Watertown Municipal Embraces Tenant Management

Author: 
Greg Gerber
Published in: 
May-June
2012

Although some in the industry may liken tenants managing their airports to inmates running their asylums, the arrangement makes perfect sense to others. Often, it's the owner of the local fixed-based operation (FBO) who assumes the lead role; and it usually occurs at small, general aviation fields.

James Coyne, president and chief executive officer of the National Air Transportation Association, predicts that such alternative management partnerships will become more common - even at larger airports - within the next decade.

Coyne attributes increased acceptance of the idea to economic pressures faced by governmental entities that own airports - specifically the need to cut expenses amid rising demand for services.

"Many municipalities face difficult budgetary realities these days," he explains. "Their taxes are restrained, they face high retirement costs and rising indebtedness means many more airports are looking to get more businesslike in the management of their public services."

The concept of FBOs managing airports is not new. They have kept some airports afloat for decades, he notes. With municipalities turning to private contractors for other services - everything from road repair to guarding prisoners to snow and trash removal - Coyne insists that airport management should be no different.

"A lot of public policy professionals have realized that private sector companies can be more efficient, able to manage employees more effectively and better able to control costs while making investments in new services and technology without having to go to taxpayers for tax increases or new bond issues," he notes.

It Works in Wisconsin

At the request of city managers, Watertown Municipal Airport in southeastern Wisconsin has been managed by the head of its resident FBO for almost three decades. Jeff Baum, president of Wisconsin Aviation, is happy to serve both roles; the town is happy to keep the airport open and aviation fuel flowing.

With a population of 23,500, Watertown is simply not large enough to afford a full-time airport manager. Despite the small community it supports, though, the facility logs 58,000 flight operations per year and bases 88 aircraft - accommodating everything from ultralights to corporate jets.

"From a money standpoint, managing the airport is a very small aspect of my job," explains Baum. "I don't do it for the money; I do it to get things done at the airport."

Baum also manages a nearby field in Dodge County, population 88,000. His duties vary according to the two airport owners. The Dodge County Board, he explains, takes on a more active role in overseeing airport operations than Watertown City Hall does.

"An aggressive FBO tenant manager will go after grant money like crazy," Baum relates. "But the success of

 

 

 

 

factsfigures

Project: Tenant Management

Location: Watertown (WI) Municipal Airport

Facility Manager: Resident FBO President

Annual Operations: 58,000

Based Aircraft: 88

2012 Operating Budget: $150,000

Of Note: Small community that would otherwise struggle to run its airport hires head of local FBO to manage the facility.

that effort depends upon the owning entity and its ability to fund their share of improvement costs."

The city of Watertown, for example, would need to cover 5% to 20% of costs for grant-supported capital improvement costs. A relatively simple $2 million improvement project would require at least $100,000 from the city. That's a sizeable amount for most small communities, especially in today's economy with multiple projects vying for support.

With a larger tax base, Dodge County can sometimes squeeze extra money out of the budget.

Mike Hoppenrath, Watertown's city clerk and treasurer, believes that an FBO tenant manager is the best solution for the town's airport. The arrangement has been so effective, officials have never re-bid the proposal, nor have they sought comparisons from other forms of operation, he adds.

Watertown Mayor Ron Krueger says he couldn't imagine what the city would do if it had to hire full-time employees to operate the airport. "I suspect it would become very expensive," he notes, adding that the city's current annual budget for the airport is only $150,000.

"We are delighted to have someone like Jeff Baum running our airport," says Krueger. "Wisconsin Aviation (his FBO) is a well-respected company in the state and nationally. Jeff gives us the ability to have a first-class airport that is constantly open to the public. And he operates it in a manner that makes it very affordable for our community."

Defining the Duties

As FBO tenant manager, Baum is responsible for the general operation of the airport: making sure that the bills are paid, the facility remains open and ready for business and routine upkeep such as maintaining navigation aids and runway lights.

He oversees an FBO employee who mows the grass and plows snow with a grader that is shared with the city's street department. The employee's time is charged back to the city, but Baum also has the option of contracting out such services.

Baum also keeps abreast of FAA and state regulations for the city and works to secure associated funding. He reports on such matters at monthly meetings of the airport commission.

As president of Wisconsin Aviation, Baum oversees a charter service and manages aircraft for other pilots, providing maintenance and pilot services and leasing back the equipment for charters. He maintains the hangars and ensures there is an ample supply of 100-octane and jet fuel.

"The biggest part of our business is charter operations and aircraft management," he reports. "We also operate a repair station for four manufacturers as well as a flight school and aircraft rental business."

Juggling multiple tasks to ensure that he gives adequate time and attention to airport management is a daily challenge. Avoiding a conflict of interests is a less frequent, but certainly weightier, matter.

"There have been times when I needed to do something as airport manager that could hurt my business, but not doing it would have been unethical," he explains. "But most of the time, what is good for the airport is good for our business, and vice versa."

Baum doesn't spend much time on facility matters. He turns most of those duties over to Krys Brown, the airport's facility manager who spends five to 10 hours a week on the job. Ed Ruppert, the airport operations manager, spends 20 to 35 hours per week cutting grass, plowing snow, repairing lights and mending fences. Both employees' time is charged back to the city.

"To have an airport that employs 55 people and generates a lot of traffic on behalf of local businesses is an absolute bargain for the city of Watertown," comments Baum. "During the Experimental Aircraft Association convention in Oshkosh, we will fill every hotel in the city that week, and thousands of people will flood the downtown area on shopping excursions."

With 13 restaurants within one mile of the airport, pilots often stop in Watertown along their journeys, he adds.

The airport's biggest economic contribution to the community, however, comes from its support of businesses that fly jets into and out of the facility. They include Eaton Corporation, which maintains a plant at the end of the runway, and Pepsi, which operates one of the largest bottling operations in the Midwest.

According to Mayor Krueger, there are about 50 manufacturing firms that rely on Watertown Municipal to shuttle staff or mission-critical parts. The facility's location halfway between Madison and Milwaukee makes it easy to support businesses from both cities as well smaller nearby communities.

"To get somewhere and back the same day is a huge benefit to our community's largest employers," says Baum. "Just having an airport in the community has been a major consideration of companies looking to start up or relocate to our area."

Community Assets

Coyne is disappointed when communities consider their airports nothing more than a strip of concrete that must be plowed in a field that must be mowed.

"Airports serve to provide a front door for the entire region - whether it is economic development, community investment or local tourism," he relates. "A well-run airport is one of the most catalytic operations in the region. Community growth and development can be explosive if the airport is well-managed."

Airport owners who fail to recognize such values are missing a tremendous opportunity, he adds.

"The biggest problem I see is that public management of airports - whether it is a board of commissioners or mayor or any collective body that meets once a month - is failing a vast majority of the time," stresses Coyne. "If they can't turn the airport into a successful venture, then they owe it to their constituents to hire a business person to do it for them. At least then they will have a spark plug to spur economic growth."

Sometimes elected officials think it is their responsibility to appoint airport commissioners to restrain traffic and reduce noise rather than devising a way to enhance growth while meeting environmental concerns, he explains.

Going Private

Coyne cites several advantages to tenant management arrangements. FBO managers or other private operators are often better at marketing, he says. "You rarely see public airports advertising because there is a lot of bureaucracy involved in how to spend those scarce dollars," Coyne explains. "I see vast improvement in the effort to market airports run by private business owners who take the time to promote their facilities on different websites and publications. These professionals are experienced in buying advertising and marketing their services, and it's paying off with stronger growth."

Belonging to a "20 Group" can provide networking benefits to tenant airport managers. A 20 Group is a tight-knit association of 20 non-competing, but similar, businesses that meet regularly to ensure all the members are operating at their peak. An airport could be extremely happy with a 5% increase in traffic - until it discovers that most members of its 20 Group were enjoying 12% growth.

The groups can also help generate new business. A Florida FBO that belongs to a 20 Group, for instance, can urge its snowbird customers to visit other 20 Group member airports on their way home. A group's primary benefit, however, is usually its "iron-sharpens-iron" approach. Members can take problems to their peers for honest, practical advice. They can also learn of new, successful strategies implemented at other airports that can be integrated into their own operations.

On the flip side, traditional non-tenant airport managers have their own networking mechanisms, too. From industry associations such as the American Association of Airport Executives to less formalized groups, they also share benchmarking information and best practice lessons and case studies.

Coyne considers improved customer service as a common benefit of FBO tenant management. "Where do you get better service, at a Starbucks or the Department of Motor Vehicles?" he asks.

A pilot himself, Coyne says he is likely to see better service and the latest technological advancements in facilities where private FBOs manage the airports. Often, the two go hand in hand, he notes. An investment in technology allows one operator to manage multiple airports and provide better service to each facility, he explains.

"With remote video terminals, an iPad and an Internet connection, smaller airports now have a way to provide round-the-clock services without having to justify staffing the facility 24/7," he relates. "A video computer monitor connected to a live person who can keep an eye on the airport all the time is an effective and low-cost way to provide adequate customer service. By using manpower more intelligently on a time-sharing basis, airports can give the appearance of 24/7 coverage without the dramatic cost it would normally entail."

When the same company operates two or three different facilities, airports can share fixed costs. While a $60,000 salary may be too big for a small town, a $20,000 piece of a shared salary could be tolerable.

Relationships are Key

A successful public-private partnership requires airport sponsors to do their homework upfront and lay down clear guidelines and expectations for airport operators, Coyne cautions.

"If a community hires a company to construct a building, it would give the contractor specific direction and guidance," he notes. "It's no different for airports. When everything is spelled out as to who is doing what and when, it makes for a stronger partnership."

Private managers also need to understand the support they can expect from the airport owner. According to Coyne, it's never totally an arm's length relationship, because the airport management and owning entity often work closely to attract FAA grants or new airline services.

"To be successful, an FBO tenant manager requires a lot of partnering," he notes. "In reality, public airports exist to improve the economic well-being of an entire community or region. They don't exist to benefit bureaucrats or airport businesses. When airport tenants and management coordinate their efforts, the entire community grows and everyone wins."

Coyne encourages airport boards overseeing struggling facilities to do some soul searching. If they simply want to reduce expenses, he says there are simple strategies that don't create long-term liabilities or risks for the community.

At a minimum, he specifies, the airport must be able to operate 24 hours a day, 365 days a year - if only to offer self-serve fuel monitored by a video camera.

Alternately, airports can set goals and give private managers economic incentives to increase airport activity and capital investment in the property, such as constructing new hangars or ramp and tarmac improvements.

"One of the great realities for any airport is that it sits on some very valuable real estate that can be attractive to small businesses - not just the FBO or aircraft maintenance business," Coyne notes.

He cites San Antonio International Airport, as an example. "There are scores of different businesses attracted to that airport," he notes. "Those companies have made billions of dollars of investment into the community and created thousands of jobs just because someone running the airport had developed that vision."

The best candidate to run an airport, public or private, is the person with a vision and an agenda for growth and community development, he explains.

"In most cases, a private entrepreneur managing the airport is much more aggressive at seeking out that kind of tenant or those investments than a public employee is likely to do," he adds.

Potential Problems

Whether operated by a private entrepreneur or public manager, airport owners must be aware of liability issues, warns Coyne. The facility's assets must be covered through proper risk management, and training programs must be used to keep staff keenly aware of potentially dangerous situations, he notes.

"Safety at airports is considerably more complicated than many politicians understand," emphasizes Coyne. "Airport operators don't want someone who doesn't have experience in safety and risk management overseeing fuel operations, ramp safety and employee movement around airplanes."

Another potential pitfall involves financial management and capital investment. An airport needs someone with solid financial management experience, with the ability to attract capital investment, Coyne explains.

"It is fundamental for an airport to seek investment in the business," he remarks. "The best way to do that is to make sure the manager has some skin in the game."

Effectively dealing with an airport's various publics and customers is also critical. "Airports are often subjected to a lot of press coverage," says Coyne. "That requires them to be operated in a very transparent environment. Managers must be experienced in dealing with these types of public projects as well as dealing with politicians and public entities.

"Running an airport is an entirely different animal than opening a bookstore," he concludes. "Airport owners don't just want any business person at the helm. They need someone with financial wherewithal, the ability to deal closely with the public and remain conscious of safety concerns."

Subcategory: 
Operations

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