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Experts: Airport results mixed

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  • Running U.S. airports

    Governance at the largest U.S. airports varies widely:

    • Los Angeles International is owned and operated as a city department, but a board of seven commissioners appointed by the mayor makes many operational decisions.

    • JFK, LaGuardia, and Newark in the New York area, and Reagan National and Dulles in Washington are overseen by two regional authorities, implemented to supervise multiple airports in the country’s most crowded airspace.

    • Seattle-Tacoma International is owned and operated by an authority, but its members are elected by the public in at-large races.

    • Orlando has an authority with five governor’s appointees, the mayor and the county chairman.

    • Atlanta’s airport, the busiest in the world, is operated as a city department, with an airport manager who reports to the mayor.

    • In North Carolina, the three other airport authorities include appointees made by local governments and other board members. Asheville’s seven-member authority includes appointments made by three local jurisdictions and one appointment made by the board itself. Piedmont Triad’s airport authority includes seven members, appointed by local governments in the surrounding areas. And Raleigh-Durham International’s authority includes eight members, with two each appointed by Durham, Raleigh, and Wake and Durham counties.

    • Only Charlotte’s proposed authority includes appointments by the House speaker, the Senate president pro tem and governor.

    Ely Portillo

  • Inside Charlotte Douglas airport

    • Charlotte Douglas is currently run by the city’s aviation department, with director Jerry Orr reporting to the city manager and city council. The airport is a self-sustaining “business-type” entity that doesn’t take city money or contribute money to the city.

    • The airport’s advisory board is made up of local appointees, but the board lacks the power to do anything except recommend actions to City Council. The advisory board typically votes unanimously in favor of the airport’s proposals. The City Council must vote on contracts and projects at the airport.

    • The airport pays for expansion projects, such as new parking decks and runways, by issuing revenue bonds, backed by the airport’s earnings. Charlotte Douglas currently has $820 million worth of revenue bonds outstanding to pay for new projects.

    • Charlotte Douglas finances its operational costs and pays back the debt incurred through bond issues with revenue from airline landing fees, parking, concessions and federal grants.

    • In fiscal 2012, the airport took in almost $220 million from fees and charges for services, covering its $169 million worth of expenses. The airport’s 283 employees are on the city’s payroll, though their salaries are paid from airport revenue. The airport also has more than $678 million worth of cash and cash equivalents on hand, according to the city’s 2012 financial report.

    Ely Portillo

  • The Charlotte Airport Authority bill

    • Creates a 13-member board to oversee the airport, with one member each appointed by the mayor of Charlotte, the Charlotte City Council, the governor, Senate president pro tem, House speaker, and the county commissioners of Mecklenburg, Gaston, Union, Lincoln, Iredell and Cabarrus counties. The board members would elect their remaining two members. Members could serve up to two consecutive four-year terms.

    • The authority would have the power to enter into contracts, issue bonds, hire and fire personnel, and hire and set the compensation for the airport director. The authority would also have limited power of eminent domain to seize property, if it was required to take the property to satisfy federal regulations.

    • The city would be required to hand over all title and claim to the airport property and assets within 90 days. The airport’s total assets were valued at nearly $2 billion in fiscal 2012. The authority would take ownership.

    • The authority would be required to hold monthly meetings, which would be subject to the same open-meetings laws as other public bodies in North Carolina. The authority would be required to submit an annual report and budget to the surrounding counties.

    • Members of the authority board would receive compensation for travel expenses and meals while attending the meetings and would be entitled to free airport parking while on official business.

    Ely Portillo

Shifting control of Charlotte’s airport from the city to an independent authority could make the airport more efficient, experts say, but could also make it less responsive to the public.

A recently published study found that airport authorities usually operate at significantly lower cost than airports run by local governments. One reason, experts suggest, is that they’re able to avoid city purchasing and contracting rules, along with other requirements.

But independent authorities tend to get less government oversight, which can make it harder for officials to spot mismanagement and corruption. Federal inspectors last year cited one of the nation’s largest airport authorities for wasteful spending.

A controversial bill pushed by Sen. Bob Rucho of Matthews, along with other Republicans in a Republican-led legislature, would transfer control of Charlotte Douglas International Airport from the city to an independent authority.

The bill has passed a Senate committee and so far appears to be on the fast track to legislative approval – despite pleas from Mayor Anthony Foxx and other local leaders, who are urging lawmakers to slow down and study the idea.

The bill’s supporters, including Rucho and Rep. Bill Brawley, R-Matthews, contend an authority would help the airport better serve the needs of a wide region. They reject calls for further study. Critics, including Sen. Malcolm Graham, D-Charlotte, say there’s little reason to propose changes at a highly successful airport.

“It’s an effective and efficient machine that we’re getting ready to break on purpose,” he said. “We’re trying to fix something that’s not broken.”

Charlotte’s airport scores well on many efficiency measures – the best in the nation, according to some studies.

Still, under an authority, “you may get even better,” said University of British Columbia professor Tae Oum, chairman of the Air Transport Research Society, an international group of academics and researchers who study air travel.

But much of the savings at authority-run airports appear to be spent on higher pay for workers, according to a study published last year in Public Finance Review, a journal devoted to economic research.

“We didn’t find there was much benefit left to give to the airlines or anyone else,” said University of Houston economics professor Steven Craig, one of the study’s authors. “That doesn’t mean don’t switch, but if you do, you may want to be careful about how you structure it.”

‘Run like a business’

Today, 10 of the nation’s 25 busiest airports are operated by authorities. Fifteen – including Charlotte, the world’s sixth busiest airport in terms of takeoffs and landings – are run by city or county departments.

By giving airports independence from government politics and bureaucracy, some experts say, the authority structure gives airports another edge: It makes it easier for them to make quick decisions, raise funds for improvements or expansions, and lure competing airlines. Elected officials and city workers are more likely to be influenced by powerful interest groups, such as a dominant airline that wants to keep competitors out.

US Airways operates about 90 percent of daily flights at Charlotte Douglas. When it is merged with American Airlines, the combined company will control even more – about 93 percent of Charlotte’s daily flights. More competition, experts say, would likely bring down airfares.

“The airport should be run like a business, for the benefit of the region economically, not for the benefit of the airline,” said Oum, of the Air Transport Research Society. “I think it will serve Charlotte better.”

Airlines like low operating costs because airports pass much of those costs on to them in the form of landing fees. On that measure, Charlotte Douglas already scores well.

It has the lowest cost per boarded passenger of any of the new American Airlines’ major hubs, according to Fitch Ratings. They put the airport’s cost-per-enplaned passenger at $2.34. The next lowest is Phoenix Sky Harbor, which has costs almost double that for each passenger. Other hubs have substantially higher costs: Miami spends $18.51 per passenger, and Chicago O’Hare spends $13.49.

According to data collected by the Air Transport Research Society, Charlotte ranked as the most “cost-competitive” airport among 30 large U.S. airports studied. And among several dozen airports in North America, Charlotte also had the lowest landing fees for a Boeing 767.

But the airport has not been free of problems.

In 2010, reviews by the IRS and the city’s outside legal counsel found that airport financial officials violated federal tax law as they allocated millions of dollars in bond money to pay for airport improvements.

That same year, a Mecklenburg teenager named Delvonte Tisdale apparently breached airport security and stowed away in the wheel well of a Boeing 737. His body was found near Logan airport in Boston, where police believe he fell from the jet as it prepared to land.

After a review of the incident, the city turned airport security over to the Charlotte-Mecklenburg Police Department. Airport policing costs are projected to rise to $5.5 million this fiscal year – more than double what it was last year – as the department adds officers to the detail. Aviation director Jerry Orr has criticized the increase in spending because the added cost could hurt Charlotte’s competitive edge. But the additional money for security will only drive up the cost per enplaned passenger by a small amount.

Prone to corruption

In most cities, airport authority members aren’t directly elected by the public. As a result, experts say, they tend to be less sensitive to the demands of voters than elected city council members.

Under the proposed N.C. legislation, control of the airport would move from Charlotte’s elected city council to an authority whose 13 members would be appointed by the governor, the speaker of the House and the Senate president pro tem, among others.

“In some subtle ways, the airport might be a little less resident-friendly or passenger-friendly,” said Craig, the University of Houston expert. “There’s no direct political responsibility.”

That could prove an issue when, for example, those who live near the airport complain of noise. Democratic Mayor Anthony Foxx has said a city department could be more responsive to such complaints than an unelected authority. A number of residents have sued the airport or threatened to sue because of frequent flights over their houses.

The separation of airport authorities from local governments also makes them more susceptible to corruption, some experts say.

Authorities typically aren’t audited as rigorously as cities. So if proper controls aren’t in place, it may be possible for airport officials to engage in unethical practices, such as collecting bribes from companies seeking work.

“In corrupt states, the authority structure doesn’t work,” Oum said.

In November, the U.S. Department of Transportation’s inspector general took the Metropolitan Washington Airport Authority to task for lax oversight and excessive spending.

The MWAA, which operates Reagan National and Dulles International airports, had weaker spending oversight and ethics rules than government departments and elected officials are subject to, the inspector general found.

The authority had improperly limited competition for two-thirds of all major contracts and accepted Super Bowl tickets and other gifts from contractors. In one case, the board created a $180,000 job for a former board member with no defined responsibilities.

In another, a manager deliberately continued to pay an employee who had left the authority. The authority had also reimbursed board members for, among other things, $238 for two bottles of wine and $9,200 for a last-minute, business-class ticket to Europe.

A need for change?

Charlotte’s airport, which has been under city control since 1935, would be the latest city-run airport to make the transition to an authority, and the last major North Carolina airport to switch. Airports in Des Moines, Iowa, Detroit and Hartford, Conn., are among the most recent handed over to authorities.

Last year, the North Carolina General Assembly created the Greater Asheville Regional Airport Authority.

In 2002, Michigan’s legislature created a public airport authority to run Detroit Metropolitan Airport. That followed an investigation by a legislative committee examining allegations that Wayne County mismanaged the airport. Wayne County subsequently leased the airport to the new authority.

And in 2011, Connecticut lawmakers approved a bill to create an authority to run Hartford’s airport, which had struggled to keep direct, long-haul flights.

But other cities – including Denver – have opted not to change their governance. A Denver committee charged with evaluating the effects of switching from city management to an airport authority concluded in 2005 that “(g)overnance structure has not had an influence on levels of service or bond ratings in other cities.”

The Denver group found that while an authority might be able to hire personnel and purchase things more quickly than a city department, the airport likely benefited from having access to city expertise and low-cost access to city services. There was also no major crisis to prompt a change, Denver officials said.

Most of the communities that converted to authorities “had a singular and dire problem that was perceived to warrant a dramatic change,” according to a 2009 report published by the Airport Cooperative Research Program.

That’s not the case in Charlotte. Many local officials and national experts view the city’s airport as a success.

From 2003 to 2012, the number of daily passenger boardings at the airport rose from 11,310 to 20,010, a 77 percent jump. During that same time, the number of airport employees increased from 248 to 283, only a 14 percent rise. The airport’s annual expenses rose from $85.7 million in 2003 to $168.7 million in 2012, as Charlotte Douglas built a new runway and expanded its facilities.

Alexander: 704-358-5060
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