Airport Board Approves $5.6 Million Hangar, $2.5 Million Runway Ramp Expansion

Cargo Business "Exploding" With Arrival Of Volkswagen, Amazon.com

Wednesday, June 27, 2012 - by Gail Perry

Acting on a consultant's recommendation, Chattanooga Airport Authority board members on Wednesday approved construction of a $5,656,666 hangar with office space located at the new Wilson Air Center on the west side of the airport. The facility will be LEED rated.

Commissioner Farzana Mitchell said, “The independent study validated and made the board more comfortable in approving this project.”

 

Another capital investment that is planned for 2013 is an expansion of the runway ramp on the east side of the airport.

This will accommodate more transient aircraft and create space for additional private hangar facilities in the future. The cost for this project is slated to be $2.5 million.

At the request of the finance committee earlier, a study by consulting firm Airport Business Solutions was commissioned. Michael Hodges, who headed the study, joined the meeting on a conference call for a presentation of the market assessment.  As a result of their analysis, he stated that the Chattanooga Metropolitan Airport is the premier airport in the area, especially with corporate aviation.

 

Based on the 90 percent occupancy rates for TAC Air and 100 percent for newly opened Wilson Air, the consultants anticipate a need for more hangar space for corporate and transient traffic. Mr. Hodges told the authority that some existing space at the airport has limited utility because of door height. Furthermore, of the existing transient space, there is no facility that offers offices or areas for crew and supply storage.

 

The current rental for private hangar space in Chattanooga is $6-$8 per square foot, which is below market rates which are driven by the economy.  He sees this changing. The time is right for development now, said Mr. Hodges. If it is started now, any new development should be in place to take advantage the economy when it is back to normal. At that time, rental rates at Lovell Field should see an increase. The study concluded that additional new hangar space was needed and that long term hangar tenants become the core business.

 

The new Cleveland, Tn. airport will have minimal impact of the Chattanooga Airport, the study states. The “life blood” of the airport is corporate activity, Mr. Hodges told the board. Traditionally, people are slow to change habits, and it is expected that corporate customers will continue to use the Chattanooga Airport because of close proximity and convenience to the location of businesses, unless they are on the far eastern side of the city. He told board members that recreational flyers may see Cleveland as an alternative.

 

The consultants used a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to evaluate the Chattanooga Airport. Among the strengths they listed are that Wilson Air Center does an excellent job, has good regional and national recognition, and that there is a demand for new, state-of-the-art facilities which creates a competitive edge. They also referenced the infrastructure of the airport.

 

Among the weakness listed were below market rental rates and the fact that TAC Air is well respected and that creates a challenge to any new development. The study shows that the new west side facilities (Wilson Air) will require some time to develop an identity.

 

The increase in airport use is spurring some capital investments to make the Chattanooga Metropolitan Airport more attractive. For the month of May, boarding was up 2.17 percent over May 2011. The year-to-date change shows an increase of 5.75 percent passenger boarding as compared to the first five months of 2011.

Cargo shipments have exploded with the new businesses such as Volkswagen and Amazon.com that have recently located in the area. The change in pounds of cargo loaded in May 2012 compared to a year earlier increased 379 percent and rose 307 percent compared to  the first five months of 2011.

 

Opportunities seen by the consulting firm include the understanding that business travelers have high expectations and want high-end, quality facilities. The Chattanooga Airport has the ability to move quickly to counter new competition such as Cleveland. Also, there is market recognition of the second facility at the local airport that will be able to provide private hangar space, refueling and maintenance to private aircraft.

 

 Among the threats listed are competition with Cleveland, competition between TAC Air and Wilson Air, and the volatility of fuel costs.

 

The terminal will be spruced up with new carpet at an estimated cost of $250,000, and remodeled restrooms in the concourse area are projected to cost $488,106. Parking facilities will be expanded which is a budgeted expense of $50,000.

 

Highlights of the 2013 budget, which was approved at the meeting, show net operating revenues of around $2 million, non operating revenues of $1,185,462, and non-operating expenses of $2,497,427. 

First Tennessee Bank has agreed to reduce the interest rate on a bond that was sold in 2009, at 5.14 percent to 3.54 percent, which will reduce the monthly payments on the fund by reducing the interest rates, resulting in a savings of $68,000 over the life of the bond.

 

Multiple contracts were approved by the commissioners. For a cost of $33,500, a contract was given to Joseph Decosimo for preparing an audit. Big Communications was granted a contract to create phase two of the airport’s comprehensive marketing plan for $150,000, which includes the media buys. Approval of the continuation of a relationship with Waterhouse Public Relations was given for the amount of $45,000. The budget also includes $99,375 for maintaining security control systems and support from “i-sys” and $31,800 for the first year of a three-year and six-month contract with Republic Parking.


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