Business Plan Bedford Final

BEDFORD COUNTY AIRPORT ECONOMIC FEASIBILITY STUDY AIRPORT BUSINESS PLAN

PREPARED FOR THE BEDFORD COUNTY AIR INDUSTRIAL PARK AUTHORITY BY L. ROBERT KIMBALL & ASSOCIATES, INC. December 2006

Economic Feasibility Study Airport Business Plan

TABLE OF CONTENTS INTRODUCTION....................................................................................3 SECTION 1 - BACKGROUND AND OPERATIONS 1.1 1.2 1.3 1.4 1.5 1.6

Location, Airport History & Ownership/Administration................................4 Business/Economic Analysis & Employment...............................................6 Development History, Current Facilities & Desired Future Plans.................7 Aeronautical Role........................................................................ ................9 On Airport Businesses/Lease Agreements........................................ .........10 Based Aircraft, Fleet Mix and Operations Activity Profile...........................10

SECTION 2 – MISSION, VISION, BUSINESS GOALS AND STRATEGIES 2.1 Mission and Vision................................................................................... ..14 2.2 SWOT Analysis......................................................................... .................15 2.3 Business Goals and Objectives.................................................................. 16

SECTION 3 - FINANCIAL DISCUSSION AND ANALYSIS 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Introduction................................................................. .............................18 Market Analysis /Service Area..................................................... ..............19 Airport Financial Condition...................................................... ..................22 Revenue Source Comparison & Existing Airport Revenue Sources............28 Expense Discussion .................................................. ...............................35 Baseline Forecast of Revenue and Expenses ........................................... .39 Grants – Federal and State................................................................... .....42 Alternative Financing Methods.................................................. ................48

SECTION 4 – AIRPORT OPPORTUNITIES & RECOMMENDATIONS 4.1 4.2 4.3 4.4

Airport Opportunities – Current and Proposed Devleopment Plan.............51 Foregin Trade Zones and Keystone Opportunity Zones.............................53 Recommendations............................................................ ........................56 Executive Summary................................................................. .................71

APPENDICES Appendix Appendix Appendix Appendix

1: 2: 3: 4:

Marketing Plan Outline ............................................. ..................73 Economic Impacts of Aviation – Bedford Airport .........................83 Twelve Year Plan (December 2006) ............................................84 Selections from Capital Improvement Program ..........................85

EXHIBITS Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit

1 - Location Map ............................................................................... ....4 2 - Desired Grant Projects – 2007 through 2010 ...................................8 3 - “Intermediate” SASP Facility Recommendations............................10 4 - Forecast: Based Aircraft Projection......................................... ........12 5 - Based Aircraft Forecast – Fleet Mix .............................................. ..12 6 - FAA Airport Master Record (5010) Operations by Type ..................13 7 - Projected Itinerant, Local and Total Operations..............................13 8 - General Aviation Radius of Influence/Primary Service Area ...........21 9a - Loan/Debt Summary as of December 31, 2005 ...........................23 9b - Fixed Asset Summary as of December 31, 2004..........................24 10 - Summary of Historic Airport Profit/(Loss) – 2001 through 2005....25 11 - Summary of Historic Financial Components – 2001 - 2005...........26 12 - 2004 Airport Operating Revenue by Source.................................27 13 - 2004 Airport Operating Expense by Source.................................27 14 - Projected Revenue and Expenses................................................. 41 15 - Proposed Airport Development....................................................52 16 - Hangar Development Model..................................................... ....59 17 - Proposed Land Acquisition................................ ...........................65 18 - Bedford County Registered Aircraft Owners ................................81

SC LAN\BusinessPlan_Bedford.doc

page 2

December 2006

Economic Feasibility Study Airport Business Plan

INTRODUCTION The Bedford County Air Industrial Park Authority has accepted the services of L. Robert Kimball & Associates, Inc. to conduct an Economic Feasibility Study/Airport Business Plan with the goal to determine the best approach for the Airport to manage aviation and non-aviation related development to maximize revenue generation to support future development and maintenance of the Bedford County Airport (HMZ). The Plan will help identify where the Airport is today, where it has been in the past and where it wants to go. The steps taken in this process will also make the Airport aware of the competition, explore alternatives, be pro-active rather than reactive and ensure that actions and recommendations are consistent with available resources and constraints. The primary goals of this report and associated analysis will provide the following: • • • • •

• • •

SWOT Analysis Create a mission and current and long-term vision for the Airport Determine supporting goals and objectives Evaluation of business operation and financial results Baseline projection of revenue and expenses Identification of strategies for meeting goals and objectives Suggest preferred course of action and implementation of such Test and make adjustments as necessary

Contained herein are the following sources/results of this Study/Plan: • • • •

Section Section Section Section

1: 2: 3: 4:

sections

that

include

the

Background and Operations Mission, Vision, Business Goals and Strategies Financial Discussion and Analysis Airport Opportunities & Recommendations

SECTION 1 BACKGROUND AND OPERATIONS This section will explore where the Airport has been and where it is currently from an operations standpoint including a look at management structure, Airport facilities, service area, employment, operations, planned projects and Airport classification. Reviewing and understanding Airport background and management structure will assist in identifying opportunities, challenges and strengths of the Airport.

SC LAN\BusinessPlan_Bedford.doc

page 3

December 2006

Economic Feasibility Study Airport Business Plan

1.1

Location, Airport History and Ownership/Administration

Location Bedford County Airport (HMZ) is located on approximately 168 acres in Bedford Township, Pennsylvania. The County is located in the Southern Allegheny Mountains, between Fulton and Somerset Counties. Bedford County has a land area of approximately 1,015 square miles and a 2004 Census population of approximately 50,230 people. Bedford is 30 miles south of Altoona and approximately 30 miles northeast of Cumberland, Maryland (reference Exhibit 1). The Airport is situated 4 nautical miles north east of the Borough of Bedford and is easily accessible via US Interstates 70, 76, and 99. The geographic coordinates of the Airport are: Latitude 400 05’ 10.059” N, Longitude 780 30’ 48.603“ W at an elevation of 1,163’ MSL (mean sea level). Exhibit 1 – Location Map

Airport History1

1

Source: Noel, Earl. Altoona Flight Service Station, Airport Profile, Bedford profile, Bedford Airport, htt://www.faa.gov/ats/afss/aooafss/airport2.htm, Accessed June 04 2004 SC LAN\BusinessPlan_Bedford.doc

page 4

December 2006

Economic Feasibility Study Airport Business Plan

The roots of the Bedford County Airport can be traced back to the WWII days when a parcel of land was leased from a local farm in Cessna, PA for the purpose of establishing a grass/gravel landing strip, which was built in 1947 and later abandoned. The official name was the Max Hunt Memorial Field and several men from the area started a successful flight school, having over one hundred flight students at its peak. A more modern Airport was built in 1950 next to the Pennsylvania Turnpike. The turnpike made the Airport easier to locate from the air. The Airport had a 2,000’ paved runway and was considered to be a challenge to fly in and out of due to the terrain. In subsequent years, the need was expressed to build a larger, more modern airport for the Bedford area. In July, 1989, a ground breaking ceremony was held for the Bedford County Airport (HMZ). The project went through many challenges and finally in May, 1994, the new airport opened for business. Significant projects will be discussed in Section 1.3. Ownership/Administration The Bedford County Airport is owned and operated by the Bedford County Air Industrial Park Authority. The governing body of the Authority is a 15-member Board appointed by the Bedford County Commissioners. This Board is authorized to exercise any and all powers necessary for acquisition, construction, improvement, extension, maintenance and operation of the Airport. This group meets monthly. Ray Jennings, the Secretary/Treasurer of the Authority, is a dedicated Airport Director who handles the day-to-day operations of the facility as well as oversees airport development projects. The fixed-base operator (FBO), Bun Air Corporation, provides maintenance, refueling services, flight training, aircraft rentals and oxygen. Bedford County Air Industrial Park Authority Robert D. Sweet, Chairman Mark W. Thomas, Vice Chairman H. Ray Jennings, Secretary/Treasurer B. Frank Dunkle, Asst. Secretary/Tresurer Donald C. Gallagher Paul I. Detwiler, Jr. Sheldon D. Ickes Joseph Lurie Dr. Thomas F. Otis Dr. Ron Markwood Henry Meetze Steve A. George Robert D. Simmons Roger S. Nave Gary L. Nouse, Sr.

SC LAN\BusinessPlan_Bedford.doc

page 5

December 2006

Economic Feasibility Study Airport Business Plan

Advisors to Authority Gordon Stroup, Esq., Solicitor Frank E. Grazier, Technical Advisor Bette B. Slayton, Director, Office of Economic Development 1.2

Business/Economic Analysis & Employment

Business/Economic Analysis In 2004, Bedford County was estimated to have a population of 50,230 and a population density of 49.5 persons per square mile2. The average annual population of the county has been rising steadily the past few decades, with the largest increase occurring in the 1970s. In fact, between 1970 and 2000 Bedford County experienced a population increase of 3,200, or an overall percent increase of 6.4%. According to the Pennsylvania State Data Center (PSDC), the population of Bedford County is expected to increase to over 54,000 people by 2020, or an overall increase of 8.8%3. It should be noted that Pennsylvania is expected to grow by 5.3% during the same period. According to the U.S. Census Bureau, between the years of 1990 and 2000 the population of Bedford Township increased by over 470 people or 9.5%, the largest numerical increase in the County. The majority of the municipalities located in the County are experiencing increases in population. The largest concentration of population lives in the central portion of Bedford County, along the Interstate 99 and Interstate 76 (Pennsylvania Turnpike) corridors. The business landscape of Bedford County is being transformed into a dynamic, competitive marketplace. There are several industrial parks (Bedford County Business Parks I and II and Bedford County Business Center) that have multi-tenant buildings as well as sites available for sale. In addition, the Bedford Springs Hotel is being renovated with completion targeted for 2007. Bedford County is a potential location for new and existing businesses to locate their operations and is desirable due to close proximity to several U. S. Interstates. The majority of municipalities that are experiencing increases in population are located along Interstate 99 and Interest 76 (Pennsylvania Turnpike) corridors. Any additions or improvements taking place at the Airport are likely to spark new growth or increase the economy surrounding this Airport. In the past, airports undertaking projects, especially runway alignments and extensions, generally result in a larger demand on aviation services at the airport. The most beneficial aspect of airport improvement projects is being able to serve the business community. 2

Source: STATS, Indiana University, USA Counties IN Profile, Overview for Bedford County, PA, http://www.stats.indiana.edu/uspr/a/us_profile_frame.html, Accessed 24 August 2005. 3 Source: Pennsylvania State Data Center, http://pasdc.hbg.psu.edu/index.html, Accessed 22 September 2005. SC LAN\BusinessPlan_Bedford.doc

page 6

December 2006

Economic Feasibility Study Airport Business Plan

Over the past few decades, there has been an increasing amount of businesses using air travel as a means of transportation. The better an airport can serve the business community the more likely it is to attract new businesses to the area, as well as increase the profits of existing ones.

Employment In 2005 the Bedford County Airport, and its related facilities and businesses employed approximately 13 people, the majority of which were FBO personnel. The Bedford County economic base is relatively diverse with manufacturing, retail trade, educational services, health care and food service sectors being the primary employers. Four of the top ten employers are involved in transportation and warehouse or manufacturing. Bedford County is located in close proximity to several major U.S. Interstates and is located within a 500-mile radius of 40% of the nation’s population. 1.3 Development History, Current Facilities & Desired Future Plans Development History The development projects are summarized below for this airport. • 1987 – Master Plan Update • 1994/1995 – Construction of T-Hangar (10 units) • 1997 – Crackseal Runway • 1997 – Addition of 5 units to existing T-Hangar facility • 1998 – Construction of Corporate Hangar 1 (150’ x 70’) • 1999 – Airport Action Plan • 2000 – Construction of Corporate Hangar 2 (150’ x 70’) • 2002 – Overlay Runway • 2004 – 900’ Runway Extension • 2005 – Replace Taxiway Edge Lights • 2005 – Airport Master Plan Current Facilities The overall facilities available at Bedford County include a single 5,005’ x 75’ (paved, bituminous) runway, a parallel taxiway, aircraft parking apron (142,500 SF), two (2) corporate hangars, one (1) 15-unit t-Hangar, FBO hangar, equipment storage maintenance hangar, navigational and approach aids, terminal building, administrative SC LAN\BusinessPlan_Bedford.doc

page 7

December 2006

Economic Feasibility Study Airport Business Plan

offices, and vehicular parking. Services include major repair, power plant repair, aircraft management, hangar rentals, tie-downs, flight instruction, 100LL and Jet “A” fuel service, bulk oxygen, aircraft rental, aircraft sales and APU. The terminal building is located adjacent to the apron and fuel farm. It is a one-story story facility and is approximately 11,500 SF. The building houses several offices as follows: • •

• •

Airport Director’s office Bun Air Corporation – Fixed Based Operator (FBO) Office Pilot Lounge Kitchen & Public Restrooms

The Civil Air Patrol (CAP) has offices in the Airport’s Maintenance Hangar. Besides this group and the FBO, there are no other businesses/organizations located at the Airport. Desired Future Plans Exhibit 2 below presents the desired future Airport projects to be submitted by December 31, 2006. It will be important that projects assigned for the future pass a business test, meaning that each project and the implementation of such support business strategies and goals and satisfy the airport’s mission/vision. It is also important to note that there is significant local share and capital budget expectations related to these future desired projects. Many of the projects focus on safety and well as revenue enhancements. Several projects in the later years involve easement and land acquisition with focus on obstruction and primary surface control. All projects are consistent with the Airport’s mission/vision to be discussed in Section 2. Exhibit 2- Desired Grant Projects - 2007 through 2010

Project Description Develop Airport GIS Program Construct Apron/Taxilanes – Hangars, Buildings E/ F, Ph I, Design Construct Apron/Taxilanes – Hangars, Buildings E/ F, Ph II, Construct Construct Vehicle Access and Parking – 14 spaces Construct Unit Hangar – (80' x 100') Building F (a) Rehabilitate Apron, Parking, Access Road and Taxiway via crack

SC LAN\BusinessPlan_Bedford.doc

Total Cost $45 ,000

Federal Share $42, 750

State Share $1,12 5

Local Share $1,1 25

150,000

142,500

3,750

3,750

270, 000 175, 000 702, 000 165,000

256, 500

6,75 0

6,75 0

166,250

4,375

156,750

4,125

4,375 351,00 0* 4,125

page 8

December 2006

Economic Feasibility Study Airport Business Plan sealant, seal coating and remark Construct East Apron/Taxilanes, Ph I, Design Construct East Apron/Taxilanes, Ph II, Construction (site prep, grading and electrical) Install MALSF – R/W 14 TOTAL

150,000

142,500

3,750

3,750

600,000 960,000 $3,217,0 00

570,000 912,000 $ 2,389,250

15,000 24,000

15,000 24,000

$ 62,875

$413,875

Note a – Balance of project costs ($351,000) to be requested via Capital Budget/Other Share monies.

Projects desired from 2011-2018 include: • Construction of various unit hangars and associated taxilanes and parking • Design and construction of apron (west) in various phases • Various new parking areas to support hangars, etc. • Acquisition of land and easements with focus on obstruction and primary surface control Related documents include Appendix 3, the Airport’s Twelve Year Plan as submitted December 2006 and Appendix 4, selections from the 2006 Airport Master Plan Capital Improvement Program concerning capital project phasing and related financial forecasts. 1.4

Aeronautical Role

According to the Regulations Relating to Pennsylvania Aviation, the Bedford County Airport is classified as a Business Service Airport. A Business Service Airport is defined as, “An airport with a paved runway 3,500’ or greater, a runway lighting system, and a precision or nonprecision instrument landing approach. The Airport is included in the National Plan of Integrated Airport Systems (NPIAS) as a General Aviation (GA) facility. Further, the 2002 Statewide Airport System Plan (SASP) developed a stratification system consisting of five (5) different functional levels that evaluated each airports role based on the contribution it makes to the entire airport system, as well as its current ability to meet statewide aviation needs. The five airport classifications include Advanced, Intermediate, Basic, Limited and Special Use facilities. Bedford County is classified as an Intermediate Facility. The SC LAN\BusinessPlan_Bedford.doc

page 9

December 2006

Economic Feasibility Study Airport Business Plan

recommended service and facility goals for an Intermediate Facility are presented in Exhibit 3. As a part of the completion of the SASP, a study on the economic impact of aviation was undertaken. The purpose of the study was to analyze and highlight the substantial economic value of the system of general aviation (both business and general service) and scheduled service airports in Pennsylvania. As indicated in the study, many people beyond the immediate environs of each airport benefit from daily aviation activity. Employees whose firms base corporate aircraft at the airports; the commercial and industrial employers whose shipments arrive or depart via the airports; the area retail establishments who provide shopping opportunities for those arriving by air; and the hotels, restaurants and tourist-related activities whose patrons arrive via general aviation and scheduled service airports all represent people beyond immediate airport environs who derive economic benefit from the system of airports. The Bedford County Airport provided the surrounding environs a total economic output of $5.3 million. A copy of the analysis specific to the Bedford County Airport may be found in the 2005 Master Plan Draft that is currently in process. Exhibit 3 – “Intermediate” SASP Facility Recommendations Runway Length: Runway Width:

Minimum of 4,000 feet (dry runway) To meet ARC

Runway Strength:30,000 pounds Taxiway:

Full or parallel for Primary Runway

Navigational Aids: Published approach with decision altitude of 400 feet or less and visibility minimum of 1 mile or less Approach Aids:

Rotating beacon, lighted indicator/segmented circle, VGSIs, REILs

Lighting:

MIRL

Weather:

1.5

wind

ASOS/AWOS

Services:

Phone, restrooms, FBO, Maintenance, Jet fuel (AvGas) and Ground Transportation

Facilities:

Local and itinerant aircraft parking apron, local and itinerant aircraft storage, general aviation terminal and general aviation auto parking.

On Airport Businesses/Lease Agreements

SC LAN\BusinessPlan_Bedford.doc

page 10

December 2006

Economic Feasibility Study Airport Business Plan

The Bedford County Airport supports the operations of Bun Air Corporation and is home to the Civil Air Patrol. Bun Air Corporation provides traditional Fixed Based Operator services such as fueling and aircraft maintenance. In addition, they are a full service aircraft management company, providing services such as aircraft purchase, maintenance, scheduling, pilot services, training, storage, insurance and equipment upgrades. 1.6

Based Aircraft, Fleet Mix and Operations Activity Profile

Based Aircraft At the time of the airport inventory in September 2005, there were 23 aircraft based at the Bedford County Airport. The breakdown of aircraft by type is as follows: 14 single engines, 4 multiengines (3 piston and 1 turbo prop) and 5 turbo-jets. This number can vary based on the season and according to activity at surrounding airports, i.e. paving projects, runway closures, inadequate services, lack of space, etc. Based aircraft per the TAF database has been fairly consistent since 1999 ranging for the most part from a low of 21 to a high of 25. It should be noted that there is not presently a waiting list for hangar space. Section 2 of the Bedford County Airport Master Plan provides extensive details on the 20 year forecasts for based aircraft operations. A general summary is provided below of the studies/methods reviewed and/or utilized to prepare the forecasts with the outcomes of all studies summarized below in Exhibit 4 with an average based aircraft forecast provided. 1.

Action Plan Projections - These represent an updated forecast of based aircraft contained in the Action Plan Summary Report completed for the Bedford County Airport in November 1999. Although studied, these projections were removed form further analysis as they were considered outdated.

2.

FAA Terminal Area Forecast (TAF) - Projections were extracted from the TAF as issued by FAA in January 2005.

3.

Pennsylvania Statewide Airport System Plan (PSASP 2020) projections – These represent data extracted from the State System Plan that was completed in the year 2000. Forecasts are provided on a planning district basis versus an individual airport basis. Although studied, these projections were removed form further analysis as they were considered outdated.

Note: The existing forecasts (items 1-3) were adjusted as required to reflect an actual 2005 level of 23 aircraft based at the Bedford County Airport. Also, growth rates contained in the existing

SC LAN\BusinessPlan_Bedford.doc

page 11

December 2006

Economic Feasibility Study Airport Business Plan

forecasts were extrapolated to provide comprehensive projections for all key planning years over the 2010 to 2025 planning period. In some cases, growth rates were modified slightly and rounded to provide a linear projection. 4. Independent Forecasts 4a. FAA Aerospace Forecast: This method of forecasting focuses on the industry versus historical trends of specific airports. The general aviation active fleet is projected to increase at a rate of 1.1% annually over the 12 year forecast period (2005-2016). 4b. National Market Share Analysis: This projection is based on the Bedford County Airport’s anticipated ability to capture a continuing percentage of the future national forecast. The publication “FAA Aerospace Forecasts FY 2005 – 2016 indicates that, in 2005, there were a total of 219,780 active general aviation and air taxi aircraft in the US, and that this fleet is expected to increase at an average annual rate of 1.1% over the FAA forecast period to a total of 240,070 in the year 2016. With a 2005 based aircraft level of 23 aircraft at the Bedford County Airport, this means that the Airport is currently capturing a 0.0105% market share of the national fleet. In consideration of the projected socioeconomic characteristics of Bedford County population, which shows a very nominal growth rate, the current market share percentage of .0105 will not be increased over the long range planning period. 4c. Linear Regression (Trend Analysis): This scenario uses a historical pattern of based aircraft and projects the trend into the future.

Exhibit 4–Forecasts: Based Aircraft Projections Study/Method Adjusted FAA TAF FAA Aerospace Forecast % National Market Share Linear Regression Analysis Preferred Method **Average: FAA Aerospace Growth Rate and Linear Regression

SC LAN\BusinessPlan_Bedford.doc

2005 Actual 23

2010 25

2015 25

2020 26

2025 27

23

24

26

27

29

23

24

25

27

28

23

33

39

45

51

23

28

32

36

40

page 12

December 2006

Economic Feasibility Study Airport Business Plan

** An average of the Linear Regression model and the FAA Aerospace Forecasting projection was used as the preferred based aircraft forecasting method for this Airport. The FAA Aerospace growth rate is intended to represent a forecast of expected national growth and the Linear Analysis is intended to represent a local scenario. The combined projection is considered to represent a demand trend more reflective of the socio economic characteristic and development trends for Bedford County, the Airport’s primary service area. Fleet Mix The Bedford County Airport currently has 14 piston powered single (61%), 3 multi-piston (13%), 1 turbo prop (4%), and 5 turbo jets (22%). The projections, as presented below in Exhibit 5, reflect the high percentage of business jet aircraft currently based at the Airport, as well as the strong business jet fleet growth predicted by the FAA. Also, it is noted that the number of twin-engine piston aircraft shows no growth rate, which also reflect information as provided by the FAA. Exhibit 5 - Based Aircraft Forecast-Fleet Mix

Aircraft Single Engine- Piston Single Engine-Turbo prop Multi – Piston Multi – Turbo prop Jet Rotorcraft TOTAL

SC LAN\BusinessPlan_Bedford.doc

2005 Actual

page 13

14

2010 15

2015 16

2020 17

2025 18

0 3 1 5 0 23

1 3 2 6 1 28

2 3 3 7 1 32

2 3 5 8 1 36

3 3 5 10 1 40

December 2006

Economic Feasibility Study Airport Business Plan

Operations According to Airport Master Records dated July 7, 2005, there were 17,758 annual aircraft operations in 2004 consisting mainly of general aviation local and general aviation itinerant with minor contributions from air taxi and military operations. Air taxi and military operations are considered to be itinerant operations which results in itinerant operations at 35% and local operations at 65%. Details by type of operation are included in Exhibit 6 below. Exhibit 6 – FAA Airport Master Record (5010) Operations by Type Type

Estimate

Air Taxi GA Local

1,800 11,58 8

Operational Mix Percentage 10% 65%

GA Itinerant Military

4,120 23% 250 2% 17,75 1 TOTAL 8 00% Section 2 of the Master Plan also forecasts operations for local and itinerant operations based on the Operations Per Based Aircraft Methodology (OPBA). This method uses a relationship between the Airport’s total operations to its based aircraft. By doing this, the OPBA reflects the operations by all planes that operate at the airport, not just based aircraft. A 600 OPBA ratio was used in this Study as suggested by the BOA and is assumed to remain stable through future years with business related activity continuing to expand, while recreational and flight training activity may decline somewhat with a gradual change in the local versus itinerant operations split to 45% local and 55% itinerant. Exhibit 7 – Projected Itinerant, Local & Total Operations

SC LAN\BusinessPlan_Bedford.doc

page 14

December 2006

Economic Feasibility Study Airport Business Plan

Operations Itinerant Operations Local Operations (2)(3) Total Annual Operations Single Multi-Engine Jet Rotor

Estimat e 2005 4,800 9,000

2010 5,180 9,220

Forecast 2015 2020 6,700 8,600 10,100 10,600

2025 13,200 10,800

13,800

14,400

16,800

19,200

24,000

9,870 1,590 2,100 240 13,800

10,306 1,690 2,160 244 14,400

12,030 2,090 2,400 280 16,800

13,510 2,590 2,800 300 19,200

16,150 3,590 3,900 360 24,000

(1) Itinerant operations are all airport operations other than local operations. (2) Local operations are performed by aircraft which: (a) operate in the local traffic pattern or within sight of the airport; (b) are known to be departing for, or arriving from, flight in local areas within a 20-mile radius of the airport; or, (c) execute simulated instrument approaches or low passes at the airport. (3) Touch-and-Go operations are estimated to represent 40 percent of local operations.

SECTION 2 MISSION, VISION, BUSINESS GOALS AND STRATEGIES 2.1

Mission and Vision

Prior to the start of this project, there was no mission statement for the Bedford Airport. Like many other airports in the state and across the county, the airport mission was simply to run the airport as a general aviation transportation facility and operate it as such and to continue existing measures. The following mission was created by a task force charged with studying the future development of this Airport as follows: SC LAN\BusinessPlan_Bedford.doc

page 15

December 2006

Economic Feasibility Study Airport Business Plan

“The identified mission of the Airport is to provide a safe, clean, and efficient operating environment for the aviation users of the Bedford County Airport, while at the same time remaining sensitive to the needs of the local community and creating a catalyst for economic development.” Below are the visions and related services that were identified to support the mission: •

Today: Basic/Core services for general aviation recreational to include: 1. Fuel 2. Tie-downs 3. Hangars 4. Maintenance 5. Flight School 6. Aircraft Sales 7. Aircraft Rental 8. Published IFR Approaches 9. AWOS 10.Limited Corporate Hangars

•

Intermediate: Full service general aviation Corporate Business Center to include: 1. Above Items 2. Instrument Training 3. Flight School Expansion 4. Charter services 5. Rental Car 6. Additional Corporate Hangars 7. Business Centers 8. Published IFR Approaches 9. Avionics

•

Future: Dynamic Aviation Business Center to include: 1. Runway Extension 2. Terminal Building Expansion (or explore use) 3. Additional Business Centers 4. Multimodal Center

The Bedford County Air Industrial Airpark Authority envisions a community that values the airport and recognizes the value the Airport brings to the community. With respect to expansion, this group hopes to significantly enhance airport operations while maintaining close working relations with business and residential users. SC LAN\BusinessPlan_Bedford.doc

page 16

December 2006

Economic Feasibility Study Airport Business Plan

2.2

SWOT Analysis

SWOT Analysis allows a business to focus and review Strengths, Weaknesses, Opportunities and Threats with the goal of identifying major factors affecting their business and competitiveness before crafting business strategies. This analysis will provide information necessary to support not only the mission and vision but will also assist in the crafting of business goals, objectives and related strategies for achieving those goals. Summarized below are highlights from the discussion of each of the four (4) components of this analysis. Strengths • The Airport offers traditional FBO services including major repair, storage facilities (T-hangars and Unit hangars) and fueling services. •

There is potential for business growth at the airport with approximately 46 acres of land available in various lot sizes located in the Bedford County Business Park which is located adjacent to the Airport.

•

The FBO contract provides for snow removal, runway maintenance and general fuel farm maintenance which can be major expense items for some airports.

Weaknesses • This airport has only one (1) runway with dimensions of 5,005’ x 75’. Although this is sufficient for current and projected operations, a 7,000’ runway is the minimum which will allow for effective marketing of turbo jet aircraft of all sizes. •

Marketing and advertising efforts have been limited. There is no assigned budget for marketing for the current year.

•

Airport cash flow is minimal and the County does not subsidize Airport Operations.

•

There is no automated fuel service at the Airport. Service is available from 7:00 a.m. to 6:00 p.m. Monday through Saturday and from 9:00 a.m. to 12:00 p.m. on Sunday.

•

The current FBO contract was renewed in May 2005 for a five (5) year period with options to renew after term. This will limit options for terms of revenue enhancement at the FBO level.

Opportunities

SC LAN\BusinessPlan_Bedford.doc

page 17

December 2006

Economic Feasibility Study Airport Business Plan

•

There are several options available for land acquisition that would greatly benefit the airport in terms of revenue generation and in terms of achieving the Airport’s mission/vision. Threats • FBO facilities may not be opportune for full-service FBO provider.

2.3

•

A long-term FBO lease was renewed in 2005 with terms effective for 5 years.

•

Website needs to be enhanced/personalized.

Business Goals and Objectives

There are a number of goals that must be addressed and related strategies and recommendations identified. The goals and related strategies highlighted below must support the vision and mission statements for the Airport. The Airport’s mission, vision and goals should be reviewed and updated annually with a team assigned to this function. An Implementation Plan will be discussed in Section 4 (Item D3). The Airport is a business with considerable investment already made in its facilities. In order to help protect this investment, as well as any future capital improvements, part of the planning process involves a financial analysis of the Airport business practices to include income and expenses. This financial discussion and analysis will be presented in the next section (Section 3) and then be followed by discussion of Airport Opportunities and Recommendations (Section 4). A) Self Sufficiency: The Airport must strive to be selfsustaining. The Air Industrial Park Authority must continue to look for ways to increase revenue and decrease expenses without sacrificing services valued by current customers. Objectives: • Fuel Sales • Hangar Rentals • Land Leases for Corporate Hangar Development • Perform Financial Analysis with Focus on O&M Expenses • Standard Policy – Lease, Rules & Regulations, Minimum Standards, etc. • Development of both Owned and Non-Owned Parcels • Full Service FBO (as it relates to above)

SC LAN\BusinessPlan_Bedford.doc

page 18

December 2006

Economic Feasibility Study Airport Business Plan

B) Attract Businesses Aviation Related and Other

–

Aviation,

Objectives: • Create Friendly Business Environment with Convenience • Establish Avenues for Potential Growth • Integration of Industrial Parks C) Private Investment Objectives: • Create Public-Private Partnerships D) Economic Stimulator Objectives: • Teaming of Airport with Local Business, Redevelopment Authority, Chamber of Commerce, Bedford County Development Authority, etc. • Continue to Serve Existing Client Base • Implementation Plan E) Enhance Airport Safety & Environmental Sensitivity Objectives: • Maintain a Safe and Secure Operating Environment for Aviation and Traveling Public • Environmental Assessments

SECTION 3

SC LAN\BusinessPlan_Bedford.doc

page 19

December 2006

Economic Feasibility Study Airport Business Plan

FINANCIAL DISCUSSION AND ANALYSIS 3.1 Introduction Generating adequate airport revenue to cover operating and maintenance costs, capital investment needs and depreciation, while at the same time maintaining and expanding the airport’s tenant and user base, is typically one of the most important and most challenging issues facing airport operators. Airports, like many other components of public transportation systems, are often subsidized by their public sponsors. This has not been the case at Bedford as there has been minimal financial support by the County. To some extent, the non-quantifiable benefits that airports provide to their local and regional communities are an important consideration when examining airport self-sufficiency and investments. Economic development, community relations and recreational opportunities that airports typically provide are often considered invaluable to those communities and their residents. Many public airport sponsors understand the importance of these non-quantifiable benefits to their communities and are willing to invest, at varying levels, in airport’s operations. In the current fiscal environment, however, the willingness and/or abilities of many public sponsors to invest in airport operations can be limited. During periods of reduced municipal and state budgets, airports are often competing with a number of other public services for funding, and airports often receive a lower funding priority. This has been the case at Bedford. The County has paid the Airport Director’s salary but beginning mid-year 2005 this was no longer the case. It should be noted that the County did assist with loan payoffs in March 2005. Assisting with loan pay-offs was a one-time occurrence and County assistance should not be expected going forward. The secondary goal is to examine the financial characteristics of the Airport to determine potential alternatives and their respective financial implications for maximizing the Airport’s revenue generating potential. Examples of industry standard leases, as well as average rates and charges, will be examined and compared to existing Airport leases and activity-related charges. Rates must be based upon amortization, depreciation and appropriate return on investment. Recommendations may be identified for improving lease terms and policies and/or revising rates with the goal of generating additional revenues and improving the Airport’s net operating outcome via a positive business environment. The following analysis examines the market/service area and past, current and projected financial operating condition.

SC LAN\BusinessPlan_Bedford.doc

page 20

December 2006

Economic Feasibility Study Airport Business Plan

3.2 Market Analysis/Service Area In order to establish a basis for determining the service area potential and competition for this Airport, it is necessary to compare and evaluate the airport's location, facilities and services with those available at surrounding airports. Bedford County Airport serves predominantly Bedford County and is in close proximity to several other similar facilities. Historically, a 30-minute drive time has represented the maximum distance that general aviation patrons would be willing to travel to an airport; however, other factors need to be considered including location of nearby airports, the existing facilities of nearby airports and services of other competing airports. Again, the Airport is classified as an “Intermediate” Airport per the SASP. There are five (5) general aviation airports located within 30 statute miles (30 to 60-minute drive) of the Airport that could potentially influence the service area of the Bedford County Airport. Exhibit 8, which concludes this section, provides a map of the radius of influence for general aviation airports. When comparing Bedford’s services and accommodations, the following items are highlighted: • Bedford County Airport runway length is competitive at 5,005 feet. The Altoona-Blair County Airport is slightly larger at 5,466’ with no competitive advantage. The John Murtha Johnstown-Cambria County Airport offers two runways - - one at 7,003’ and the other at 4,507’. • Services are similar with some Airports offering charter, APU and avionics as additional services. • Only three (3) of the five (5) airports offer Jet “A” fuel in addition to AVGAS. Per the airnav.com website, the average price of 100LL is $4.18 and Jet “A” is $3.90 for fuel prices reported within 50 miles of Bedford Airport. Bedford’s pricing at August 2006 was $4.30 for 100LL and $3.90 for Jet A. • T-hangar prices were available for two (2) of the Airports listed below in addition to two (2) other Airports located in the same Region as Bedford. Average t-hangar monthly rental price was $150 compared to Bedford’s price of $160. In general this price is a subsidized price and is not reflective of current construction costs and related expenses. The services, accommodations, aids to aircraft operations and area of influence associated with each airport are described as follows4: 4

Per PennDOT Bureau of Aviation Website – Airport Directory, October 26, 2005

SC LAN\BusinessPlan_Bedford.doc

page 21

December 2006

Economic Feasibility Study Airport Business Plan

• • •

•

•

Altoona-Blair County Airport, Martinsburg, PA Classified as an Advanced Airport within the SASP classification system and is located 15.4 nautical miles northeast of the Airport. Maintains a 5,466’ x 100’ bituminous runway, 3,668’ x 75’ bituminous runway and two (2) parallel taxiways. Services: 100 LL and Jet “A” fuel, major repairs, hangar rental, tie-downs, Auxiliary Power Unit (APU), aircraft charter, flight instruction, aircraft rental, aircraft sales, avionics sales and service. Navigational/approach aids: Airport Surface Observation System (ASOS); Altoona Flight Service Station (FSS) located on the airport; rotating beacon; Runway End Identifier Lights (REILs) RW 2, 12 and 30; Precision Approach Path Indicator (PAPI) RW 2, 12, 20 and 30; Medium Intensity Approach Lighting System (MALSR) RW 20; High Intensity Runway Lights (HIRL) RW 2-20; Medium Intensity Runway Lights (MIRL) RW 12-30; VOR and ILS RW 20. Accommodations: Admin/terminal building, restrooms, airport restaurant, taxi, limo, car rental and phone.

John Murtha Johnstown-Cambria County Airport, Johnstown, PA • Classified as an Advanced Airport and located approximately 20.2 nautical miles northwest of the Airport. • Maintains a 7,003’ x 150’ bituminous runway, 4,507’ x 100’, and a series of taxiways. • Services: 100LL and Jet “A” fuel, major repair, hangar rental, tie-downs, APU, charter service, flight instruction, aircraft rental and aircraft sales. • Navigational/approach aids: ASOS; Common Traffic Advisory Frequency (CTAF); Air Traffic Control Tower (ATCT); Very High Frequency Omni-Directional Tactical Air Navigation (VORTAC); Instrument Landing System (ILS) RW 33; HIRLs RW 15-33; MIRLs RW 10 and RW 28; Visual Approach Slope Indicator (VASI) RW 15; 23 and 28; REILs RW 23; MALSR RW 33; PAPI RW 5 and RW 33 and a rotating beacon. • Accommodations: Administration building, terminal building, restaurant, restrooms, phone, Servomation, car rental, taxi service and nearby motels. Blue Knob Valley Airport, Duncanville, PA • Classified as a Limited Airport in the SASP and is located approximately 18.8 nautical miles north of the Airport. • Maintains a 3,415’ x 92’ gravel runway. • Blue Knob Valley is attended irregularly. SC LAN\BusinessPlan_Bedford.doc

page 22

December 2006

Economic Feasibility Study Airport Business Plan

•

• •

Services: 100LL fuel, minor repairs, hangar rental and tie-downs. Navigational/approach aids: a Unicom system and CTAF. Accommodations: Administration building, restrooms, Servomation and taxi service.

Somerset County Airport, Friedens, PA • Classified as a Basic Airport in the SASP and is located approximately 23.0 nautical miles west of the Airport. • Maintains a 4,697’ x 75’ bituminous runway, a 2,695’ x 192’ asphalt/turf runway and a full parallel taxiway. • Services: 24-hour self-serve fuel service for 100LL and Jet “A” fuel, major repairs, hangar rental, tie-downs, flight instruction and aircraft rentals. • Navigational/approach aids: WeatherMation; AWOS III; Unicom; NDB; LOC RW 24; GPS RW 6; GPS RW 24; MIRL RW 6/24; rotating beacon; REIL RW 24 and PLASI RW 24. • There is experimental aircraft activity at this airport. • Accommodations: Administration building, restrooms, phone, Servomation, car rental, taxi service and nearby motels. Ebensburg Airport, Ebensburg, PA • Classified as a Basic Airport in the SASP and is located approximately 26.0 nautical miles northwest of the Airport. • Maintains a 3,204’ x 50’ bituminous runway, a 1,615’ x 122’ turf/dirt runway and a full parallel taxiway. • Services: 24-hour self-service 100LL fuel, minor repairs, hangar rental, tie-downs, flight instruction and aircraft rentals. • Navigational/approach aids: CTAF/Unicom, VOR, MIRLs RW 7/25 and rotating beacon. • Accommodations: Administration building, restrooms, nearby restaurants, servomation, nearby motels, phone and car rentals. Exhibit 8 below illustrates the location of these airports and their proximity to Bedford County Airport. Also shown is a primary service area based upon a 30- minute drive time and reference to nearby facilities. Exhibit 8 – Radius of Influence/Primary Service Area

SC LAN\BusinessPlan_Bedford.doc

page 23

December 2006

Economic Feasibility Study Airport Business Plan

3.3

Airport Financial Condition

Background Historic financial data was compiled for the Bedford County Airport from audited financial statements. Financial data for calendar years 2000 through 2004 was examined as well as 2005 unaudited results to determine the current financial operating condition of the Airport. This was done specifically to determine whether the Airport generates sufficient operating revenues to cover its operating expenses on an annual basis. This analysis, which will focus mainly on the last two years as well as the 2005 unaudited results, will provide the baseline from which Airport fees and leases will be examined and potential means for generating additional revenues will be identified and will ultimately provide the baseline for developing business strategies. The financial operating characteristics of the Airport are summarized in the following sections. It is important to note that this analysis focuses on operating revenues, operating expenses and netoperating outcome. Infrastructure development costs, as well as nonoperating revenues such as investment income, will only be discussed briefly below. The general reason for focusing on operating (versus nonoperating) results is that the Airport should be able to generate sufficient operating revenues to cover the operating expenses that are incurred in the daily operation of the Airport. Infrastructure development and other airport-related investments, however, should continue to be funded through FAA and other grant processes. SC LAN\BusinessPlan_Bedford.doc

page 24

December 2006

Economic Feasibility Study Airport Business Plan

Required local matching funds will need to come from cash reserves, private partnership funds, bank loans/lines of credit and /or County support. Exhibit 10 follows the next section and provides detailed financial data for the years 2001 though 2005. Non-Operating/Debt Non-operating expenses consist mainly of depreciation, interest income and interest expense. In September 2005, Bedford County committed $357,414 to the Bedford County Air Industrial Park Authority for pay-offs on two (2) lines of credit (LOC) and a guaranteed revenue series. In the past, Bedford County has not subsidized Airport operations nor should this be expected going forward. Exhibit 9a provides a Loan/Debt Summary as of December 31, 2005. Estimated interest payment for 2005 (excluding pay-offs of principal and interest provided by the County) were $43,880. Of this total, it is estimated that approximately $26,463 will be required to support future interest payment related to debt on both corporate hangars and the t-hangar building with a direct impact on net operating results. A cash requirement of approximately $77,294 will be required to support both principal and interest. The three (3) loans acquired to support development of the new hangars are for a term of 15 years with the first loan expiring 2013. In addition to the hangar debt, First Commonwealth Bank approved a $200,000 line of credit in November 2005. It is the Authority’s intention to pay down the current line by September 2006 with current borrowings at $12,500 with minimal principal and interest paid in 2005. Finally, a new vehicle was purchased for the Airport via a 48-month lease (annual cash commitment at $6,165 or approximately $514/month). Exhibit 9a: Loan/Debt Summary as of December 31, 2005 2005 Interest

Years

Loan

Estimate d Principal

Term

Rate

Left

Balance

Payment

15 Years begin 8/1998 15 Years begin 2002

variable 3.39% @12/31/0 5 variable 4.25% @12/31/0 5

$153,395

$17,018

$5,689

17,906

11,517

15

variable

Bank Project M&T: Corp 1 Hangar First Commonweal th: Corp 2 Hangar M&T:

Loan

$250,00 0 304,000

SC LAN\BusinessPlan_Bedford.doc

page 25

7.4

10.75

255,574

Interes t Paymen t

December 2006

Economic Feasibility Study Airport Business Plan

T-Hangars First Commonweal th: LOC (a) Bedford Dev. Council: Bridge Fin. (b) First Commonweal th: LOC (c) First Commonweal th: Guaranteed Rev Series (c) M&T: LOC (c)

265,000

4.76% @12/31/0 5

9.2

187,618

15,906

9,258

5,500

316

---200,000

12,500

150,000

10 Years begin 10/200 2 Closed 9/2005

200,000

Closed 9/2005

100,000

45,000 Old Vehicle Loan Subtotal

Years begin 4/2000

-

Closed 9/2005 Closed 9/2005

NY Prime 100,000

start 9/2007

start 9/2007

WSJ Prime + 1%

To be Closed

5,500

-

6,902

6%

Closed

-

10,000

8,095

81% of Prime to Float

Closed

-

14,000

1,328

Closed

$714,587

400 $80,73 1

775 $43,88 0

Note a: Line of credit to be paid off in September 2006. Note b: On 9/11/02, the Authority borrowed $100,000 via a Promissory Note from this Council. The note requires no P&I payment until 9/7/07 at which time payments are due at the New York Prime Rate. Note c: Balance of debt paid by the County in 9/2005 as follows: M&T LOC $31,152.55, Guaranteed Revenue Note $175,520.83 and First Commonwealth LOC $150,740.25.

The most recent improvements at the Airport involved the extension of Runway 14/32 which included lighting, signage and rehabilitation to several taxiways. The only active grant involves the current Airport Master Plan & Feasibility Study Update for the approach lighting system and the addition of a truck with plow and spreader for snow removal purposes. Land, runways, buildings and equipment are recorded at cost of purchase or construction. The straight line depreciation method is used over the estimated lives as noted in Exhibit 9b below. Expenditures for maintenance, repairs and minor replacements are expensed as incurred. Replacements/betterments that increase the life of the asset

SC LAN\BusinessPlan_Bedford.doc

page 26

December 2006

Economic Feasibility Study Airport Business Plan

are capitalized. Asset cost was $20,969,215 at 12/31/04 with book value at $17,583,241 with details as follows: Exhibit 9b – Fixed Asset Summary as of December 31, 2004 L ife

Cost

Depreciati on 2004

Asset Land

$0

Accumulat ed Depreciatio n $0

Runway, Terminal, & Taxiways Hangars

40 40

$1,848,67 8 16,203,51 9 1,559,472

Maintenance Buildings Fuel Facility

40

370,128

9,253

78,652

40

303,088

15,154

159,121

Sewerage Treatment Airport Buyout

20

75,753

3,788

39,770

90,628

0

0

AWOS III

20

112,129

5,342

44,234

Beacons

20

190,664

9,512

56,877

Equipment

20

222,346

11,341

111,118

Utilities

294,898

7,365

25,777

Total

$21,271,3 03

348,818

2,896,006

38,987

276,507

$449,560

$3,688,062

Book $1,848,67 8 13,307,5 13 1,282,96 5 291,47 6 143,96 7 35,98 3 90,62 8 67,89 5 133,78 7 111,22 8 269,12 1 $17,583,2 41

Exhibit 10 - Summary of Historic Airport Profit/(Loss) - 2001 through 2005 SC LAN\BusinessPlan_Bedford.doc

page 27

December 2006

Economic Feasibility Study Airport Business Plan

2005 Unaudited

2004 Audited

Operating Revenue FBO: Fuel Flowage Fee FBO: Hangar/Office Rental Hangar rental Other Total Operating Revenue

$ 60,158 25,200 70,778 664 156,800

$ 47,944 25,200 44,940 5,720 123,804

Operating Expense Advertising Airport Maintenance/Repair Airport Director’s Salary Legal & Auditing Dues & Subscriptions Utilities Insurance Supplies Telephone Travel & Training Total Operating Expense

296 17,879 16,416 576 592 10,285 19,391 2,384 1,448 8,760 78,027

705 18,810 13,414 3,991 1,185 10,797 19,390 2,830 1,993 6,954 80,069

Net Income from Ops.

$ 78,773

$ 43,735

Non Operating Results Interest Expense Depreciation Expense Interest Income

(43,880) (449,530) 854 (492,556) ($413,783 )

Total Non Operating Exp Net Loss

2003 Audited $

2002 Audited

2001 Audited

41,423 25,200 59,091 10,481 136,195

$ 32,147 25,200 70,541 127,888

$ 27,633 25,200 63,616 116,449

444 16,003 9,600 1,728 580 10,423 17,695 1,930 2,197 5,379 65,979

715 7,972 8,290 3,113 477 9,658 17,590 1,932 2,026 3,057 54,830

958 6,050 13,261 4,216 584 7,853 13,975 1,934 974 743 50,548

70,216

$ 73,058

$ 65,901

(47,775) (449,530) 190

(51,258) (372,846) 411

(60,438) (367,617) 256

(497,115) ($453,380 )

(423,693)

(427,799)

($353,477)

($354,741)

(44,455) (358,536) (402,991 ) ($337,090 )

$

NOTE: The Authority implemented a new financial reporting model (GASB No. 34) which provides for significant changes in terminology: recognition of contribution in the Statement of Revenues, Expenses, Changes in Net Assets and other changes. This statement excludes amortization on fixed assets acquired by grants and results in a reduction in total operating results for 2001 and 2002 of $344,543 and $343,955, respectively.

As shown in Exhibit 10, Airport operating revenues are generated from variety of sources. Total operating revenues from these sources decreased from $136,195 in 2003 to $123,804 in 2004, a decrease of approximately 9% or $12,391. Although it appears that fuel sales increased in 2004, this was not the case. The Airport sold less fuel; however, effective June 2004, the fuel flowage fee collected by the Authority was increased from $.15 to $.30 gallon. Vacancy in hangars was the main reason for the decrease in revenue from 2003 to 2004. Although audited financial results for 2005 were not available at the time this report was completed, it is projected that the Airport revenue will reach an all time high of $156,800. Average hangar capacity for 2005 was 87% with approximately 200,500 gallons of fuel sold. All hangars were rented effective March 2006. As of April 1, 2006, there

SC LAN\BusinessPlan_Bedford.doc

page 28

December 2006

Economic Feasibility Study Airport Business Plan

was no waiting list as there were several vacant spots filled at the end of 2005 and into 2006. During the same period, Airport operating expenses increased 21% ($14,090) from $65,979 in 2003 to $80,069 in 2004 due mainly to increases in salary, insurance and maintenance repair expense. This financial data indicates that the Airport experienced a net operating gain ranging from a low of $43,735 in 2004 to a high of $73,058 in 2002 over the four(4) year audited period from January 1, 2001 to December 31, 2004. A substantial gain of $78,773 is projected for 2005. When factoring in non-operating results, mainly depreciation and loan interest expense, the Airport has been operating at a net loss. Exhibit 11 below presents a summary of the various financial components from 2001 through 2005. Exhibit 11 - Summary of Financial Components – 2001 through 2005 225,000 Operating Revenue

150,000

Operating Expense

75,000

Net Operating Income Net Loss

0 -75,000

2001

2002

2003

2004

2005Unaudited

-150,000 -225,000 -300,000 -375,000 -450,000 -525,000

Financial data for 2004 was further examined to determine the relative importance of different components of Airport operating revenue and expense. Exhibits 12 and 13 presented below provide a general understanding of which components of Airport operating revenues and expenses are the most significant and would tend to have the greatest impact on the facility’s net operating outcome.

SC LAN\BusinessPlan_Bedford.doc

page 29

December 2006

Economic Feasibility Study Airport Business Plan

Exhibit 12 - 2004 Airport Operating Revenue by Source

Other 5%

Fuel Flowage Fee 39%

Hangar Rentals 36%

FBO Rental 20%

As shown, Airport operating revenue of $123,804 for 2004, as presented in Exhibit 12, is derived from a variety of sources. The primary components of aviation-related revenue includes hangar rentals, fuel flowage fee revenue and FBO hangar/office rental income. Revenue will be discussed in detail in Section 3.4. Exhibit 13 - 2004 Airport Operating Expense by Source

Telephone 2%

Travel Training 9%

Advertising 1%

Supplies 4% Insurance 25% Dues Subscriptions 1%

Airport Maintenance 23%

Salary 17% Legal Auditing 5%

Utilities 13%

Total operating expense was $80,069 at December 31, 2004. Airport maintenance and insurance accounted for almost half of the total expense. For many airports, personnel salaries, wages and taxes are usually significant but this is not the case at this Airport. Salary expense is at 17% and other primary components of Airport operating expense include insurance at 25%, airport maintenance at 23%, utilities at 13%, travel and training at 9% and legal and auditing at 5%. All other expense categories each represented 4% or less of total operating SC LAN\BusinessPlan_Bedford.doc

page 30

December 2006

Economic Feasibility Study Airport Business Plan

expenses. A detailed expense analysis will be presented in Section 3.5 (Expense Discussion). When 2004 operating revenues and operating expenses are compared, Airport operations provided net income of $43,735 during 2004. Unaudited results for 2005 provide a net gain from operations of $78,773 due mainly to increased hangar rental income. Although not presented above, depreciation expense is significant for this Airport with a net loss of $453,380 reported at December 31, 2004 and a net loss of $413,783 projected for 2005. 3.4

Revenue Source Comparison and Existing Airport Revenue Sources

The characteristics of each of these revenue sources, as well as their contribution to total operating revenue at the Airport will be examined. In addition, current rates and leasing policies will also be examined and compared to national averages and industry standard practices. Revenue Source Comparison The objective of the revenue source comparison is to examine revenue source and leasing strategies and compare them to comparable revenue and lease characteristics at other airports. While activity-related fees and leasing rates vary by airport, there are common practices that generally promote maximized revenue generation. Based on the findings, revenue sources from which the airport should be generating additional revenues are determined, industry standard best-practices related to those revenue sources are identified and recommended changes to Airport leasing practices are presented. These potential rate/lease and revenue source adjustments would bring leasing strategies and Airport operating revenues more inline with national averages and industry standard best-practices and could materially increase the Airport’s revenue generating potential. The goal of this analysis is to identify best financial management practices for Airport leases, as well as appropriate fee and rate structures for activity-related fees. Specific emphasis will be placed on those components of Airport net operating revenue that may present opportunities for improving the net operating outcome. The American Association of Airport Executives (AAAE) conducts a national survey of airports to identify current rates and charges at those airports that participate in the survey. Responding airports are categorized by type and size so that national average rates and charges can be identified for airports based on hub size (determined by number of annual enplaned passengers) and geographic region. In the AAAE’s most recent survey, almost 350 airports, including over 220 commercial

SC LAN\BusinessPlan_Bedford.doc

page 31

December 2006

Economic Feasibility Study Airport Business Plan

service airports, responded to the survey and provided data regarding activity-related fees and leasing policies as well as a variety of other airport financial data. The findings from this analysis were summarized as National Average Rates and Charges. National average data is presented by airport hub size in the following categories: • • • •

Large hub (LH) – over 6.6 million annual passenger enplanements. Medium hub (MH) – between 1.7 million and 6.6 million annual passenger enplanements Small hub (SH) – between 330,000 and 1.7 million annual passenger enplanements Non-hub (NH) – less than 330,000 annual passenger enplanements

Although this Airport has less than 330,000 annual passenger enplanements, it is not categorized as a non-hub airport. It is important to note that Bedford County, like many low enplanement airports, is not operating as a non-hub but rather as a General Aviation airport. The most applicable comparisons for the Airport would be the small hub and non-hub categories. Relevant data for each hub size is presented in the following analyses to provide a range of comparison. A common tendency depicted by the data relates to average airport revenues and airport operating costs at airports of differing hub sizes. The data to be presented indicates that large hubs, medium hubs and small hubs, on average, generate more total revenue per enplaned passenger than total operating cost per enplaned passenger. Therefore, on average, airports in these hub categories tend to operate with a positive net operating outcome (revenues are greater than expenses). At non-hub airports, the average total operating cost per enplaned passenger is greater than the average total revenue per passenger, indicating that, on average, non-hubs tend to require subsidies to fund their operation. Review of this national database shows that many of the nation’s airports implement standard practices when developing rates and fees and that these standard practices result in common revenue source characteristics. While specific rates and fees tend to vary by airport based on local market conditions, common practices used to develop the rates tends to make them somewhat comparable region to region. Data from the AAAE studies are presented where applicable in the following review of sources of revenue. Existing Airport Revenue Sources Operating revenues generated from 2004 generally be categorized into the following categories and will be discussed in detail in this section: SC LAN\BusinessPlan_Bedford.doc

page 32

December 2006

Economic Feasibility Study Airport Business Plan

A) Terminal/FBO Revenues (20%) B) Activity-Related Revenues (39%) C) Hangar Rental and/or Land Lease Revenue (36%) D) Other (5%) A) Terminal/FBO Revenue Terminal/FBO revenue accounted for 20% or $25,200 of total revenue in 2004. This amount was collected and terms have remained the same as far back as January 1, 2000. The Authority has agreed to lease a total of 10,400 square feet of terminal and attached hangar space, including the fuel farm to Bun Air Corporation (Bun Air) for a period of five (5) years commencing May 20, 2004 and terminating May 20, 2009. The tenant has the right to renew the lease for three (3) terms of five (5) years each. The lease amount is subject to an adjustment and escalation provision which states the rental will not be less than $12,000 during any year nor shall the rent increase more than 10% during any year. Although this group does most of their work in the hangar attached to the terminal building (6,400 sq. ft.), there is an office in the terminal building for flight instruction, general counter space and common access to kitchen, bathroom and lounge facilities. Bun Air pays for heat and electric for the entire terminal facility and is responsible for utilities related to runway lighting and the fuel farm. The Authority pays for water and sewer for all facilities at the Airport. Utilities will be discussed in more detail in Section 3.5 (Expense Discussion). Incongruities exist between this Airport and other non-hub airports in terms of terminal rental rates. As shown above, national average terminal rental rates for the various types of terminal building rental space vary significantly based on hub size. It should be noted, however, that Bedford’s rate is somewhat consistent with similar Airports in Pennsylvania for which a lease analysis has been completed. AAAE National Average Rates Terminal Building Rates ($/sq. ft./yr.) Common Rental Space Bedford Rate FBO Terminal/Hangar 10,400

SC LAN\BusinessPlan_Bedford.doc

page 33

Large Hub

Mediu m Hub

Small Hub

Non Hub

$35.2 9

$44.1 0

$31.1 0

$20.2 5 $2.42

December 2006

Economic Feasibility Study Airport Business Plan

There is no unused space or space that could easily be converted to rentable space to provide additional revenue. At other Airports in the area, terminal areas can accommodate a wide variety of tenants which frequently leads to challenges when establishing rental rates for different terminal tenants. A common best-practice regarding terminal rental rates involves establishing a standard terminal rental rate that is applicable to all terminal tenants and then adjusted based on the nature of the tenant’s activities. A base terminal rate should be determined based on current market value. In addition to this base rate, the Authority must include an additional amount to recover costs associated with the tenant’s space including, but not limited to, necessary improvements, utility expense and maintenance/cleaning costs, where applicable. Specific recommendations related to Terminal revenue will be discussed in Section 4. Industry standard best practices regarding FBO leases and revenues typically include one or more of the following categories of fees: •

Land/building lease – FBOs operating at an airport should be assessed land lease and/or building lease fees, whichever are applicable, for those facilities that they use. Like other airport tenants, land lease rate and building lease rates applicable to FBOs should be determined based on the fair market value of the areas being leased and should include escalation clauses. In addition, when FBOs fund facility development on leased property, reversion clauses should in place that require reversion of the new facilities to airport ownership following an initial leasing period sufficiently long enough to allow the FBO to amortize its investment.

•

Percentage of gross sales – In addition to land/building leases, some airports collect percentage fees from FBOs based on their gross sales at the airport. In many cases, the FBO must reach a certain volume of gross sales before such a lease provision would apply. When implemented, airports typically collect between 2 percent to 10 percent on gross sales over the threshold established in the lease. In general, this type of FBO fee represents a “privilege” fee for that FBO’s right to operate at the airport and serve/generate revenues from airport users. In some instances, the financial benefits of this approach are mitigated by the costs associated with monitoring FBO sales and collecting the appropriate amount of percentage fees. This structure does not exist at this Airport.

•

Fuel flowage fee – Fuel flowage fees typically apply to all FBOs selling fuel to airport users. As previously discussed, FBO fuel

SC LAN\BusinessPlan_Bedford.doc

page 34

December 2006

Economic Feasibility Study Airport Business Plan

flowage fees should be assessed on a per gallon basis on all fuel delivered to the airport. National average fuel flowage fees typically range from between $.07 and $.10 per gallon. Bedford Airport receives a fuel flowage fee from Bun Air and details will be discussed below. •

Permit to operate on airport – Those businesses and individuals providing services for a fee to airport users on airport property should be assessed some fee by the airport for their operation. In many cases, this fee is established as a nominal permitting fee which requires businesses, tenants or other individuals providing for-fee services at the airport to acquire an airport permit. These permitting fees can vary based on the gross sales of the entity being permitted as well as the service that they provide. In addition to generating airport revenues, this process allows the airport to better monitor business activity as well as maintain a more accurate data base of on-airport businesses and/or service providers.

B) Activity-Related Revenues Activity-related revenues (39% or $47,944) are those generated through the use of Airport facilities and/or services and for this Airport is solely fuel flowage fees collected from the FBO. These fees should generally be considered as revenues collected by the Airport from individuals or businesses for the short-term use (usually a period not to exceed one year) of Airport-owned and managed facilities. Airport revenues generated through longer-term facility or land leases will be discussed in a following section. The type and scope of activity-related revenues collected by airports varies significantly by airport size, activity levels, location and a number of other factors. In addition, many airports do not collect activity-related revenues from some sources, such as general aviation landing fees or automobile parking fees, for cost-benefit and/or policy-related reasons. As a result, fees and standard practices related to activity-related revenues must be adjusted to reflect local conditions. Activity-related revenues are collected at the Airport from the following sources: Fuel Flowage Fees Effective June 1, 2004, the Authority is able to collect $.30 per gallon of gross sales of fuel to Airport tenants and others. This fee paid to the Authority by the FBO represents 39% of revenue in 2004 and is SC LAN\BusinessPlan_Bedford.doc

page 35

December 2006

Economic Feasibility Study Airport Business Plan

about the same percentage of revenue in 2005. Gallons sold for 2004 were around 195,000 gallons with sales increasing to approximately 200,500 gallons in 2005. Most Airports collect a per gallon fuel flowage fee which can range from $.05 to $.10 ($.07 average from AAAE study). Another option, although not as common, is for the Owner to collect a percentage of gross fuel sales. The Authority has an extremely good arrangement with the FBO. With current fuel prices, overall profit to an Airport Owner or FBO is generally estimated at $.50/gallon on Avgas and approximately $1.00 on Jet “A” fuel. Additional details/suggestions to be discussed in Section 4 (Objectives A1 and A7). Landing Fees Landing fees are not currently collected at the Airport. Most Airports determine landing fees based on an aircraft’s maximum allowed takeoff weight (MATOW) of the aircraft landing at the Airport. The AAAE National Average Rates are presented below for informational purposes only and are presented as a cost per 1,000 pounds of aircraft weight. Large Hub

Mediu m Hub

Signatory Air Carriers

$2.01

$1.35

Non-signatory Air Carriers

$2.25

$1.73

AAAE National Average Rates Landing Fees (per 1,000 lbs glw)

Small Hub

Non Hub

$1.2 4 $1.6 2

$.90 $1.0 8

Parking Fees The Airport does not generate revenue from automobile parking fees. It should be noted that many airports collect aircraft parking fees (overnight and/or monthly tie-down fees) and vehicle parking fees. National average automobile parking rates are presented below for those airports currently collecting them. As the data indicates, parking rates generally decrease with declining hub sizes, so does the number of airports in each hub size collecting parking fees. For example, survey results indicate that less than 10 percent of the non-hub airports responding to the survey collect parking revenues. For all but the busiest non-hub airports, the costs associated with implementing and collecting parking fees generally outweigh the revenues generated from automobile parking. It is anticipated that this would be the case at this Airport; therefore, the implementation of parking fees at the Airport is not considered a feasible means of generating additional revenue. It is important to note that by not collecting these fees, parking lot construction and/or maintenance is Airport Improvement Program (AIP) eligible.

SC LAN\BusinessPlan_Bedford.doc

page 36

December 2006

Economic Feasibility Study Airport Business Plan AAAE National Average Rates Automobile Parking Rates: Short-term Automobile Parking Rates: Longterm Automobile Parking Rates: Max. Daily Automobile Parking Rates: Weekly

Large Hub

Mediu m Hub

Small Hub

Non Hub

$2.00

$2.00

$1.50

$1.00

$9.00

$8.00 $14.5 0 $84.0 0

$6.00

$4.50

$8.00 $48.0 0

$5.00 $28.0 0

$17.00 $84.00

C) Hangar Rentals and/or Land Leases Hangar rental income contributed 36% ($44,940) to total revenue in 2004. This figure has been projected to increase dramatically in 2005 to $70,778 or 45% of revenue. Two things account for the increase in revenue from 2004. Vacancies have gradually declined and corporate hangar prices were increased effective June 2005. Effective March 2006, Bedford Airport storage facilities and hangars are at capacity. There is 41,881 sq. ft. of rentable hangar space at the Airport excluding the FBO terminal/hangar space discussed above. The Airport could earn up to $81,300 at full capacity at current lease rates as follows: T-Hangar Facility $29,700 Corporate Hangars(2) $48,900 Maintenance Hangar $2,700 The t-hangar facility offers 15 rental units at $165 per month. Given the current rate and total area of 16,881 sq. ft., tenants are paying approximately $1.76 per square foot. The t-hangar facility has electric but no heat. Two (2) corporate hangars (70’ x 150’ each) currently provide seven (7) rental units with prices ranging from $300 up to $700 per month based on plane size. The average annual price per square foot is approximately $2.33 per square foot based on a total area if 21,000 sq. ft. for both facilities. The corporate hangar facilities have heat, electric, water and sewer. The maintenance hangar measures 4,000 sq. ft. with four (4) garage bays, two (2) offices, meeting area and kitchen. Only one-half of this building provides rental income to the Authority as two (2) of the bays are used for snow removal equipment storage and another for miscellaneous storage. The remaining bay is rented for $1,500 per year. The Civil Air Patrol (CAP) utilizes this hangar and related office space for weekly meetings and remits $1,200 annually to the Authority. The annual rate per square foot for the area rented is $1.35. This group also provides a 25% reimbursement on electric and heat for this building. The Authority pays the water and sewer bill. All of the hangar lease agreements are for a one-year lease period with an option to renew. The lease does include a provision for a price increase. SC LAN\BusinessPlan_Bedford.doc

page 37

December 2006

Economic Feasibility Study Airport Business Plan

There are no land leases at the Airport as all hangars and buildings are owned by the Authority. The Authority has increased prices in both the t-hangar and corporate hangar facilities over the past few years. The facilities are in good condition. T-hangar prices are competitive compared with several Airports located within the vicinity of this Airport; however, some airports are subsidized and prices may not reflect construction costs, related expenses and depreciation. Also as a general comparison, storage units measuring 10’ x 10’ generally rent for up to $80 per month or $960 annually, which equates to $9.60 per square foot. This is significantly higher than the $1.76 square footage rate obtained on hangars. As a general note, land leases typically involve airport property that is leased over longer term periods to individuals or businesses. As an example, developers and/or tenants may develop aviation-related facilities on leased areas, such as hangars for their individual use or lease to other parties or non-aviation facilities. Industry standard best practices regarding land leases typically involve establishing a lease rate for the leased parcels of land that reflects the fair market value of the land and in some cases varies by location relative to airport facilities. For examples, a parcel having access to the airfield may be leased at a rate greater than a parcel without airfield access. Another best practice related to land leases, one that represents significant longterm financial benefits to airports, requires that following a lease period of 20 to 30 years, any facilities developed on leased lands revert to airport ownership. The lease term is typically structured to allow the developer to amortize the costs of developing the facility, as well as benefit from its use, before it is reverted back to the airport. Once the facility reverts back to airport ownership, the original tenant can enter into a new lease agreement for use of the land and facility; however, the new lease is developed as a building lease on an airport-owned facility. Reversion of tenant-developed facilities to airport ownership is a very valuable means in promoting airport development while protecting the airport’s long-term ability to generate revenues from airport property and facilities. D) Other Other revenue for 2005 consisted mainly of Authority dues and was a very small percentage of total operating revenue. Each of the 15 board members pays $100 annually. For 2004, other income represented 5% of total income and consisted of Authority dues and a salary related grant reimbursement. 3.5

Expense Discussion

SC LAN\BusinessPlan_Bedford.doc

page 38

December 2006

Economic Feasibility Study Airport Business Plan

Expense details highlighted below have been extracted from Exhibit 10 for 2005 and 2004. There has been only a minimal change in operating expense from 2004 ($80,069) to 2005 ($78,027). Each major expense will be examined along with a summary section that will provide net operating profit/(loss) by each facility that generates revenue for the Authority. Non-operating results, mainly depreciation and a significant expense for this Airport, have not presented below. 2005 Unaudited Operating Expense Advertising Airport Maintenance Airport Director’s Salary Legal & Auditing Dues & Subscriptions Utilities Insurance Supplies Telephone Travel & Training Total Operating Expense

$296 17,879 16,416 576 592 10,285 19,391 2,384 1,448 8,760 $ 78,027

2004 Audited -23% 21% 1% 1% 13% 25% 3% 2% 11%

$705 18,810 13,414 3,991 1,185 10,797 19,390 2,830 1,993 6,954 $80,069

1% 23% 17% 5% 1% 14% 24% 4% 2% 8%

Airport Insurance Airport insurance for 2005 and 2004 was $19,390 and accounted for approximately 25% of the total expense in both years. The Authority’s property policy covers the four (4) main hangar units at the field. In addition, there is coverage for the snow removal/grass cutting equipment, business vehicle and errors and omissions on Authority members. There is also a $10 million per occurrence general liability (G/L) policy that encompasses hangarkeepers liability. Deductibles range from $250 to $5,000. The FBO carries a policy to cover property and G/L coverage on the main hangar and terminal building. Insurance costs are detailed below. General Liability, including Hangarkeepers and Errors & Omissions, have been allocated to facility based on square footage. Facility Corporate Hangar 1 Corporate Hangar 2 T-Hangar Maintenance Hangar Terminal/Hangar Equipment/Auto Subtotal Insurance

Property Auto $510 1,035 731 753 FBO 2,840 $5,869

G/L, E/O & Hangarkeepers $2,375 2,375 3,818 905 4,049 ----$13,522

Total Insurance $2,885 3,410 4,549 1,658 4,049 2,840 $19,391

Airport Maintenance Maintenance expense was $17,879 for 2005 and represented 23% of total operating expense in both 2005 and 2004. There are SC LAN\BusinessPlan_Bedford.doc

page 39

December 2006

Economic Feasibility Study Airport Business Plan

approximately 20 related maintenance accounts in the general ledger some of which overlap. Some suggestions for booking this expense going forward will be made in Section 4. Below are 2005 estimated costs by category. Maintenance Category Maintenance – Contracts/Inspections Repair: Common – AWOS, Taxiway & Equipment Corporate Hangar 1 Corporate Hangar 2 T-Hangar Maintenance Hangar Terminal Building/Hangar Subtotal Repair Runway Light/Bulbs Airport Mowing Fuel – Snow Removal Subtotal – Maintenance

2005 Expense $6,863 3,490 775 283 360 385 98 5,391 1,235 4,241 149 $17,879

Salary Expense Salary and related benefits are generally a significant percentage of overall expense but is not the case at this Airport at the present time. One Authority member serves as the Airport Director. In the past, a portion of the Director’s salary was paid by the County; however, this is no longer the case. Salary expense for 2005 is projected to be $20,416; however, only $16,416 (21% of total expense) is reported due to $5,000 credit from grant funding related to a recent project. This reduction should not be expected or planned going forward. Salary expense for 2004 was $13,414 or 17% of total expense. Note that this expense is strictly salary related with no associated benefit or retirement expense. Utility Analysis Total utility expense is projected to be at $10,285 or 13% of total expense for 2005. Details of this expense by facility are presented below. It should be noted that the FBO pays for heat and electric for the entire terminal building and attached hangar as well as utilities related to the runway and fuel farm. Per the FBO, this expense runs approximately $800-$850 monthly. In addition, the Civil Air Patrol (CAP) utilizes the maintenance hangar, particularly the office, meeting area and kitchen and reimburses the Authority for 25% of electric/heating bills. Heating expense is billed to the Authority for three (3) facilities that include the corporate hangars and the maintenance hangar. The tSC LAN\BusinessPlan_Bedford.doc

page 40

December 2006

Economic Feasibility Study Airport Business Plan

hangar facility is not heated. The heating expense for 2005 was $6,348 and total expense to the Authority was $5,816 taking into account a $532 reimbursement from the CAP. Estimated cost per square foot for heat after CAP reimbursement for these facilities is approximately $.23 based on 25,000 sq. ft. of utility coverage. Total cost has been allocated to each facility as follows: Heat Expense $2,446

Facility Corporate Hangar 1

Corporate Hangar 2 2,446 Maintenance Hangar 924 Subtotal Heat $5,816 Electric expense was $3,884 in 2005 with actual expense presented below for the corporate hangars, maintenance buildings, thangar facility, beacon and pole light. Because these facilities are metered separately, actual electric costs are presented below along with the cost per square foot. Electric Cost per Facility Expense Square Foot Corporate Hangar 1 $843 $.08 Corporate Hangar 2 1,237 .11 T-Hangar Facility 468 .03 Maintenance Hangar * 1,086 .27 Beacon 164 n/a Terminal Bldg. - Pole 86 n/a Light Subtotal Electric $3,884 * includes 25% reimbursement by CAP ($362) Water and sewer expense for 2005 was $585 with services to all buildings (42,900 sq. ft) except the T-Hangar building. There is one meter at the Airport and the Authority incurs total cost. An estimated cost per square foot of approximately $.01 with allocated expense is provided below by facility. Facility Corporate Hangar 1 Corporate Hangar 2 Maintenance Hangar Terminal Building/Hangar Subtotal Water Sewer

SC LAN\BusinessPlan_Bedford.doc

page 41

Water & Sewer Expense $143 143 54 245 &

$585

December 2006

Economic Feasibility Study Airport Business Plan

Travel and Training, Other Travel and training is at 9% due mainly to the fact that Mr. Jennings is heavily involved in PA Aviation and attends the PA Aviation Council and FAA Eastern Region conferences annually. In addition, he serves as a Board member of the Governor’s Advisory Committee and serves on various sub-committees. This group meets six (6) times throughout the year. All other expense categories represented 5% or less of total operating expenses. Facility Revenue/Expense Comparison As detailed above, there are specific expenses which can be mapped or allocated directly to each Airport facility that generates revenue. As detailed above, these are mainly insurance, utility and maintenance repair expense. Through detailed analysis of ledger, $28,573 (36%) of the total operating expense of $78,027 was allocated back to a facility. Operating Expense Advertising Airport Maintenance Airport Director’s Salary Legal & Auditing Dues & Subscriptions Utility (Beacon only) Insurance (Equip/Auto only) Supplies Telephone Travel & Training Total Operating Expense

2005 Unaudited $296 15,978 16,416 576 592 164 2,840 2,384 1,448 8,760 $49,454

Below is a snapshot of net operating results by facility with revenue presented at full capacity and current prices with reductions represented by 2005 expenses. It should be noted that Repair expense may vary significantly from year to year and impact bottom line. This expense was minimal for 2005 and has been included. Average profit margin is 73% with all facilities generating income with the exception of the maintenance hangar due to the fact that two (2) of the four (4) bays in this facility are used to store snow removal equipment. It is important to note that the summary below does not take into account any related loan expense associated with these facilities. Facility: Revenue and Expense Comparison

Revenue Expense Insurance

Corp 1 $21,00 0 2,885

SC LAN\BusinessPlan_Bedford.doc

Corp 2

T-Hangar $29,700

Maint. Hgr $2,700

Termin al $25,200

$27,900 3,410

4,549

1,658

4,049

page 42

Total $106,50 0 16,551

December 2006

Economic Feasibility Study Airport Business Plan 3,432

3,826

468

2,064

331

10,121

775

283

360

385

98

1,901

Subtotal

7,092

7,519

5,377

4,107

4,478

28,573

Net Result

$13,90 8 66%

$20,381

$24,323

($1,407)

$20,722

$77,927

73%

82%

----

82%

73%

Utility Repair

% Margin

The only revenue line items not included in the table above are fuel flowage fee income and other miscellaneous income of $60,822. This revenue covers the unallocated expense presented above of $49,454 and allows for a net profit of $11,368. In addition, the net profit by facility contributes to bottom line operating results and provides the Authority with an estimate of profit by facility. 3.6

Baseline Forecast of Revenue and Expenses

The projections of future airport operating revenue and expenses have been developed and presented through the year 2010 using baseline conditions. Revenue projections in this analysis are based on the continued leasing of existing facilities and do not include estimates of future revenues that may be collected by the Airport from potential new facilities that may be developed and/or new businesses that could potentially locate to the Airport. The projection does take into account aviation growth, which is an important factor when forecasting revenues and expenses. Both based activity and total operations will have an impact on the projection. Exhibit 14 will be presented at the end of this section and provides this Five-year projection. As a review from Section 1, based aircraft are expected to increase slightly through 2010 from the current level of 23 to 28 aircraft (increase of one (1) each for single engine piston, single engine turbo prop, multi turbo prop, jet and rotorcraft). The projection was the result of an average of the Linear Regression Model and the FAA Aerospace Growth Rate. The increase will not impact the projection presented below as there is currently no additional rentable spaces at the field. Operations will increase significantly to 24,000 by the end of the forecasting period (2025). Note that Appendix 3 provides a copy of the Airport’s Twelve Year Plan as submitted in December 2006 and Appendix 4 provides selections from the 2006 Airport Master Plan Capital Improvement Section with financial projections provided based on desired future Airport projects. A summary of other assumptions for the Five-year projection is as follows: SC LAN\BusinessPlan_Bedford.doc

page 43

December 2006

Economic Feasibility Study Airport Business Plan

•

•

•

• • •

•

• • •

A projection for 2005 using full year actual unaudited results was the starting point for the Five-year projection. For 2005, revenue increased $32,996 due to corporate hangar price increases and to an increase in occupancy rate. Fuel sales by the FBO increased slightly from 2004 with the average at 197,800 gallons sold over the course of the past (2) years. The change in expense from the prior year was minimal ($2,042). Projected fuel demand was available via Section 3 of this Master Plan with a 200,356 gallon estimate for 2005 and a 257,292 gallon estimate by 2010. Actual gallons sold of 200,500 was used as the starting point with steady increases ranging from 3% up to 6% applied to the get to the projected gallonage figure for 2010 as close to the projection as possible. Current fuel flowage fee of $.30/gallon was used for the projection period to obtain the fuel flowage fee revenue. Hangars are generating an average of $2.07 per square foot at full capacity and current rates. Revenue at 100% capacity is $81,300. Because prices were recently increased on both T-hangar and corporate units, an occupancy rate of 88% was assumed for Years years 1 through 3 and 91% for remaining years. The FBO Lease Agreement expires in 2009. The projection assumes a 5% increase in the current terminal building annual rental fee of $25,200 to $26,460 in year 5. A 3% inflation factor was applied to salary, professional fees, dues and subscriptions, utilities, supplies and telephone. Fixed budgets were set for travel/training at $9,000 per year, which represents only a minor increase from 2005. In order to enhance the role of the Airport in the community, an advertising budget was assigned at $2,500 per year at the beginning of the projection period and was increased to $3,000 by year 45. Maintenance expense has been projected at $18,000 for years 1 through 3 with an increase to $20,000 for the remaining years. The 2005 expense is projected to be close to $18,000 and included a significant AWOS repair expense. The Authority has noted that the weathermation contract should be eliminated with annual savings of $1,800 in this category. Principal and interest payments will continue at $77,294 annually on loans associated with the T-hangar and corporate hangar buildings. Effective September 2007, the Authority will begin making payment at Prime (currently 8.25%) on a $100,000 loan granted in 2002 from the Bedford Development Council. Note that it was recommended that the Authority consider a reserve be held to support future local share and

SC LAN\BusinessPlan_Bedford.doc

page 44

December 2006

Economic Feasibility Study Airport Business Plan

maintenance costs; however, at this time the focus for this Airport must be on generating revenue.

Exhibit 14: Projected Revenue and Expenses

Fuel Sales (Gallons) Operating Revenue FBO: Fuel Flowage Fee FBO: Rentals Hangar Rental existing Other - Dues Subtotal Revenue

2005 Est 200,5 00

$60,15 8 25,20 0 70,77 8 66 4 156,80 0

Yr 1 '06 206,515

Yr 2 '07 216,841

$61,955

$65,052

25,200

25,200

71,544

71,544

600

600

159,299

162,396

Yr 3 '08 228,76 7

Yr 4 '09 242,49 3

Yr 5 '10 257,04 3

$68,63 0 25,20 0 71,54 4 60 0 165,97 4

$72,74 8 25,20 0 73,98 3 60 0 172,53 1

$77,11 3 26,46 0 73,98 3 60 0 178,15 6

2,50 0 18,00 0 22,30 9 62 9 64 7 11,23 9 21,18 9 2,60 5 1,58 2 9,00 0 89,70

2,50 0 20,00 0 22,97 8 64 8 66 6 11,57 6 21,82 5 2,68 3 1,63 0 9,00 0 93,50

3,00 0 20,00 0 23,66 8 66 8 68 6 11,92 3 22,47 9 2,76 4 1,67 9 9,00 0 95,86

Operating Expenses Advertising Airport Maintenance Salary Expense Legal & Auditing Dues & Subscriptions Utilities Insurance Supplies Telephone Travel & Training Subtotal Expenses

29 6 17,87 9 16,41 6 57 6 59 2 10,28 5 19,39 1 2,38 4 1,44 8 8,76 0 78,02

SC LAN\BusinessPlan_Bedford.doc

2,500

2,500

18,000

18,000

21,028

21,659

593

611

610

628

10,594

10,911

19,973

20,572

2,456

2,529

1,491

1,536

9,000 86,245

9,000 87,947

page 45

December 2006

Economic Feasibility Study Airport Business Plan

Net Income from Ops

7

1

7

7

$78,77 3

$76,27 4

$79,02 4

$82,289

(77,29 4) (14,718 )

(77,29 4) (14,718 )

(77,29 4) (14,718 )

7,50 0 (8,238 ) (6,308 ) ($14,54 6)

-

-

-

(9,723 ) (27,534 ) ($37,25 7)

$73,054

$74,449

Cash Flow - Other: Loans: Hangars Loan: Bed. Dev. Coun. Local Share:Existing (a) Pledged Donations (c) Annual Cash Flow BOP – Cash EOP - Cash (b)

(77,29 4) (900 )

(77,294) (3,047)

579 4,27 8 $4,85 7

(7,287) 4,857 ($2,430)

(77,294 ) (4,908 ) (3,625 ) 7,500 (3,878 ) (2,430 ) ($6,308 )

(12,988) (14,546) ($27,53 4)

Note a: Existing Project /Local Share @2.5%: Master Plan ($3,947) & Snow Removal Equipment ($3,625) Note b: Actual cash per 2005 Audited Financials Note c: Donations pledged that remain from ‘01 Capital Campaign.

In summary, continuing operations based solely on an “as is” policy will not result in additional revenue to the Authority. Current debt on existing facilities and local share are exhausting any positive results from operation. Growth in revenue is simply limited due to the fact that there is no space available for new customers and the fact that expenses will continue to grow. It will be important that future FBO contracts and other lease arrangements are designed to generate optimal revenue for the Authority. In addition, over time it would be anticipated that the financial benefits of the recommended standard leasing policies would increase as a result of consistent, scheduled increases in lease rates. Current lease price per square foot range from $1.20 (Maintenance Building – CAP) to $2.51 (Corporate Hangar 2). 3.7 Grants – Federal and State Bedford Airport has utilized aviation grants for various projects over the years. Currently, there is one active grant at the Airport that covers an update to the Master Plan with focus on an approach lighting system. Grant paperwork has recently been received to provide details on the purchase of snow removal equipment. There are significant desired future projects for this Airport. Below is a general discussion of federal and state grants. Detailed guidelines and specifics can be found on FAA and BOA websites. There is no guarantee that an airport will receive grant funding. Following this grant section is a discussion of various alternative financing methods that the Airport may want to consider should desired projects become a reality for this Airport. Federal and State: Aviation Specific

SC LAN\BusinessPlan_Bedford.doc

page 46

December 2006

Economic Feasibility Study Airport Business Plan

Only public-use airports and those licensed by the Commonwealth can receive grants administered by the Bureau of Aviation. The Bureau administers three (3) grant programs amounting to approximately $20 million annually for the purpose of airport development as follows5: •

Block Grant Program (BGP) – This federal program is supported by various taxes collected nationally on airline tickets, freight waybills, international departure fees and the sale of fuel. Deposits are made into the FAA’s Aviation Trust Fund. Funds are then distributed to the Airport Improvement Program (AIP) with Pennsylvania getting approximately 18.5% (based on area/population formula) or $8.5 million annually. Legislation provides for up to ten (10) block grant states and currently there are only eight (8) (Illinois, Michigan, Missouri, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin). This BGP gives the state aviation agency more responsibility in managing its AIP allocation and the state decides which airports will receive grants versus the FAA. For Pennsylvania, the FAA administers General Aviation State Apportionment AIP funds for five (5) airports where the Sponsor offers commercial service (Northeast Philadelphia, Queen City Municipal, Capital City, Rostraver and Allegheny County).

This program is available only to airports that are part of the National Plan of Integrated Airport System (NPIAS), meaning those airports that are public use and serve civil aviation or those that are privately owned and serve as a reliever airport. Projects that enhance the safety and security are given the highest priority. Below are a few common projects that have and continue to be supported via AIP funds: •

• • •

Airport Development Projects (i.e. runway and taxiway improvements, terminal modifications, lighting updates, weather observation stations, roads, buildings, safety and security) Airport Master Planning Noise Compatibility Planning Noise Program Implementation projects

Revenue generating projects such as public parking facilities, hangars, expansion of commercial space in terminals and parking garages cannot be funded via AIP grants. Current funding is generally 95% at the federal level with the state matching funds at 2.5%. (70 airports are excepted and only get approximately 70% - large and medium hubs on approved 5

Source: PennDOT BOA Website – November 9, 2005

SC LAN\BusinessPlan_Bedford.doc

page 47

December 2006

Economic Feasibility Study Airport Business Plan

projects.) In addition, funding is reduced for projects involving an airport terminal building. Remaining project costs of 2.5% must be supported by the Airport Sponsor/Owner. AIP money is further divided into two (2) broad categories of entitlement funds and discretionary funds as follows: Entitlement Funds: There are four (4) categories of airports that may receive entitlement funds. Only the primary (commercial service airport) and non-primary entitlements (general aviation airports) will be discussed in detail as they are applicable to most Pennsylvania airports. The amounts presented below assume that the total amount made available is $3.2 billion or more. -

Primary Entitlements: Various formulas are applicable based on passengers boarded at commercial service airports. The minimum entitlement is $1,000,000 per year for airports with commercial air service with at least 10,000 passenger boardings per year. Additional amounts are available based on total passengers boarded. A new category announced in 2005 and called the Virtual Primary Airport Category represents those airports that have scheduled service but don’t meet the 10,000 annual enplanement requirement. These airports will receive $500,000 in entitlement funding. Also see the Passenger Facility Charge discussion that follows as reductions may be made to entitlements for medium and large hub airports.

-

Cargo Airport Entitlements: Cargo service airports are entitled to share money that equals 3% of total AIP funds. An airport shares in this money in proportion to which the total landed weight of cargo-only aircraft landing at an airport is to the total landed weight of such aircraft at all cargo service airports.

-

General Aviation Non-primary Entitlements and State Apportionments: General aviation non-primary entitlements apply to airports that have only limited commercial service or are used by private aircraft. The entitlement is based on 20% of the Five-year cost of requested development and the maximum entitlement is currently $150,000 per year. Remaining funds go to the states by formula taking into account the population of each state. Bedford County Airport falls into this category.

-

Alaskan Airport Entitlements: Alaskan airports are entitled to receive at least the same amount of money that they received in 1980 (i.e. $10.5 million). If total AIP funding is

SC LAN\BusinessPlan_Bedford.doc

page 48

December 2006

Economic Feasibility Study Airport Business Plan

at least $3.2 billion in a year, that amount is doubled. Discretionary Funds: Any leftover funds are allocated by the FAA at its discretion. However, their funding is subject to three (3) setasides that include funds for noise projects, military airports and another that focuses on reliever airports with significant runway length and operations. After the set-asides, the money is to be spent on airport projects that will enhance capacity, safety or security or reduce noise. •

Aviation Development Program (ADP) – This state program is funded through taxes collected on Avgas and Jet fuel with deposits made into Pennsylvania’s Aviation Restricted Account. Avgas taxes first fund the state’s aviation real estate tax rebate program. Remaining funds go into the ADP. In order to receive funds, the facility must be a licensed public airport. For selected projects, funds are used to pay for project expenses up to 75% at state obligated airports and 5% at federally obligated airports. Currently, $7.5 million is available through this program.

•

Capital Budget/Transportation Assistance Program (Act 40) – In 2005, Governor Rendell released over $6,000,000 to various airports to support such projects as airport acquisition and hangar projects. This program covers projects that are not typically covered via AIP and ADP grants (i.e. revenue producing projects such as hangar development). After capital budget funds are released, grants generally cover 50% of the cost. Land acquisition costs are generally granted at 75% of project costs via this program. Only the corporate hangar expansion project estimated at $250,000 will qualify for capital budget funding at 50% or $125,000. There is no guarantee that this project will be selected.

Other Federal Program – Specific to Air Carrier •

Passenger Facility Charge (PFC): This is an alternative federal funding source for financing airport development. Commercial airports assess passengers a PFC charge (max is $4.50) and carriers remit to airport. These fees supplement the AIP program. For medium or large hub airports that charge a $3.00 or less PFC, the AIP apportionment is reduced by 50% of the forecast PFC revenue but not by more than 50% of the apportionment calculated. If the PFC is more than $3.00, the percentage increases to 75%. Foregone funding then goes into a special small airport fund and is distributed by various percents to non-hub airports, general aviation airports, small hub airports and to the discretionary fund.

SC LAN\BusinessPlan_Bedford.doc

page 49

December 2006

Economic Feasibility Study Airport Business Plan

• Essential Air Service Program (EAS): This federal program is funded through the Airport and Airway Trust Fund. Its purpose is to subsidize scheduled air service to small communities that would not otherwise receive air service. This program must be applied for annually. •

Department of Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies (THUD) Fiscal Year 2006 Appropriations Bill: Congress approved $4.6 million of federal funding for various projects in Pennsylvania which were included in the Economic Development Initiative portion of this bill. There were no funds allocated to the Airport.

Summary As a summary and assuming an airport is part of NPIAS and has no air carrier service, most airport development projects (if selected) will be funded as follows: Block Grant: - 95% federal share: This source comes from the Airport Improvement Program (AIP) which is funded through the Airport and Airway Trust Fund. The revenues for the fund come from various sources such as aviation fuel taxes and passenger ticket taxes. - 2.5% state share: The state share comes from the Aviation Restricted Account. The source for the revenue for this account comes from aviation fuel taxes. - 2.5% local share: The source is airport operating revenues or from airport donators. The Airport must attest that this share is available prior to the start of a project via a resolution signed by the owners of the Airport. ADP and Capital Budget: Non-Revenue Producing Projects: Revenue Producing Projects: - 75% Maximum State Share - 50% State Share - Balance is Local Share - Balance is Local Share

SC LAN\BusinessPlan_Bedford.doc

page 50

December 2006

Economic Feasibility Study Airport Business Plan

Federal and State Partnership: Appalachian Region Grants6 Each year the Appalachian Regional Commission (ARC) provides funding for projects throughout the Appalachian Region. Bedford County is included in this region. Goals of this group are as follows: 1. Increase job opportunities and per capita income to reach parity with the nation. 2. Strengthen the capacity of the people to compete in the global economy. 3. Develop and improve infrastructure to make the region economically competitive. 4. Build the Appalachia Development Highway System to reduce Appalachia’s isolation. For fiscal year 2005 through September 30, 2005, the ARC has funded over $5.4 million of projects in Pennsylvania. Some of the current ARC funding has been granted to Planning & Development Commissions with some funding for Industrial Park Development. This ARC’s Area Development Program (ADP) addresses the goals of the Commission’s strategies, and the focus of this Commission includes promoting a diversified region economy through strategies that help communities create and retain businesses and jobs and helping communities to develop an educated, skilled workforce. Specifically, there are a few initiatives in this program that may be applicable to operations at the Airport or surrounding area of an Airport. Some of the specific grant initiatives are explored below. The Intermodal Transportation Network specifically references aviation with funds granted to help improve and coordinate the Region’s comprehensive intermodal transportation network. Planning and development activities to improve accessibility to the region are supported by ARC. The Asset-Based Development Initiative seeks to help communities identify and leverage local assets to create jobs and build prosperity while preserving the character of their communities. One of the strategies includes converting overlooked and underused facilities into industrial parks, business incubators or educational facilities. Approved projects are scrutinized as federal dollars fund these projects. The supported activities must have economic impact and must identify unique assets of a region. Another is the Business Development Revolving Loan Fund Grants, which are pools of money used by grantees for the purpose of making loans to create and retain jobs. The goal of the loans is not to make a 6

Per ARC’s website at www.arc.gov – December 6, 2005

SC LAN\BusinessPlan_Bedford.doc

page 51

December 2006

Economic Feasibility Study Airport Business Plan

profit like conventional loans but rather to create private-sector jobs; however, these loan grants are not designed as substitutes for conventional lending sources. Loans are generally limited to 50% of project costs. Some examples of eligible loans include: 1. Machinery, equipment and other fixed asset acquisition including transportation/delivery and installation costs; 2. New construction, alteration, modification, repair and renovation of existing facilities, demolition and site preparation; 3. Land acquisition that is an integral part of a project where the dominant funding requirement is for building acquisition or construction; 4. Working capital, which can include but is not limited to loans for the interest obligation of interim construction loans, to exceed a term of three (3) years, and for reasonable fees of loan packaging, environmental data collection, consultants and fees of licensed professionals; and 5. Refinancing existing debt only when the Grantee can document that the project is viable and necessary to create or save jobs. The Commission provides for a comprehensive overview of their program and funding specifics at www.arc.gov. The contact for Bedford County is the Southern Alleghenies Planning and Development Commission, 541 58th Street, Altoona, PA 16602-1193, (814) 949-6520, Email: [email protected]. PA Department of Community Opportunity Grant Program7

and

Economic

Development

–

There are a whole host of programs offered by the PA Department of Community and Economic Development. The mission of this group is to make Pennsylvania more attractive to existing companies and more competitive with other states in attracting new jobs. The Opportunity Grant Program (OGP) is available to private companies, municipalities, municipal authorities, private developers and Industrial Development Authorities and corporations. Funding can be used for job training, construction or rehabilitation of infrastructure, acquisition of land, buildings and rights-of-way, construction or rehabilitation of buildings, purchase or upgrading of machinery and equipment, working capital, site preparation, environmental assessments, remediation of hazardous materials and architectural and engineering fees up to 10% of the OGP award. Per discussions with the Governor’s office in February 2006, there appears to have been no past funding to Pennsylvania airports via the 7

Per PA Department of Community and Economic Development - Business Financing Programs Manual dated July 2005 and Opportunity Grant Program Guidelines dated March 20044 SC LAN\BusinessPlan_Bedford.doc

page 52

December 2006

Economic Feasibility Study Airport Business Plan

OGP. That is not to say this will not be the case in the future and airport owners should be aware of this program. It may be possible for airports to partner with qualifying companies and attract these companies to do business at the airport. These grants have been primarily utilized for manufacturing and industrial. Funding is also provided to economic development groups for development of industrial parks. In addition, call center operations have typically received funding. There are several conditions that eligible companies must meet as follows: 1. Must locate, expand or maintain operations at a PA site. 2. They must contribute at least $4 private investment for every $1 of OGP assistance. It was also noted in current discussions that because of the competitive nature of these programs, the 4:1 ratio is only a minimum suggestions and that some of the more recent grants have required 20:1 and even 30:1 contribution ratios. 3. Within three (3) years, they must create or preserve 100 full-time jobs at the site, or increase their PA employment by at least 20%, or provide a substantial number of new employment opportunities within a high-growth industry. 4. Projects that will result in the creation or preservation of less than 100 jobs must be located in counties or communities suffering from severe economic distress. 5. Employees hired or retained by the private company must receive a base pay of at least 150% of the minimum wage in order to be counted toward the employment requirement. 3.8

Alternative Financing Methods

Due to timing or uncertainty that a project will receive federal or state funding, there are several alternative financing methods that may be available. These options are detailed below. The Bedford County Air Industrial Park Authority ("Authority) began a capital campaign in 2001 and was able to obtain a five-year pledge of $167,000. In addition, the Bedford Development Council provided the Authority with a $100,000 loan in 2002 to be used interest free until 2007. Municipal Bonds Municipal bonds are securities issued by a local or state government for a public or private purpose. These securities can consist of long- and short-term issues. Short-term notes generally mature in a year or less and can be used to gain funds quickly in anticipation of future revenues such as state or federal grant payments

SC LAN\BusinessPlan_Bedford.doc

page 53

December 2006

Economic Feasibility Study Airport Business Plan

or to cover irregular cash flows and also to raise capital funds until long-term financing can be arranged. Most notes have a minimum denomination of $5,000 with interest typically paid at maturity. Bonds are issued over the long term to finance significant capital projects and are also issued in denomination of $5,000 or multiples of $5,000 with interest being paid semi-annually. Returns are generally tax free from federal tax, and local governments will sometimes make their debt non-taxable for residents, thus making these bonds completely tax-exempt. Some revenue producing projects may be taxable (i.e., rental car facilities and airline offices). Because of this tax advantage, the yield is general lower than other types of bonds that are taxable. There are two basic types of municipal securities as follows: •

•

General Obligation (GO) Bonds: The bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from other projects. There are no assets required to be used as collateral. Principal and interest are secured by the full faith and credit of issuer. These bonds finance projects that do not produce revenue and are backed by the creditworthiness and taxing power of the municipality operating the airport. Revenue Bonds/Revenue Financing: Many public projects are financed by these bonds and include airport projects. They are generally the most common funding source at larger commercial service airports. However, airports with sufficient operating surplus/net revenue may qualify for this type of bond issue. Principal and interest are secured by revenues derived by the users of the facility built with the proceeds of the bond issue. Revenue bonds may help bridge the gap between federal and state grant funding and the funding required by the airport, which is generally 50% of project costs for some of the larger capital projects. In order to successfully issue a bond on behalf of a hangar project, a substantial waiting list and/or long-term executed leases will most likely need to be available to substantiate future revenue stream to support the bond issue.

Private Financing/Development This method of financing is used by an airport sponsor who decides to use a third-party developer or a tenant to finance a construction project. This is typical with hangar development. Individuals and/or corporations lease land from the airport on which the private developers fund the construction of hangar facilities. These facilities are typically then leased by the developers to private aircraft

SC LAN\BusinessPlan_Bedford.doc

page 54

December 2006

Economic Feasibility Study Airport Business Plan

owners. A long-term lease program is typically developed that provides a lease term of up to 20 - 30 years during which the developer continues to pay a land lease to the airport. At the conclusion of the lease term, the asset developed via private financing hangar facilities and the land on which they are located should revert back to the airport. This process allows the developer to have sufficient time to amortize capital investments in the hangar development while generating sufficient profits to make the project financially beneficial. The private development alternative promotes increased activity at the airport while minimizing the airport’s amount of capital invested in a project. After the reversion of the hangar buildings, the airport can then benefit from lease revenues generated on these hangar facilities for which its maintenance costs are minimal. In the privately-funded development scenario, revenues collected by the airport from lease facilities would be limited to land leases and be significantly lower than revenues collected if the airport was owner of the facilities. This method is popular if capital is not available by the airport to construct hangar facilities or where the Airport wants to minimize its financial risks. Another option is for the developer to deed the improvements back to the Airport immediately after construction, and the airport enters into a Management Agreement with the developer. A portion of the improvement rent pays the management fee and allows the developer to amortize the investment and receive an appropriate return. As a public owner of the improvement, the airport does not incur real estate taxes, thus increasing its net revenue. Private financing may also mean that private individuals are willing to provide full or partial funding for projects on terms much more appealing than those from a local bank. General Tax Fund It may be possible to fund local share or any other projects not available for FAA/BOA funding via the general tax fund at the county or township level. The public entity needs to create separate accounts to avoid the perception of “airport revenue diversion.” Business Line of Credit/Loan The Airport has used this form of financing. A business line of credit from a local bank may be available for some of the smaller projects at your airport with lines of credit reaching $500,000 with the maximum line varying depending on the bank. Generally, up to $100,000 can be obtained as an unsecured line of credit. An airport must be able to demonstrate sustainable earnings and cash flow in order to qualify with additional common requirement details specified SC LAN\BusinessPlan_Bedford.doc

page 55

December 2006

Economic Feasibility Study Airport Business Plan

below. A line of credit is generally used for shortterm working capital, seasonal purchases, inventory and others. For minimal loan amounts generally no collateral is required, terms are open-ended, variable interest rate based on prime plus a spread, and interest and fees may be tax deductible. Requirements include an annual fee based on credit limit, minimal opening fee, business must be established for a number years, satisfactory business/personal credit history, profitable business with sufficient cash flow and review required on prior years tax returns and financial statements. To gain the best “deal”, the airport should competitively bid this financing. Aviation Development Loan Program This program is detailed as part of Act 164, Title 74, Part III, Subchapter D of Pennsylvania Laws relating to Aviation. It is a relatively new loan program (Pennsylvania Infrastructure Bank) and was initially seeded during state fiscal year 2003-04 with $500,000 with only a minimal amount left as of February 2006. Additional funding was added in 2006, with current funding at approximately $1.4 million. This program is available to public airports with the maximum loan amount being 10% of the overall Aviation Development Account or $100,000 whichever is greater. The loan must be used for airport development. The approved loan shall bear interest at a rate of onehalf the prime lending rate as published by the Federal Reserve at the time of the loan application with the repayment period not to exceed 10 years.

SECTION 4 AIRPORT OPPORTUNITIES AND RECOMMENDATIONS 4.1 Airport Development Plan

Opportunities

–

Current

and

Proposed

General Promoting new development at the Airport is a means of improving the Airport’s financial operating condition and supports the Airport’s mission/vision as outlined in Section 2. In addition to recommended infrastructure development projects identified in the master plan, attracting and promoting additional tenant development at the Airport is extremely important. There are several areas on Airport property that could be developed. Although it is not easy to identify in specific detail the types of future development that may arise at the Airport, there are general categories of development that should be considered and planned for, yet not funded or constructed, before any specific tenant and/or user is identified.

SC LAN\BusinessPlan_Bedford.doc

page 56

December 2006

Economic Feasibility Study Airport Business Plan

There are a number of factors supporting growth and development of this Airport. Socioeconomic trends are on the rise for Bedford County. The County has several KOZ sites some of which are located adjacent to the Airport or within a few minutes drive time of the Airport which may help to bring new customers/business to the Airport. This County has seen recent development. The historic Bedford Springs Hotel is slated to open in 2007 with $90 million provided via a public-private financial package for restoration of this facility. Two companies have returned or re-opened business in the County including Defiance Metal Products and JLG Industries, a global producer of aerial work platforms and telescopic hydraulic equipment. Seton Co., a manufacturer of automotive leather, expanded their business and has relocated operation from New Jersey to Bedford. In addition Recreational Equipment, Inc. (REI), a national retail co-op which provides quality outdoor gear and apparel, will open an eastern distribution center in Bedford with full capacity completion by 2008. Services/accommodations from general aviation airports within 50 miles of this Airport are not an overriding consideration for aircraft relocation based on current status. With future growth, the Airport will need to consider additional hangar facilities to remain competitive. This will be discussed further in Section 4.3 (Recommendations). Of course with any growth and development plan there are challenges. The airport must continue to keep up with maintaining current structures in order to make the airport marketable and continue to keep the airport safe. Citizen/Neighborhood Support groups may offer significant challenges for any airport and can delay or even limit the ability of the airport to serve business interests. The Authority has done a good job thus far in keeping the community abreast of proposed changes for this Airport. Finally, marketing efforts and standardization of documents at the Airport will require significant resources, time and money. Aviation Development Aviation development represents a two-fold means for improving an airport’s operating income. Revenues generated from new aviation facilities through lease rates or user fees will increase an airport’s net operating revenue. In addition, increased activity levels that may result from aviation development, generate additional revenue through fuel sales and other fees. Two primary potential aviation development opportunities to be discussed in Section 4.3 are land development and related hangar construction. Exhibit 15 presents the proposed Terminal Area plan for the Airport and highlights various areas on Airport property and related development. The development will be discussed throughout Section 4.3 (Recommendations).

SC LAN\BusinessPlan_Bedford.doc

page 57

December 2006

Economic Feasibility Study Airport Business Plan

Exhibit 15 – Proposed Airport Development

Indirect Aviation Development Where aviation development opportunities may not exist, indirect development may represent a means for generating revenues from vacant airport property. When pursuing this type of development, it is important to maintain sufficient Airport property with airfield access to accommodate anticipated and unanticipated aviation-related development at the airport. However, opportunities may arise for shortterm or long-term, indirect aviation uses that would generate some revenues on Airport property that may currently be un-utilized or under utilized. Indirect aviation use of Airport property may not increase the usage rates of current aviators or attract new users to the Airport, but there is potential to generate revenue by making better use of vacant land. Non-aviation development does not exist at the Airport today and should continue to be discussed as it has the potential to increase aviation activity by bringing the corporate aviation market to the Airport. Fractional ownership is becoming common for businesses as well as individuals and could mean a source of growth at the airport. Other examples of indirect aviation development that may be synergistic with current and future aviation activity could include retail operators such as restaurant/food service, automobile fueling/repair service, hotel development and foreign trade zones (discussed below in Section 4.2). Development – Financial Implications

SC LAN\BusinessPlan_Bedford.doc

page 58

December 2006

Economic Feasibility Study Airport Business Plan

One of the most important steps in attracting and accommodating new development at an airport facility is having a thorough understanding of the financial implications that potential development may have on the airport. Each opportunity must be examined individually; in all cases, the following steps should be taken to identify the potential financial implications of the development:

4.2

•

Identify the potential costs to the airport: Any infrastructure development costs that may be the responsibility of the airport need to be identified and, if possible, a means for recouping these costs from the potential tenant should be identified. In addition, the “opportunity” cost of using airport property for indirect aviation development should be quantified. This indirect aviation development will provide minimal, if any, benefits to airport activity levels, and therefore, may not represent the highest and best use of some parcels of airport property.

•

Identify the potential benefits to the airport: Potential benefits of any development that may occur need to be quantified. It is important to understand that the potential benefits include not only anticipated future revenue streams from the potential tenant but also increases in overall airport activity and fuel sales, parking and tie down fees and hangar fees that may be related to the operations of the potential tenant.

•

Use Industry Standard Best Practices in Lease Development: When pursuing any potential development, the lease document provides the primary means of ensuring a mutually beneficial arrangement between potential airport tenants and the airport itself. Implementing best practices related to fair-market value appraisals, rate escalations and building reversion clauses is essential to ensuring the potential development will benefit the airport over the long run.

Foreign Trade Zones (FTZ) and Keystone Opportunity Zones (KOZ)

Foreign Trade Zones (FTZ) A foreign/free trade zone is defined as a port designated by the government of a country for duty-free entry of any non-prohibited goods. Merchandise may be stored, displayed, used for manufacturing, etc. within the zone and re-exported without duties being paid. Duties are imposed on the merchandise (or items manufactured from the merchandise) only when the goods pass from the zone into and area of the country subject to the Customs Authority. The advantage to an SC LAN\BusinessPlan_Bedford.doc

page 59

December 2006

Economic Feasibility Study Airport Business Plan

airport of having a FTZ means an additional revenue stream to the owner through renting a facility to support the business operating in the FTZ. The application and activation process is not quick. It is estimated that the application process takes eighteen to twenty-four months with the activation process requiring another four (4) to six (6) months. There are two (2) types of FTZs as follows: General Purpose Zone (GPZ): A GPZ must be operated as a public utility and be located within 60 statute miles or 90 minutes driving time from the outer limits of a U.S. Customs port of entry. They are established for multiple activities by multiple users. GPZ projects may consist of one or multiple sites (i.e., single building, industrial park, airport). While activities such as storage, inspection and distribution are permitted at all FTZs, processing and manufacturing require special permission from the FTZ Board. Sub-Zone: These are designated in cases where a firm wants FTZ status for its own plant or facility, or when the existing generalpurpose zone cannot accommodate the firm's proposed activity. Sub-zones are common for an individual company's manufacturing operations. They can be located anywhere within a state, as long as a sponsoring grantee of a general-purpose zone exists in the state and the U.S. Customs Service can fulfill its proper oversight functions at the proposed location of the subzone. L. Robert Kimball & Associates, Inc. has partnered with Gambit Interactive Corporation who specializes in Foreign-Trade Zone and Special Purpose Subzone activity and the related international economic development. There is currently no FTZ that includes the Bedford County Airport or an area near Airport property. The closest FTZ is Reading/York (#147 FTZ) with the York Zone located on 2,020 acres and covering Adams, Cumberland, Franklin, Perry and York counties. Keystone Opportunity Zones8 The Keystone Opportunity Zone (KOZ) program, in effect for a twelve-year period, from January 1, 1999 to 2010, identifies and develops a community’s abandoned, unused and underutilized land/buildings into business districts and residential areas that provide community revitalization. These KOZs are generally close to major interstates, ports, rail lines and airports. The program is administered by the Department of Community and Economic Development, and a 8

PA Department of Community and Economic Development: Keystone Opportunity Zone, Program Guides and Application, Nov 2005 SC LAN\BusinessPlan_Bedford.doc

page 60

December 2006

Economic Feasibility Study Airport Business Plan

partnership exists between state and local government in collaboration with the Department of Revenue (state taxes) and the Department of Labor and Industry (Unemployment Compensation taxes). KOZs are designated by local communities and are approved at the state level and are virtually tax free and entitle businesses/residents to certain tax benefits when they locate in a KOZ. Currently, there are 12 defined regions in 61 counties across the state covering more than 49,000 acres (acreage ranges from under 10 acres to over 500 acres per parcel). The elimination of state and local taxes within these underdeveloped and underutilized areas is resulting in significant economic growth and investment for designated communities. It is important to note that KOZs must be approved at the local level by all taxing authorities, including school districts. Businesses located in a KOZ must actively conduct business from the property. There is an on-line application process and businesses that qualify must continue to apply annually. Current businesses in Pennsylvania can relocate to a KOZ; however, there are additional requirements in order to receive the tax incentives. Total taxes to a business in a KOZ may be reduced to almost zero. Credits, waivers and broad-based abatements impact State taxes including the Corporate Net Income tax, Capital Stock and Foreign Franchise tax, Personal Income tax, Sales and Use tax, Mutual Thrift Institution tax, Bank and Trust Company Shares tax and Insurance Premiums tax. Local taxes impacted include the Earned income/Net Profits tax, Business Gross Receipts, Occupancy, Privilege and Mercantile tax, Sales and Use tax and the Property tax. In some cases through Pennsylvania, airport property or portions thereof have been designed as a KOZ. Although this is not the case for the Airport, there are several areas designated in Bedford County (highlighted below), many of which are close to the Airport. These sites will offer an opportunity to entrepreneurs and small business owners for expansion and potential growth which will in turn present opportunities for the creation of various types of jobs in the county and should mean more traffic and business for the Airport. Some of the specific sites highlighted and owned by the Bedford County Development Authority’s are highlighted below as detailed on this Authority’s web site. The KOZ sites include the following: 1) Bedford County Business Park I: Approximately 36 acres remain in this 143-acre Business Park located in Bedford Township. All vacant lots are designated KOZ through 2008 and within close proximity of the Airport. 2) Bedford County Business Center: This facility was completed in the Bedford County Business Park I on 6.29 acres and includes a

SC LAN\BusinessPlan_Bedford.doc

page 61

December 2006

Economic Feasibility Study Airport Business Plan

24,000 square foot multi-tenant building. Approximately 5,500 square feet of office space is available for lease. This area is designated KOZ through 2008 and located near Airport property. 3) Bedford County Business Park II– Located at Interstate 99 and County Ridge Road in Bedford, this site exists on 145 acres. This Business Park provides turn-key sites geared to large distribution centers and manufacturing. 4) Breezewood: Located in East Providence Township and one-half mile from Interstates 70 and 76, this 90-acre parcel is owned by the Bedford County Development Association and has KOZ status through 2013. It is suitable for industrial and manufacturing. 5) Broad Top Industrial Park: Located in Saxton Borough, approximately 28 miles from Interstate 70 and 76 and approximately 15 miles from Interstate 99, this 25.66-acre parcel is suitable for industrial and light manufacturing and has KOZ status through 2013. 6) Everett Area Business Park: Located in West Providence Township, approximately 8 miles from Interstate 70 and 76 and approximately 10 miles from Interstate I-99, this 9-acre parcel (two contiguous lots) is suitable for industrial and manufacturing. It has KOZ status through 2008. 7) Hyndman Borough Industrial Park: Approximately five acres of underutilized land is available in Hyndman Borough, located in southern Bedford County near the Maryland state line, the area is suited for industrial and manufacturing. 4.3

Recommendations

Below are the goals as discussed in Section 2. This section will explore and discuss related business objectives and recommendations and includes a discussion of County/Owner priorities. Business Goals: A. Self Sufficiency B. Attract Businesses – Aviation, Aviation Related & Other C. Private Investment D. Economic Stimulator E. Enhance Airport Safety & Environmental Sensitivity Authority/Owner Priorities The Authority has done a good job of keeping both the Stakeholder and Community Advisory Group informed of current status SC LAN\BusinessPlan_Bedford.doc

page 62

December 2006

Economic Feasibility Study Airport Business Plan

at the field and their vision for the future. Several meetings have been conducted for each group. There is a strong desire for hangar development, additional parking space, additional snow removal equipment and a published approach system. A 500’ runway extension was analyzed with costs estimated at $6.9 million to take the field from a B-2 to C-2 status. It has been determined by the Authority that this is not a priority for the Airport at this time. In the past year or so, the Authority has considered adding an Avionics Shop and having the Airport serve as a police helicopter operation base. In addition, the Airport Director has interest in a GIS system. Both the hangar development and published approach projects will make the Airport much more desirable by current users and make the airport more appealing to new users. These projects support the Airport’s long range vision of becoming a dynamic Aviation Business Center. It will be important to demonstrate demand for new hangars, not just by a waiting list but by potential leasee monetary commitment. It is suggested that a meeting take place to show the proposed development area for new hangars to include detail by unit, including type and proposed cost per unit. It is also suggested that the County develop a long-term lease arrangement for any new hangars (i.e. 10 years) and that applications be available at such a presentation. Funding may be a hurdle. The Authority will have the opportunity to apply for capital budget funds each year. The Authority has identified a corporate hangar expansion with capital funding at $125,000. It is also important to note that there is no guarantee that total funds will be released and depending on the project, only a percentage of funds can be applied to total project costs (i.e. 50% for hangar development, 75% land acquisition). Regardless of funding provided by federal and state agencies, there will need to be a matching local share and private funding for non-eligible work. Per Exhibit 2, the local share requirement over the next four (4) years is $207,550 assuming all desired projects are approved. The Authority must also focus on additional revenue streams for the Airport and with hangars filled will need to consider a 50% local share match on any future development. Hangar development and impact on financial results will be discussed in detail in this section under the Self Sufficiency goal, specifically A2 (Hangar Development). A) GOAL: Self Sufficiency A1) Objective: Fuel Sales •

FBO Fuel Sales: Bun Air provides the fueling services at the Airport and sold approximately 200,500 gallons of fuel in 2005 providing $60,158 to the Authority based on the $.30 per

SC LAN\BusinessPlan_Bedford.doc

page 63

December 2006

Economic Feasibility Study Airport Business Plan

gallon fuel flowage fee. As a general note, the average profit for fuel sold by the Airport Owner is $.50 per gallon on Avgas and $1.00 per gallon on Jet “A”. The current FBO Lease Agreement expires May 20, 2009. The Authority is earning an exceptional fuel flowage fee in comparison to AAAE study results and other FBO arrangements in Pennsylvania. It is suggested that the Authority consider a fuel flowage fee for each type of fuel sold at the field in order to increase fuel revenue and/or consider including a percentage of gross sales clause into the next FBO contract. •

Automated Fueling Services: Fueling service is currently available at the Airport from 7:00 a.m. to 6:00 p.m. Monday through Saturday and from 9:00 a.m. to 12:00 p.m. Sunday. As general information, automated aircraft fueling services are also a way to provide fueling services around the clock and could provide for increased income. Equipment cost is generally $15,000 per product with installation varying between $5,000 and $10,000 depending on distance from tanks to office. This may be a cost that could be shared by both the Authority and FBO as both parties would benefit.

A2) Objective: Hangar Rentals There are 23 units available at the Airport. All units are at capacity with no waiting list. Facilities are in good condition. The Authority has increased prices on both types of hangar units over the study period. Annual hangar revenue at full occupancy will provide the Authority with $81,300 which equates to an average price of $1.95 per square foot. Monthly t-hangar prices are $165 per unit while the corporate rates vary based on size of unit and range from $300 to $700 per unit. L. Robert Kimball conducted a survey of hangar prices by size a few years ago. Over 23 airports provided pricing for hangar units similar in size to those of Bedford County. The average monthly rate per unit was $215. It should be noted, that rates at Bedford are competitive compared to other Airports in its service area. It is clear that Bedford needs to consider hangar development in order to improve cash flow and operating results. Exhibit 16 below provides a simplified financial exhibit that reviews annual income and expense figures associated with the addition of a typical 10-unit hangar facility (11,000 square feet) assuming an average rental price of $250 per unit per month to be constructed on one (1) acre of airport owned property. A comparison is presented showing the Authority as Owner and also a private developer scenario. Note that this Exhibit only takes into account the construction costs and SC LAN\BusinessPlan_Bedford.doc

page 64

December 2006

Economic Feasibility Study Airport Business Plan

does not factor in inflation or related development such as design, taxiways, etc. These related costs are generally covered at 97.5% (federal and state share) assuming related projects are selected by FAA/BOA. Note that construction of thangar taxiways and site development are generally estimated to be the same cost as hangar construction costs.

Exhibit 16 – Hangar Development Loan or Bond Financing $300,000 for 20 Yrs @5% Year 1 Yrs 2-20 Yrs 21-40 Construction Revenue Hangar Rent * ($250 mth/10 units)

-

Land Lease (1 acre) Private Developer

-

Subtotal Revenue

Loan/Rent

30, 000

-

3 0,000

30,000

30, 000

4, 000 4, 000

3 0,000

1 ,700

1,7 00

-

3,000

3,000

-

-

-

7,5 00

-

7 ,500

30,000 -

-

Rent

Private Development Yrs 1-30 Yrs 31-40 Develope r as County as Owner Owner

Expense Hangar Insurance

1,70 0

O&M Hangar Costs and/or Reserve (10%) Interest/Principal -$1980 mth ** (non-operating)

11,88 0

23,760

Depreciation-40yrs/SL (non-operating) **

7,500

7,500

Subtotal Expense

35,960

12,200

Net Operating Gain/(Loss) – Per Year (21,080) (5,960) 17,800 4,000 Cumulative Gain/(Loss) (21,080) (134,320) 221,680 120,000 Cumulative Cash Flow (13,580) 15,680 521,680 120,000 * Suggested rental rate per preliminary discussions with the County.

17,800 298,000 373,000

page 65

12,200

3,000

4,000

SC LAN\BusinessPlan_Bedford.doc

21,080

1 ,700

December 2006

Economic Feasibility Study Airport Business Plan ** Assumes ½ year of principal/interest payment and depreciation in construction year

Keeping in mind that there are many variable in the presentation above (loan rates, monthly hangar rental rates, etc.), the loan/bond financing scenario provides for a cumulative gain of approximately $221,680 over a period of 40 years. The private development scenario provides a slightly higher gain of flow of approximately $298,000 over the same time period. Cash flow must also be available over the course of the first 20 years to cover the minimal loss.

A3) Objective: Land Leases for Corporate Hangar Development The proposed development area could support additional corporate hangars. The Authority may want to consider a business user survey (to be discussed in the Marketing Appendix) to determine if there is a need for additional corporate hangar units. The Authority may also want to consider a presentation to the business community to discuss future development at the airport and if there is a need by each business for aviation services, whether it be in terms of charter service, corporate hangars or just general use by business travelers. Corporate hangar facilities to support jet activity are generally 60’ x 60’ square feet and may have a small portion of the unit dedicated to office space. As detailed above, a financial model should be developed to determine which method of development provides the maximum financial benefit to the Airport. Depending on cash flow, hangars could be constructed by the company interested in development or by the Airport Owner. Commitment by interested parties needs to take place early in the process with long-term lease arrangements in hand prior to breaking ground. A4) Objective: Financial Analysis with focus on O&M Expenses There are several suggestions that have surfaced as part of the historical review of financial results as well as actual results through December 2005. 1.

Financial Results/Accounting Detail: All general ledger results are prepared and booked to General Ledger by the Airport Director. There is both a general operating ledger and project

SC LAN\BusinessPlan_Bedford.doc

page 66

December 2006

Economic Feasibility Study Airport Business Plan

ledger. It is suggested that accounts be standardized as there are a multitude of accounts relating to Maintenance and Repair as well as duplicate accounts to record other general expenses. In addition, there are some accounts that exist in the project ledger that should be booked in the general operations ledger such as mowing, airport insurance and AWOS expenses. Streamlining the ledger will provide for timely and accurate analysis. It is suggested that a Repair account be opened specific to each major facility at the field. There are also several general accounts to record T-Hangar unit revenue. One account would be sufficient. 2.

Cash Flow: Although the cash flow was not requested, there is an analysis being done by the Airport Director. With an active grant and proposed future development, the cash flow analysis should provide details month-by-month details and should be estimated for a Five-year period.

3.

G/L Journal Entries: It is suggested that standard journal entries be used. As an example, hangar unit should always include lessee, unit and month being paid.

4.

Grant Details: Grant specifics must be recorded in detail and it appears that a project ledger was created to identify grant receipts and related project expenses. Local share, which is the Owner contribution, impacts cash flow. Federal and state payments will need to be detailed in audited financials. The current grant requires a local share of 2.5%. Local share of projects at a minimum should be known or even accounted for when discussing projected results. For each project, the major stakeholders should be identified and benefit to them quantified to justify participation in the local share. Capital improvements selected for the Airport must pass the business test and complement the Airport vision/mission. Viable projects as presented via the Twelve-Year Plan (TYP) must be studied in depth so that cash flow is not jeopardized.

5.

Utility Analysis: Utility expense accounted for about 13% of total expense. The FBO is responsible for runway, fuel farm and terminal building utility expense with the exception of water and sewer. This is generally a substantial expense for an Airport Owner. Although the Authority is not responsible for the heat/electric expense in the FBO area. The Authority should be aware of what it costs to support these facilities. Utilities increase from year to year and are usually overlooked. It is suggested that utilities be further broken down to study the expense from a landside and airside perspective. It is expected that detailed analysis will supplement the review of leases and will insure lease rates

SC LAN\BusinessPlan_Bedford.doc

page 67

December 2006

Economic Feasibility Study Airport Business Plan

• • • •

are appropriately covering this expense. Some questions to consider are: Are utility meters placed appropriately to map/track expenses to the appropriate group (i.e., terminal facilities and hangars)? Can metering changes be made to adjust for areas that may have on and off peak usage? Can energy efficient improvements be made at the field (i.e. lighting upgrades, insulation additions, etc.)? Should a portion of the water and sewer costs (although minimal) be allocated back to FBO and CAP?

6.

Accounting Policy/Reserve Funding: It is suggested that the Authority consider a reserve fund to support future repairs/maintenance of Airport property as well as future local share for desired projects. It is suggested that a minimum of 5% of gross revenues be held in a reserve fund for each of these categories at the point when operations can support.

7.

Lease Summary: A comprehensive lease summary should be developed and maintained to identify every square foot of property that is available for leasing. This exhibit should identify lessee, square footage rented, begin and end date of lease, lease amount, important lease conditions (i.e. security deposit, utilities included, concessions collected, etc.), renewable period (if applicable), period of time vendor has leased space and an area to document any future provisions or notes on leased spaced. This worksheet has been created and will be provided for future updates by the Owner.

Other Suggestions: A. Full Capacity: The Authority should consider a Snow Removal Equipment (SRE) storage building. There are currently two (2) units in the maintenance hangar being used for storage of SRE. In addition, the Authority recently received a grant application related to the purchase of additional equipment. Although the Authority would be responsible for local share and minimal utility expense, the revenue generated from two (2) additional rental units at current price would be approximately $4,000. Besides these units, it appears that the Bedford Airport is leasing every possible space at the Airport. B. Business Permitting Fee: Per current Airport Rules and Regulations, a one-time fee of $75 has been established to accompany each request for lease/license. It is suggested that procedures be updated to include a statement such as, “Individuals providing services for a fee at the Airport, whether operating as a business or not, will be charged an SC LAN\BusinessPlan_Bedford.doc

page 68

December 2006

Economic Feasibility Study Airport Business Plan

Airport concession fee of at least $300 per year.” If possible, the Authority may want to consider basing this fee on gross sales, etc. to generate additional income. The benefits to the Airport from implementing such a policy will include an improved ability to manage and monitor on-Airport business activities in addition to a positive revenue impact. C. Landing/Parking Fees: Landing fees are not being collected at the Airport. Billing for landing fees is often time consuming with aircraft owners not always identifiable. However, the Authority should continue to focus on this potential revenue stream to determine if there is a profitable way to collect this fee. As a general note, some airport owners pay a commission to their FBO to do this job for them. Landing fees are generally collected based on aircraft weight as discussed in Section 3.2 (Activity Related Revenues). For all but the busiest non-hub airports, the costs associated with implementing and collecting parking fees generally outweigh the revenues generated from automobile parking. This is mentioned as a general note should parking become substantial at this Airport in the future. D. Partnership: It is suggested that members of the Authority partner with a comparable airport to discuss and compare business plans, financial policy and general operations. A5) Objective: Standard Policy - Lease and Other Background/General Establishing standard policies regarding Airport leases, rates and charges is an important means available to promote long-term improvement to the Airport’s financial operating condition. The impacts from this approach may not immediately generate additional revenues like one would expect from increasing user fees, for instance. However, the long-term impacts of establishing consistent leasing policies, on a lease-by-lease basis if necessary, that improve the Airport’s revenue generating potential and provide maximum benefit to the Airport could significantly out-weight any one-time increase to fees. Current average rate per square foot is $2.12 at the Bedford County Airport based on leaseable space of 50,281 square feet. Lease rates and charges vary by airport and tend to reflect market conditions. Furthermore, the nature of an airport’s activity can also be a major determinant of the types of revenue sources that exist at the airport as well as the appropriate level of fees to be imposed on airport users. While the actual charges may vary, common approaches are SC LAN\BusinessPlan_Bedford.doc

page 69

December 2006

Economic Feasibility Study Airport Business Plan

frequently used at airports to determine, collect, and adjust fees at their facilities. An airport’s goal in establishing rates, charges and leasing policies is to ensure that revenues generated from an airport area, or cost center, generally cover the costs of operating that area. Furthermore, each airport tenant should contribute towards the operating costs of those areas or airport facilities that it frequently uses. Specific rate escalation details should be included in the lease and not be subject to negotiation during the terms of the lease. Quantifying the potential costs and the potential benefits of the development to the Airport is essential for ensuring that any compromises that may occur during the lease negotiation process will not negatively impact the Airport’s net operating outcome. In some cases, anticipated increases in activity levels and associated revenues, as a result of development by potential tenant, may justify rate reductions to that tenant. However, the steps identified above should be followed so that all potential impacts of the development are quantified and understood before any long-term lease agreement is executed. •

Terminal Lease Rates: The Airport should establish a standard terminal lease rate that is adjusted every three (3) to five (5) years based on terms included in the contract. The periodic adjustment should increase the previous rental rate by 3-5% in order to keep pace with changes to the general price level. This could be directly related to Bun Air (FBO) Lease. The rental of the terminal building and attached hangar has not changed over the course of the last four years. The current rate is $25,200 per year for use of 10,400 square feet. The lease does include language to allow for up to a 10% increase in rental amount.

•

Land Leases & Reversion Clauses: There are currently no land leases at the Airport today. If these exist in the future, a standard land lease rate should be applied to all land leases. This rate should be based upon location, site development, utilities and visibility. The rate should be increased annually if the market justifies such an increase. The standard rate and scheduled escalations should be included in all future land leases as well as provisions outlining the reversion to the Airport of all facilities constructed and/or improved by the tenant during the lease term. It is vitally important that the Airport consistently implement reversion clauses in all future land leases, as well as in lease extensions with existing tenants when possible, to allow the Airport to benefit from future revenue streams resulting from privately-developed facilities on Airport property.

SC LAN\BusinessPlan_Bedford.doc

page 70

December 2006

Economic Feasibility Study Airport Business Plan

•

Lease Buy-Outs: If the need arises, the Authority should assess the cost/feasibility of lease buy-outs for those long-term leases that are no longer profitable. The longest lease term is with Bun Air for a period of four (4) years with an automatic renewal option. •

Essential Facilities: Going forward, the Authority should address ownership versus lease of any new essential facilities. Currently, all essential facilities at the Airport are owned by the Authority.

•

Hangar Leases and General Use Requirements: The Authority issues hangar lease agreement which includes key requirements as follows: 1. Hangar lease rentals should be short-term in nature and allow for a 3-5% increase annually. The Bedford County Airport Lease Agreement is for a period of one (1) year and is not renewed automatically. 2. The amount of rent can be changed via written notice. 3. It is clear that the hangar shall be used for the storage of aircraft only and items specifically related to the maintenance of the aircraft.

A multi-year schedule of hangar rental rates and escalations should be developed and maintained by the Airport to assist in tracking this activity and insuring that rates are increased as scheduled. The per-unit monthly cost should be evaluated periodically and should reflect current market replacement costs. •

•

Minimum Standards: Minimum Standards are available for this Airport, however they were last updated May 1, 1993. Although still effective, the Authority should consider an annual review of this document and update accordingly. Upon receipt of federal funding, it is the Airport’s responsibility to make the airport available for public use on reasonable conditions and without unjust discrimination. Through these standards, the airport sponsor agrees to make available the opportunity to engage in commercial aeronautical activities to any person, firm or corporation that meets reasonable minimum standards as established by the Airport Sponsor. The purpose of this document is to ensure a safe, efficient and adequate level of operation and services to the public. Compliance with the standards should be made part of a service provider’s agreement with the sponsor. Once created, this document should be updated as needed and reviewed annually at a minimum. Business Permit Fees: See Section A4, Financial Analysis, Item B for details.

SC LAN\BusinessPlan_Bedford.doc

page 71

December 2006

Economic Feasibility Study Airport Business Plan

A6) Objective: Development – Owned and NonOwned Parcels •

•

New Development via Airport Property: There are several areas at the Airport which could be made available as potential development sites. Exhibit 17 highlights several recommended areas for future hangars and related development such as taxilanes and parking. Instrument Approach Development is under way which will make the Airport much more desirable to aircraft users, specifically a LPV approach has been recommended which will greatly enhance safety. Proposed Land and Easement Acquisition: There are several easement and land acquisition parcels identified on the TYP (Appendix 3). The purpose of acquisition is mainly for obstruction and primary land control. In addition, two parcels have been identified for future aviation development consisting mainly of the Heartland and Stahl properties at at approximately 32 acres. Exhibit 17 – Proposed Airport Layout Plan

A7) Objective: Full Service FBO •

Experienced FBO: It will be important to review FBO capabilities and to explore what might be required to support

SC LAN\BusinessPlan_Bedford.doc

page 72

December 2006

Economic Feasibility Study Airport Business Plan

increased Business/Corporate activity. The existence of an air charter service would be considered a key ingredient to the Airport and should produce revenue generation for other on-site aviation services. There may also be an added benefit for bringing in this service exclusive from the FBO. The charter service could provide the FBO with fuel sales thus resulting in additional income to the Authority. In addition, the charter service would be set up to provide financial incentives to the Owner (via lease income and possibly a percentage of gross sales). “Full service” must be well-defined in the Airport’s Minimum Standards. •

Limited FBOs: Limited FBOs are not recommended for this Airport as they create unnecessary competition unless they are truly specialty limited FBOs (i.e. airplane painting, avionics, etc.).

•

FBO Standard Rates/Charges: Although standard rates and charges are necessary, it is important to have access to FBO results and/or projections to insure the Owner has instituted the best revenue generating policy. As a general note, FBO’s that focus on maintenance activities and charter operations generally produce significant profit margins. Collecting a fee for service based on gross sales may produce additional revenue than a general concession fee.

•

FBO Financial Results: FBO report of results from operations and fuel sales/gallons sold should be required monthly with the requirement detailed in the FBO Agreement. Also for those FBO’s that pump fuel for Owner, all fuel coming on to the Airport should be reported to the Owner as all vendors accepting fuel must be registered with the Owner. Note that corporate and stand alone fueling facilities only erode the desire for a full service FBO.

•

Minimum Standards: See Objective A5 (Standard Policy – Lease and Other) for details.

A8) Objective: Communication Effective and frequent communication between the FBOs, Airport Directory/Authority and tenants will only enhance operations. The mission, vision and goals for this Airport need to be shared with those that will contribute to the success of taking this Airport above and beyond where it is today. Those directly involved in daily Airport operations should meet weekly even if for a few minutes. Communication must also extend to tenant group with meetings scheduled periodically throughout the year to provide general updates from both sides.

SC LAN\BusinessPlan_Bedford.doc

page 73

December 2006

Economic Feasibility Study Airport Business Plan

B) GOAL: Attract Businesses – Aviation, Aviation Related and Other B1) Objective: convenience

Create

friendly

business

environment

with

•

Advertising: Advertising value is directly proportionate to traffic levels. Advertising today consists only of yellow-page listings. The terminal building may become a place for local company advertising as traffic to this airport increases. Some airports generate $1,000 annually from any one local company for advertising opportunities at airports. As the Airport begins is development and moves towards an aviation business center, advertising will become increasingly important. The Airport should also evaluate other non-terminal advertising locations such as billboards with highway visibility.

•

Survey: Create survey cards for air transportation users as a way of obtaining recommendations for improvements of Airport facilities/services. The Marketing Appendix will provide details.

•

Benefits: The Authority as Owner must strive to show not only the economic but also the intangible benefits of this Airport. There must be a balance between concerns of local citizens and the transportation service that this Airport provides to local businesses. Noise complaints should be responded to immediately. Compatible public use of Airport facilities should be encouraged.

B2) Objective: Establish avenues for potential growth •

Marketing: An aggressive marketing strategy and supporting budget is a necessity and priority for this Airport. Most successful airports incorporate a strong marketing program to bring the existence of the airport and related services/facilities available to the public on a continuing basis. The marketing appeal should be made to the private business sector with the Airport marketed as a business service center catering to corporate needs. While the private business sector is important, focus should also be on recreational customers, tenants and the community. It may also be beneficial to explore a joint marketing campaign with the FBO. See Appendix 1 (Marketing Plan Outline) for detail.

•

Marketing Committee: The Authority should create a committee to work on such a strategy and end product (i.e., materials, mailers, distribution list, etc.). Hiring a marketing firm should also be explored. With the vision of transforming

SC LAN\BusinessPlan_Bedford.doc

page 74

December 2006

Economic Feasibility Study Airport Business Plan

the Airport into an Aviation Business Center, the marketing plan needs to focus on attracting corporate aviation users. A good marketing plan may also boost advertising revenue. This committee may also want to partner with the groups developing the local business centers and partner in their marketing efforts. •

“Rent Anything” Approach: The Authority should be prepared to rent any available space and be flexible to meet most any opportunity. Available space could be rented for business training, conferences, fairs, flea markets, etc. for a daily fee. Future plans should incorporate some sort of training facility to provide additional income to the Airport.

•

Website: This Airport must have a website to include extensive and current information about the airport, products services and facilities provided, management at the airport and local community issues. This site should be professionally designed and constructed so that the Authority can easily update and maintain general information.

•

Foreign Trade Zone (FTZs): FTZs were reviewed in detail in Section 4.2. With portions of an airport designated as a FTZ, the result will be increased revenue via land and/or building lease. The County should pursue any opportunities for a FTZ on Airport property.

•

Keystone Opportunity Zones (KOZs): KOZs were reviewed in detail in Section 4.2. They serve as a partnership between each community and region among state and local taxing bodies, school districts, economic development agencies and community-based organizations. There are several KOZ sites located near the Airport which may mean increased business. Exploration of the KOZ that encompasses the Bedford County Business Park is recommended to see if any adjacent Airport property can be included.

•

Highest and Best Use: It will be important to determine the highest and best use of current and new facilities at the Airport and those that will provide the highest potential for revenue generation for the Owner.

B3) Objective: Integration of Industrial Parks Economic indicators suggest that any number of industries should prosper in the area with manufacturing making steady progress. There are numerous industrial parks in the area. The Airport should make all attempts to attend these planning meetings to introduce the Airport to prospective tenants and to introduce future plans. Partnering with developers in their marketing efforts is also suggested. In October SC LAN\BusinessPlan_Bedford.doc

page 75

December 2006

Economic Feasibility Study Airport Business Plan

2005, the Commonwealth Financing Authority (CFA) provided the Bedford County Development Authority (BCDA) with a $175,000 grant with funds to be used to develop the County’s marketable assets, create jobs and boost tourism. It appears that this group has invested heavily and having the Air Industrial Authority work with this group could be extremely valuable. C) GOAL: Private Investment C1) Objective: Create public-private partnerships •

Grant Funding: The County must continue to partner with PennDOT to continue grant funding of desired Airport projects. Meetings should be scheduled with this group to present future desires and the County’s involvement in the current and future operations of this Airport.

•

Private Development: Explore ways to appeal to the private sector for help with local share and other capital projects. Any future marketing plans should focus on this group with literature or meetings to discuss plans for future expansion at the Airport.

D) GOAL: Economic Stimulator D1) Objective: Teaming of Airport with Local Business, Chamber of Commerce, Bedford County Development Authority (BCDA), etc. It is suggested that the Authority draft a Memorandum of Understanding (MOU) of goals for Airport in relation to the goals of Bedford County. It is suggested that the Airport Owner in consultation with stakeholders and community members come together to review the current vision and goals and activity. As discussed above, the BCDA may be a great starting place. Branching out beyond the Airport border and working with these groups should result in new tools and processes for the betterment of the Airport and overall economy. Integrating planning efforts with a larger system may also increase the success rate. D2) Objective: Continue to Service Existing Client Base Hold monthly meetings for general aviation users and any future concessionaires for focus on issues and needs. D3) Objective: Community Partnership Public appearances to target audiences and hosting and/or attending charitable events can build good will and create positive profiles in the community. Reaching out to the community is a

SC LAN\BusinessPlan_Bedford.doc

page 76

December 2006

Economic Feasibility Study Airport Business Plan

necessity. The Airport currently hosts an annual Young Eagle Day, school tours and also provides meeting space for the Eagle Scouts. The Airport must partner as much as possible on projects so that the local community can enjoy the benefits of an airport, not just the noise. D4) Objective: Implementation Plan Create an Implementation Plan to incorporate all goals of the Airport and how the Airport will reach immediate- and long-term vision. Include a timeline for each individual goal and schedule monthly meetings to review progress and update goals as necessary. Posting the Mission/Vision at the Airport is also recommended.

E) GOAL: Enhance Airport Safety E1) Objective: Maintain a safe/secure operating environment for aviation and traveling public. •

Airport Rules and Regulations and Emergency/Security Plan: The Authority has developed Airport Standards and Operating Rules and Regulations. In addition, the Emergency/Security Plan must be developed, published and released to all airport tenants. In addition, these documents should be reviewed and updated annually as necessary. The Security Plan to focus on preventing unauthorized access to aircraft, tenant involvement and the involvement with law enforcement.

•

Website: Update the Bedford County Airport’s website to include information on safety and security measures.

•

Safety Checks: Implement monthly “safety check/walk” to be conducted by Airport Director.

•

NEPA Compliance: It is suggested that a lease provision be added to all future agreements that will require an annual environmental audit be done by an independent firm with the requirement of a report to be submitted to the Airport Owner.

SC LAN\BusinessPlan_Bedford.doc

page 77

December 2006

Economic Feasibility Study Airport Business Plan

4.4

Executive Summary

The Airport has been able to generate net income from operations for the past few years. The Airport hangar units are at capacity wit h no additional opportunity for additional hangar revenue beyond future price increases. It will be imperative that the Authority consider all options to advance this Airport beyond current capabilities. On-airport acreage has been identified for future hangar and aviation development, which is a necessity for this Airport. Based aircraft operations are currently at 23 and are projected to increase slightly to 28 by 2010 and to 40 by 2020. Total operations are projected to increase to 24,000 by 2025 from a projected figure of $13,400 at 2005. The Authority has a good relationship and fairly good lease terms with the current FBO, Bun Air Corporation. The fuel flowage fee is significant at $.30 per gallon sold and the FBO handles most expenses and issues related to the terminal building and adjacent hangar. The Authority also leases the fuel farm and snow removal equipment to the FBO. It is suggested that the Authority consider an increase in the annual rental rate of $25,200 as it has been more than four (4) years since a price change. The Authority may also want to explore implementing a gross percentage of revenue fee on FBO fuel sales beyond a certain number of gallons sold. Highlighted recommendations from the documentation are as follows: •

The Airport has been supported by the business community with donations of approximately $167,000 pledged through

SC LAN\BusinessPlan_Bedford.doc

page 78

December 2006

Economic Feasibility Study Airport Business Plan

2006. Another campaign is suggested as the Authority will need to fund local share of $413,875 over the course of the next four (4) years. In addition, capital funding on hangar development is not a guarantee and could be an additional financial requirement. It is suggested that the Airport Director and other Authority members invite the business community to the Airport to share the Airport and future plans with the community. •

It will be important to fully understand future demand based on the business additions to the community. It will be imperative that the Authority continue to work with the community and local development groups to reinforce a positive image of the Airport and benefits to the community. A Marketing budget has been suggested for this Airport with emphasis on partnering with the local community. In addition, a Marketing Plan Outline has been provided as Appendix 1.

•

Although the Airport Standards and Operating Rules and Regulations are comprehensive, they are dated May 1993. It is suggested that the Airport Director release this document with a current date and continue to update annually or as changes in operations/policy occur.

•

A Lease Summary has been provided for the Airport and should be maintained going forward. Cost of utilities as they relate to each facility should be documented. The summary provides an annual cost per square foot based on leaseable space and current revenue generated per facility.

•

The Authority should consider adding a snow removal equipment storage building to the Airport’s future plans. Such a unit would free up two (2) units in the maintenance hangar with potential revenue at $4,000 annually.

•

The 500’ runway extension was analyzed with costs estimated at $6.9 million to take the field from a B-2 to C-2 status. It has been determined that this project will not be a priority for the Airport at this time.

•

Non-aviation development does not exist at the Airport today and should continue to be discussed as it has the potential to increase Airport operations. Examples of indirect aviation development that may be synergistic with current and future aviation activity could include retail

SC LAN\BusinessPlan_Bedford.doc

page 79

December 2006

Economic Feasibility Study Airport Business Plan

operators such as restaurant/food service, automobile fueling/repair service, hotel development and a foreign trade zone. Fractional ownership is becoming common for businesses as well as individuals and could mean a source of growth at the airport. •

The Authority has recently contracted with Citation Shares for pick-ups and drop-offs with revenue stemming from the fuel flowage fee associated with fuel sales related to this business.

•

The Authority should consider a future reserve based on gross revenues to support future local share and Airport repair/maintenance costs. Cash flow is not able to support this reserve currently.

Late in 2005, the County received its first Industries Planning Grant. The Commonwealth Financing Authority (CFA) approved a grant to the Bedford County Development Association for $175,000. The purpose is to develop the County’s marketable assets, create jobs and increase tourism. The funds will specifically be used to create a comprehensive marketing program to promote tourism. Bedford County has seen recent development with many businesses taking advantage of the Keystone Opportunity Zones (KOZ) sites in the area that will provide numerous business opportunities with tax incentives. The historic Bedford Springs Hotel is slated to open in 2007 with $90 million provided via a public-private financial package for restoration of this facility. Two companies have returned or re-opened business in the County including Defiance Metal Products and JLG Industries, a global producer of aerial work platforms and telescopic hydraulic equipment. Seton Co., a manufacturer of automotive leather, expanded their business and has relocated operation from New Jersey to Bedford. In addition Recreational Equipment, Inc. (REI), a national retail co-op which provides quality outdoor gear and apparel, will open an eastern distribution center in Bedford with full capacity completion by 2008. With this significant business expansion, the Airport should see an impact.

APPENDIX 1 MARKETING PLAN OUTLINE INTRODUCTION Product, Price, Promotion and Place are the basis for a marketing plan. Target markets and their needs will be identified with appropriate pricing strategies developed to reach these markets. The Airport’s image development will also be an important part of the

SC LAN\BusinessPlan_Bedford.doc

page 80

December 2006

Economic Feasibility Study Airport Business Plan

marketing plan. Airport marketing is generally a long-term process, and the Owner must be able to monitor the success of their marketing activities through performance measures that support these long-term goals. The marketing plan will play a significant role in helping this Airport to meet the followings goals: 1) 2)

Attract Businesses – Aviation, Aviation Related and Other Self-Sufficiency

The Airport’s current promotional program is limited to an annual Young Eagle Day, school tours, and host to Scouting meetings. General details about this airport offered via the Bedford County website. The Airport is listed on the AirNav.com website but this is a general website used for all airports. Having potential customers rely on information from AirNav.com, but means a loss of “value-added” information such as future development, standard policy, public relations information and other airport amenities. Like other airports similar in size/service to Bedford County, this Airport simply lacks the staffing required to prepare and carry out a comprehensive marketing plan. There is simply not enough time for the Airport Director to focus on marketing efforts. Because it is difficult to measure the success of a marketing program, airport owners are not able to justify the significant expense often associated with a marketing plan. This has been the case at Bedford County with no marketing funds assigned via the operational budget; however, a good marketing plan should pay for itself. Performance standards must be defined with testing and evaluation done annually. PRODUCT Details on product, services and facilities were outlined in detail in Section 1 and will only be reviewed briefly in this section for purposes of having all information available in this Appendix to assist with a comprehensive marketing plan. The Bedford County Airport encompasses approximately 168 acres of land. The overall facilities available at Bedford County include a single 5,005’ x 75’ (paved, bituminous) runway, a parallel taxiway, aircraft parking apron (142,500 SF), two (2) corporate hangars, one (1) 15-unit t-hangar, FBO hangar, equipment storage maintenance hangar, navigational and approach aids, terminal building, administrative offices and vehicular parking. Services include major repair, power plant repair, aircraft management, hangar rentals, tie-downs, flight instruction, 100LL and Jet “A” fuel service, bulk oxygen, aircraft rental, aircraft sales and APU.

SC LAN\BusinessPlan_Bedford.doc

page 81

December 2006

Economic Feasibility Study Airport Business Plan

The terminal building is located adjacent to the apron and fuel farm. It is a 1 story facility and is approximately 11,500 SF. The building houses several offices including Airport Director’s office, Bun Air Corporation - FBO Office, pilot lounge, kitchen and public restrooms. The Civil Air Patrol (CAP) is housed and has offices in the Airport’s Maintenance Hangar. Besides the CAP, there are no other businesses/organization located at the Airport. Local attractions include but are not limited to: Old Bedford Village, Bedford Springs Golf Club, Blue Knob Ski Resort, Shawnee and Raystown Lakes, Fort Bedford Museum and Espy House (national registry). PRICE Price will simply mean offering the most competitive price for the services being offered at the Airport. Assumed preferences for the various types of customers will be reviewed below, and it will be important to conduct a survey to make sure the list of preferences are complete and ranked in order of importance. Market Analysis/Service area was discussed in detail in Section 3.2 of this Study. In order to establish a basis for determining the service area potential and competition for the Airport, it is necessary to compare and evaluate the Airport's location, facilities and services with those available at surrounding airports. Based on the available facilities and the location of surrounding general aviation airports, the Bedford County Airport has a radius of influence to general aviation airports of 30 miles. Five (5) general aviation airports could potentially influence the service area of this Airport and include Altoona-Blair County, John Murtha Johnstown-Cambria County, Blue Knob Valley, Somerset County and Ebensburg. They are all within a 30-60 minute drive from the Airport. When comparing Bedford’s services and accommodations, the following items are highlighted: •

• •

Bedford County Airport runway length is competitive at 5,005 feet. The Altoona-Blair County Airport is slightly larger at 5,466’ with no competitive advantage. The John Murtha Johnstown-Cambria County Airport offers two runways one at 7,003’ and the other at 4,507’ Services are similar with some airports offering charter, APU and avionics as additional services. Only three (3) of the five (5) airports offer Jet “A” fuel in addition to AVGAS. Per the airnav.com website, the average price of 100LL is $4.18 and Jet “A” is $3.90 for fuel prices reported within 50 miles of Bedford Airport with

SC LAN\BusinessPlan_Bedford.doc

page 82

December 2006

Economic Feasibility Study Airport Business Plan

•

pricing at Bedford Airport at $4.30 and $3.90 respectively at August 2006. T-hangar prices were available for two (2) of the airports listed below in addition to two (2) other airports located in the same region as Bedford. Average t-hangar monthly rental price was $150 compared to Bedford’s price of $160. In general this price is a subsidized price and is not reflective of current construction costs and related expenses.

Based Customer Preferences There are no available hangar units at the Airport for new customers. There are two (2) corporate hangars and one (1) t-hangar facility consisting of 15 rental units. All are in good condition. Currently there are no waiting lists as several vacant hangar units were recently filled. All facilities at the Airport are owned by the Authority. Below are some assumed preferences for based aircraft operators. Surveys should be conducted to gather additional details on what customers are looking for at an airport and items should be ranked in order of importance. 1. 2. 3. 4. 5. 6.

7.

Proximity to Business/Home Runway Length/Strength, including the availability of multiple runways and approaches Presentable Terminal Facilities FBO Services Availability of Adequate/Quality Storage Facilities for Aircraft Availability of Adequate/Quality Facilities for Office Space, Parking, etc., Safety and Security Related Features such as Control Tower, Aircraft Rescue and Fire Fighting, Part 139 Aircraft Operating Certificate, Military Presence, Precision Instrument Approaches and Timely Snow Removal. Minimal Noise Abatement Procedures/Restrictions

Transient Customer Preferences Transient customer preferences are listed below. Surveys should also be conducted for these transient customers so that this list is complete and ranked in order of importance. 1. Proximity to Customer Destination 2. Cost and Associated Service 3. Runway Length/Strength, including the availability of multiple runways and approaches 4. Presentable/Comfortable Terminal Facilities 5. Safety and Security Related Features such as Control Tower, Aircraft Rescue and Fire Fighting, Part 139 Aircraft Operating

SC LAN\BusinessPlan_Bedford.doc

page 83

December 2006

Economic Feasibility Study Airport Business Plan

Certificate, Military Presence, Precision Instrument Approaches and Timely Snow Removal. 6. Minimal Noise Abatement Procedures/Restrictions 7. FBO Services PROMOTION It appears the Airport’s current promotional program is limited to yellow page advertising and limited on-site meetings for tenants. In addition, there are limited special events held at the field and a comprehensive website does not exist for this Airport. Although it has been suggested that the marketing plan is a necessary element for this Airport, there are some relatively inexpensive ways to promote the Airport. The key is reaching as many people as possible and being able to promote the importance of general aviation in the community. Some ideas are as follows: 1. Presentations could be made at local community meetings

2. 3. 4. 5.

6. 7.

such as Chamber of Commerce, BCDA meetings or even have the Airport host such meetings. Special events could be held at the airport (i.e. Relay for Life, holiday promotions, etc.) The Airport should conduct special organization tours and continue to offer school tours. The Airport should offer open houses and continue to sponsor or co-sponsor the annual Young Eagle day. Joint marketing efforts should be explored with the FBO and with local efforts (i.e. local economic development firms, BCDA, etc.). Participation in local trade shows/conferences to promote the Airport to local business/corporations. Promote Airport as venue for large outdoor activities and community interest events.

PLACE All products and services are provided at the Bedford County Airport and a brief summary of based operations will be presented. Based Aircraft Both based and annual operations are expected to increase but not significantly. There are 23 aircraft currently based at Bedford County Airport with breakdown by aircraft as follows: 14 single engine, four (4) multiengine, and five (5) jets. This number can vary based on the season and according to activity at surrounding airports, i.e. paving projects, runway closures, inadequate services, lack of space, etc. Referencing Exhibit 4 (Based Aircraft Forecast Study) of this report, the preferred average forecast for 2025 is 40 based aircraft with SC LAN\BusinessPlan_Bedford.doc

page 84

December 2006

Economic Feasibility Study Airport Business Plan

increases mainly in the single and jet fleet. It should be noted that desired projects have been identified in the Airport’s Twelve-Year Plan to include hangar expansion and related development (i.e., taxilanes and aprons), GIS development and future land and easement acquisitions mainly for obstruction and primary surface control as a highlight. Aircraft Operations According to Airport Master Records, 13,400 annual aircraft operations were estimated for 2005 consisting mainly of local general aviation at 65% and itinerant operations at 35%. The preferred operations forecast provides for an increase of roughly 79% to 24,000 by 2025 using the preferred forecasting method. TARGET MARKETS Bedford County Airport customers consist of based aviation and the community. With land development and the “corporate business center” concept as a vision for this Airport, the marketing plan should target not only business/corporate customers but also recreational users of the Airport, tenants and the community. Marketing materials should emphasize the value an airport brings to the community. With specific expansion ideas, this could mean increased operations at the Airport and more opportunities for the community in terms of jobs and working relationships with local businesses. The needs for each of these target markets that exist at Bedford County Airport are explored below. Business/Corporate Customers The following attributes should be highlighted when appealing to the business/corporate environment: 1. Runway Length/Strength, including the availability of multiple runways and approaches 2. Proximity to Customer Destination 3. Availability of Adequate/Quality Storage Facilities for Aircraft 4. Availability of Adequate/Quality Facilities for Office Space, parking, etc. 5. Service Availability – FBO fuel services, competitive fuel pricing (24-hour and/or self serve), maintenance and instruments 6. Ground Transportation – rental cars, courtesy cars and limousine service 7. Presentable/Comfortable Terminal Facilities (space, refreshments, etc.) 8. Safety and Security Related Features such as precision instrument approaches, timely snow removal and published safety procedures. SC LAN\BusinessPlan_Bedford.doc

page 85

December 2006

Economic Feasibility Study Airport Business Plan

9. Minimal Noise Procedures/Restrictions

Abatement

As discussed in the business analysis, charter service and business/corporate aircraft are becoming a popular means of transportation. It allows the business/corporate sector as well as the private sector the ability to meet on-demand transportation requirements. This mode of transportation provides flexibility and time savings as there is generally no wait. Recreational Customers These customers that use aircraft for recreational purposes are typically based at general aviation airports like Bedford County. With the exception of a precision approach and airport restaurant, the assumed required services of this type of customer appear to be adequate given current demand. 1. Runway Length/Strength, including the availability of multiple runways and approaches 2. Availability of Adequate/Quality Storage Facilities for Aircraft or Tie-down Availability 3. Service Availability – FBO fuel services, competitive fuel pricing (24-hour and/or self serve), maintenance and instruments 4. Ground Transportation – rental cars and courtesy cars 5. Presentable/Comfortable Terminal Facilities 6. Safety and Security Related Features such as precision instrument approaches, timely snow removal and published safety procedures. 7. Minimal Noise Abatement Procedures/Restrictions 8. Restaurant Tenants Airport tenants look for the following attributes when locating on Airport property. Representatives from the Authority should meet biannually (at a minimum) with all Airport tenants to discuss the Airport and to get tenant feedback. 1. Responsive and resourceful airport management 2. Facilities that are maintained and kept current 3. Availability of Standard Policy and consistent application of such 4. Availability of an Airport Mission and Business Plan Community The following are assumed attributes for the community.

SC LAN\BusinessPlan_Bedford.doc

page 86

December 2006

Economic Feasibility Study Airport Business Plan

2. 3. 4. 5.

1. Provider of safe and affordable air transportation to the community Provide business growth/opportunity to build local economy Provide balance between aviation sector and community by hosting community events at Airport (fund raisers, hosting meetings, etc.) Minimize environmental impacts Provide convenient business access to the community

SUGGESTED MARKETING STRATEGIES Several of the marketing strategies listed below could be implemented quickly and should involve minimal time and financial resources. Website It is suggested that Bedford County hire a firm to design a website that would not only offer general information about the Airport such as runway length, services offered and accommodations but also information on new projects at the Airport, proposed land development, future projects, special events to be held at the Airport as well as community events. This website should be designed to allow Authority members or the Airport Director to update general information such as current prices, standard rates and charges, etc. In-House User Surveys/General Information Flyers Surveys should be created for based customers, tenants and general users of the Airport. This Survey/Informative Flyer would provide answers on what the Airport is doing well and what could be done to improve services. The flyer could include upcoming events at the Airport as well as any other information applicable to each group being surveyed. For general users of the Airport, it would be interested in knowing where they live (county/town/state) and common travel destinations. Local Aircraft Owners It might be suggested that this Airport consider a survey of registered aircraft owners located in Bedford Country and possibly aircraft owners in surrounding counties. A survey could be developed for this group to see how many owners use the Airport and if not, why. Although the current facility has little opportunity for customers who may want to base their aircraft at the Airport, it would be beneficial to

SC LAN\BusinessPlan_Bedford.doc

page 87

December 2006

Economic Feasibility Study Airport Business Plan

know how many owners may consider this Airport as a home base given future development desired by the Owner. Per the FAA’s database of registered aircraft owners (http://registry.faa.gov/aircraftinquiry/, select “State and County”) for Bedford Country as of April, 2006, there are currently 30 registered aircraft owners (20 individual, two (2) partnerships, four (4) corporations and four (4) co-owners). All registered aircraft are less than 12,500 pounds. An extract from this database is presented as Exhibit 18 (concludes document) with details provided for owner address, tail number and aircraft make, model and year. Business/Corporate Surveys Surveying local businesses/corporations is also a necessity. At a minimum, the services/facilities should be highlighted. In order to increase marketability, perhaps the Airport could be introduced as a facility offering a business meeting setting with catering services. Business needs of this group must also be captured and should include questions such as: 1. Do employees travel frequently for business purposes? 2. Does the company own a business jet? 3. What airport is used by employees for business travel purposes? 4. Do you use a charter service or an airline for business travel? How often? 5. Is there a common destination for your company? And if so, how many people generally travel to this destination? 6. If you do not currently use the Airport, why not? General Community If Charter Service should become a reality at this Airport, it is also recommended that a survey be sent to residents of the local community to determine why or why not the Airport is being used by the community. The survey should also request if there are any other destinations that would be beneficial to the community. Again, general Airport information should be highlighted via the appeal to general additional business. School tours should continue and use of Airport property by the community should be offered. Image Development Image development is an important element and/or outcome of the overall marketing plan. Image development could include the following:

SC LAN\BusinessPlan_Bedford.doc

page 88

December 2006

Economic Feasibility Study Airport Business Plan

• • • • •

Sponsor of business events and/or local club meetings

Signage updates Airport open house Website enhancements Conference participation

EFFECTIVENESS OF PROGRAM The Airport must have some method of tracking the effectiveness of any implemented marketing program. All inquires about the Airport should be tracked and recorded with the purpose of determining what type of marketing program/materials were effective and if they should continue to be used. Increases in based aircraft, aircraft operations and fuel sales are also a good indication that marketing efforts are paying off.

Exhibit 18 – Bedford County Registered Aircraft Owners Tail #

Serial #

1723P

22-2513

19962

17260891

2081T

28R7135025

2388E

7AC-5967

2522J

15061022

2759J

A1500589

Name/Address WILLIAM L. MORELAND 160 MORELANDS RD BEDFORD PA 15522-5653 W EUGENE FOOR 124 RIVER BOTTOM LANE SAXTON PA 16678-9705 BAKER HOLDINGS LLC 5741 BUSINESS 220 BEDFORD PA 15522-7643 SELL HAROLD R 4584 WOODBURY PIKE WOODBURY PA 16695-9708 WILLIAM L. MORELAND 160 MORELANDS RD BEDFORD PA 15522-5653 THOMAS H. BLACK, JR. 307 12TH STREET SAXTON PA 16678

92443

BERNARD F. FRANK 3299 RAGGED MOUNTAIN RD CLEARVILLE PA 15535-8920

2760

BERNARD F. FRANK 3299 RAGGED MOUNTAIN RD CLEARVILLE PA 15535-8920

PIPER PA-22-150 CESSNA 1972 172M PIPER 1970 PA-28R-200 AERONCA 1946 7AC CESSNA 1964 150E CESSNA 1975 A150M FRANK BERNARD F 2003 BABY ACE MODEL D SCHNETZLER ESTILL E 1983 B8M

page 89

December 2006

30051

3134Y

SC LAN\BusinessPlan_Bedford.doc

Make/Year/Model

Economic Feasibility Study Airport Business Plan JAMES E. WILLIAMS RR A4 BOX 121 31JR

2119

EVERETT PA 15537 BLAIR LOFFER

3944Q

17260044

46WF

32-971

4855Z

22-8430

5087A

28087

5262H

17265388

5325L Tail #

28-4628 Serial #

534Q

TC-1176

650PV

TE-427

6589J

28-5048

70W

001-KDW

7372V

30226

7489M

55789

83323

7AC-1990

86123

11AC-550

88323

15941

FISHERTOWN PA 15539 WILLIAM FOY 130 BALTIMORE ST SCHELLSBURG PA 15559 JERRY M. GRIIFITH 1099 CENTERVILLE RD BEDFORD PA 15522-5735 HARRY E. DOLLY, SR. 4774 BEDFORD VALLEY RD BEDFORD PA 15522-5900 BUN AIR CORP PO BOX 638 BEDFORD PA 15522 ROGER L. LIPPINCOTT 138 FLASH DR NEW ENTERPRISE PA 166648022 Name/Address KENNEY AVIATION LLC PO BOX 475 OSTERBURG PA 16667-0475 PAUL W. SOKOLOSKI 247 DELLWATER LN BEDFORD PA 15522-3631 KEVIN V. FREDERICK 1252 ROSE LN BEDFORD PA 15522-4353 SAMUEL A. MONTGOMERY 1377 LOWER SNAKE SPRING RD EVERETT PA 15537-6657 WILLIAM L. MORELAND 160 MORELANDS RD BEDFORD PA 15522-5653 SHELDON D. ICKES 124 W BARCLAY ST BEDFORD PA 15522 MICHAEL W. FITCH 304 VALENTINE ACRES RD CLEARVILLE PA 15535-8642 SALE REPORTED RT 3 BOX 96 BEDFORD PA 15522 RICHARD E. PHILBRICK 332 BEDFORD VALLEY RD BEDFORD PA 15522-5311

SC LAN\BusinessPlan_Bedford.doc

page 90

RYAL 1975 VOLKSPLANEVP-2 CESSNA 1971 172L PIPER 1967 PA-32-260 PIPER 1961 PA-22-108 CESSNA 1955 172 CESSNA 1975 172M PIPER 1968 PA-28-180 Make/Year/Model BEECH 1968 95-B55 (T42A) BEECH 1967 95-C55 PIPER 1968 PA-28-180 PITTS SPECIAL 1967 S1C BELLANCA 1969 17-30 CESSNA 1959 175 AERONCA 1946 7AC AERONCA 1946 11BC PIPER 1946 J3C-65

December 2006

Economic Feasibility Study Airport Business Plan

9116Z

2811015

9305J

28-3397

93648

971

9411X

21057711

9805G

17259705

BEDFORD MEDAIR CORP 160 LAKE DR BEDFORD PA 15522-6572 DENNIS Y. TAYLOR ROUTE 1 BOX 107 BEDFORD PA 15522 WELDON B. SHANK 160 HOLLARS EXT EVERETT PA 15537-4364 ROBERT D. SIMMONS 2028 W GRACEVILLE RD EVERETT PA 15537-5648 EDWIN D. SELL 4686 WOODBURY PIKE WOODBURY PA 16695-9709

1198006

EDWARD L. FRY 175 DOWRICK DR MARTINSBURG PA 16662-9612

99VR

PIPER 1987 PA-28-236 PIPER 1966 PA-28-180 ERCOUPE 1946 415-D CESSNA 1960 210A CESSNA 1971 172L FRY EDWARD LEO 1999 S-16 SHEKARI

APPENDIX 2 ECONOMIC IMPACTS OF AVIATION

SC LAN\BusinessPlan_Bedford.doc

page 91

December 2006

Economic Feasibility Study Airport Business Plan

APPENDIX 3 TWELVE YEAR PLAN (TYP)

SC LAN\BusinessPlan_Bedford.doc

page 92

December 2006

Economic Feasibility Study Airport Business Plan

APPENDIX 4 SELECTIONS FROM CAPITAL IMPROVEMENT PROGRAM

SC LAN\BusinessPlan_Bedford.doc

page 93

December 2006