Idea Transcript
Denton Municipal Airport Business Plan
Final Technical Report With Appendices
Prepared for:
City of Denton, Texas Texas Department of Transportation
Prepared by:
R.A. Wiedemann & Associates, Inc. P.O. Box 621 ! Georgetown, KY 40324 (502) 535-6570 ! FAX (502) 535-5314
in Association with
TABLE OF CONTENTS SECTION 1: 1.1 1.2 1.3
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Understanding and Key Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Desired End Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Report Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2: 2.1 2.2 2.3
AIRPORT MISSION AND MANAGEMENT STRUCTURE . . . . . . . . . . . . 6 Airport Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Airport Goverance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Airport Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3: 3.1 3.2 3.3 3.4 3.4 3.4 3.4 3.5 3.6 3.6 3.6
EXISTING AIRPORT CHARACTERISTICS . . . . . . . . . . . . . . . . . . . . . . . . . 9 Airside Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Landside Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Airport Operational Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Airport Development Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Parallel Runway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 West Side Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Existing Tenants and Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Funding Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Airport Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Market Area Airport Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4: BASELINE FINANCIAL AND ECONOMIC OUTLOOK . . . . . . . . . . . . . . 32 4.1 Historical Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 4.2 Baseline Forecast of Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5: 5.1 5.2 5.3 5.4 5.5
BUSINESS PLAN ALTERNATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Industry Trends Impacting Denton Airport Analysis . . . . . . . . . . . . . . . . . . . . . 38 Area-wide Factors Supporting Growth and Development of the Airport . . . . . . 39 Obstacles to Airport Performance and Goal Attainment . . . . . . . . . . . . . . . . . . . 42 Revenue Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Impact of Revenue Enhancement Strategies on Potential Demand . . . . . . . . . . . 47
SECTION 6: 6.1 6.2 6.3 6.4 6.5
RECOMMENDED PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Recommended Management and Policy Actions . . . . . . . . . . . . . . . . . . . . . . . . 49 Revenue Enhancement Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Impact on Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Summary of Business Plan Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Timetable and Trigger Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
TABLE OF CONTENTS (Cont.) LIST OF FIGURES Figure 1 Figure 2 Figure 3 Figure 4 Figure 5
Denton Airport Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Airport Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Existing Airport Layout Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Airport Development Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Airport Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
LIST OF TABLES Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13
Runway Data Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Businesses at Denton Municipal Airport . . . . . . . . . . . . . . . . . . . . . . . . . 12 Historical Activity: FAA Tower Counts . . . . . . . . . . . . . . . . . . . . . . . . . 13 Current Denton ACIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Parallel Runway Options Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . 16 West Side Development Potential Infrastructure Cost . . . . . . . . . . . . . . 20 Airport Comparison Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Based Aircraft Mix Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Airport Facility Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Airport Service Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Airport Rates and Charges Price Comparison . . . . . . . . . . . . . . . . . . . . . 31 Historical Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Denton Airport Baseline Financial Pro Forma . . . . . . . . . . . . . . . . . . . . 36
Table 14 Table 15 Table 16
Baseline Net Operating Income/(Deficit) . . . . . . . . . . . . . . . . . . . . . . . . 37 Total Net Income for Baseline Projections . . . . . . . . . . . . . . . . . . . . . . . 37 Major Employers in the Denton Area . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Table 17
Impact of Revenue Enhancement Strategies on Potential Demand . . . . . 47
Table 18
Action Plan Trigger Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
APPENDICES Appendix A Appendix B Appendix C Appendix D
Denton Airport SWOT Detailed Survey Results Lease Analysis Local and State Incentives
Denton Municipal Airport Business Plan
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FINAL TECHNICAL REPORT Denton Municipal Airport Business Plan 1.
INTRODUCTION
T
HE PURPOSE OF THIS BUSINESS PLAN FOR Denton Municipal Airport (DTO) is to assess potential means to improve the Airport’s financial performance, economic development, and operation. To do this, the business plan will evaluate a number of potential operational and development scenarios and provide the City of Denton with decision-making information. Our understanding of the current situation involves several components, including the Airport’s significant recent growth in operations, its competitive setting in North Central Texas, the highest and best use of Airport property, the benefits and costs of attracting corporate aviation, safety and noise issues in the vicinity of the Airport, the potential for hangar development, identifying the optimum development of the Airport’s west side, the desire of the Sponsor to examine the Airport governance structure, and a number of other facility-related issues.
1.1
Understanding & Key Issues
Our understanding of the Denton Municipal Airport involves its position as a jet-capable facility that desires to expand its revenue base, develop a blueprint for moving into the future, and take advantage of the growing connection between local business/industrial development and aviation. The location of several large factories adjacent to the Airport has confirmed the notion of a connection between the two land uses. In addition, the Airport enjoys royalties from gas wells on the field that add significantly to the capital budget of the Airport. Planning for the future involves diversification so that limited-term gas revenues allow the Airport to develop long term revenue sources to support operations. The Airport desires financial self-sufficiency in the long term and thus will need to review its policies set for Airport development, management of hangars, and gas well revenues. Additionally, the Airport must keep its existing clientele and provide revenue producing facilities such as development pad sites, hangars, and aviation industry incentives for continued growth. Finally, the Airport is expanding its runway system to 7,000 feet to attract the largest business and corporate clients. The Denton Municipal Airport is fast becoming the northern business hub airport for the Dallas region. Properly managing and directing that effort is essential to successful capture of the business aviation market. Key issues that are recognized by the business plan include the following: !
Reversion Clauses in Lease Agreements: There is significant debate about the value or justification for including reversionary clauses in hangar leases, especially for major investments financed by aviation industry. The business plan will address this issue by providing information on how these lease arrangements work at other airports. In addition, the business plan will examine the pros and cons associated with this practice at Denton and other airports.
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!
Parallel Runway: Recently, the need for a parallel runway has been justified from an operational standpoint. With the influx of significant pilot training in both helicopters and fixed wing aircraft, there is now a significant usage of current airfield capacity. The business plan will examine the issues associated with the development of a parallel runway, including cost, justification, access, safety, impact to airspace, and other issues.
!
Radar Displays: The FAA has plans in the summer of 2010 to provide the Tower with radar displays to supplement the current visual traffic control.
!
General Fund versus Enterprise Fund: Questions have been raised concerning the best accounting model to use for the Airport. At stake is whether or not the Airport should be operated under the General Fund or as an Enterprise Fund. The business plan will present the pros and cons of either method and describe the ideal conditions for each to be used.
!
Airport Management Structure: The current airport management and advisory board structure will be reviewed, along with alternative methods, such as Airport Commissions, Boards, Authorities, and Departments. The ideal conditions under which different operating structures work will be described.
!
Airport Branding: The City has undertaken some significant branding efforts in the past for Denton Municipal Electric (the City’s electric utility), the City’s economic development activities, and the Airport (slogan, “North Texas Airport of Choice”). While the Airport should conform or be complementary to the City’s branding efforts, a significant change in the operational make-up of the Airport has occurred over the last five years. It is no longer a small airport primarily serving a small general aviation client base. Instead, the Airport has grown into a corporate base and training facility that can compete with any of the general aviation airports in North Central Texas. As such, it is believed that the Airport brand should reflect this larger role in Denton’s economic development.
!
West Side Development: The development of the west side of the Airport may be highly dependent upon the ground access available to that side of the Airport. In this regard, the proposed development of Loop 288 has been delayed for a number of years. It is currently unknown when that important road will be constructed. While there are interim access alternatives, the major west side development is linked to the Loop 288 schedule. West side development could accommodate additional airport facilities and commercial-industrial facilities. Also at issue is the cost to extend utilities to the west side, the responsibility for that cost, the location of existing and future gas wells, and potential property acquisition.
!
City Development of Hangars or Private Enterprise: Another topic with diverse opinions involves the political decision as to whether or not the City should be involved in hangar development at the Airport. This topic is related to the lease
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reversionary clause issue in that both situations might require the City to own and manage rental property at the Airport. The economic consequences of these options will be identified in the business plan. !
Airport Financial Performance: A significant question about the Airport involves whether or not it can operate without subsidy. The business plan will examine the financial performance of the Airport and project at least two different scenarios: the Status Quo and Revenue Enhancement Options.
!
Gas Well Leases and Royalties: As mentioned, the Airport enjoys revenues from gas wells on Airport property. These revenues have a finite timeframe due to depletion of the gas. It has been suggested that to plan for future revenue sources and needs, the revenues from the wells may be best used on new revenue-related infrastructure development at the Airport. The Business Plan will suggest means of diversifying revenue generation.
!
Rates and Charges Comparison: The financial analysis will examine lease rates and other fees and taxes paid by tenants. Typically, rates should be market based, i.e., competitive with alternative airport facilities. Tenant comments have indicated that lease rates are reasonable, tax rates are high, and the permitting process cannot be completed in a reasonable timeframe.
!
Future Client Base and Amenities: If the City is to take a proactive role in securing new tenants at the Airport, a key question involves the target market for promotional activities and resources. The business plan will help identify those industries. As the Airport continues to grow and attract business aviation, certain amenities are expected from the corporate users, including Airport Rescue and Fire Fighting (ARFF), rental cars, U.S. Customs, meeting facilities, food service, and other business-enabling services.
!
University of North Texas Aviation Program: The University has just approved an Aviation Curriculum and will start the program in the fall of 2010. While no flight training has been proposed for the initial program, a cooperative training program with existing airport tenant(s) is planned. It is anticipated that a formal training program could evolve in a few years. Thus, the UNT aviation program is expected to further stimulate airport activity – particularly pilot training.
!
Flight Training Operations: Significant growth in flight training activity has occurred in the past few years with a major fixed wing flight school and two helicopter programs. Training activity and facilities increase airport revenues, but also significantly increase FAA tower controller workload, traffic pattern congestion, and may constrain corporate aviation activity and/or recruitment. Training operations versus corporate activity can sometimes be seen as competing for limited resources of airport operational capacity and landside space.
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!
Limited Development Area: Only a limited amount of development area remains on the east side of the Airport. The highest and best use for this property should be addressed as alternate development locations would have substantially high costs and access issues. The Business Plan will make recommendations for potential acquisition of property. The need and feasibility to physically segregate light general aviation activity/facilities from corporate/business aircraft is a related issue.
!
International Activity: The City has applied for a Foreign Trade Zone (FTZ) designation that incorporates all of the airport property. Approval of the FTZ could stimulate the need/demand for U.S. Customs Service. The Airport currently operates under a limited area, temporary FTZ.
!
Master Plan Update: The current master plan is now dated. As such, the Business Plan will consider options that may not have been addressed in the old master plan. It is anticipated that the Business Plan will focus on strategic initiatives that can be used by future master planning efforts.
Desired End Products The desired end products produced as a result of this analysis include the following: ● ● ● ● ● ● ● ● ● ● ● ● ●
A well-defined mission statement for the Airport. An identification and evaluation of strengths, weaknesses, opportunities, and threats facing the Airport. A ten-year projection of revenues and expenses at the Airport for the baseline case and alternative scenarios. An examination of re-branding for the Airport. Strategic planning recommendations for the Airport, including those for capital development, leases, operations, marketing, zoning, and management. Recommendations for development of the West Side of the Airport. Analysis of potential hangar development options – private versus public ownership. Budget pro formas showing the status quo and revenue enhancement options for the future. Detailed analyses of leases. Potential impacts of the runway extension and attraction of more corporate aviation. Examination of the need for a parallel runway. Identification of the need for an advertising and/or marketing strategy for the Airport, if warranted. Executive summaries and technical reports for the Airport and City.
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Report Outline
In order to address the issues described above and to produce the desired end products, this report has been organized to include the following sections: ● ● ● ● ● ● ● ● ● ● ●
Section 1 - Introduction Section 2 - Background and Management Structure Section 3 - Existing Airport Characteristics Section 4 - Baseline Financial Projection Section 5 - Business Plan Alternatives Section 6 - Findings and Recommendations Section 7 - Economic Impact Assessment Appendix A – SWOT Analysis Appendix B - Detailed Survey Results Appendix C – Lease Analysis Appendix D – Local and State Incentives
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BACKGROUND AND AIRPORT MISSION
A
CLEARLY ARTICULATED MISSION REFLECTS THE GOALS AND vision for the Airport. It also empowers all Airport staff to fulfill their roles. The overall Airport mission provides a foundation of common purpose from which decisions can be made and changes can be pursued. The management structure and capabilities of the Sponsor must fit with the mission of the Airport to ensure success.
Understanding the background and management structure of Denton Airport aids in working through the key issues identified in the previous section (e.g. Enterprise Fund vs. General Fund structure). This examination can identify whether roles and/or responsibilities are clearly defined, or if authority in the decision-making process is granted at the proper levels. To address these issues, this section is organized to include the following: ● ● 2.1
Airport Mission Airport Management Structure
Airport Mission
Denton Airport’s role is that of a publicly-owned, public-use airport. The Airport is classified in the National Plan of Integrated Airports System (NPIAS) as a General Aviation Reliever airport, providing access to the air transportation system for general aviation aircraft. The mission statement under which the current Airport staff operates is: “It is the mission of Denton Airport to provide: operational safety; outstanding service; and, absolute security.” Because of the increasing role of the Airport in attracting and supporting businesses and creating local jobs, it may be helpful to expand the mission statement to include wording about economic development and the creation of jobs in the Denton area. As such, it is suggested that the Airport mission statement be revised as follows: “It is the mission of Denton Airport to serve as an engine for economic development in the Denton area, providing operational safety; outstanding service; and, absolute security for private pilots and the aviation industry.” Discussions with Airport Management indicate that at least two other goals and objectives for the Airport exist: ● ●
Additional revenue generation and diversification of revenue sources. Development of a new airport brand that recognizes its elevation as a top tier general aviation facility in the region.
While the Airport mission statement is adequate, the challenge to achieving greater financial performance in the future will depend on the City’s ability to partner with private
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enterprise in creating a strong brand and market niche. Subsequent sections of this Business Plan will further examine the Airport’s market potential in an effort to achieve these goals. 2.2
Airport Governance
Denton Airport is owned and operated by the City of Denton, Texas. Figure 1 presents the organizational chart for the Airport and its management structure. As shown, the chain-ofcommand authority flows from the Denton City Council through the City Manager to the Assistant City Manager, to the Director of Strategic Services and on through the Transportation Director to the Airport Manager. The Airport Manager has a staff of three with roles shown in the Organization Chart. Administratively, Denton Airport is an operating department of the City. As a Home Rule Charter City with a Council-Manager form of government, City of Denton administration is the responsibility of a City Manager who is appointed by the City Council. The City Council also appoints an Airport Advisory Board which makes recommendations regarding Airport policy directly to the City Council. The City Council reviews and approves all Airport operating policies including rate schedules for Airport property leases and services. The daily operation of Airport services, infrastructure and aviation business relations is the direct responsibility of the Airport Manager. Contract service providers operate the on-Airport FBO (pilot services) and control tower. These contractors are supervised by Airport Staff under authority of the Airport Manager. 2.3
Airport Management
The day-to-day operation of the Airport is the responsibility of the Airport Manager. The Airport Manager’s position incorporates all facets of Airport administration including responsibility for budget oversight, public infrastructure management, lease administration and maintenance of grounds at the Airport. The Airport Manager must have a working knowledge of Federal, State, and local laws and regulations relating to aviation. From an administrative standpoint, the Airport Manager supervises Airport staff, administers Airport security and emergencies, and coordinates the financial responsibilities of the Airport with the Transportation Director. The Airport Manager also is responsible for the planning and environmental processes at the Airport. The Administrative Assistant to the Airport Manager and Airport Operations Coordinator perform the duties of the Manager when he is absent. The maintenance field service worker supervises and performs maintenance on the Airport, mowing, repairs to equipment, buildings etc. Large parcels of Airport land are mowed by the Parks Department personnel under contract with the Airport. Anything beyond the City’s capabilities is coordinated through other contractors. Airport attendants are needed to staff the Airport during its working hours. The Airport is open 24 hours per day, seven days per week. However, it is only staffed by the City from 8:00 am to 5:00 pm, Monday through Friday. The FBO (Business Air Center) is open from 6:00 am to 10:00 pm, Monday through Friday and from 7:00 am to 7:00 pm on the weekends. The Airport’s second FBO, U.S. Aviation Group, will begin in mid-2010 to operate 24/7 with complete line services. The Air Traffic Control Tower is operated from 6:00 a.m. to
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10:00 p.m. seven days per week. The Airport Manager or his designate is on call after operating hours for emergencies.
Figure 1 - Organization Chart
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EXISTING AIRPORT CHARACTERISTICS
A
or landside. Airside (or airfield) facilities include those directly used by aircraft during takeoff and landing, such as runways, taxiways, lighting, and instrumentation. Landside facilities include support buildings and structures, such as aircraft hangars and parking (tie-down) aprons, automobile parking lots, and access roads. IRPORT FACILITIES ARE OFTEN DESCRIBED AS AIRSIDE
This section presents an inventory of airside and landside facilities at Denton Municipal Airport. However, as part of the Airport Business Plan, this inventory considers the utility of these facilities for the Airport as a business enterprise. In this way, this section not only reports on what facilities exist on the Airport, but also how they affect the Airport business operations. 3.1
Airside Facilities
From a business perspective, airside facilities at DTO provide an access point into the National Airspace System (NAS) for aircraft owners, operators, and business travelers. These facilities include one asphalt runway (Runway 17-35) which is 5,999 feet long and 150 feet wide with a full length parallel taxiway. All primary taxiways are 50 feet wide. The runway has a precision instrument approach which permits operation during low visibility weather conditions. Figure 2 graphically shows these facilities while Table 1 summarizes the runway facilities and characteristics. Table 1 - Runway Data Summary Runway 17-35
Facility Type
17
35
Length
5,999’
Width
150’ Asphalt
Pavement Weight Bearing Capacity Markings
70,000 lbs Single Wheel – 100,000 lbs Dual Wheel Precision
Medium Intensity
Runway Lighting Approach Lighting
MALSR
None VASI
Visual Aid
Left
Traffic Pattern Approaches
Non-Precision
RNAV, ILS, & NDB
RNAV
Legend: MALSR = Medium Intensity Approach Light System with Runway Alignment Indicator Lights VASI = Visual Approach Slope Indicator RNAV = Area Navigation ILS = Instrument Landing System NDB = Non-Directional Beacon
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DTO is considered a reliever to Dallas/Fort Worth International Airport (DFW) in the FAA’s National Plan of Integrated Airport Systems (NPIAS). The runway covers between 96 percent and 99 percent of all-weather wind conditions. The Airport is further equipped with the following:
Four Instrument Approaches, Including RNAV/GPS Approaches at Both Runway Ends ILS Approach on Runway 17 RNAV for geographic positioning NDB Rotating Beacon (Offers Aircraft w/o GPS to Fly Instrument Approaches) Segmented Circle and Lighted Wind Indicators Automated Surface Observance System (ASOS) Medium Intensity Runway Lights
FAA Airport design standards are based on the Airport’s Reference Code (ARC)1. The ARC of any airport is based on the largest aircraft category that conducts at least 500 annual itinerant operations. DTO is classified as a D-II airport (accommodating turboprops and jets). DII airport design aircraft include the Hawker 700, Learjet 35, and Gulfstream IV. In general, DTO adequately provides for ARC D-II design standards. Additional standards may be put into place if the Airport were to obtain a Part 139 certification for commercial operations. These standards would include firefighting, wildlife, security, and others. In summary, the DTO airfield offers the full complement of infrastructure facilities and approach equipment desired by a wide range of aircraft in the business and corporate fleet. 3.2
Landside Facilities
In terms of landside facilities, Denton Municipal Airport offers a range of buildings and equipment that serve the business aircraft owner, operator, and traveler. These include an administration building, many aircraft storage hangars, an aircraft museum, maintenance facilities, and fixed base operator (FBO) hangars. Currently, there are over 30 corporate/conventional hangars and 12 T-hangar buildings, many of which are utilized by businesses. In addition to these facilities, there are two Fixed Based Operators (FBO) and other onsite business operators that provide all of the traditional aviation services including aircraft rental flight training, charter, avionics, aircraft sales, aircraft maintenance, painting and upholstery, full and self-serve fueling, ground power units (GPU) for external power, and line service. Business Air Center is the senior provider of these services. Table 2 displays aviation businesses at DTO; there may be private individuals who use their aircraft for business purposes that are not included in Table 2. Each of the businesses is housed within a structure fitted to their requirements, and includes attached or interior offices, vehicle parking, and apron area. 1
The ARC has two components. The first component, depicted by a letter, is the Aircraft Approach Category and refers to the aircraft approach speed during landing. The second component, depicted by a Roman numeral, is the Airplane Design Group, and refers to the aircraft wingspan. R.A. Wiedemann & Associates, Inc. in association with CHA, Inc.
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The paved aircraft parking apron has approximately 75 tie-down spaces for itinerant and based aircraft use for either overnight or monthly parking. In total, there is over 720,000 square feet of hangar space at DTO. Other landside facilities and services available include:
Six Fuel Tanks Offering 70,000 Gallons of Fuel; Two Fuel Trucks with a Combined 1,750-Gallon Capacity; 24-Hour Fueling Access; Approximately 100 Automobile Parking Spaces Each building also contains an apron area or taxilanes, and separate or combined auto parking Table 2 - Businesses at Denton Municipal Airport Business
Function
Alan Ritchey
Postal Contractor
All American Helicopters, LLC
Flight School
Alliance Air Charter
Charter
Avionics International Supply, Inc
Maintenance
Avionics Test Equipment Calibration, Inc
Maintenance
Barrett Aviation Maintenance
Maintenance
Business Air Center
Aircraft Sales, FBO, Charter, Hangar Rental
City of Denton
Airport Management and Administration
EZ Composites
Experimental Aircraft Manufacturing
Ezell Aviation
Commercial Hangars
GCBSXX, LLC / Finley Ledbetter
Electric Manufacturing
Haltom Aircraft Service
Maintenance
Hangar 10 Flying Museum
Museum
Jet Works Air Center
Maintenance & Paint Shop
Longhorn Helicopters, Inc
Charter, Flight School
Nebrig & Associates, Inc
Aircraft Sales, Hangar Rental
Owens Aviation
Aircraft Sales
Piaggio
Aircraft Interiors
Tech Aero Avionics, LLC
Avionics Maintenance Aircraft Sales, FBO, Flight School Hangar Rental, Maintenance
US Aviation Used Dealer's Aircraft
Aircraft Sales
Weyer Investments
Hangar Rental
In summary, the landside facilities currently available at DTO are quite comprehensive, and improvements are continuing. The operation of several FBO’s on the Airport is evidence that the market for corporate/business aviation services is strong, as is the list of existing business tenants.
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Airport Operational Characteristics
The primary and driving force of growth at general aviation airports involves increases in based aircraft and operations. These two measures of activity affect not only an airport’s infrastructure requirements, but also the amount of revenues and expenses it can generate. This market demand reflects the airport as both a product and service that consumers will buy. Therefore, development of future airside and landside facilities at DTO, if constructed and phased in response to market demand, can contribute significantly to the Airport’s revenues through rents paid on new leases. In recent years, the operating environment at DTO has changed from a relatively low activity general aviation airport to a significant business and corporation aviation oriented facility with a growing flight training and aircraft service business component. This growth has come primarily within the last seven years and has altered the character of the Airport to become an economic development engine for Denton. This change, coupled with the expansion of gas well development has created a unique nexus of both aviation and economic activity. Since 2004, DTO has experienced a significant increase in both based aircraft and total annual operations. (An aircraft operation is defined as either a takeoff or a landing. A takeoff and landing are two operations.) Because of the significant growth in training operations between 2006 and 2009, official FAA Terminal Area Forecast records have not yet shown the significant spike in operational activity. The most recent FAA TAF is shown in Table 3. Table 3 - Historical Activity: FAA Tower Counts Year 2004
Total Operations 57,612
2005
86,802
2006
88,832
2007
99,734
2008*
126,670
* Source: FAA Air Traffic Activity Systems (ATADS)
As indicated by the ATADS, the Airport has gained more than 69,000 annual operations between 2004 and 2008. An annualized extrapolation of the 2009 FAA Air Traffic Control Tower (ATCT) counts at DTO predicts approximately 150,000 annual operations for calendar year 2009. These annual ATCT counts do not include activity that takes place when the tower is not operational. With training operations now taking place 24 hours per day, it might be expected that the Airport will have as much as 50,000 more actual operations than those recorded by the ATCT. This is significantly higher than 2009 TAF forecast of 119,081 and exceeds both the FAA forecast for 2014 and the Airport Master Plan forecast for 2011. In an effort to improve the integrity of the FAA’s based aircraft data, a new methodology for accounting for aircraft based at an airport was implemented by the FAA in 2009 through the FAA Order 5010.4, Airport Safety Data Program. Airports are now required to enter the tail
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numbers (also known as N-numbers) of the aircraft that are based at their airport. The FAA will then cross reference the tail numbers between airports and in cases where an aircraft appears at multiple airports, will reconcile the discrepancy. In some cases, this methodology significantly changed the number of based aircraft at an airport. As this is in the first year of the new program, its affects on forecasts and funding await to be seen. The March 2009 effort for DTO resulted in the following aircraft fleet mix:
131 Single-Engine (73%) 29 Multi-Engine (16%) 10 Jets (6%) 7 Helicopters (4%) 2 Other (1%) TOTAL = 179
The mix shows DTO’s activity is based mainly on flight training and corporate activity. While some single-engine aircraft are used for the individual businesses that utilize the Airport, most are used for recreational or flight training. Flight training also utilizes the helicopters and some multi-engine aircraft. With almost one-quarter of the total aircraft made up of multi-engine aircraft and jets, the Airport has a healthy level of corporate and business aviation. It should be noted that Airport Management has a higher number of based aircraft listed in their records. It is believed that these will eventually show up in FAA 5010 reports as new inspections are undertaken. Importantly for this business plan, the actual number of existing based aircraft will not impact future revenue projections because only the growth in based aircraft is used in the projection methodology. Section 5 of this Plan addresses based aircraft growth. 3.4
Airport Development Plan
One of the tasks of this business plan is to evaluate the existing Airport Capital Improvement Program (ACIP). This review includes suggestions for any revisions (either specific projects or timing and phasing of projects) that may better suit the business need or market demand for the projects. For the purpose of the business plan, review of the ACIP considers opportunities for revenue generation. The 2003 Master Plan describes the last formal recommended development plan – the Airport Capital Improvement Program (ACIP) for DTO. The Terminal Area Plan was revised in 2006 to reflect the buildings that had been constructed since 2003 and any additional changes of locations or plans of buildings. The short-term projects identified in the Master Plan have either been completed or under construction at this time. Table 4 shows the current ACIP for DTO as provided by the City of Denton. The 2010 – 2012 TxDOT Capital Improvement Program (CIP) has listed a total of $1,146,100 in funding for DTO for 2012. There are no projects funded for 2010 or 2011 listed at this time. One project previously added to the TxDOT CIP for 2010 is for security fencing, including the engineering/design and installation of 18,000 linear feet of perimeter fencing.
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Table 4 – Current Denton ACIP Project
Local
Federal
Total
1. Southeast Taxiway Expansion
77,135
1,094,615
1,171,750
2. Runway Extension
425,000
8,275,000
8,700,000
3. Security Fence (Perimeter-south)
57,000
570,000
627,000
4. Southeast Road Infrastructure
500,000
-
500,000
5. Airport Entrance (Design)
50,000
-
50,000
6. Airport Signage (On-site)
50,000
-
50,000
7. Maintenance Facility
145,000
-
145,000
$1,304,135
$9,939,615
$11,243,750
1. Ramp Expansion
89,000
890,000
979,000
2. Parallel Runway / Taxiway (5,000 ft)
761,050
6,849,450
7,610,500
3. RADAR Equipment Installation
250,000
1,025,000
1,275,000
4. Airport Entrance (construction)
150,000
1,350,000
1,500,000
$1,250,050
$10,114,450
$11,364,500
1. Runway Overlay
240,000
2,160,000
2,400,000
2. General Aviation Parking Facilities
14,000
126,000
140,000
3. Taxiway A & B Rehabilitation
140,000
1,260,000
1,400,000
$394,000
$3,546,000
$3,940,000
285,000
-
-
2. Heliport (west side)
1,500,000
-
-
3. Public Ramp / Taxiway (west side)
2,500,000
-
-
Not On Master Plan Total
$4,285,000
-
-
TOTAL
$7,233,185
$23,600,065
$26,548,250
Short Term
Short Term Total Intermediate Term
Intermediate Term Total Long Term
Long Term Total Not On Current Master Plan: 1. Airport master Plan / Business Plan
Source: City of Denton
Parallel Runway Until recently, the need for a parallel runway could not be justified from an operational standpoint. With the influx of pilot training in both helicopters and fixed wing aircraft, there is now a significant usage of current airfield capacity according to the FAA tower counts. The mix of the slower propeller aircraft and faster jet aircraft contributes to the immediate need for a parallel runway. The future parallel runway depicted on the ALP is 5,000 feet by 75 feet and would be used primarily for small aircraft, to provide an alternative runway for training aircraft. According to the 2003 Master Plan, a parallel runway would increase the Annual Service
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Volume of DTO to 300,000 operations. A second runway would also provide an alternative should the main runway need to be closed due to maintenance or emergencies. Figure 3 displays the 5,000-foot by 75-foot parallel runway from the Airport Layout Plan (ALP) with a full length parallel runway. The distance between the two runways is 700 feet, which allows for simultaneous operations of the two runways, and for aircraft to hold on the exit taxiways. Figure 4 displays an alternative parallel runway of 3,200 feet. While this runway would be shorter, it would be adequate for most small aircraft and flight training and is long enough to obtain an instrument approach. The shorter length would also contain the Runway Protection Zones mostly within the existing airport property, reducing the requirement for land acquisition or easements. The shorter runway could be extended at a later date as necessary. In an effort to further reduce the cost, only 35-foot wide exit taxiways are provided. Aircraft may safely hold on the exit taxiways between the runways. Table 5 – Parallel Runway Options Cost Estimates Item Option #1 – 5,000 ft Runway Pavement Lighting Markings Taxiway Pavement Lighting Markings Option #2 – 3,200 ft Runway Pavement Lighting Markings Taxiway Pavement Lighting Markings
Amount
Units
Cost/Unit
Total Cost
375,000 10,000 375,000
SF LF SF
$10.00 $20.00 $1.50
$3,750,000 $200,000 $562,500
252,000 10,000 252,000
SF LF SF
$10.00 $20.00 $1.50 Total
$2,520,000 $200,000 $378,000 $7,610,500
232,500 6,400 232,500
SF LF SF
$10.00 $20.00 $1.50
$2,325,000 $128,000 $348,750
84,000 6,400 84,000
SF LF SF
$10.00 $20.00 $1.50 Total
$840,000 $128,000 $126,000 $3,895,750
Source: RAWA Consultant Team
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West Side Development There is approximately 200 acres of open land on the west side of the existing airport property, a portion of which would be reserved for the parallel runway as discussed above. An additional 150 acres are also available for potential acquisition for a total of 350 acres for development. However, beyond the runway, there is still ample land available for additional development. This land could be used for both aviation and non-aviation development as shown in Figure 5 – Potential Long-Term Development. Non-aviation development at DTO must ultimately conform to the City’s land use plan and be compatible with surrounding uses and the operation of the Airport. Additionally, it is anticipated that the proposed Loop 288 Roadway along with appropriate utilities will attract businesses to the area. While construction of this section of Loop 288 is still five to ten years away, thoughtful planning of the timing / phasing and financing of such development should be considered now. The development illustrated on Figure 5 includes a conceptual airport business park, composed of two distinct sections. Immediately west of the potential parallel runway, is a 100 acres area suggested to be reserved for additional airport-related facilities. This area can accommodate virtually any type of airport user, including major corporate flight departments, maintenance facilities, and specialty services. The illustration depicts an assortment of large hangars, aprons, offices, roadways, and vehicle parking along a new 5,000-foot long parallel taxiway, sized for Airplane Design Group III (e.g., Boeing Business Jets). For comparison, this area is similar in size and capacity to the existing development area on the east side of the Airport. In addition to the airport-related development, the concept also illustrates a potential 50 acre business and industrial park, with instant access to the Airport, adjacent to the Loop 288 highway corridor. With some land acquisition to the north and west, the business park could be expanded to 100 acres, and would be bounded by the Dry Fork Creek to the north and Hickory Creek to the south. As the area is generally level and undeveloped, there are few impediments to future development, with the exception of a few existing gas well locations. However, initial development would require investment (whether public or private) to foster implementation of the concept. Although, the actual costs cannot be projected prior to specific site planning, the table below provides some order of magnitude costs for initial public infrastructure. Note that concept assumes that proposed Loop 288 is constructed, and includes utility rights-of-way and the extension of municipal sewer and water. The conceptual costs below are for public infrastructure improvements located on Airport property. All buildings and associated facilities would be at the expense of the developers or tenants.
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Table 6 – West Side Development Potential Infrastructure Cost Airside Taxiway Includes Pavement, Lighting, and Markings Apron Main Apron Design & Contingency
Landside Access Road Includes Pavement, & Markings Lighting Utilities Sewer Water Design & Contingency
Amount
Units
Cost/Unit
Total Cost
6,000
LF
$700.00
$4,200,000
300,000
SF $16.00 25% of cost Subtotal Estimate
6,000 6,000 6,000 6,000
LF LF
$300.00 $50.00
LF $110.00 LF $110.00 25% of cost Subtotal Estimate Total
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$4,800,000 $2,250,000 $11,250,000
$1,800,000 $300,000 $660,000 $660,000 $855,000 $4,275,000 $15,525,000
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3.5
October 2010
Funding Options
The ACIP lists the recommended projects and associated cost estimates for the 20-year planning period. The local, state, and federal governmental agencies utilize the ACIP as a reference document for future funding. The main source of funding for many airports is grants through the FAA’s Airport Improvement Project (AIP). Texas is designated as one of ten states in the U.S. that serves as a “block grant state.” As such, TxDOT acts, by law, as the agent for political subdivisions for the purpose of applying for, receiving, and disbursing federal funds for GA airports. TxDOT also funds 50 percent of non-federal airfield maintenance projects up to a maximum participation amount of $50,000. Improvements related to enhancing airport safety, capacity, security, and environmental concerns are eligible through the AIP program. Typical AIP eligible projects include: airport master plans and airport layout plans; land acquisition and site preparation; airfield pavements, e.g. runways, taxiways, and transient aprons; lighting and navigational aids; safety, security, and snow removal equipment; selected passenger terminal facilities; and obstruction identification and removal. In addition, some revenue producing projects can be funded from an airport’s entitlement grants if there are no runway or safety projects at that airport. These items can include hangars, fueling facilities, automobile parking facilities, private use areas of terminal facilities, and other revenue generating facilities. Highest funding priority according to FAA’s rating procedure is generally offered those projects that are safety related such as obstruction removal, runway safety area improvements, and facility improvements to meet current FAA Airport Design Standards. There are several other requirements to obtain AIP funding and include items such as:
Project Must Be Reasonably Consistent With Regional Plans Project Is Included on the Most Current FAA Approved Airport Layout Plan Sufficient Funds Available to Pay the Non-Federal Share
As Texas is a block grant state, TxDOT has developed the Texas Airport System Plan (TASP) which includes all the airports from the FAA’s National Plan of Integrated Airport Systems (NPIAS) along which a few additional airports it deems necessary for the system. There are additional goals beyond the FAA’s AIP program and include:
Scheduled Air Carrier Service Within a 60-Minute Drive for All Residents Business Jet Aircraft Access Within 30-Minute Drive of Significant Population or Mineral Resource Centers Light Piston-Engine Aircraft Access Within 30-Minute Drive of Agricultural Centers
The goals of the federal and state plans are combined by TxDOT in the following order for project funding priority: 1. Safety 2. Preservation 3. Standards
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4. 5. 6. 7.
October 2010
Upgrade Capacity New Access New Capacity
Texas is one of only three states in the country that does not have a state tax on aviation fuel, nor does it have any other dedicated source of funds for airport development. Historically, state funds for matching 50 percent of the sponsor share of federal airport grants have come from “Fund Six”, the state’s transportation fund which is funded primarily through an excise tax on gasoline. For the past three years, the state’s aviation funding has been $16 million annually. There is a proposal to redirect the existing state sales tax on aviation and air transportationrelated goods and services that currently go into the state’s general fund into a dedicated fund to provide additional revenues for airport projects. The primary advantage to this proposal is airports would receive additional funding without requiring new taxes. The formation of public/private partnerships is another emerging trend for GA airports. In today’s economy, businesses require more than a parcel of land or a building from which to operate in order to realize their success. Many state and local governments across the country offer corporate incentives in an effort to attract businesses and promote economic development within their communities. Whether they are companies just starting their business or wellestablished enterprises looking to relocate, these incentives provide excellent opportunities to evaluate and compare multiple sites and seek out the locations that offer the most benefits (see Appendix D). It is here that owners of GA airports may find methods in addition to traditional incentives such as low interest loans and temporary tax abatement, to entice economic development. Public/private partnerships are sometimes created as a means to provide a mutually beneficial financial relationship between a private entity and a local government. The community wins by gaining the positive (and often substantial) economic impact generated by the business. The business wins by gaining previously inaccessible assistance, and the local government wins by gaining additional revenues and/or reducing its cost for the project. DTO is uniquely positioned to use gas well royalty, which must be used exclusively for on-Airport expenditures, to fund public participation in projects that increase annual revenue for the Airport. 3.6
Market Analysis
To understand the revenue-producing potential of DTO, it is important to evaluate the economic forces at play in the existing market. The interaction of customers in the market with existing offerings of aviation products and services determines prices, and can guide the Airport in finding a unique position in the market that can produce revenue. In addition to assessing the condition of the existing market in the Dallas/Fort Worth region, there is also some undetermined amount of potential new customers (e.g. based aircraft or itinerant users), should the Airport find the right balance of product/service, price, and value to offer the market. The ultimate goal of DTO is to become an economic development hub by capturing an increased share of both the existing customer market and a share of the natural regional growth of general aviation demand in the Dallas/Fort Worth market. R.A. Wiedemann & Associates, Inc. in association with CHA, Inc.
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Airport Market Area For the purpose of this Business Plan, the existing geographic market of DTO is defined by a 30–nautical-mile ring centered on the airport, which includes the north-central portion of the Dallas/Fort Worth Metroplex. While there is no hard rule that sets these boundaries, particularly in a large metropolitan region, this geographic area represents the target market from which the Airport is likely to draw users and activity that will assist in driving revenue growth. It is unlikely that DTO would be competing with airports in the southwestern portion of the region for based aircraft and activity due to regional factors such as vehicle congestion/travel time and the ability for these airports to fulfill the needs of their tenants. It should be noted that transient activity at DTO originates in many other regions of the country. Figure 6 illustrates the general market area of the Airport and includes other nearby public-use airports. Market Area Airport Facilities Within the geographic service area for DTO, there are a number of other public-use airports, which provide a range of general aviation services, and likely compete with DTO for activity and users. While there may be other large airports in the Metro area that compete with DTO for corporate aviation facilities and services, a 30-mile geographic area was considered inclusive of most, since locational convenience is one factor used in selecting a home-base airport. For this Business Plan, there were several potential airports considered as competing facilities. These airports include, but are not limited to:
Addison (ADS) Aero Country (T31) Airpark-Dallas (F69) Collin County (TKI) Gainesville (GLE) Hicks Airfield (T67) Lakeview (30F) North Texas Regional (GYI) FW Alliance (AFW) FW Meacham (FTW) Northwest Regional (52F)
The location of these facilities can be seen in Figure 6. Although general aviation airports with smaller runways were included in the above list (52F, 30F, F69, T31, T67), airports within the market service area with less than 59 based aircraft or without paved runways were not included as competitors to DTO in this analysis. Tables 9 and 10 present information regarding the facilities and services offered by these airports for comparison purposes.
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Denton Airport
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The majority of the airports shown on the map northwest of DTO are smaller and privately-owned; thus, not likely competitors. A few airports to the south and east, such as Aero Country, Lakeview and Airpark-Dallas, appear to be used mainly for recreational traffic and offer very few services. These airports have almost no multi-engine based aircraft or jets. As DTO is focused on providing business activity and flight training, these airports were not used as competing facilities even though they are in proximity to DTO. As indicated, airports within the DTO market area offer a range of options to general aviation users. Highlights of the comparison are shown in Table 7 below. Table 7 – Airport Comparison Highlights Longest Runway Fort Worth Alliance Largest Airfield Gainesville Most Based Aircraft Northwest Regional Most Based Jets Addison Most Based Multi-Engine Aircraft Addison Least Based Aircraft Gainesville
Other Airports
Denton Airport
9,600 feet
5,999 feet
1,336 acres
716 acres
612
179
199
10
88
29
59
170
Comparisons to other airports must be qualified due to the specific characteristics of the region. Addison (ADS), Fort Worth Alliance (AFW), and Fort Worth Meacham (FTW) are also reliever airports to DFW, but are significantly closer to downtown Dallas and Fort Worth than DTO. They have the highest levels of based aircraft and longer runways. They also have a higher percentage of jets in their based aircraft mix. As shown in Table 10, DTO has six percent of all based jets, while ADS has 36 percent and FTW has 32 percent. This suggests that jet aircraft operators have a high desirability to access the central business districts of Dallas and Fort Worth. Table 8 also shows that regionally, a tower and higher approach capabilities do not necessarily mean a higher percentage of based jets. It should be noted, however, the airports without these services do not have any based jets. Table 8 - Based Aircraft Mix Comparison Total Based Aircraft
Jet % of Total
ME % of Total
SE + Other % of Total
NAVAID
Tower
Denton Municipal (DTO)
179
6%
16%
78%
ILS
Yes
Addison (ADS)
545
37%
16%
47%
ILS
Yes
Aero Country (T31)
90
0%
11%
89%
-
No
Collin County (TKI)
206
5%
17%
78%
ILS
Yes
Gainesville (GLE)
59
5%
20%
75%
LPV
No
Airport
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Table 8 - Based Aircraft Mix Comparison Total Based Aircraft
Jet % of Total
ME % of Total
SE + Other % of Total
NAVAID
Tower
Hicks Airfield (T67)
321
0%
6%
94%
-
No
North Texas Regional (GYI)
161
12%
11%
77%
ILS
Yes
Airpark - Dallas (F69)
68
0%
1%
99%
-
No
FW Alliance (AFW)
107
23%
25%
51%
ILS
Yes
FW Meacham (FTW)
198
32%
23%
44%
ILS
Yes
Lakeview (30F)
63
0%
0%
100%
-
No
Northwest Regional (52F)
612
0%
10%
90%
-
No
Airport
The prices of 100LL at these airports are at the higher end of the range, but not significantly higher for Jet-A, suggesting that these airports are attempting to promote business activity and discourage recreational traffic. If regional growth patterns continue, it is only a matter of time before communities in traditionally suburban areas of the region expand into active and competitive business markets. As growth does occur, DTO will likely find itself in an improved position to attract additional corporate market share. There are several privately-owned airports that are open to the public. Many of these airports operate as such in order to preserve the surrounding airspace from obstructions and encroachment. Hicks Airfield has over 321 based aircraft and offers charter service. The fuel rates at Hicks are at the lower end of the range, which may attribute to the large number of aircraft. However, in terms of business activity, Hicks Airfield has a relatively short runway, does not offer Jet-A fuel, and has zero based jets. Therefore, the likelihood that Hicks will compete with DTO for business activity is low. Market Area General Aviation Services General aviation services available at area airports include airframe repairs, avionics, power plant repairs, flight instruction, rental and sales, and charter, and were shown in Table 10. DTO appears to offer comparable, if not better, services than other airports within the region. Fort Worth Meacham and Addison airports are the only two other airports to provide the same level of services recorded by the FAA’s 5010 Master Record. DTO also offers a paint shop, interior refurbishment, and a foreign trade zone (FTZ). Other FTZ’s are located at Dallas/Fort Worth International and Fort Worth Alliance. Market Area Rates and Charges As indicated in Table 11, prices for 100LL in August of 2009 were found to be as low as $3.25 per gallon at North Texas Regional, and as high as $6.09 per gallon at Addison. Jet A was $2.80 at Gainesville, and $4.95 at Addison. From this analysis, it appears that airports closer to downtown Dallas and Fort Worth have higher fuel prices.
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A telephone survey to FBOs and airport managers/owners was conducted to determine the rates for aircraft storage, including tie-downs, T-hangars, and conventional hangars. Rates for daily tie-downs range from no cost at DTO and Gainesville to $20 at Fort Worth Alliance (for 12,500lbs and under). Fort Worth Alliance and Fort Worth Meacham rates vary based upon aircraft weight. At DTO the monthly tie-down fee is $40, while at Alliance it is $300. T-hangars at DTO range from $180 to $250 depending upon the type of aircraft, size of hangar space, and number of other aircraft in the hangar. According to the FBOs contacted, community space is available in a conventional hangar at DTO, Fort Worth Alliance and Fort Worth Meacham, and North Texas Regional, but individual conventional hangars are not. Gainesville offers a $0.05 discount on fuel on the weekends for basing the aircraft in one of their hangars. Market Analysis Summary Overall, DTO is in the mid-range for fuel prices and is on the lower end for aircraft storage rates. DTO should market the wide variety of services and facilities it provides. It has a business jet capable runway system with precision approach, ATCT, and highly qualified FBO service providers. In particular, it is a key aviation provider for aviation demand in the northcentral Dallas/Fort Worth region.
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Table 9 - Airport Facility Comparison Based Aircraft
Runway
Jet
ME
SE
Helicopter
UltraLight
Total
First
Second
NAVAID (Highest)
Tower
716
10
29
131
7
2
179
5,999
-
ILS
Yes
Public
368
199
88
258
18
0
545
7,202
-
ILS
Yes
Aero Country (T31)
Private
36
0
10
80
4
3
90
4,305
-
-
No
Collin County (TKI)
Public
661
11
35
160
2
0
206
7,001
-
ILS
Yes
Gainesville (GLE)
Public
1,336
3
12
44
4
1
59
6,000
4,296
LPV
No
Hicks Airfield (T67) North Texas Regional (GYI)
Private
77
0
19
302
3
3
321
3,740
-
-
No
Public
1,410
19
18
124
6
2
161
9,000
2,300
ILS
Yes
Airpark – Dallas (F69)
Private
85
0
1
67
1
1
68
3,080
-
-
No
FW Alliance (AFW)
Public
1,198
25
27
55
48
0
107
9,600
8,220
ILS
Yes
FW Meacham (FTW)
Public
745
64
46
88
17
0
198
7,501
ILS
Yes
Lakeview (30F)
Public
15
0
0
63
0
1
63
2,815
-
No
0
62
550
4
0
612
3,500
4,006 2,600 (Turf) -
-
No
Airport
Ownership
Acreage
Denton Municipal (DTO)
Public
Addison (ADS)
Public 81 Northwest Regional (52F) ME = Multi-engine, SE = Single engine, Heli = Helicopter Source: Airport Master Record (July 2, 2009)
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Table 10 - Airport Service Comparison Frame Repairs Major
Power Repairs Major
Flight Instruction X
Charter Service X
Addison (ADS)
Major
Major
X
X
Aero Country (T31)
Major
Major
X
Collin County (TKI)
Major
Major
X
Gainesville (GLE)
Major
Major
X
Hicks Airfield (T67)
Major
Major
X
North Texas (GYI)
Major
Major
X
Airpark – Dallas (F69)
Major
Major
FW Alliance (AFW) FW Meacham (FTW)
Major
Major
Lakeview (30F)
Major Major
Major Major
X X
Northwest Regional (52F)
Major
Major
X
Airport Denton Municipal (DTO)
X
Aircraft Sales X
Aircraft Rentals X
X
X
X
Avionics
X
Other Aerial Survey
X X
X
X
Agriculture
X
X X
X
X
Cargo
Ambulance & Survey
X
X X
X
X
Source: Airport Master Record (July 2, 2009)
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Table 11 - Airport Rates and Charges Price Comparison Fuel ($/gallon) Airport
Avgas/
Tie-Down
Hangars
Jet A
Daily
Monthly
T-Hangar
Conventional
Self-Serve $3.80
$4.34
Free
$40
$180-300
$300+3
Addison (ADS)1
$6.09
$4.95
$15
$125
$335-650
-
Collin County (TKI)
$5.39
$4.89
-
$75
$420-650
$1,000
Gainesville (GLE)
$3.55
$2.80
Free
Free
$100-195
-
Hicks Airfield (T67)2
$3.56
-
North Texas Regional (GYI)
$3.25
$3.25
Free
$40-100
$195-300
$9003
FW Alliance (AFW)
$5.55
$4.65
$20
$300
$300
$3033
FW Meacham (FTW)
$5.45
$4.55
$8
$120
$300
$3033
-
-
$150-3504
-
Denton (DTO)
Northwest Regional (52F) $3.65 Storage Rate Source: Airport Surveys conducted August/September 2009. Fuel Price Source: Airnav.com, Retrieved 8/26/2009 1. New rates may go into effect October 1, 2009. 2. No response was received regarding aircraft storage rates. 3. Only community space is available in box hangars thru the FBO. 4. All hangars are owned by private individuals.
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4.
October 2010
BASELINE FINANCIAL AND ECONOMIC OUTLOOK
T
attributable to Denton Municipal Airport and projects those revenues and expenses to the year 2018. This projection only considers a baseline scenario with no revenue enhancement projects included. In a later section, alternative projections of financial performance will be developed based upon revenue enhancement initiatives and marketing pro-formas. In order to properly frame these financial statements, this section is organized to present the following: HIS SECTION IDENTIFIES HISTORICAL REVENUES AND EXPENSES
● ● 4.1
Historical Revenues and Expenses Baseline Forecast of Revenues and Expenses
Historical Revenues and Expenses
Table 12 shows the historical revenues and expenses for FY 2006 through FY 2008 as well as the budget for FY 2009. This information was taken from the statements of revenues and expenses for Denton Airport provided by Airport management. Many of the revenue and cost categories represent aggregated totals of several accounting sub-categories. Revenues from Airport operations are derived from the following:
Airport Lease Revenues: Lease revenue is earned from over 30 corporate/conventional hangars and 12 T-hangar facilities at the Airport. Aircraft Storage (Tie-downs): The Airport has a paved aircraft parking apron that has approximately 60 tie-downs for itinerant and based aircraft use. Airport FBO Commissions: These revenues come from a percentage of revenue from the FBOs, as well as fuel flowage fees for fuel facilities. Agricultural Lease: Revenues from agricultural leases of land on the west side of the Airport. Fees and Fines: Revenues include assignment fees, photo shoots, and late fees. Airport Miscellaneous Revenues: This category captures all revenue that is not attributable to the other categories. Airport Operating Expenses were made up of the following cost items:
Personal Services: This includes salary and benefit costs of Airport workers. Materials and Supplies: This category includes such things as office/building supplies, postage, and uniform expenses. Maintenance and Repair: Includes machinery and equipment, buildings and equipment, radio equipment, and sidewalks and grounds maintenance and fuel. Insurance: Includes the commercial insurance premiums and self insurance premiums for the Airport. Miscellaneous: This includes the Airport Advisory Board expenses as well as other miscellaneous expenses.
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Operations Expense: The Operations Expense category involves the cost of day-to-day operations at the Airport, including utilities expense, training, vehicle operations, dues and fees, office expenses, etc. Indirect Allocation: The Indirect Allocation includes the portion of general overhead costs of the City of Denton that are allocated to the Airport. Interfund Transfers: These are transfers to other City Funds for services rendered to the Airport.
Not included in these operating income and expense statements are the annual contributions to the Airport from the City and State for capital development grants. Those contributions are not considered operating revenues by this analysis. Rather, this analysis is geared to identify the direct revenue producing ability of the Airport, along with its direct operating costs. In this regard, revenues from gas wells are considered non-operating since they are not generated by aviation activity. However, they do impact the total revenues generated for the Airport. As such, any surplus revenues can be applied to non-operating costs such as capital development, debt service, etc. Thus, for presentation purposes, the non-operating revenues and expenses are shown at the end of Table 12 to reflect the overall financial picture of the Airport. Table 12 - Historical Revenues and Expenses Operating Revenue:
FY 2005-2006
FY 2006-2007
FY 2007-2008
FY 2008-2009
Airport Lease Revenues
$202,318
$218,325
$257,639
$292,750
Aircraft Storage (Tie-Downs)
$8,614.68
$8,702
$8,789
$8,877
Fuel Flowage Fees & FBO Commissions
$120,426
$138,231
$222,769
$176,483
Agricultural Lease
$5,072.48
$5,176
$5,280
$5,385
$2,190
$3,750
$0
$1,000
$166.74
$11,572.85
$10,994.76
$8,179.29
$338,788
$385,721
$505,470
$492,674
Fines and Fees Airport Miscellaneous Revenues Total Operating Revenues
Operating Expenses: Personal Services
FY 2005-2006
FY 2006-2007
FY 2007-2008
FY 2008-2009
$272,632
$323,169
$223,118
$277,561
$5,022
$8,212
$6,850
$8,800
Maintenance and Repair
$17,286
$21,492
$20,486
$58,533
Insurance
$25,863
$19,580
$18,011
$17,350
$1,156
$1,345
$1,257
$1,200
Operations
$126,261
$167,947
$161,708
$142,773
Indirect Allocation
$230,712
$240,325
$327,858
$340,972
Materials and Supplies
Miscellaneous
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Table 12 - Historical Revenues and Expenses Operating Revenue: Interfund Transfers Total Operating Expenses Net Operating Revenues/Expenses Non-Operating Revenues
FY 2005-2006
FY 2006-2007
FY 2007-2008
FY 2008-2009
$44,596
$34,700
$43,901
$27,550
$723,528
$816,769
$803,189
$874,739
($384,739)
($431,012)
($297,719)
($382,065)
FY 2005-2006
Gas Well Revenue
FY 2006-2007
FY 2007-2008
FY 2008-2009
$1,152,785
$817,347
$1,732,414
$67,586
$71,143
$74,700
Cost of Debt
($204,282)
($200,992)
CIP Local Funding
($765,000)
($410,837)
$1,220,371
($80,792)
$1,195,285
$789,359
($378,511)
$813,219
Airport Property Tax Revenue Non-Operating Expenses
Net Non-Operating Revenues/Expenses Total Net Revenues/Expenses
($384,739)
For purposes of the business plan, the ability of the Airport to generate revenues and cover operating costs is the primary concern. From the historical information, Total Operating Expenses grew by an average of 6.5 percent per year from FY 2006 to FY 2009 largely due to increased maintenance and indirect allocation costs. The increased costs are associated in part with the new terminal building, new taxiway, and enhanced grounds maintenance. Operating income has increased by 13.3 percent per year. This is a due to an increase of FBO Commissions due to increases in flight training and fuel sales. The net operating revenues and expenses deficit has fluctuated each year but has decreased in FY 2009 by $2,000 dollars compared to FY 2006. Of significance is the impact of gas well revenue, which can be used to fund capital and other projects at the Airport. This revenue source has a finite lifespan and as such, should be used in a manner that creates revenue producing facilities that diversify income production at the Airport. It is against this historical backdrop that the baseline forecast of revenues for Denton Municipal Airport is presented. It should be noted that most public-use general aviation airports in the United States do not cover annual direct expenses with revenues and thus become subsidized by their owners/sponsors. From this perspective, it appears that DTO has benefited significantly from the increases in activity and gas well production since FY 2005-2006. 4.2
Baseline Forecast of Revenues and Expenses
This baseline forecast presents a status quo look at revenues and expenses, influenced primarily by historical activity. It does not consider all of the potential changes at the Airport that might occur through the implementation of this Business Plan or in the City of Denton’s economy that might change the historical trend. To determine the historical trend, the percent
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increase from the fiscal year 2006 to the fiscal year 2009 was examined to find the average percent change in revenues and expenses. Thus, any major fluctuation during any one year did not unduly affect the overall trend. The history of non-operating revenues and expenses was not used to determine the forecast for the planning period. Airport management provided the nonoperating revenue and expense schedules anticipated for the planning period. These will be verified to the extent possible, later in this plan. In order to show a conservative baseline forecast, a number of assumptions were used about the growth of individual line items in the budget. In this regard, the following growth rates were assumed:
The future rate of price inflation was assumed to mirror the Consumer Price Index (CPI), and was estimated at 4 percent per year. Tie-down fees were grown by 1 percent per year to reflect the historically slow growth of pricing of these services. Agricultural Lease was grown by 2 percent per year, also because of the history of slow growth. Lease Revenues, FBO Commissions and Miscellaneous categories were grown by the rate of CPI or 4 percent annually. Maintenance and Repair Expense was taken from a list of maintenance projects and costs that Airport management submitted, which include costs associated with the new runway and taxiway extensions. All other expenses were increased at the rate of CPI.
As shown, baseline operating revenues are anticipated to grow from $459,359 in FY 2009 to $644,069 by the fiscal year 2018 - an average yearly increase of 3.8 percent and an overall increase of 40.2 percent for the period. Baseline operating expenses, on the other hand, are expected to increase from $457,011 in FY 2009 to $843,985 by the fiscal year 2018 – an average yearly increase of 7.1 percent and an overall increase of 84.7 percent for the period. In addition to operating revenues and expenses, there are non-operating revenues and expenses. These non-operating accounts include the revenues from the gas wells and the expenses associated with debt service and capital expenditures. Any operating deficits from the Airport are taken directly from the gas well fund. Thus, the operating pro forma for the Baseline scenario has its primary impact on the gas well fund balance, which is anticipated to grow by $8.7 million over the period.
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Table 13 - Denton Airport Baseline Financial Pro Forma Baseline Pro Forma Operating Revenue Airport Lease Revenues Aircraft Storage (Tie-Downs) Airport FBO Commissions Agricultural Lease Fees and Fines Airport Miscellaneous Revenues Total Operating Revenue
FY 2009 $276,664 $8,877 $165,603 $5,385 $2,750 $80 $459,359
FY 2010 $287,731 $8,966 $168,228 $5,493 $2,860
FY 2011 $299,240 $9,055 $174,957 $5,603 $2,974
FY 2012 $311,210 $9,146 $181,955 $5,715 $3,093
FY 2013 $323,658 $9,237 $189,233 $5,829 $3,217
FY 2014 $336,604 $9,330 $196,803 $5,946 $3,346
FY 2015 $350,069 $9,423 $204,675 $6,065 $3,480
FY 2016 $364,071 $9,517 $212,862 $6,186 $3,619
FY 2017 $378,634 $9,613 $221,376 $6,310 $3,764
$473,277
$491,829
$511,119
$531,175
$552,028
$573,711
$596,255
$619,696
FY 2018 $393,780 $9,709 $230,231 $6,436 $3,914 $0 $644,069
Operating Expenses Personal Services Materials and supplies Maintenance and Repair Insurance Miscellaneous Interfund Transfers Operations Total Operating Expenses
FY 2009 $241,025 $5,909 $20,103 $17,350 $1,720 $27,550 $143,355 $457,011
FY 2010 $250,666 $6,146 $94,990 $18,044 $1,788 $39,194 $149,089 $559,917
FY 2011 $260,693 $6,391 $159,114 $18,766 $1,860 $40,762 $155,053 $642,638
FY 2012 $271,120 $6,647 $159,844 $19,516 $1,934 $42,392 $161,255 $662,709
FY 2013 $281,965 $6,913 $173,857 $20,297 $2,012 $44,088 $167,705 $696,837
FY 2014 $293,244 $7,189 $205,359 $21,109 $2,092 $45,852 $174,413 $749,258
FY 2015 $304,973 $7,477 $324,767 $21,953 $2,176 $47,686 $181,390 $890,422
FY 2016 $317,172 $7,776 $294,707 $22,831 $2,263 $49,593 $188,645 $882,988
FY 2017 $329,859 $8,087 $248,965 $23,745 $2,353 $51,577 $196,191 $860,777
FY 2018 $343,054 $8,411 $207,700 $24,694 $2,447 $53,640 $204,039 $843,985
($86,640)
($150,809)
($151,590)
($165,662)
($197,230)
($316,711)
($286,733)
($241,081)
($199,916)
Net Operating Revenues Non-Operating Revenue/Expenses Non-Operating Revenue Gas Well Royalty Gas Well Surface Lease Total Non-Operating Revenue Non-Operating Expenses Debt Service CIP Local Funding Total Non-Operating Expenses Net Non-Operating Income/Expenses
$2,348 FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
$1,692,684 $39,730 $1,732,414
$3,003,827 $29,445 $3,033,272
$2,700,499 $29,445 $2,729,944
$2,236,152 $31,848 $2,268,000
$1,952,652 $31,848 $1,984,500
$1,666,554 $34,446 $1,701,000
$1,383,054 $34,446 $1,417,500
$1,096,743 $37,257 $1,134,000
$812,743 $37,257 $850,000
$526,702 $40,298 $567,000
$200,992 $410,837 $611,829
$188,021 $2,060,000 $2,248,021
$185,013 $474,000 $659,013
$186,019 $310,000 $496,019
$182,113 $368,000 $550,113
$142,862 $146,000 $288,862
$118,088 $70,000 $188,088
$121,603 $65,000 $186,603
$120,059 $140,000 $260,059
$120,000 $145,600 $265,600
$1,120,585
$785,251
$2,070,931
$1,771,981
$1,434,387
$1,412,138
$1,229,412
$947,397
$589,941
$301,400
Total Net Revenues/(Expenses)
$1,122,933
$698,611
$1,920,122
$1,620,391
$1,268,725
$1,214,908
$912,701
$660,664
$348,860
$101,484
Gas Well Balance
$7,000,000
$7,698,611
$11,239,124
$12,507,849
$13,722,757
$9,618,733
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$14,635,458
$15,296,122
$15,644,981
$15,746,465
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When the baseline operational costs are compared with the baseline forecasts of operational revenues, the net operating costs for the Airport can be predicted as follows: Table 14 - Baseline Net Operating Income/(Deficit) Year
Operating Expense
Operating Revenues
Net Operating Income/(Deficit)
2009 2010 2011 2012 2013
$457,000 $559,900 $642,600 $662,700 $696,800
$459,400 $473,300 $491,800 $511,100 $531,200
$2,400 ($86,600) ($150,800) ($151,600) ($165,600)
2014
$749,300
$552,000
($197,300)
2015
$890,400
$573,700
($316,700)
2016
$883,000
$596,300
($286,700)
2017
$860,800
$619,700
($241,100)
2018
$844,000
$644,100
($199,900)
From Table 14, the net operating deficit is anticipated to grow from -$86,600 in 2010 to $199,900 by the year 2018 - a 9.7 percent per year increase. Cumulative net operating revenues for the period total -$1,793,900. However, non-operating revenues currently work to offset these deficits. When considering both operating and non-operating income, Table 15 shows the effects of gas well revenue and property taxes on total net revenues. Cumulative net revenues for the forecast of total revenues and expenses (including non-operating income and costs) are anticipated to reach +$9,869,500 through 2018. Thus, the favorable airport revenue forecast is made possible by gas well revenue, which has a finite life. Table 15 – Total Net Income for Baseline Projections Net Non-Operating Income/(Deficit) $1,120,600 $785,300 $2,070,900 $1,772,000 $1,434,400
Year
Net Operating Income/(Deficit)
2009 2010 2011 2012 2013
$2,400 ($86,600) ($150,800) ($151,600) ($165,600)
2014
($197,300)
$1,412,100
$1,214,800
2015
($316,700)
$1,229,400
$912,700
2016
($286,700)
$947,400
$660,700
2017
($241,100)
$589,900
$348,800
2018
($199,900)
$301,400
$101,500
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Total Net Income/(Deficit) $1,123,000 $698,700 $1,920,100 $1,620,400 $1,268,800
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Denton Municipal Airport Business Plan
5.
October 2010
BUSINESS PLAN ALTERNATIVES
S
EVERAL BUSINESS PLAN ALTERNATIVES WERE IDENTIFIED, ANALYZED,
and compared based on their ability to improve the financial performance of Denton Municipal Airport. The ultimate goal of the alternatives’ analysis for the Airport is to provide the City with sufficient information to make informed decisions concerning airport operating practices and capital improvement spending. In addition, the long-term financial viability of the Airport is a significant part of this analysis. Thus, any increases in operating revenues that result from a selected plan can then be used to cover the Airport’s operating expenses, pay for portions of the local share of capital development projects, finance additional terminal services, or provide for other needs at the Airport. In order to present these alternatives, this section is organized to include the following: ● ● ● ● ● 5.1
Industry Trends Impacting Denton Airport Analysis Area-wide Factors Supporting Growth and Development of the Airport Obstacles to Airport Performance and Goal Attainment Revenue Enhancement Impact of Revenue Enhancement Strategies on Potential Demand
Industry Trends Impacting Denton Airport Analysis
There are at least three industry trends that impact the analysis and recommendations of this business plan: ● ● ●
Growth in Airport Operations Cost of New Hangar Development Cost of Fuel
Airport Operational Count Estimates In total, 146,000 annual aircraft operations were conducted at DTO in 2009. These annual ATCT counts do not include activity that takes place when the tower is not operational. With training operations now taking place 24 hours per day, it can be expected that the Airport will have as much as 30,000 more actual operations than those recorded by the ATCT. This is significantly higher than the 2009 TAF forecast of 119,081 and exceeds both the Airport Master Plan forecast for 2011, and the FAA forecast for 2014. Impacts of high operational levels to this plan are significant in that the business strategies must be adapted to this new reality. New thinking spurred by the higher operational estimates includes the following strategic considerations: ● ●
With operations approaching 200,000 annually, there is a need to consider a parallel runway for capacity purposes and to segregate itinerant from training operations. Hours of operation for the FAA Air Traffic Control Tower were recently expanded from the former 12-hour shift (8:00 a.m. to 8:00 p.m.) to the expanded
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16-hour shift (6:00 a.m. to 10:00 p.m.) in the FY 2010 budget and should take effect this year. Cost of New Hangar Development Between 2007 and 2009, hangar development costs have soared with increases in the price of steel and energy. Reports of T-hangars costing as much as $100,000 per individual unit (including site preparation) are becoming common. When these costs are translated into 20-year payoffs toward debt service, monthly rentals of more than $650 must be charged. Such rents/prices are approaching the market ceiling for hangar rentals. As mentioned later in this plan, the financial feasibility of hangar construction may require the use of grant money in the public sector or private developers using land leases and pre-engineered buildings. Options for these development possibilities are outlined in the pro formas presented in Section 6. Cost of Fuel A spike in the cost of Avgas and Jet A fuel in 2008 created a significant downturn in the use of general aviation aircraft. Avgas prices in the $5 per gallon range and Jet A prices reaching as high as $7 per gallon at some airports were record breaking at the time. In this regard, it was estimated that general aviation activity was down almost 30 percent in some parts of the nation. In terms of operations, the hardest hit were the personal and training operations, where the cost of flying typically exceeded disposable income for those activities. The least impacted segment of aircraft operations has been corporate and business flying. Much of this activity was maintained through the high fuel price period because businesses can typically pass their air transportation costs along to their customers. Fuel prices per gallon have abated since 2008 and at Denton Airport are $3.68 for self-serve Avgas, $5.24 for full service Avgas, and $4.55 for full service Jet A (October 2009). For the future, prices are likely to increase. With those increases comes the possibility of reductions in operational demand. 5.2
Area-wide Factors Supporting Growth and Development of the Airport
There are a number of factors that now support the potential growth and development of Denton Airport. These factors are briefly described below. Airport Location Regionally, Denton Airport is located north of Dallas and Fort Worth, at the intersection of Interstate Highways 35E and 35W. From city center to city center, Denton is 39 miles from Dallas, and 39 miles from Fort Worth. The population growth in the D/FW metro area is moving north and will likely increase the demand for aviation services in Denton. Locally, Denton Airport is located adjacent to a developing industrial area west of the City. The Airport’s location is considered a strength, given that it has good access to two Interstate Highways and it is far removed from residential housing and other development encroachment. The Airport is located close enough to both Dallas and Fort Worth to serve these communities, yet it is far enough away from D/FW International Airport to have favorable airspace within the Class B airspace environment.
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Gas Well Revenue Estimates Gas well revenue estimates are subject to change, depending upon market prices and the production life of the gas wells on the Airport property. From the Baseline Forecast, it was projected that gas well revenue of $16.6 million would accrue between now and FY 2017. Annual revenues are predicted to grow to a maximum of $2.6 million in 2011 and slowly decline to $1.9 million by 2017. The production curve for these wells is said to decline throughout their 20+ year lifespan. If forecasts of revenues are accurate, the City can look to invest its gas well revenues in capital projects that will provide future revenue streams or needed infrastructure. This source of income is unusual at airports and will significantly benefit any projected growth at DTO. Growth Trends in City of Denton Aviation industry forecasts have linked the growth in economic activity and demographics to the demand for air transportation services. Over the course of the last 10 years, the Dallas/Fort Worth (D/FW) Metropolitan Statistical Area (MSA) has experienced a 29 percent growth in population. In Denton, the growth has been even more pronounced, with a positive change in population of 48 percent since the year 2000. Similarly, employment growth in the D/FW MSA has totaled 14 percent since 2000. In the same period, Denton area employment has grown 42 percent. By all measures, the area is out-performing population and employment growth statistics for the Dallas/Fort Worth MSA and State of Texas as a whole. The growth in per capita personal income (PCPI) in the Denton area has lagged slightly behind the D/FW MSA, growing 19 percent since the year 2000, as compared to 22 percent for the D/FW MSA. Even so, these numbers show a significant and consistent set of growth trends for Denton, relative to its market area. It would seem that there is linkage between the demand for air transportation services and economic and demographic trends, as the actual growth experienced at the Denton Airport from the year 2000 to the present has also been dramatic. Table 16 lists the major employers in Denton, showing the spectrum of large government, educational, and business organizations in the area. Table 16 - Major Employers in the Denton Area Employer
Estimated Number of Employees
University of North Texas (Education)
7,762
Denton Independent School District (Education)
2,948
Frito-Lay Inc. (Manufacturing)
2,050
Texas Woman's University, Denton (Education)
1,586
Denton State School, Denton (MHMR Facility)
1,500
Denton County (County Government)
1,458
Peterbilt Motors, Denton (Diesel Trucks)
1,404
Centex Home Equity Phase I & II (Real Estate)
1,400
City of Denton (Municipality)
1,300
EMC Mortgage Corp. (Finance)
1,000
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Table 16 - Major Employers in the Denton Area Employer
Estimated Number of Employees
Wal-Mart (Distribution Center)
900
Denton Regional Medical Center (Health Care)
800
Thermadyne Holding Corp. (Manufacturing)
751
Presbyterian Hospital of Denton (Health Care)
750
American Building Control (Distribution Center)
710
Trinity Medical Center (Health Care)
700
Household Automotive Finance (Finance)
680
Source: www.dentoncounty.com/dept/main.asp
Denton Plans for Future Development The Denton Comprehensive Plan 1999-2020 was developed in 1999 to guide the next 20 years of development in the City of Denton. It sets the framework for the organization of new development and land uses envisioned by the residents. The Plan emphasizes essential services such as clean water, good roads, and efficient wastewater and stormwater systems. Life issues considered important to the residents include urban design, environmental quality, and parks. The Plan was to be updated every five years in the form of ordinances. The primary goal of the Plan is to “Preserve and retain the qualities that make Denton the unique and prosperous place it is today and to help it develop into an even better city in the future.” The Plan outlines policies for public involvement, land use, urban design, street development, historic preservation, environmental management, economic diversification, housing, schools, and transportation, waste and water services. An implementation plan guides the City by using tools and timeframes to implement sections of the Plan and how to track the progress. The Plan’s goal for the Airport is to “Provide aviation facilities that will integrate with the various coordinated transportation systems.” Strategies include: ● ● ● ● ●
The Airport shall be a key component in the multi-modal transportation system. The Airport is effectively located to optimize the movement of goods and services throughout the Metroplex. Maintain and improve Airport infrastructure to promote additional development through high-quality service and to reduce costly reconstruction. Coordinate with the FAA and State Aviation Division to determine likely funding of proposed airport improvements. Get in queue for runway extension and terminal expansion/reconstruction. Plan active property acquisition to avoid inflated real estate costs. Investigate joint use of low-impact land usage (open space, nature areas, maintenance depots, etc.). Maintain a development pattern consistent with the airport master plan. Work with neighboring and affected property owners to ensure airport consolidated land-use districts (ACLUD) are effective. Maintain integrity of Airport height hazard district and ACLUD.
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● ● ●
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Investigate public-private partnership agreements to assist with infrastructure and facility development. Establish a formal western entranceway into the Airport when Loop 288 is completed to the west side of the airport. Design transportation routes to maximize truck, auto, and aircraft mobility. Since the Airport is located in the industrial center, it will support activities in the movement of goods and services of city businesses.
The City has implemented some of these strategies, but many are still in the works and those are addressed in this Business Plan. Local and State Development Incentives & Programs There are a number of incentives for business development and expansion in the Denton area. These incentives have been developed to spur growth by reducing the costs of expanding or locating to Denton. In this regard, there are a number of tax abatement programs, electric utility cost reductions, infrastructure financing, grants, reduced educational costs, and other benefits for growing companies. The purpose of these programs is to expand economic development in the Denton area, bringing new jobs and a higher standard of living. A side benefit of this economic growth is greater demand for aviation services at the Airport. Appendix D presents a more detailed listing of these state and local incentive programs. Summary of Factors Supporting Growth and Development of the Airport The factors discussed in this section point toward a highly positive environment for continued growth and development in Denton which translate into opportunities for growth at Denton Airport. In fact, growth and development trends in the Dallas/Fort Worth Region, and Denton in particular, are encouraging, as evidenced by growth in population, employment, and income. Additionally, the City has identified the Airport as offering excellent potential for business development and has committed significant financial resources in recent years. All of these factors support a future of growth and development at the Airport. 5.3
Obstacles to Airport Performance and Goal Attainment
In addition to factors that support growth and development of Denton Airport, there are a number of factors that present challenges to such growth. The following briefly identifies these obstacles. ●
Competition with Other North Central Texas Airports: The future success of Denton Airport must be considered in light of other airports in the Dallas/Fort Worth metro area that compete for the local market of general aviation activity. In particular, nearby airports such as Alliance, Addison, and Collin County all are competing for corporate and business jet aircraft. These airports alone account for nearly 860 based aircraft, of which, 235 are jets. DTO success in competing for based aircraft and in filling new or existing hangar space with business and corporate client is enhanced by the Airport making a compelling value
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proposition to the local market to capture activity that may have options at other regional airports. ●
Ground Access to the West Side of the Airport: Once the runway extension is completed, convenient ground access to the west side of the Airport will no longer be available. Development of that Airport property and surrounding land will require adequate access, such as the proposed Loop 288. Without this access, significant development cannot be expected in the near term.
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Land Saturation: Other development around the Airport may threaten DTO’s expansion capability or operational flexibility. There are floodplain issues around the Airport and the east side has only about 25 percent more expansion available on the landside area. Without adequate land for runway expansion, the Airport is limited in what types of aircraft can be served in the future. Similarly, without adequate landside area, the Airport’s operational activity will cease to grow, simply because users have no place to park or store their aircraft at the Airport.
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Class B Airspace: Currently the Class B Airspace surrounding the Dallas/Fort Worth area begins at 4,000 feet above DTO. (Class B airspace resembles an upside down wedding cake.) If greater airspace restrictions are placed on the Airport in the future, it may result in reduced activity levels.
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Other Limitations: As listed in the SWOT analysis, there are a number of other limitations or threats to the continued growth of the Airport, including, but not limited to: Airport Security Tower Personnel Workload Municipal Site Plan Approval Requirements and Associated Delays Potential Conflict Between Training and Corporate Aircraft Operations Potential Future Reductions in Flight Training Contracts General Aviation User Fees in National Legislation Another Significant Downturn in the National Economy Airfield Capacity Constraints Lack of Utilities on the West Side Cole Ranch Residential Development South of DTO All of these factors have the capability to constrain growth and development of the Airport to its fullest potential.
5.4
Revenue Enhancement
Considering the positive factors and obstacles discussed in previous sections along with current activity levels and financial conditions at Denton Airport, there are a number of ways to increase net revenues and improve the long-term financial viability of the Airport. Generally, such strategies can be understood as those which either increase revenues or cut costs. In this section, revenue enhancement strategies are presented that focus on either increasing aviation activity or increasing rental fees. Elements of these strategies include the following: R.A. Wiedemann & Associates, Inc., in association with CHA, Inc.
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Extension of Runway 17-35: The extension of Runway 17-35 to a length of 7,000 feet is an ongoing project that will help the Airport accommodate regional aviation demand. This extended runway length will provide the ability to attract potential specialty air cargo activity, larger business jets for Maintenance/Repair/Overhaul (MRO) activities, and more FAR Part 135 charter activities associated with athletics or vacation travel. During hot summer days, the added 1,000 feet of runway will extend flight stage lengths for some aircraft and permit greater payloads for others. By increasing the size of aircraft that can use the Airport, additional revenues can be generated.
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Addition of a Parallel Runway: The potential addition of a parallel runway on the west side of the Airport would increase the capacity for Denton Airport and permit the separation of training activity from corporate and other aircraft operations. By increasing the capacity, DTO would gain potential to attract more aircraft activity. These activity gains are usually accompanied by increases in fuel sales, aircraft maintenance work, and aircraft storage fees. There are two side benefits of this additional runway. One is an increased margin of safety. The other benefit is a reduction in the financial impact to tenants during scheduled runway maintenance.
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Attraction of Corporate Aviation: The attraction of new corporate aviation activities, including transient operations and based corporate tenants at Denton, can be linked to the provision of corporate and business amenities at the Airport. This would include upscale FBO service, longer runway length, growing business activity in the Denton area, and attractive fee schedules. When successful, new businesses create significant revenue enhancement for airport sponsors. Possible jet tenants could include those currently basing at other regional airports, new jet owners, or companies that manage fractional ownership of business jets. For an average 400-hour flight year, a medium corporate jet can consume between 85,000 and 100,000 gallons of jet fuel (for a Learjet 60 or Citation Excel). Large business jets can use between 180,000 and 200,000 gallons of jet fuel (Gulfstream 550 and Global Express). If only half of this fuel is purchased at the Denton Airport, it could still increase fuel flowage revenues significantly. These benefits do not include the potential aircraft storage fees, maintenance expenditures, or jobs created by new flight crews and maintenance personnel.
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Hangar Development: The attraction of new business aviation users and based corporate flight operations to the Airport can be accelerated through the development of aircraft storage hangars, which also provide additional sources of revenue for the City. Currently, there are 134 T-hangar bays that encompass 155,000 square feet and 38 conventional and box hangars with a total storage capacity of approximately 568,000 square feet. The paved aircraft parking apron has 75 tie-downs for itinerant and based aircraft and is approximately 30,000 square yards. Because of significant recent price inflation, conventional hangars may be more cost-effective to develop because of their flexibility to accommodate
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small aircraft in the near term, and larger aircraft as business/corporate aviation activity increases. Conversely, T-hangars are limited in their ability to accommodate only smaller aircraft. Different methods of funding hangar development are presented in Section 6 of this plan. ●
Airport Branding: Branding is the process of developing a unique identity for a product or service in a given market, which can be defined as both the geographic area and the conceptual space occupied by service providers in competition for customers shopping for such services. In this regard, the development of a unique selling point and identity in the market for Denton Airport can be beneficial to the future growth of the Airport. Currently, the Airport brand is not well defined. In the past five years, the Airport has outgrown its former image of being a relatively inactive municipal airport. Instead, the current level of corporate aviation and pilot training activity at the Airport indicate a change in the image and direction of the facility. From a branding standpoint, this may include a name change for the Airport, new logo, upgraded website, new Airport entranceway, or marketing campaign.
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New or Improved Terminal Services, Amenities, and Activities: This business plan examined a number of existing terminal services, airport amenities, and activities. Services and accompanying facilities that have been suggested include: Airport restaurant, Public transportation to and from the Airport and the City, On-Airport satellite car rental station, Terminal building expansion, with an Automated Teller Machine (ATM) within the terminal building, Convenient hotel near Airport property, U.S. Customs facilities and services that may attract international flights from Mexico and other countries, Also, if corporate activities continue to increase, greater airfield security is needed to assure aircraft owners that their property is safe against vandalism or theft. The Airport could also benefit from a formal entrance that uses a new branded logo, colors, etc., to project the upscale image of the facility. It functions as the gateway to the community for air travelers who use Denton Airport and often helps form their first impressions of the area. As such, it conveys much about the professionalism and image of the City itself.
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Maintain/Increase Training Activity: Because the Airport may become committed to significant training activity (increased staffing of the Tower, FBO commitments for aircraft, hangar space, mechanics, etc.), there is a potential downside to the Airport should future training contracts be cancelled or lost to a competing airport. For this reason, a diversification of flight training clients may be needed to ensure that future activity levels meet expectations. As such, the encouragement of the North Texas University Provost and faculty to include flight training in their new aviation program is warranted.
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Attraction of Specialty FBO(s): The City should be prepared to deal with requests and offers from large specialty FBOs that desire to locate at Denton Municipal Airport. Such companies could include Maintenance/Repair/Overhaul (MRO) operations, specialty engine repair, aircraft manufacturing, or other similar types of operation. Denton is a location where unexpected business ventures can materialize on relatively short notice. Because the Dallas/Fort Worth area is a major economic activity center, aviation businesses desiring to locate in the metro area have a variety of airports from which to choose. As a result, DTO has a significant target market of aviation related business and industry to pursue. There is no accurate method that can predict when opportunities of any size will occur. However, the City should be prepared to take advantage of such proposals. The Potential locations on the east and west sides of the Airport exist for such expansion, however, west side options were not included as near term opportunities.
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Gas Well Revenues: The forecast of revenues from gas wells on the Airport will add to the Airport’s bottom line. However, the spending management for these revenues will be important in helping the Airport to develop revenue producing facilities or needed infrastructure. These funds can also be used strategically to reduce debt and its associated interest expense. FAA Order 5190.6B states that “A sponsor may use its airport revenue to repay funds it contributed to the airport from general accounts or to repay loans from the general account to the airport provided the sponsor makes its request for reimbursement within six (6) years of the date on which it made the contribution (See 49 U.S.C. § 47107(l)).” Thus, historical revenue shortfalls can be recovered from gas well revenues. This may or may not be the best use of these revenues from a strategic investment standpoint.
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Rates & Charges Analysis: One method to potentially increase revenues is to examine rates and charges at the Airport and adjust those to be competitive with the regional market prices. For Denton, the lease rates may be underpriced and could over a period of years be increased to reflect market values. The schedule of fees will be examined to see which ones are impacted by the City and which ones are exclusively controlled by the FBOs. Those that are City controlled can be changed as needed to increase competitiveness or improve revenues. Differing pricing strategies will have a varying influence on overall revenues to the Airport.
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West Side Aviation and Non-Aviation Property Development: At Denton Airport, there are approximately 200 acres of open land on the west side of the existing runway with an additional 150 acres of land that could be acquired for development. Of these, approximately 50+ acres are available for potential nonaviation development. Figure 5, presented in Section 3, shows an ultimate potential development scheme for the west side. Airport property that will not be needed for aeronautical purposes can be developed for non-aviation uses to increase revenue production at the Airport. To obtain land releases from the FAA, the Airport must agree to devote all revenues from that land to the operation or capital improvement of the Airport. Significant development of the Airport’s
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west side was not assumed until after the 2018 timeframe. Thus, revenue production from this source was limited to the east side development for the planning period. For the east side, there is roughly 35 acres remaining of undeveloped property that can be used for either aviation or non-aviation development. 5.5
Impact of Revenue Enhancement Strategies on Potential Demand
The first step in determining the impacts of the revenue enhancement strategies is to predict the change in aviation demand that would occur if each strategy were implemented. Table 17 presents a listing of the potential demand changes along with the assumptions used in estimating demand changes. As shown, if all activity-generating strategies are undertaken, aviation demand could be anticipated to grow by 80 based aircraft and 50,400 aircraft operations by the year 2018. Some of the strategies listed in Table 17 work together and cannot be adequately separated, such as the effects of branding versus other marketing efforts for the attraction of corporate aviation or more training activity. Similarly, the addition of a parallel runway would enhance aircraft training operations and safety by providing an alternate runway for their use. For this reason, some categories were cross-referenced in the demand estimation process. In addition, there are a number of activities that may impact revenues, but will not impact overall aviation activity levels. This would include strategies such as Gas Well revenues, Non-aviation Property Development, and the new Terminal Services and Amenities described in this Plan. Table 17 - Impact of Revenue Enhancement Strategies on Potential Demand Strategy
Assumptions
Current
Source: FAA 5010, March 2009
Runway 17-35 Extension
Permits use by larger corporate aircraft. Assume attraction of itinerant jets.
New Parallel Runway
Permits up to 50,000 more operations (primarily training).
Attraction of Corporate Aviation
Marketing corporate sectors through branding, added capacity, and services. Assume 200 operations/based business aircraft plus itinerant operations.
20
4%
University flight program added to expanded international and domestic student pilot training. Assume 3,000 operations per training aircraft annually.
6
10%
Increases based aircraft capacity in concert w/new parallel runway. Assume 300 operations/based aircraft.
35
6%
Training Activity
Hangar Development
Airport Branding
Marketing efforts to promote Airport to targeted segments of demand
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Based Aircraft
Operations
179
180,000
2
2%
See Training Activity
See Corporate Aviation and Training Activity
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Table 17 - Impact of Revenue Enhancement Strategies on Potential Demand Strategy
Assumptions
New Terminal Services
Additional Specialty FBOs
Gas Well Revenues
Rates & Charges
Non-Aviation Property Development
Additional Growth From Plan
Based Aircraft
Operations
U.S. Customs may attract flights from Mexico. Other amenities may increase value-added experience but not assumed to increase based aircraft
N/A