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FAA Airport Privatization Program

FAA Airport Privatization Program. Federal law places strict limits on the privatization of airports Pilot program was established in 1996 to evaluate feasibility of privatization in U.S. Five airports may participate No more than one large hub At least one must be general aviation

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FAA Airport Privatization Program

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  1. FAA Airport Privatization Program • Federal law places strict limits on the privatization of airports • Pilot program was established in 1996 to evaluate feasibility of privatization in U.S. • Five airports may participate • No more than one large hub • At least one must be general aviation • Currently three slots open to airports like COS • Commercial airports may be leased only • Public owner must provide plan for continued operation in case of bankruptcy or insolvency • 65% of air carriers must approve plan including use of revenue for non-airport purposes • Private operator can use profits for non-airport purposes

  2. History of Privatization Program • Since 1996 six applications have been filed with the FAA • Four were withdrawn or terminated due to privatization deemed unfeasible • Fifth applicant was privatized but program failed • Midway is sixth and only active application • Brown Field • New Orleans Lakefront • Niagara Falls • Rafael Hernandez • Stewart International • Chicago Midway • Additional privatization efforts • Indianapolis entered into management contract with BAA • Program failed and reverted back to City

  3. Midway Privatization Project • MIDCo pays City $2.52 billion up front for 99 year lease • $1.4 billion used to pay off airport debt and to fund police, fire, construction projects underway and legal costs • $1.1 billion for other uses • 90% toward City’s pension fund and infrastructure projects • 10% unrestricted • Airline rates frozen for six years at 2007 levels • After six years rates adjust at no more than core CPI

  4. Midway Privatization Project • With airline revenue frozen profit must be generated from passenger concession sales and revenues from other airport users • Midway agreement does not place cap on parking rates • Operator will be allowed to raise them to point that market accepts • Agreement places no restrictions on other revenues • Restaurants • News and gifts • Rental Car • Land rents • Fuel flowage fees

  5. Midway vs. COS MidwayCOS Net Assets $282,390,000 $208,304,995 Total Operating Revenue 11.92 21.54 per enplaned passenger Net Income (net depr) (4,029,000) 6,814,275 Debt Service Coverage 1.12 1.62 Concession revenue 5.84 11.78 per enplaned passenger

  6. Chicago Privatization Trends • Over the past six years, Chicago has been in a privatization mode • Privatization has had an impact on consumers • Chicago parking garage • Resulted in rate increases of 31% since 2006 • Chicago Skyway • Resulted in rate increase of 50% since 2004 • Similar impacts are anticipated at Midway • Investor opportunity is in low yielding concessions and other airport user fees • Consumers will clearly feel an impact

  7. Other Considerations • Colorado Springs Airport serves as an economic development generator for the City of Colorado Springs and the metro area • Invested $20 million on west side that has spurred $50 million in additional investment and expansion of general aviation (SkyWest) • Generates jobs and income for the City • Invested $2.5 million in planning of Airport Business Park • Has attracted two quality firms that bring high paying jobs into the community • Selection of national company to develop remaining parcels • Generates jobs and income for the City • Able to negotiate land deals with military that help foster civic/military relationship • Private operator would demand market value rents • Potential financial impacts on City • COS pays more than $2 million annually for police service • COS contributes more than $1.7 million annually to City general fund

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