projects are under way in Germany, Ireland, and the United Kingdom. These Remote Tower projects are being implemented by the ATC corporations of those European countries, as a way to improve and expand tower services.
Unfortunately, the FAA has no Remote Tower program, and has no known plans to develop one. This is ironic since some of the original research on the concept was carried out a decade ago at the FAA Tech Center in Atlantic City. But budget pressures and cost overruns on NextGen programs seem to have precluded any FAA Remote Towers program. There are two pilot projects under way here—one at Leesburg, VA and the other at Loveland, CO—but neither is FAA-funded.
That is tragic, because if Remote Towers were approved for use in this country, they would enable more small airports to qualify for a contract tower, as Van Beek explains in the report. Because of its increased performance in all kinds of weather, the benefits of an RT should exceed those of a conventional tower. And the costs of an RT would generally be significantly lower than a conventional tower. Larger benefits and lower costs means a higher B/C ratio.
Looking ahead, Van Beek (a former member of the FAA Management Advisory Council) suggests that the likelihood of a funded contract tower program, including Remote Towers, would be greater if the ATC system had a reliable revenue stream that could support bonds for modernization (like the bonds airports issue). The FAA MAC actually recommended that the Air Traffic Organization be converted to a nonprofit entity similar to the European ATC providers that are already implementing Remote Towers at small airports. And if airports, general aviation, controllers, and regional airlines were part of the governing structure, that could be a workable model. Download the brief here: https://reason.org/files/air_traffic_control_remote_towers.pdf
Airport Terminal P3s Proliferate
The White House has called for increased private investment to improve America’s transportation infrastructure, and investors are stepping up the pace, with major public-private partnership (P3) deals under way at Austin, Denver, LaGuardia, and (potentially) Kansas City.
P3s differ from traditional design-build construction contracts. The scope of a long-term P3 concession includes design, build, finance, operate, and maintain. This model is widespread in parts of Europe and South America, but has seen little use in the United States until recently. One example is the terminals at Orlando Sanford airport. Another—this time applied to the entire airport—is the 40-year lease of the San Juan International Airport in Puerto Rico, under the federal Airport Privatization Pilot Program. Indeed, under the terms of that program, air carrier airports may not be sold (which is what “airport privatization” often means in Europe); here, they may only be long-term leased.
I’ve covered the $2.8 billion LaGuardia Central Terminal replacement project in previous issues. That P3 project was financed by $2.5 billion in tax-exempt bonds issued by the airport operator (Port Authority of New York & New Jersey) and $300 million in equity from concessionaire Skanska Infrastructure Development, Vantage Airport Group, and Meridiam. Demand for the bonds exceeded supply by 10 times, at an interest rate of 3.27%, tax-exempt. Funds pledged for debt service on the bonds will come from airline terminal-use payments (up to 85%) and the rest from retail concessions. A much larger make-over of JFK International has been proposed by New York Gov. Andrew Cuomo, in which $7 billion of the projected $8 billion costs is expected to be raised via P3 deals.
Austin’s project is far smaller, but was developed along the same lines. The aim was to redevelop the unused South Terminal as a no-frills home for ultra-low-cost carriers, with airline use payments at half the level charged in the main terminal. The airport selected Oaktree Capital Management (which was part of the consortium that has redeveloped the San Juan Airport under the federal pilot program) to develop the new South Terminal P3 approach. They set up LoneStar Airport Holdings as the project-specific concession company, which designed and carried out the $12.5 million renovation of the South Terminal and will operate and manage it for 30 years. The renovation was completed last winter and the terminal opened in April, with Allegiant Air and Texas Sky moving in. The no-frills approach has been developed in a retro-style, reminiscent of the “golden age of flying” in the 1960s. There are no jetways, just traditional air stairs from the tarmac to the planes. And the styling of the terminal is mid-century modern.
On a vastly larger scale is the make-over of the main terminal at Denver International Airport. Though opened only 22 years ago, DIA has already exceeded its design capacity of 50 million annual passengers; the revamped terminal will be sized for 80 million. Under a $1 billion, 34-year P3 concession, Ferrovial Airports will rebuild the Great Hall, relocating TSA screening lanes during a four-year design and construction period. This will free up space to triple the retail concessions in the Great Hall (post-security), generating additional revenue as Ferrovial operates the revamped terminal over the remaining three decades. The P3 agreement shifts the risk of construction cost overruns to Ferrovial, and allows the airport to get the massive project done in the near term, to cope with the projected growth.
Kansas City is embroiled in the latest phase of a long-standing contretemps about whether to replace its pre-deregulation multi-terminal design with a state-of-the-art single terminal with centralized TSA screening. Many residents of the area prefer the current configuration, which allows them to park close to the terminal they will use, but airport directors and others have long called for a single-terminal replacement, as more efficient. Political pressure led the city to enact an ordinance requiring any new terminal plan to be put to the voters for decision.
In this environment, the city this spring received an unsolicited proposal from KC-based airport developer Burns & McDonnell to finance and build a new $1 billion single terminal to replace the existing ones. Several weeks later, a larger firm, AECOM, asked for an opportunity to submit a competing proposal. It suggested the city consider not merely design-build-finance (per Burns & McDonnell) but a long-term P3 concession that would also include operating and maintaining the terminal (a la Denver). After some debate, the City Council issued a request for qualifications, due August 10th, under which firms can submit their bona-fides to design, build, and finance a new 750,000 sq. ft. terminal and parking garage with at least 6,500 spaces. That is not really a P3, in the sense being used by other airports, and it will be interesting to see if any of the teams seek to go beyond its terms.
Fort Lauderdale Security Fiasco Worse than First Reported
In the March 2017 issue of this newsletter, I reported on the panic and chaos that ensued at Fort Lauderdale International Airport (FLL) in the aftermath of a lone-gunman attack in the baggage claim area of one of its four terminals, on January 6th. A new report, from the Broward County Sheriff’s Office (BSO) was covered in a June 4th front-page story in the South Florida Sun-Sentinel: “BSO Cites Own Flaws in Airport Shooting.” The report indicts both the agency itself and also FLL airport management.
To recap, the previously known basics were as follows. The lone gunman killed five and injured six other people in the baggage claim area of Terminal 2, after which he was captured by sheriff’s deputies on duty at the airport. That should have been the end of it, but was not. With social media disseminating news of the shootings, 90 minutes later, false reports circulated about gunfire in all four terminals, leading to mass panic and uncoordinated evacuation onto the tarmac and into the parking structures. That much we already knew.
But as the 99-page report from BSO details, the responses to this panic were also chaotic and uncoordinated. Investigators were still containing the crime scene as this new panic began, but Terminal 2 had not been shut down. BSO then sent out a general call for backup from law-enforcement agencies throughout South Florida, resulting in more than 2,000 officers descending on the airport in an uncoordinated manner, clogging radio frequencies, leaving parked police cars in the way of BSO’s mobile command post and blocking evacuation routes for airport customers’ cars.
But it was not just a law-enforcement failure. According to the BSO report, the Aviation Department “failed to follow its own evacuation plan, resulting in a breach of security in all four terminals.” It “denied access to airport blueprints to SWAT teams seeking to sweep and secure the terminals.” Its staff removed luggage from Terminal 2 before it could be screened for evidence. And with passengers being stranded for up to 10 hours, nobody provided food, shelter, or medical attention. (All quoted material is from the Sun-Sentinel article, not the BSO report itself.) As this is written, the Aviation Department has not issued its own assessment of the fiasco, which is being done by an outside consultant.
What is very clear from this account is that neither the airport management nor local law enforcement were at all prepared for the kind of panic that was spread by social media more than an hour after the lone gunman had been taken into custody. Whatever emergency drills the airport carries out, in accord with FAA and TSA mandates, are obviously not capable of coping with this kind of situation, which has occurred within the past year at three large hub airports: FLL, JFK, and LAX. Changes in communications and video capability, an on-airport command post, possibly gunfire detectors in terminals, and a very clear chain of command for dealing with major security emergencies all need priority attention.
None of these incidents were cases of terrorism, and each could have been contained. The next one may be far more of a threat—especially if airports remain woefully unprepared.
Airports Get Short Shrift in House and Senate FAA Bills
In late June, both the House Transportation & Infrastructure Committee and the Senate Commerce Committee marked up their bills to reauthorize the Federal Aviation Administration. Notably absent from both bills were reforms to the Passenger Facility Charge (PFC) and to the Airport Privatization Pilot Program. Airports, and the state and local governments that own them, should make their voices heard about the need to reform both programs.
Although the White House Fact Sheet on its Infrastructure Initiative mentioned neither of these reforms specifically, both are consistent with its principles. Among those principles are creating a better balance between the federal role and that of states and localities that own nearly all transportation infrastructure. The principles also seek to “encourage self-help” and “leverage the private sector.”
Increasing or—better still—removing the federal cap on airports’ self-help funding mechanism, the PFC, would be entirely consistent with these principles. And if removing the cap is coupled with eliminating AIP grants for large hubs (which could easily replace those grant monies with PFC revenues), the combination should have broad appeal to fiscal conservatives in Congress. That was illustrated by HR 1265, the bipartisan bill by Rep. Thomas Massie (R, KY) and Peter DeFazio (D, OR). With both of them being members of the House T&I Committee, it’s a mystery why they did not offer this as an amendment to the House reauthorization bill. A number of center-right groups, including the Competitive Enterprise Institute and FreedomWorks, have supported this approach. And both the Business Roundtable and the National Association of Managers support at least an increase in the federal PFC cap.
The other omission is much-needed reform to the FAA Airport Privatization Pilot Program. Given both growing U.S. interest in the program—Airglades, St. Louis, and Westchester now have slots, and Nashville is considering applying for one—and the interest of the global infrastructure investment community, the United States is missing out on opportunities to recycle important infrastructure assets, as numerous other countries have done. Airport privatization is a timely enough topic that it is being featured in a session at the Airports Council International-North America conference in Fort Worth this September.
The current Pilot Program is more of an obstacle course than an invitation. Now that airport privatization is a well-accepted global phenomenon, the opportunity should be open to any and all airport owners that wish to consider it. The arbitrary limits—only 10 airports, only one large hub, at least one GA airport—are silly and obsolete. So is the double super-majority airline approval requirement: nothing like that exists anywhere else in the world. And the cumbersome bureaucratic procedure to get from initial application for a slot to final approval—often several long years—is also uniquely American, and foolish. Thus, a sensible reform would:
- Remove the limits on the number and types of airports that could be privatized;
- Replace the airline double super-majority requirement with, at most, a simple majority vote;
- Provide equal eligibility for AIP grants between government-owned and privatized airports; and,
- Simplify and streamline the FAA approval process.
These changes would not require any airports to be privatized. But they would give state and local officials the opportunity, if they chose, to recycle the asset value of their airport into either building other needed infrastructure or shoring up their under-funded public pension systems.
Alternative to Laptop Ban Means Higher Airline/Airport Costs
The good news is that international aviation has dodged a major bullet—a proposed ban on laptops and other electronic devices in carry-on luggage that was poised to be applied to all airports with nonstop flights to the United States. Since carrying very large numbers of such devices (with their flammable lithium-ion batteries) in the cargo hold posed a serious fire risk, the end result could well have been a ban on air travel with laptops and other electronics. And that would have devastated international aviation and much business and tourist travel to and from the United States. So that threat has been avoided.
The bad news is that the Department of Homeland Security’s alternative will impose many billions of dollars of new cost on the world’s airlines and/or airports. Enhanced screening will be required at airports with flights serving the United States from 280 airports in 105 countries, with 180 airlines operating an average of 2,000 daily flights. The exact requirements have not yet been made public, but will include enhanced screening of passengers and their luggage, as well as new protocols for security within terminals and on the ramp.
The initial requirements, for the first 21 days(!), include the use of explosive trace detection equipment, costing $25K to $50K per unit. A more-costly longer-term solution is to replace existing two-dimensional carry-on baggage scanners with 3-D scanners like those used for checked baggage. The latest generation of these, available from four U.S. firms, promises faster but more-accurate screening than current 2-D scanners. They can reportedly detect explosives by measuring the density of imaged objects within carry-on bags. This could mean passengers in regular screening lanes (not just in PreCheck lanes) could leave their electronics within their bags, rather than removing them prior to scanning. That would also increase the throughput of the screening lanes.
American Airlines has announced a commitment to spend $6 million on 3-D bag scanners for checkpoints at its eight largest U.S. airports, once the scanners receive final TSA approval. The airline and TSA have been testing them at Boston and Phoenix in recent months.
But the United States does not have direct control over airport screening practices in other countries, so the new requirements for enhanced screening for flights heading to our shores will apparently be imposed on the airlines providing those flights. Since most overseas airports do not have concourses dedicated to specific airlines, but rather have screening lanes serving an entire terminal or airport used by multiple airlines, the new requirements will impose numerous airport-specific difficulties, and it’s far from clear who will bear the costs of the new enhanced security.
It’s been many, many years since I held a Secret clearance, for my first two jobs out of MIT engineering school. In writing about this, I am assuming that the threat information recently analyzed by DHS, and provided to certain congressional committees in classified briefings, is as ominous as appears to be the case, from the actions DHS is now taking without protest from Congress. But I will also repeat what I’ve said many times before about aviation security issues. Major actions such as this new DHS mandate can only be justified if the benefits (in lives saved, etc.) are greater than the costs, which in this case will be many billions of dollars. At this point in time, we can only hope that somebody in authority has done those calculations and demonstrated that this holds true.
Toronto Airport May Be Worth $3.2 Billion. Bloomberg reported in May that the Canadian government is considering selling a minority stake in Toronto Pearson International Airport, which was valued at $3.2 billion in a confidential report to the government by Credit Suisse. Brookfield Asset Management’s Sam Pollock said that if the airports are put on the market, there would be a “feeding frenzy” among infrastructure investors, and the C.D. Howe Institute’s Steven Robins told Bloomberg that “The market for assets like this is at an all-time high.”
London City Airport Opts for Remote Tower. To free up space on this airport serving the Canary Wharf business community, the airport has worked with ATC company NATS to replace its 30-year-old control tower with the UK’s first remote tower. Controllers will operate the remote tower from the NATS center at Swanwick, 80 miles away. The technology for the system is being provided by Saab Digital Air Traffic Solutions, which is also the provider of remote tower facilities in operation at two small airports in Sweden. Saab is also providing the technology for the remote tower demonstration at the Leesburg, VA airport.
Nashville Mayor Considers Airport Privatization. Oaktree Capital Management made a presentation to Mayor Megan Barry in May on a potential long-term lease of Nashville International Airport. The mayor and other city officials are interested in recycling the asset value of the airport to help fund other local infrastructure, including a new transit system. The Tennessean reported that city officials are closely following the progress of St. Louis, which has won a slot in the federal Airport Privatization Pilot Program.
Alaska Airlines Commits to Serving Paine Field in 2018. Following the start of construction of a passenger terminal at Paine Field north of Seattle, Alaska Airlines on May 17th announced that it would launch commercial service there once the new terminal is operational. Alaska’s initial service would be nine daily departures, using both Boeing 737 and Embraer 175 aircraft. Specific routes and prices will be announced early in 2018. The terminal is being developed and will be operated by a private company, Propeller Airports.
Oaktree Exits San Juan Airport. After having played a key role in privatizing, via a 40-year lease, the San Juan International Airport, Oaktree Capital Management has sold its 50% interest in the concession company, Aerostar, that won the bidding to modernize and operate the airport. Oaktree sold a 10% stake to its original partner, Mexican airport operator ASUR, and sold the remaining 40% to a Canadian pension fund, Public Sector Pension Investment Board (PSP Investments).
Sydney Airport Declines Option to Develop Second Airport. When Sydney International Airport (Australia’s largest) was privatized in 2002, one provision of the 99-year lease agreement was that if and when the government got around to green-lighting the development of a second Sydney airport, concessionaire Sydney Airport Group would have first dibs on becoming the second airport’s developer/operator. When the government decided to go forward with the Western Sydney Airport (at Badgerys Creek) this spring, Sydney Airport Group said thanks, but no thanks. The company said it did not want to take on the “considerable risks” of developing and operating a new airport, and will therefore face a competitor once the new $5 billion airport is completed.
Atlanta Airport Opts for Continuous Background Checks. Airport workers are a potential security threat, and there have been many cases of baggage theft and smuggling of guns and drugs by such employees, who have access to the secure areas and aircraft but have only had an initial FBI background check when they are hired. Hartsfield-Jackson International Airport has decided to make use of an FBI service called Rap Back, facilitated by TSA. Under Rap Back, the FBI retains employee fingerprints and does ongoing criminal history checks, so that it can alert the airport of any new criminal activity. Rap Back costs less than the airport’s current practice of fingerprinting all employees every two years.
Athens Airport Concession Renewed. The current Athens International Airport was developed under a long-term concession with private investors (AIA) in 1995. As the 25-year expiration of that agreement nears, AIA has been negotiating with the government for a 20-year extension. On June 2nd, a tentative agreement was reached, subject to final approval by the government’s Court of Auditors. AIA will pay the government $672 million for the extension, and will commit to a total investment in the airport of $2.63 billion over the 20-year period.
New Device Will Detect GPS Interference Near Airports. Back in 2009, portable GPS jammers used by truckers passing Newark Airport led to a three-year delay in gaining operational status for the Honeywell GBAS, a GPS-based alternative to conventional instrument landing systems. More than 80 such incidents have been reported at airports worldwide since 2013. Aviation Daily reported (May 26th) that Spirent Communications has released a portable device that can detect such jamming up to 1,600 feet away from its location. It is applicable not only to GBAS but also to space-based GPS systems such as WAAS in this country and EGNOS in Europe.
New Greek Airport to Be Developed by GMR Infrastructure. Leading Indian airport developer/operator GMR submitted the sole bid to develop and operate the planned new airport in Heraklion, the largest city in Crete. The bid was €480 million, half the expected amount. GMR, which is involved with three airport public-private partnership (P3) projects in India, teamed with Greek firm GEK Terna for the 35-year design-build-finance-operate-maintain concession.
Second Airport for New Delhi to Be a P3 Project. A $2 billion, four-runway airport has been proposed to the Indian national government by the state of Uttar Pradesh and approved by the Ministry of Civil Aviation. The site of the Noida International Airport is 45 miles from the existing Indira Gandhi International Airport, which is expected to reach capacity by 2024. The government plans to select a concessionaire via a competitive bidding process.
Serbia Qualifies Five Teams to Bid for Tesla Airport. On June 20th, the government of Serbia announced the five international teams that have been short-listed for the privatization of the Nikola Tesla Airport in Belgrade. The expected concession fee is in the $550 million range, and the winner will have to invest an estimated $795 million to add an additional terminal at the airport.
Correction Regarding Middle-East Airports. Airline expert Gary Leff emailed in response to last issue’s article about the U.S. ban on laptops and other electronics in the cabins of airliners serving the United States from 10 airports in the Middle East and North Africa. My article had said that four of these airports have preclearance facilities—but Leff informed me that only Abu Dhabi has such a facility. He added that this airport also does additional secondary screening for U.S.-bound flights, overseen by DHS. Unfortunately, similar services are not provided at Dubai, Doha, and Kuwait City.
“IATA must strive to convince regulators that dealing with security threats by reacting to specific incidents makes no sense. That a passenger was able to blow up a laptop on a flight from Mogadishu, Somalia, to Djibouti says nothing about security levels at big international airports. Denying the wholesale use of laptops in cabins is akin to forcing all travelers to go barefoot on flights following the ‘shoe bomber’ incident in December 2001. View the bigger picture; don’t seek to make one very particular scenario impossible. The key is to promote measures to secure earlier detection.”
—Jens Flottau, “One Voice, Strong Message Needed,” Aviation Week, May 29-June 11, 2017
“The success of sixth-freedom carriers shows how outdated bilateral traffic rights have become. To compound the problem, the Chicago Convention  has spawned a web of now-anachronistic rules—for example, the requirement of national ownership and effective control. This deems that a carrier serving a ‘national purpose’ must be controlled by the citizens of that nation. Security-sensitive companies in banking, telecommunications, and cyber security can buy peers in other countries. Airlines, as a rule, can’t. Airlines need to break free from these archaic constraints. Open-skies agreements point in the right direction: they spur competition, growth, and value creation for all stakeholders. While some open-skies agreements are more open (the European Union’s) than others (the ASEAN’s), there is no evidence that deregulation and increased competition have created any threat to national interests of the countries involved.”
—Philipp Goedeking, “Rule-Based Approach Must Triumph,” Flight Airline Business, June 2017