Losses mount at Chattanooga Airport's new aviation terminal

Losses mount at Chattanooga Airport's new aviation terminal

February 28th, 2012 by Mike Pare in Business Around the Region

Line technicians Jeremy Cranmore, left, and Jason Waters converse on the tarmac in front of Chattanooga's new general aviation terminal, WIlson Air, which is the first national airport to receive a LEED Platinum certification.

Photo by Dan Henry /Times Free Press.

Losses at Chattanooga Airport's new general aviation terminal already have hit the entire year's projected deficit in the first five months of operation.

The general aviation terminal and hangar that opened in August has lost a little more than $300,000 so far, airport officials said. Original projections had put the total first-year deficit for the terminal -- which offers fuel and hangar space to corporate planes and pilots -- at about $300,000, they said.

Officials at Tac Air, a private company that has provided the same services for about a decade at Lovell Field, said the figures are proof the new $5 million terminal isn't needed or financially feasible.

Pam McAllister, Tac Air's general manager, said she thinks the Airport Authority is trying to drive her business off Lovell Field and using public funds in large measure to do so.

"That's our feeling," she said.

But Terry Hart, the airport's interim chief, said the early financial picture includes a lot of startup costs, and he predicted the facility will turn a profit within five years. More importantly, he said, competition is benefiting airport users by driving down costs for them.

"It's doing exactly as planned," Hart said.

He said the losses will be made up out of the airport's overall general revenues, which are rising mostly because of parking and car rental figures. Over the same five-month period, the airport's revenues grew by $1 million over projections, he said.

A top executive for Wilson Air Center, the Memphis-based company hired by the airport to run the new terminal, said lower fuel, hangar and other costs will save users $1.5 million over the year, based on existing numbers.

Dave Ivey, Wilson Air's vice president, said the day the new terminal opened, aircraft fuel at the airport fell by up to 80 cents per gallon.

"The competition is intense," he said. "The end user is reaping the benefits of competition."

McAllister said the changes in fuel prices are more market driven than anything else.

Airport officials unveiled plans in mid-2010 to build up to $10 million in general aviation facilities on the west side of the main runway, opposite the main commercial airline passenger terminal.

Terry Hart, Interim Presiednt & CEO for the Chattanooga Metropolitan Airport Authority

Terry Hart, Interim Presiednt & CEO for the...

Photo by Dan Henry /Times Free Press.

State government is slated to pay for 90 percent of the cost of the facilities while the airport covers the remainder. Also, $3 million in federal stimulus money was used to pave an aircraft parking area at the site.

Before building the new terminal, airport officials said they'd received complaints about pricing related to Tac Air's services and that competition was needed.

Tac Air complained to federal regulators about how the airport used federal grants to create the rival service, and the results of an inquiry are pending, McAllister said. In addition to the operating deficit so far, the airport plowed about $1 million into early costs to ready the facility before the doors opened in August, she said.

McAllister projected a loss of $750,000 for the year for the airport terminal. Over five years, she said, it could lose more than $3 million, based on a study by a private consulting firm funded by Chattanoogans for Fair Aviation.

"At the end of the day, you can't sustain that," she said.

A new airport now being built in Cleveland, Tenn., she said, will siphon away hangar business when it opens, tentatively slated for later this year or 2013. She said Tac Air's hangar vacancy rate already is about 30 percent.

McAllister complained that Tac Air basically is having to compete with its landlord, the Airport Authority, and she believes the airport is directing business toward Wilson Air.

But Ivey said that, while the new terminal in Chattanooga is expected to experience a loss for the year, he's hopeful it won't be in the $700,000 range, based on how business is growing.

He also said he believes the terminal and hangar will turn a profit within five years, though he couldn't provide a timetable.

"That's our goal," Ivey said.

Dan Jacobson, Airport Authority chairman, said the board knows that long-term decisions can't be based on five months of startup operations.

"We spent a lot of time on the business model we are implementing," he said. "We have confidence in its long-term success."

Hart said the initial projections were rough because they were made many months before the terminal opened and better figures will follow.

While the airport's initial plan calls for construction of another hangar, airport officials said they're evaluating the need and have asked Wilson Air to make a recommendation.

Hart said the Airport Authority has begun an application for state funds to find out if money is available, but applying for and receiving a grant doesn't mean the airport must build.

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