The Chattanooga Metropolitan Airport has bought the TAC-Air fixed base operator for $12.375 million, airport officials said Friday.
The move was approved by the Airport Authority board at an afternoon meeting.
Officials said $10 million of the amount will be financed through revenue bonds, which were approved by the board on Wednesday.
TAC-Air has been in a contentious relationship with the airport after it built a competitor - Wilson Air Center. The new facility has lost over $1 million, though airport officials said it was on track for an eventual profit.
Terry Hart, airport president, said since the opening of Wilson Air Center in 2010 that fuel prices at the airport has been consistently 20 percent lower than similarly-sized airports.
He said the airport "expects a positive return on the combined operations of the facilities and will use the revenue to re-invest in the airport."
Mr. Hart said, "Keeping prices low and service high are among our top priorities. The combined operations on the east side and west sides of the airfield will allow us to keep costs low while investing revenue back into the airport."
Wilson Air Center will operate both FBO facilities.
Officials said Wilson Air plans to keep most of the current TAC-Air employees. Jobs were offered to 95 percent of the hourly employees and most accepted and have been trained, it was stated.
The change will take effect on Saturday at 12:01 a.m.
Some of the property is to be used for public parking and for an airplane ramp, according to the bond resolution. Mr. Hart said the airport has a problem with space for parking cars. He said a consultant earlier said it would cost between $16 million and $18 million to build an 800-car parking deck. Mr. Hart said the acquisition will allow the airport to re-evaluate its master plan.
Phillips Petroleum had a contract with TAC-Air and, in order to avoid a termination penalty, the airport is agreeing to fulfill that contract by buying 800,000 gallons of fuel per year. That is about 40 percent of the airport yearly quantity.
Wilson Air Center has an exclusive agreement on fuel purchases with Eastern Aviation Fuel. That will be amended to allow the Phillips purchases. The Eastern Aviation contract will be extended from five years to 10 years.
First Tenonessee Bank is buying the bonds on a 10-year term. The basic fixed rate is 4.99 percent.
The airport already has a $5 million loan through First Tennessee.
The remainder of the purchase price will come from airport reserve funds.
Farzana Mitchell, who heads the board's finance committee, said the board has been involved in the acquisition process for about a year. "This did not just come up ovenight," she said.
Officials said longtime airport consultants Newton and Associates helped evaluate the deal and that Decosimo and Company inspected the TAC-Air books.
Tony Smith said he had been representing a firm that is moving into town and has been negotiating with both Wilson Air and TAC-Air. He asked about the loss of competition and the effect on prices. Mr. Hart said the airport would keep fuel costs as low as possible. "We are not going backward," he said.
He said Wilson Air, despite taking on the new facility, will keep its management fee at $200,000.
Dan Jacobsen, board chairman, said, "This is an exciting time for the Chattanooga Airport. With improved service and pricing for our customers, we are able to provide the infrastructure and aviation services our community needs in order to grow. We've seen tremendous growth in our sustainability initiatives, in the continued development on the west side of the airfield and in the terminal renovation currently underway.
"This is all part of the airport's strategic vision and we are energized by the opportunity to reassess our master plan and consider changes that enhance the experience, not only at the FOBs, but at the commercial terminal as well."
- Photo2 by Brent McDonald, News Channel 9