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The management structure of airport operations in Canada and the United States Baldwin, Blair Christopher 1979

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THE MANAGEMENT STRUCTURE OF AIRPORT OPERATIONS IN CANADA AND THE UNITED STATES by BLAIR CHRISTOPHER BALDWIN B.A. Honours, Queens Univers i ty, 1977 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION in THE FACULTY OF GRADUATE STUDIES' Graduate School of Business Administration We accept th i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA June, 1979 © B l a i r Christopher Baldwin 1979 In presenting this thesis in pa r t i a l fu l f i lment of the requirements for an advanced degree at the Univers ity of B r i t i s h Columbia, I agree that the Library shal l make i t f ree ly avai lable for,reference and study. I further agree that permission for extensive copying of th i s thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publ icat ion of th i s thesis for f inanc ia l gain shal l not be allowed without my written permission. Department n f The Univers ity of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 D E - 6 B P 75-51 1 E Thesis Supervisor - Dr. Karl M. Ruppenthal. ABSTRACT This thesis examines the standards of a i rpor t management in Canada and the United States with the spec i f i c goals of ident i fy ing the d e f i c i -encies that ex i s t in the standards for Canadian/management and evaluating proposals aimed at el iminating the def ic ienc ies and improving the manage-ment system. The examination of the Canadian management structure discloses a centra l ized system whereby the headquarters branch of the federal" Min istry of Transport controls a i rpor t operations from Ottawa and loca l a i rpor t administrations respond to pol icy d i rect ives from Ottawa. Although th i s has t r a d i t i o n a l l y been a well-respected system,' complaints voiced by a i r -port users and loca l administrations indicate that problems do ex i s t with the present standards. A heightened f i nanc ia l d e f i c i t at a i rports and a lack of responsiveness to users needs on the part of a i rpor t management h ighl ight the complaints from users. Local management at a i rports i s ex-pressing i t s f ru s t ra t ion over the lack of control and independence i t possesses, bel ieving i t cannot e f f ec t i ve l y carry out the r e spon s i b i l i t i e s attached to the job of managing operations. An analys is of the behaviour of the federal headquarters branch in Ottawa reveals that the emphasis upon the commercial v i a b i l i t y of a i rports i s ;not as high a p r i o r i t y as the maintenance of a national system of a i r -ports. The bureaucracy in Ottawa has no incentive to minimize the costs of the management system. Sp i r a l l i n g costs are passed onto a i rpor t users in order to maintain the expensive system. By ass imi lat ing the objectives of a l l a i rpor t interest groups with the strategy of the federal government, a broader set of standards for management i s formed including greater independence for loca l a i rpor t ad-min i s t ra t i on , an emphasis upon the decentra l izat ion of management, and a better balance between the maintenance of a national system of management and better f i nanc ia l s t a b i l i t y fo r a i rpor t s . Choices ranging from changes in pol icy to changes in the organization of management are evaluated against these c r i t e r i a . The most promising so lu-t ion c a l l s fo r the conversion of a select number of Canadian a i rports to i n -dependent a i rpor t commissions, s imi la r to those that ex i s t at major a i rports in the United States. On th i s bas is , the standards••'for a i r port;management in the United States are i den t i f i ed and contrasted against the Canadian standards. The nature of American management and i t s problems are i n v e s t i -gated in order to determine what def ic ienc ies ex i s t and how they d i f f e r from those that ex i s t at present in Canada. It i s concluded that the def ic ienc ies in the American system are less numerous. A high degree of independence exists in the loca l a i rpor t commissions, with l i t t l e bureaucratic influence from the federal government. The f inanc ia l footing of American a i rports i s more stable than t he i r Canadian counterparts. Problems do ex i s t with the commission concept of management but none of them are serious enough to detract from the merit of the proposal. The standards of American a i rpo r t management are superior to those ex i s t ing in Canada, and improvements can be made to the Canadian a i rpor t management system by fo l lowing, in part , the examples set by the standards of management in the United States. TABLE OF CONTENTS Chapter Page Introduction . 1 1 One The Canadian A i rport System and i t s Problems 4 Two Canadian A i rport Management Philosophy 27 Three ' C r i t e r i a 32 Four A l ternat ive Management Schemes and Their Evaluation '. 36 Five The United States A i rport System. 58 Six The Concept of the Authority 76 Seven The Management Structure of the United States A i rport Author i t ies "and Associated ProbTems ' .rr. ' ; 84 Eight The Comparison of Canada's Management System to The United States Management System 97 Conclusions 122 Footnotes 15.7 Selected Bibliography ' 161 Appendix l 3 l LIST OF TABLES Table Page Table 1 - Organizational Structure - The Canadian A i r Transportation Adminstration 1978 9 Table 2 - Geographic Boundaries 1978 - CATA Regions 10 Table 3 - Typical Organization Structure - Regional Airports Branch of the Canadian A i r Transportation Administration 1972 .. 11 Table 4 - Passengers Handled 1974 - Top 25 Airports , . . . . 15 Table 5 - Trends of Revenues, Expenses Versus Passengers Enplaned - Top 23 A i rpor t s , 1973/74 . . . . . . . . 16 Table 6 - Operating Surplus (Def i c i t ) fo r Seven Canadian Airports 1975 - 1977 17 Table 7 - 1975 Enplaned Passengers at Selected Canadian Airports Versus Additional Revenue Required per Enplaned Passenger to Achieve 100% Cost Recovery . . . . . . 18 Table 8 - Proposed Landing and Terminal Fee Increases at Canadian Airports to Achieve Fu l l Recovery of User Costs 43 Table 9 - Status of A i rport and Airway Trust Fund, United States September 30, 1976 66 Table 10 - The United States A i rport Development and Aid Program Funding Levels for Airports 1976 - 1980 69 Table 11 - The United States A i rport Development and Aid Program Grant Levels for 1970 - 1980 69 Table 12 - The United States Federal Government Share of A.D.A.P. Grants for American Airports 1976-1980 ... 70 Table 13 - Post-1980 U. S. A i rport Leg is lat ion - A c t i v i t i e s to be Considered for Exclusion from the General System User Cost Recovery Base 73 Table 14 - Management Roles at American Airports . . . . . . . . . . . . . 82 LIST OF TABLES CONT'D Tab.1 e Page Table 15 - The Relationship Between F a c i l i t i e s , Benef i c ia r ie s , Revenues, Expenses for American Airports . , . , . . . . . . 84 Table 16 - Duties of an Airport Manager 86 Table 17 - I t inerant A i r c r a f t Movements at Selected Canadian and American Airports 1974 - 1976 100 Table 18 - Annual Passenger Enplanements at Selected Canadian and American Airports ( inc lus ive or Domestic, International and Transborder t r a f f i c ) 1974-1975 .. 102 Table 19.- Budgeted Man-Years for Selected Canadian Airports 1976 . 103', Table 20 - Budgeted Man-Years for Nashvi l le A i rport 1977 103 Table 21 - Operating Surplus (Def i c i t ) 1971/75 - 1976/77 for Selected Canadian Airports 105 Table 22(a) - Annual Operating Expenditures ($) at Selected Canadian and American Airports 1974 - 1977 . . . . . . . . I l l Table 22(b) - Annual Dollar Expenditure/Passenger Enplanement at Selected Canadian and American Airports 1974 - 1975 I l l Table 23 - Gross; Annual Revenues ($) at Selected Canadian and American Airports 1974 - 1977 112 Table 24 - Annual Revenue Contribution per Passenger Enplaned ($) at Selected Canadian and American Airports . . . . 112 Table 25(a) - Analysis of A i rport Revenues at Selected Canadian'!and American Airports $ per enplaned Passengers 1976/77 114 Table 25(b) - Analysis of A i rport Costs $ per enplaned Passengers;ir976/77/... 114 Table 26 - Nashvil le Metropolitan A i rport Operating and Maintenance Budget July 1, 1978 - June 30, 1979 ... 117 Table 27(a) - United States 1978 Landing Fee Rates . . . . . . . . . . . 117A LIST OF TABLES CONT'D Table Page Table 27(b) - Canada International A i rport System Landing'-;Reestul;976,' .... 1:17A Table 28 - Average Annual %. Increase in Classes of Landing Fees From 1976 to Achieve Fu l l Cost^Recovery by Selected Target Years 1980 - 1987 for a l l Canadian Airports ; 119 Table 29 - Canadian Landing Fee Level in 1978 i f Fees Were Increased According to % Increases Outlined in Table 28 119 Graph 1 - Trends of Revenues, Expenses Versus Passengers Enplaned for the Top 23 Airports 1973/74 In Canada ..' 106 Graph 2 - Relationships of 1966 A i rport Operating Revenue and Expense to Annual A i r Carr ier Passenger Enplanement Level 108 Graph 3 - Trends of the Mean of Operating Revenue and Expense for Airports of Given Annual A i r Carr ier Passenger Enplanement Levels 109 Diagram 1- An Example of X-Ef f ic iency in a Bureau .. 30 1 INTRODUCTION An examination of the management structure at a i rports in Canada and the United States provides an interest ing contrast in s ty les . In Canada, the headquarters branch of the federal Min istry of Transport in Ottawa d i rects the management of the national a i rpor t system and controls the authority required to operate an a i rpor t . Local a i rpor t administration . i s responsible for the management of a i rpor t operations according to pol icy d i rect ives from Ottawa. In the United States, a i rports are managed on a decentralized basis. The Federal Aviat ion Administration in Washington, D.C, has control only over safety, zoning and certa in other standards at a i rpor t s . I t i s also responsible for the a l l ocat ion of federal a id to a i rpor t s . Local management has tota l independence in cont ro l l i ng opera-tions at the a i rport from f inanc ia l management to the management of per-sonnel. The descr ipt ion of these two d i f fe rent management systems, both well respected in av iat ion c i r c l e s , i s an ind icat ion that no ideal set of standards ex ists to determine the performance of a i rpor t management. Both countries appear to use the i r own measures. Despite the degree of respect accorded to the Canadian system, there are a number of problems which plague a i rpo r t management and raise the important issue of whether or not Canadian a i rports are well managed. F i r s t , the federal government which operates the majority of a i r po r t s , i s facing a growing f inanc ia l d e f i c i t fo r i t s a i rpor t operations. The widening gap between costs and revenues has pr imari ly been caused by s p i r a l l i n g costs which are imposing a heavier burden upon the shoulders of general taxpayers. Add i t i ona l l y , complaints are being voiced by 2 a i rpor t users, including a i r c a r r i e r s , a i rpor t tenants and a i r t r a ve l l e r s . Rising operating costs at a i rports threaten the p r o f i t a b i l i t y of the a i r -l i nes and a i rpor t tenants, and a i r t r ave l l e r s must therefore pay the consequence of higher fares. A general consensus amongst these groups also indicates that the a i rpor t management system i s not so responsive to the needs of users as they would l i k e . Furthermore, local managers at a i r -ports, responsible fo r a l l operations, are expressing concern over the lack of independence and authority which they believe comprise an essential part of good a i rpor t management. Although both countries are known to use d i f fe rent standards for manage-ment, the presence of these issues leads one to inquire as to the exact nature of the standards of a i rpor t management. Without a proper de f i n i t i on of the standards, i t i s d i f f i c u l t to pinpoint the def ic ienc ies that may ex i s t and address the task of proposing improvements to the management of a i rpor t s . I t i s the intent of th i s paper to address these issues with the primary goal of making improvements to the Canadian, system of a i rpo r t management. F i r s t , to aid the formulation of standards fo r Canada, the role of the government i s examined to discover i t s present objectives with regard to the national system of a i rpo r t s . This forms a basic groundwork from which the standards and complaints of a l l a i rpor t users are incorporated to ident i fy the def ic ienc ies in the present set of standards. Proposals fo r improvements ; are 'put forth and evaluated for t he i r respective merit. The United States a i rpor t management system, because of i t s strong reputa-t i o n , closeness of proximity and a v a i l a b i l i t y of information provides a good vehicle fo r the evaluation of the proposal c a l l i n g for improvements which give more independence and authority to local a i rpor t administrations. 3 A comparison based on a common set of c r i t e r i a i s made between a se lect number of Canadian and American a i r po r t s , to provide an ind icat ion of the consequences that may resu l t i f the proposed improvements to the standards of management were implemented in Canada. The subject of a i rpor t management in Canada has yet to be investigated in d e t a i l . I t i s hoped that th i s paper w i l l contribute to a better under-standing of the complexiissues involved and that i t also may encourage the federal government to make a concerted e f f o r t to improve our own a i rpor t management system. 4 Chapter One THE CANADIAN AIRPORT SYSTEM AND ITS PROBLEMS A. THE STRUCTURE OF MANAGEMENT The Canadian a i rpor t system, run by the federal Min istry of Transport, i s operated in accordance with the objective/; that as part of the national transportation system, i t be' responsive to the needs and interests of the public and private sectors in the economy. This statement i s ind icat i ve of the complex nature of the a i rport industry. Numerous groups are i n -volved in the operation of an a i r po r t , e i ther as administrators or users--the a i r l i n e s , federal government, local communities, po l i ce , general av i a -t i o n , concession operators, and others. With such a diverse array of i n -terests i t i s not surpr is ing that each group in the a i rpor t industry f } ^ t r i e s to a t ta in a number of goals which c o n f l i c t with other groups' objec-t i ves . For example, an a i r l i n e may desire to minimize the costs of landing at an a i r po r t , while the federal government may be concerned with increas-ing operational revenues from landing fees. On one s ide, there i s pressure to reduce operating d e f i c i t s which are running at over $100 m i l l i o n per year for national and internat ional a i rports alone. On the other, there i s industry pressure ( a i r l i n e , general av iat ion and the publ ic) fo r re s t ra in t . In par t i cu la r the a i r c a r r i e r s ' major complaints about the increased land-ing fees are: 1) they are i nd i r e c t l y paying for the roughly $60 m i l l i o n annual operating d e f i c i t at Mirabel; 2) the higher charges must be passed on to the public v ia higher fa res , and.the^ a i r l i n e s claim th i s could d e t r i -mentally a f fec t a i r travel in Canada. C5 Ideal ly , the a i rpor t system, through i t s administrative st ructure, should function to coordinate communication and enable a rat ional p r i o r i -zation of goals deemed important by a l l interested part ies . While th i s theme i s embodied in the aims of the national transportation pol icy i t i s noted that the industry i s monopolized by the federal government, one of the major groups in the industry. Transport Canada i s the branch of the federal government that operates 233 a i rports across Canada. Where a i rports are pub l ic ly owned, the question arises as to the extent of con-t ro l that the government possesses over the a i rpor t system and what l e g i s -l a t i on governs t he i r operation. The introduction of B i l l C-20, which has yet to receive any debate in parliament, proposed a new pol icy entrenching the monopolistic control of the federal government over the a i r transporta-t ion mode, including a i rpor t s . However, there i s no o f f i c i a l Canadian A i rport Act such as ex i s t s in the United States with the 1940 l e g i s l a t i on of the A i rport and Airway Development Act and the A i rport and Airway Revenue Act. There are several pieces of federal l e g i s l a t i on which apply to a i rports in Canada. The major ones are: ( i ) The Aeronautics Act and Amendments, 1977 ( i i ) The Financial Administration Act, Amended, 1977 ( i i i ) The National Transportation Act. The f i r s t law encompasses federal pol icy regarding the planning and opera-t ion of a i r po r t s , the provision of a i r navigational f a c i l i t i e s , a i r t r a f f i c serv ices, safety standards, and security arrangements. The Min ister of Transport i s empowered to supervise and promote the development of a l l matters connected with aeronautics including the construction and mainte-nance,iof .a l l government a i rpor t s . Within the Financial Administration Act, the Treasury Board has j u r i s d i c t i o n over matters of f i nanc ia l management 6 including: estimates of expenditures, f i nanc ia l commitments, accounts, charges fo r the provision of serv ices, renta l s , revenues, annual and longer term expenditure plans. This control extends to the national a i rpo r t sys- 2 tern under the d i rect ion of C.A.T.A. The National Transportation Act i s the tool through which the Ministry of Transport and the Treasury Board carry out the i r mandates. A more detai led summary of these laws i s found in Exhibit #T in the appendix. The monopolistic control extended over the a i rpor t system by the federal government has l o g i c a l l y dictated that an emphasis be placed upon the i r own p r i o r i t i e s . This enhances the c o n f l i c t between the federal Ministry of Transport and other interested parties whose p r i o r i t i e s do not necessari ly pa ra l le l those of the government, but cannot be considered un-f a i r because the government pays for the majority of the costs incurred in running the system and therefore has a r ight to control i t s operation. Having i den t i f i ed the major management group as the federal govern-ment, i t i s worthwhile to examine the organization and objectives of the arm within the federal Min ist ry of Transport that manages the a i rpor t s . The administration of the a i rpor t system i s handled by the Canadian A i r Transportation Administration. It i s responsible, on behalf of the Min ister of Transport, fo r the provision of standards, l i cenc ing act ions, procedures and regulations for the convenient, safe and e f f i c i e n t conduct of aeronautics in Canada,-.and for the prov is ion, operation and maintenance of many a i rpo r t s , navigational a ids , airway systems and other related f a c i l i t i e s and services in support of aeronautics. In broad context, these are generally described as regulatory and operating r e spon s i b i l i t i e s . The framework within which CATA carr ies out i t s r e spons ib i l i t i e s is defined in i t s objectives to which the CATA management philosophy and organizational 7 const i tut ion are t i e d . Its primary objective i s the development and operation of a safe and e f f i c i e n t national c i v i l a i r transportation sys-tem that contributes to the achievement of government object ives, and to operate spec i f i c elements of th i s system. Underlying t h i s , i t i s C.A.T.A.'s intention to reach the fol lowing set of sub-goals: ( i ) To foster an environment which supports the e f f i c i e n t development, provision and operation of a l l elements of the national c i v i l a i r transportation system. ( i i ) To support the achievement of the objectives of the federal government that re late to nat iona l , regional and urban social and economic development, and to i n d u s t r i a l , environmental, energy and other po l i c i e s . ( i i i ) To e f f i c i e n t l y develop, provide, operate, or ensure the e f f i c i e n t operation of, the spec i f i c c i v i l a i r f a c i l i t i e s and services that are essential to the national transportation system and that are with in the federal government's j u r i s d i c t i o n . ( iv) To ensure that an adequate level of safety i s pro-vided fo r the national c i v i l a i r transportation system. (v) To obtain maximum product iv i ty from the resources a l located to the A i r Transportation Program. (v i ) To recover the costs of departmental f a c i l i t i e s and services that are provided in support of c i v i l a i r transportation requirements. ( v i i ) To ensure that users of the national c i v i l a i r t rans-portation system are treated equitably. ( v i i i ) To ensure that Canadians have reasonable a c c e s s i b i l i t y to the national c i v i l a i r transportation system. ( ix) To ensure that the federal government's p o l i c i e s , regulat ions, d i rect ives and guidelines for person-nel administrat ion, f inanc ia l administrat ion, o f f i -c i a l languages, equal opportunit ies, human r ights and other areas of s i gn i f i cance, are adhered to throughout the A i r Transportation administrat ion. 8 C.A.T.A. i s organized into three branches: a headquarters branch, s ix regions, and local administration at a i rpor t s . Table 1 outl ines the overal l organizational structure. I t employs over 13,000 public servants, The major r e spons ib i l i t i e s of the-headquarters include: 1) the provision of pol icy development, planning, f i nanc ia l and per-sonnel administrat ion; 2) provision and maintenance of a i r navigational services; 3) the development and enforcement of aeronautics l e g i s l a t i o n , standards, procedures and other regulatory services; 4) the construct ion, operation and maintenance of c i v i l a i rports owned or contro l led by the M in i s t ry , excluding those designated as s e l f -supporting a i rpo r t s ; 5) the construct ion, operation and maintenance of self-support ing c i v i l a i rports owned or contro l led by the Ministry which include Gander, St. John 's, Charlottetown, Sydney, Ha l i fax , Saint John, Freder icton, Moncton, Quebec, Montreal, Ottawa, Toronto, London, Windsor, Thunder Bay, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, Vancouver and V i c t o r i a . The second level of management comprises s ix regions: P a c i f i c , Western, Centra l , Ontario, Quebec, and A t l an t i c regions. The geographic boundaries of these regions are outl ined in Table 2. The organizational structure of a regional branch i s outl ined in Table 3. The role of the regional administrator i s construed as: ( i j d i rect ing the administration of designated a i rport s within the region; ( i i ) developing plans to ensure that services and f a c i l i t i e s at designated a i rports meet future a i rpor t demands; TABLE 1 Organization Structure - The Canadian A i r Transportation Administration 1978 Manncjcrg fleport to tlpqlun Mniingcr of A i r p o r t s C P roper t i e s BratK.1i: - Vancouver - Ottawa - Ca l ga ry - Hal Ifnx - F i b n l o n - Rainier - Winnipeg  Managers Report to Manager o f A i r p o r t operat l i t i ! V i c t o r i a rirglrw Snskntoon Hntn lc r Day Lct«k.n Wlntteor Or_1>oc 0vir loH.rl.twti F r a l c r i c t f «i Sa int . M n M »»rt/n S y l i c y St. J r l n ' n Source: The Federal Min ist ry of Transport, Ottawa IX) ro S; 7 ' ^ T > / //"' • 3> £*'Jr \ ( Y K ( GEOGRAPHIC BOUNDARIES 1978 CATA REGIONS 1 httS - T A B L E 2 ^ ^ o u r c e : The Federall V r Min istry of Transport Ottawa. 11 ! TABLE 3 Typical Organization Structure - Regional A i rports Branch of the Canadian A i r Transportation Administration 1972 REGIONAL ADMINISTRATOR GENERAL MANAGER PTUNCirAL AIRPORT REGION MANAGER AIRPORTS G PROPERTIES nitANai TRANSPORT CANADA AIRPORT SUI'ERIMTENDANT AIRPORT SERVICES INDUSTRIAL SAFETY AIKPURT EMERCENCY SERVICES AIRPORT POLICING C -_SECU1ITY__ AIRPORT TERMINAL SERVICES SUPER W1TMDANT MARKETING 5 PROPERTIES MARKETING 4~ PROPERTIES niANSPoirr CANAIW AIRPORT inANsPurr CANADA Aiin-un SUPER 1 Wl EHDANT AIRPORT FACILITIES MECHANICAL MAINTENANCE ELECTRICAL MAINTENANCE CIVIL ENGINEERING MAINTENANCE SUPERIWIENDANT PLANNING C ADMINISTRATION PROGRAI+—1 RUDCCT ADMINISTRATION P1ANNING STAFF FINANCIAL ASSISTANCE STAFF PROJECTS STAFF Al I rcjiorC s r p n r a t e l y MANAGER AIIUXJIT OIHIATIUNS -mm CANADA AIRPORT itiANiiiViir CANADA AiRixjrr Tful 1 |GENEI<AL MANAGHl PRINCIPAL Al R r a i T " iWMsrrnTi CANADA AIRPORT •TRANdtfiTl CANAIW AIRPORT -ATU PRINCIPAL AIRPORT PRINCIPAL AIRPORT SUBSIDY AIRHJUTS A i r p o r t s whtdi qiml I fy I c i r Operating S i l i s l d l r e Source: The Federal Ministry of Transport, Ottawa r 12 ( i i i ) es tab l i sh ing, administering and cont ro l l i ng f i nanc ia l re-sources a l l o ted to designated a i rports fo r operations and maintenance; ( iv) d i rect ing the u t i l i z a t i o n and development of personnel resources; (v) developing sources of revenue and e f fec t i ve management of a i rpor t propert ies; (v i ) providing a public re lat ions program with a i r l i n e s and other users of a i rpor t f a c i l i t i e s in order to promote communica-tions in a i rpor t operations. The re spon s i b i l i t i e s of the region are d i s t r ibuted throughout the branch headquarters and to the various/airports in the region. The th i rd level of management i s the local administration at the a i r -ports. The organizational structure and operations at a i rports are usually related to the amount of t r a f f i c at each a i rpo r t . This paper examines the management at the pr inc ipal a i rports which include a l l a i rports that q u a l i -fy as internat ional or national a i rpor t s . These comprise twenty-three a i r -ports, the l i s t of which i s contained in Exhib it 2 in the Appendices, along with the i r 1977 t r a f f i c volumes and operating expenditures. The managers of pr inc ipa l a i rports possess a s ta f f that handles the functional areas of: technical serv ices, operations serv ices, and administrative services. The function of technical services includes the provis ion and maintenance of a i r f i e l d and grounds, buildings and u t i l i t i e s , vehicles and equipment, the management of technical services contracts, minor construc-t ion projects , and the control of a i rpor t po l lut ion problems. The function of operations services includes the management of: 1) terminal and public services; 13 2) a i rport po l ic ing and secur i ty ; 3) emergency services; 4) public information services; 5) operation services contracts; 6) a i rpor t users and tenants; and 7) noise abatement. The function of administrative services involves the provis ion of: 1) f inanc ia l services; 2) contracts; 3) stores serv ices; 4) purchasing serv ices; 5) central reg i s t ry ; 6) personnel services; and 7) marketing and propert ies. From the i r defined ro les , a degree of overlap amongst r e spon s i b i l i t i e s i s evident within the three-t iered management structure. Accompanying these r e spon s i b i l i t i e s , C.A.T.A. headquarters posesses the l ions share of authority with corresponding lesser amounts a l l o ted to the regions and local a i rport management. It follows from the descr ipt ion of the system, that the administrative structure is most f l e x i b l e to changes in the environment that pr imar i ly a f fect the government's concerfttto achieve i t s own goals. Since the government i s responsible for covering the majority of the costs of running the pr inc ipa l a i rpo r t s , i t j u s t i f i a b l y should have the loudest voice in governing the system. It can be expected that other groups, mainly the a i r l i n e s , w i l l voice c r i t i c i s m of the system as beingaunresponsive to t he i r needs, consider-ing the con f l i c t i n g nature of the goals of the two part ies . Not only does 14 -C.A.T.A. support the system, but i t points out that there i s a need for some government support, given the unique geography and low population densi:ty:of our country. Canada i s a large country, with a requ i s i te need fo r a large num-ber of a i rpor t s . Combining th i s with a widely dispursed small population, i t may be reasonably assumed that priv.ate market forces could not support the whole a i rport system based on the c r i t e r i o n of p r o f i t a b i l i t y . Cer ta in ly , some of the pr inc ipa l a i rports may be able to f i n a n c i a l l y support themselves, but Canada has only eight a i rports with greater than one m i l l i o n enplaned passen-gers. For the purposes of comparison with the United States, our 25th largest a i rport enplanes roughly 200,000 passengers whi le, in the United States, the 2 25th largest a i rpo r t , San Juan, enplanes roughly four m i l l i o n passengers. Canada's busiest a i rpo r t , Toronto, ranks between Boston (9th ranked) and Miami (10th ranked) in terms of passenger enplanements. Table 4 provides a i rpor t a c t i v i t y rankings forCCanada, the United States and Europe in 1974. Given these unique propert ies, Canadians must expect to pay (either as taxpayers or as a i r t rave l le r s ) for maintaining such a system. Given the present level of reve;-. nues, and the manner in which they are al located to a i rpo r t s , there i s not s u f f i c i en t t r a f f i c volume to generate an operating surplus, and the a b i l i t y of an a i rport to earn revenue, while dependent on the management structure, 3 i s c lose ly correlated with the t r a f f i c handled at the a i rpo r t . The f ixed costs of an a i rport are large, given the investments in runways, taxiways, ramps, and t e r m i n a l " f a c i l i t i e s . At smaller volume a i rpo r t s , where revenues are substan-t i a l l y les s , the gap between costs and revenueswidens, and i t becomes d i f f i c u l t to rea l i ze f u l l cost recovery for these a i rpo r t s , even with an increase in user charges. Table 5 presents a graphical breakeven analysis of Canadian 4 a i rports for operating costs versus operating revenues in 1973/74. Only three a i rpor t s , Dorval, Malton and Vancouver, registered operating surpluses. Also TABLE A P a s s e n g e r s h a n d l e d 1974 - thousands Top 25 a i r p o r t s Canada 1 U.S.A. 2 Europe 3 M a l t o n 9838 New York 34219 London 25387 D o r v a l 7516 C h i c a g o O'Hare 32812 P a r i s 16898 Vancouver 4321 A t l a n t a 25253 F r a n k f u r t 11453 C a l g a r y 2383 Los A n g e l e s 18 015 Copenhagen 7593 Winnipeg 2051 D a l l a s / F o r t Worth 13761 M a d r i d 7493 Ottawa 1697 San F r a n c i s c o 12235 Amsterdam 7221 Edition ton 1344 Washington(Nat) 10918 Palma 6413 H a l i f a x 1335 Denver 10699 Z u r i c h 5846 Edmonton(Ind) 645 Bo s t o n . 9922 M i l a n 4933 Quebec 588 Miami 9650 D u s s e l d o r f 4793 Reg i n a 542 H o n o l u l u 8502 Stockholm 4314 S a s k a t o o n 476 D e t r o i t 7666 B e r l i n 4267 V i c t o r i a 424 P i t t s b u r g 7222 Athens 4164 S t . John's N f l d . 388 . S t . L o u i s 7074 Munich 4066 Thunder Bay 369 P h i l a d e l p h i a 6998 B a r c e l o n a 4012 S t . John N.B. 315 M i n n e a p o l i s 6533 B r u s s e l s 3752 Windsor 313 S e a t t l e 5708 Hamburg 3401 Sydney 294 C l e v e l a n d 5584 Geneva 3147 Moncton 285 Houston. 5638 O s l o 2826 F r e d e r i c t o n 281 Las Vegas 5409 I s t a n b u l 2734 P r i n c e George 279 Tampa 4745 Malaga 26 70 London 254 New O r l e a n s 4347 H e l s i n k i 2524 Sept l i e s 253 Kansas C i t y 4266 L i s b o n 2513 Gander 224 Ph o e n i x 4017 S t u t t g a r t 2126 F o r t S t . John 223 San Juan 3982 D u b l i n 2075 1. A i r p o r t A c t i v i t y S t a t i s t i c s , S t a t i s t i c s Canada 1974 2. A i r p o r t A c t i v i t y S t a t i s t i c s , U.S. Dept. o f T r a n s p o r t a t i o n FAA, 1974 Emplanements x 2 3. ITA B u l l e t i n 30-E 1975, p. 727. 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 TABLE 5 Trends of Revenues, Expenses Versus Passengers Enplaned Top 23 A i rpo r t s , 1973/74 (M i l l i ons of Do l la r s , Passengers) Vancouver A l l other ai rports 2 3 4 5 6 7 8 Scheduled Passengers A r r i v i ng & Enplaned - M i l l i o n s Notes: The top 25 a i rpor t s run from Mai ton with 8,682,000 pax to Fort St. John with 180,000. Edmonton Industr ial i s omitted fo r lack of data, not being an MOT A i rpor t . Gander has abnormally high revenue fo r i t s throughput and i t also i s omitted. Revenue Trend: Y = -$826,960 + 2.736186 x no. of pax R2 = 0.9718: standard error $1,054 m i l l . Expense Trend: Y = $357,210 + 2.29066 x no. of pax R2 = 0.9870: standard error $594000. Expenses are maintenance + operating + debt service at 6%, 40 years. Source: J . Smith, Considerations in Local Administration of A i rports in Canada, Annals of A i r and Space Law, Vol . I l l (McGi l l : 1978) included are the regression formulas for revenue and expenses demonstrating the pos i t i ve co r re la t ion between volume and revenue. The large pos i t i ve intercept in the expense function indicates the sunk costs in an a i rpo r t . Table 6 below presents updated f igures for 1975-76 and 1976-77 fo r seven major a i rpo r t s . I t i s i n te res t ing to note the operating d e f i c i t fo r Mirabel exceeds the to ta l of a l l operating surpluses in Canada. (Note that by the d e f i n i t i o n of operating expenses, depreciation i s included.) TABLE 6 5 Operating Surplus (De f i c i t ) f o r Seven Canadian Airports 1975-1977 (Thousands of Canadian Dol lars) Toronto Dorval Vancouver Calgary Winnipeg Mirabel Ottawa 75/76 15288 9669 1845 3263 (880) (18382) (2040) 76/77 22389 1983 5722 4468 2 (49821) (781) Source: House of Commons Debate, December 9, 1977. Given the existence of and need fo r governmental support, there are several developments in the industry that ra ise the question of whether or not the manner of government management i s as responsive to the needs of a l l a i r po r t users as i t should be. A long-range plan of C.A.T.A. i s to achieve 100 percent recovery of leg i t imate costs v ia a system of cross sub-s i d i z a t i o n and higher user charges. Table 7 i s an excerpt from C.A.T.A.'s 1975 cost recovery study ind icat ing the addit ional revenue per passenger required at each a i rpo r t to achieve 100 percent cost recovery ( including operating costs , debt serv ice and terminal control costs ) . Only Mai ton a i r p o r t , at the time, covered 100 percent of i t s costs. A i rports such as Dorval required only an extra $.31/pass., while Mirabel required $226.54/ passenger ( th i s f i gure includes depreciation and in teres t charges). C.A.T.A also set up, in .1969, an A i rports Revolving Fund to f inance the operation and development of Malton, Dorval, Vancouver, Mirabel and the 18 TABLE 7 1975 Enplaned Passengers at Selected Canadian Airports Versus Additional Revenue Required per Enplaned Passenger To Achieve 100% Cost Recovery Additional Cost Revenue Revenue Per Per A i rport .. ./.Passengers i i l . Required J:. ..Passenger Passenger (000's) ($) ($) ($) Toronto 5,308 (0. 09) 3. 97 4.06 Dorval (UL) 3,365.9 0. 31 4. 95 4.64 Montreal (UL & MX) 3,411.9 3. 40 -- — Vancouver 2,350 1. 96 5. 31 3.35 Calgary . 1,190 2. 52 5. 75 3.23 Winnipeg 998 2. 44 6. 17 3.73 Ottawa 757 6. 10 11. 22 5.42 Edmonton 720 2. 72 6. 63 3.91 Hal i fax 6.18 3. 54 6. 54 3.00 Quebec 270 13. 60 19. 02 5.42 Regina 249 8. 59 13. 36 4.77 V i c to r i a 224 10. 74 14. 87 4.13 Saskatoon 214 10. 83 15. 52 4.69 St. John's 195 16. 17 21. 33 5,16 Windsor 168 8. 35 14. 74 6.39 Thunder Bay 167 14. 81 19. 38 4.57 London 122 13. 92 19: 45 5.53 Sept-I les 114 21. 68 26. 48 4.80 Monctbn 111 29. 36 34. 99 5.63 Prince George 105 21. 08 25. 90 4.82 Saint John 1.105 16. 45 21. 63 5.18 Sydney 103 22. 81 27. 62 4.81 Charlottetown 86.0 16. 45 20. 20 3.66 Fredericton 85.2 17. 98 23. 25 5.27 Sault Ste. Marie 84.0 27. 09 31. 12 4.03 Kami oops 78.9 8. 92 13. 14 4.22 Gander 77.5 29. 30 45. 59 16.29 Fort St. John 74.4 22. 87 27. 64 4.77 Wabush 63.0 18. 17 22. 57 4.40 Table 7 - continued A i rport Passengers (OOO's) Additional Revenue Required ($) Cost . .Perl Passenger ($-)--Revenue Per Passenger ($) Prince Rupert 61.3 24.68 28.18 3.50 Mont Jol i 56.9 21.49 25.09 3.60 Timmins 55.1 12.46 17.38 4.92 Baie Corneau 50.5 14.56 18.20 3.64 Yellowknife 49.1 20.58 23.82 3.24 Fort McMurray 48.6 6.52 10.65 4.13 Whitehorse 47.3 25.48 28.18 2.70 Mirabel (MX) 46.6 226.54 286.42 59.88 Penticton 44.1 18.46 23.93 . 5.47 Val d'Or 39.9 20.56 23.83 3.27 Lethbridge 37.8 10.95 14.95 4.00 Grande P ra i r i e 37.2 28.64 33.62 4.98 North Bay 36.7 57.11 61.59 4.48 Terrace 34.1 33.23 37.85 4.62 Port Hardy 33.7 64.79 70.24 5.45 Goose Bay 32.3 468.34 651.84 183.50 Inuvik 23.2 41.67 46.56 4.89 Sandspit 19.7 37.30 42.90 5.60 House Harbour 18.6 8.31 11.68 3.37 The Pas 16.6 30.67 37.41 6.74 Fort Nelson 16.4 71.50 78.50 7.00 Churchi l l 1.5.5 109.43 124.62 15.19 Hay River 13.2 33.94 36.67 3.73 Watson Lake 11.7 38.00 42.02 4.02 Frobisher Bay 11.6 77.02 83.98 6.96 Williams Lake 11.0 39.22 45.91 6.69 She f fe r v i l l e 9.2 51.60 58.33 6.67 Smithers 9.2 37.33 43.44 6.11 Yarmouth 8.1 93.02 101.00 7.98 Fort Smith 8.0 40.98 45.05 4.07 Kapuskasing 7.0 39.29 45.05 4.00 Quesnel 6.2 45.37 51.50 6.13 Table 7 - continued : Additional Cost Revenue Revenue Per Per Ai rport Passengers (000's); Required ($) Passenger ($) Passenger ($) Resolute 6.1 257.58 397.22 139.64 Norman Wells 5.4 85.45 96.04 10.59 Red Lake 4.6 40.90 45.20 4.30 Fort Simpson 4.3 . 65.13 68.48 3.35 Fort Chimo 4.2 263.00 278.00 15.00 Cambridge Bay 3.2 109.31 115.65 ' 6.34 Earl ton 2.9 76.9 82.67 5.88 Kenora 2.4 122.12 142.00 19.88 Baker Lake 1.2 238.45 314.02 5.57 Tuktoyaktuk 1.2 46.94 50.34 3.80 Hall Beach 1.1 66.55 68.59 2.04 Coral Harbour 0.5 664.89 868.96 204.07 Fort Resolution 0.4 176.29 188.83 12.54 Wrigley 0.3 485.72 500.07 14.32 Notes: Costs included a l l costs, including terminal (area control) costs Volume of passengers includes scheduled Classes 1, 2 and 8 (A i r Canada and CP. A i r , the regionals and loca l or th i rd - l eve l a i r car r ie r s ) and charter t r a f f i c , enplaned and deplaned passengers divided by two. Source: The Federal Ministry of Transportation, "Proposals on Cost A l l o ca -t i o n , A i rport C l a s s i f i c a t i on and Fee Increases." Canadian A i r Transportation Administrat ion, 1975. land costs fo r the Pickering s i t e . The fund has not been se l f - susta in ing and has b u i l t up a debt with the government of over $600 m i l l i o n . The methods outl ined for reducing operating d e f i c i t s should be care-f u l l y examined fo r the i r impact upon the operating costs of a i r l i n e s and the passenger publ ic . Both part ies w i l l endure a heavier f i nanc ia l burden to support the government's p o l i c i e s , and economic arguments have been made against the use of cross-subs id izat ion. The question of i n -terest i s whether or not these po l i c ie s are the most e f fec t i ve ones for reducing the cost-revenue gap at a i rports or i f there i s some other option which lends i t s e l f to the accomplishment of C.A.T.A's objectives while reducing the f inanc ia l burden placed on a i rpor t users? Perhaps there i s no other v iable a l t e rna t i ve , and perhaps there i s a better so lut ion. At the minimum, th i s issue merits further invest igat ion, which i s an intent of th i s paper. Second, there are a growing number of complaints from managers of the larger a i rports concerning federa l l y imposed constraints placed upon the i r a b i l i t y to manage the i r operations. These constraints take the form of a management structure whereby f i n a n c i a l , personnel and other management re spons ib i l i t i e s are contro l led by C.A.T.A. headquarters and regional s t a f f . '.Local administration claims that i t s operational control of a i rports i s i n s u f f i c i e n t to support the re spons ib i l i t y of the job. The basis fo r these complaints may be modelled using a set of mult ip le c r i t e r i a to evaluate the performance of the a i rpor t system. At one extreme, managers of larger a i rports desire to manage the i r operations in the s ty le of a commercial enterprise and consequently feel they should have more author ity. The s i tuat ion i s complicated by the large number and varying nature of a i rpor t s . While the larger ones do possess the potential to operate ..more autonomously, the majority do not possess s u f f i c i en t t r a f f i c to generate revenue to cover investment and operating costs. Managers of smaller a i rports tend to be more complacent, r ea l i z i ng that the i r a i rpor t would not function without the a id provided by C.A.T.A. headquarters. At the other end of the spectrum, C.A.T.A. headquarters uses the c r i t e r i on of achieving nat iona l , reg ional , social and economic objec-t ives as measurement of the system's performance. Natural ly th i s c r i t e r i o n may be achieved without any consideration being given to the re spon s i b i l i t i e s and authority of local a i rpor t management. Given the issues surrounding the administration of the national a i r -port system, C.A.T.A. i s placed in the s ingular ly d i f f i c u l t posit ion of try ing to maintain the system to enable the continuation of adequate a i r transportation services fo r a l l of Canada while attempting to i dent i f y changes in the management structure which would: ( 1 ) allow the system to be more responsive to the needs of a l l part ies involved, and ( 2 ) reconci le the mult ip le c r i t e r i a problem ex i s t ing between C.A.T.A.'s pol icy makers at headquarters, C.A.T.A's local a i rpo r t management, and a i r c a r r i e r s . B. THE STRUCTURE OF COMPLAINTS . A better understanding of the dilemma that local management faces can be gained through an examination of the divergence between the authority and re spons ib i l i t y possessed by the local administration that runs the a i r -ports. The common complaint ar ises from the marginal authority that accom-modates the re spons ib i l i t y of the job. The a i rpor t manager possesses authority only to carry out the decisions and po l i c ie s l a i d down by the higher level of management at headquarters and has l i t t l e authority to make any decisions on his own. As a r e su l t , most managers fee l that they 23, have the i r hands t i ed which prevents e f fect i ve control over operations and supports an imbalance between authority and re spons ib i l i t y . This tarnishes the image of the a i rpor t manager both in the eyes of his subor-dinates and the users. For example, numerous complaints have been lodged by a i r ca r r i e r s concerning the long lag in response time in dealing with local a i rpor t management. Often, i t i s more convenient to go over the heads of a i rpor t managers to e i ther the region or headquarters. For example, at one a i r po r t , an a i r l i n e devised a plan in the spring of 1978 to i n s t a l l outside check-in counters. When the project was broached with the a i rpor t manager, he agreed to the p ro ject ' s worthiness, but was not able to give f i n a l approval because he did not have the authority to do so. He had to fo l low proper procedures by relaying the request to the region which would then forward i t to C.A.T.A. headquarters. The length of time required to obtain approval interfered with the a i r l i n e ' s short-range plans and th i s forced the c a r r i e r to bypass local management in the attempt to obtain permission more quickly. While th i s a i rpor t i s one of the country 's larger a i r po r t s , the loca l a i rpor t manager i s given no more special consideration regarding strategic input for operational decisions for his a i rpor t than any of the other a i rports in the region, a l l of which are smaller a i rports with less than half the t r a f f i c processed by th i s a i rpo r t . The administration at certa in a i rports also al ludes to a f a u l t in the present system of management in claiming that i t devotes too much time to being penny-wise and pound f oo l i s h . At a time when the government i s short of money, loca l management should be concentrating the i r e f fo r t s on the provision of essential services. For example, at one a i r po r t , aesthetic projects improving the landscaping have been approved, while more functional repairs to the runway took longer to be approved, i nd i ca t -ing a difference in p r i o r i t i e s which local management feels i t would l i k e to change i f i t were provided with more input into the project planning process. The opinion has been expressed at another a i rpo r t that addit ional revenue could be generated i f the administration had the authority to undertake p r i o r i t y projects (such as car-park improvements), but since a l l projects are delegated by C.A.T.A. headquarters through the region, th i s would seem d i f f i c u l t . In f a c t , a l l a i rpo r t managers, save the one at Malton a i r p o r t , only possess authority to purchase goods and services up to $100 without receiving regional approval. Amongst local f inanc ia l managers, i t has been claimed that they are not able to carry the i r accounting function to the end. An examination of the methods used to handle revenues, operating and cap i ta l expenditures reveals a fragmented system where some accounts are handled l o c a l l y (park-ing charges), some regional ly (car rental company leases); and some handled through headquarters (the A i r Transportation Ticket Tax and the A i rport Revolving Fund). Headquarters i s responsible for the consol ida-t ion of the accounts into a i rpor t f i nanc ia l statements. Local a i rpor t managers feel i so lated in th i s process as they have no d i rec t control over the generation of the f inanc ia l statements. The pract ice of imputing interest and charging depreciation to a i r -ports whose d e f i c i t s are financed with loans or appropriations, although a legal procedure, has been subject to c r i t i c i s m from a i r c a r r i e r s . They claim that the resu l t ing higher d e f i c i t i s being paid by ca r r i e r s through higher user charges. A s im i l a r claim i s made about the pract ice of charg-ing overhead from headquarters to the cost of indiv idual a i rpor t s . The airlines 5 ih:.this:.:case cannot be assert ing that these charges should be abolished; rather, i t i s a question of the d i s t r i bu t i on of these charges. Someone must pay the depreciat ion, overhead and interest charges, and i t w i l l be e i ther the a i r t r a ve l l i n g pub l i c , or the non-f ly ing taxpayer, or some combination of both, which pa ra l l e l s the present s i tua t i on . The a i r l i n e s are arguing in favour of a heavier weighting for the non-f ly ing taxpayer, while C.A.T.A., in attempts to give support to the user-pay philosophy, i s passing more of these charges on to those that use the f a c i l i t i e s—name l y the a i r l i n e s and the publ ic. Arguments can be made to sustain the posit ions of both sides. The user-pay concept i s supported by economists as an e f f i c i e n t approach.whereby a better a l l ocat ion of cap i ta l resources i s achieved. But the a i r l i n e s also have a r ight to claim that other sectors of the economy such as education and health are supported through payments by the general taxpaying pub l i c , and that the a i rpo r t system should be part of th i s system subsidization as we l l . I t i s not the intent here to resolve th i s i ssue, but merely to indicate the c on f l i c t i n g nature of the views between C.A.T.A. and the a i r l i n e s and how they have led to c r i t i c i sms of the f inanc ia l management of the system, by both these parties and local a i rpor t administrat ion. In the f i e l d of p e r s o n n e l t h e staff ing,process i s viewed as cumber-some. Staf f ing action must go through three or four branches fo r approval and;: in part, th i s delay i s a function of employees being in the public service. Opinions have also been voiced that the present rate of s taf f turnover, considered to be high, could be reduced i f levels of c l a s s i f i c a -t ion pay were higher. The local administration also does not hold e f fec -t i ve control over security arrangements and the opinion has been expressed at a couple of a i rport s that the cost of the R.C.M.P. i s higher than necessary, and the value of the i r presence i s questionable. I t was b r i e f l y noted that a i r ca r r ie r s have problems in dealing with local a i rpor t management because of short lead times for planning. D i f f i -cu l t i e s are also encountered because of the economic character of a i r l i n e s . They operate as a class of commercial enterprise which offers a range of services that w i l l enable the company to return a p r o f i t . To th i s end, they respond to market,.forces in order that company strategy properly re f l ec t s a pol icy ident i fy ing the needs of the market and opportunities ex i s t ing therein. Tying th i s hypothesis into the role that the a i rpo r t plays, a i r l i n e s require f a c i l i t i e s that meet; the needs of the i r c l i e n t s , and to the extent poss ib le, these f a c i l i t i e s should be supplied at market pr ices. The construction of an a i rpo r t such as Mirabel does not r e f l e c t , from the viewpoint of a i r l i n e s , an i den t i f i c a t i on of the market's needs, nor does i t supply f a c i l i t i e s at prices that are considered f a i r by a i r -l i ne s . They are bothered by.=having to cross-subsidize th i s a i rpo r t through increased user charges throughout the national system. The a i r l i n e s pass these increases on to the passengers in the form of higher fares and they are concerned as to the effects th i s w i l l have on passenger t r a ve l . A l -though market growth has continued to increase, i t may be queried as to how much th i s growth rate has been cu r ta i l ed by increases in landing fees and other user charges in the past. E. Culley has researched th i s issue and concluded that the ex i s t ing level of charges fo r a i rpor t f a c i l i t i e s , including landing fees, i s such that they form only a small part of a i r l i n e s costs (<5%) and that the market for a i r c r a f t landings fo r unit t o l l services i s pr ice i n e l a s t i c . ' ' While th is research was conducted in 1972, i t indicates that the a i r l i n e s ' concern for a negative impact in the short run has been over-estimated. Considering that Culley also demonstrated that a percentage increase in landing fees would be passed pn to t rave l le r s via a smaller percentage increase in fares , i t seems that from an external observer's viewpoint, there i s not much cause to worry. However, the a i r l i n e s ' case i s not t o t a l l y without support. Upon further invest igat ion;df Cu l ley ' s report, i t i s revealed that: 1) the ex i s t ing structure of landing fees bears much more heavily on short-haul services which are much less p ro f i tab le runs than long-hauls; 2) the ex i s t ing st ruc-ture i s such that the charges bear more heavily on larger a i r c r a f t which encourages the use of smaller a i r c r a f t . Since smaller a i r c r a f t w i l l enta i l higher frequency serv ices, congestion costs r i s e , not to mention the ne-gative impact of the less prof i tab le operations. I t has also been proven that while the demand for a i r c r a f t landings i s pr ice i n e l a s t i c , the a i r travel market i s fare e l a s t i c in the long-run, and a r i se in fares re su l t -ing from higher user charges (assuming the r i se in fees i s passed on to the consumer) w i l l resu l t i n ' a loss in revenues, assuming no new passenger growth. Considering that in the late 1970's, the market growth rate has s t a b i l i z e d , and assuming that the a i r l i n e s ' costs are r i s i ng f a s te r , the a i r l i n e s only want to raise fares when necessary. I t becomes more under-standable why, then, they argue against the r i se in landing fees. I t i s also worth noting two other factors that,provide a better ins ight into the stance taken by the a i r l i n e s . F i r s t , the landing fee structure in Canada i s amongst the highest in the world. Second, Cu l ley ' s study i s seven years o l d , and with to ta l costs escalat ing qu ick ly , even the 5% of tota l costs at t r ibuted to landing fees (assuming i t has remained at 5% since 1972) i s important. To conclude, the arguments of both sides are not without j u s t i f i c a t i o n and provide further evidence of the nature of the con f l i c t i n g issues sur-rounding the management of the present a i rpor t system. 28) Chapter Two CANADIAN AIRPORT MANAGEMENT PHILOSOPHY The behaviour of the Canadian A i r Transportation Administration to-ward a i rpor t management i s based upon a be l i e f that Canadians possess a set of c o l l e c t i v e p r i o r i t i e s forming the public interest in the national a i rpor t system. As C.A.T.A. i s encumbered to act in the public i n te re s t , i t s t r a d i -t ional-philosophy emphasizes the development of an a i rpor t system ava i lab le for use by those c i t i zens that have a requirement for i t . Any area that demonstrates a reasonable need through potential t r a f f i c , regional develop-ment, or some other c r i t e r i o n i s en t i t l ed to an a i r po r t , regardless of i t s p r o f i t a b i l i t y . The emphasis upon reasonable need rather than a system which pays for i t s e l f i s not i l l o g i c a l behaviour by C.A.T.A. Idea l ly , i t s man-date is to operate a national a i rport system whereby the benefits of the a i rport management and operations system exceed the costs incurred i t i t s operation. However, the issue of measuring costs and benefits i s complex, and use of th i s decision tool as an ind icat ion of the pos i t ive performance of the system i s clouded with a number of uncertainties regarding what should be measured, the d i f f i c u l t y in measuring certa in items in do l l a r terms, the choice of discount rates, and the consideration of relevant con-s t ra in t s . In what may be assumed to be a circumvention of these d i f f i -c u l t i e s , C.A.T.A.'s basic strategy has been a maximization of the social benefits of the a i rpor t management st ructure, without giving serious con-s iderat ion to the socia l and private costs incurred. For example, the fol lowing benefits are c i ted : the stimulus provided to regional economic development, employment, and a safer transportation system. While C.A.T.A. may attempt to measure these social benefits to establ i sh a national aware-ness that the system does measure up to the public i n te re s t , i t does not estimate the socia l costs of the system, nor does i t have an incentive to be e f f i c i e n t with i t s pr ivate costs; a l b e i t i t does measure the l a t t e r which includes relevant operating costs (general and admin is t rat ive, de-prec ia t ion, interests and provisions fo r cap i ta l expenditures). Since i t i s a monopoly suppl ier of a i rpor t management serv ices, costs generated external to the operations((for example, congestion costs) are not con-s i deredi . : As the bureau;is an arm of the government i t has a claim on c a p i t a l , labour and land resources in the public domain, and may use these according to i t s own established object ives. While i t . t r i e s to be aware of the social benefits of i t s po l i cy , any bureau en-deavours to make expenditures which w i l l exhaust i t s . approved budget, so Q as to increase the probabi l i ty of i t s receiving a larger budget. A larger budget not only permits the bureau to spend more to create further benef i t s 2 along the l ines of the public i n te re s t , but the larger budget increases the power of the bureau's central empire. Using th i s c r i t e r i o n as a mea-sure of the bureau's output, i t does not fo l low that i t w i l l act as a p r o f i t maximizer. If th i s i s t rue, there i s no economic incentive fo r 9 the bureau to minimize i t s costs. This results in a loss of X -e f f i c iency as a i rpor t management does not seek cost-improving methods which would have directed i t toward the optimal marginal cost level f o r operations. .Diagram 1 below outl ines th i s case.,- The optimal marginal cost represents the cost path of a pro f i t -o r iented f i rm ; which, when given the opportunity, w i l l adopt new po l i c i e s (these may be be technological or otherwise) to i ef fect reductions in the i r operating costs. The cost schedules MC and Diagram 1 An Example of X-.Efficiency.- in a Bureau _ Source: C. D. Foster, The Public Corporation: A l l ocat i ve E f f i c iency and X-Ef f ic iency. From Pol icy to Administration. (J.A.G. G r i f f i t h , - 1943) Mc" r e f l e c t cost curves of bureaus such as C.A.T.A. which do not have the incentive to determine the i r optimum cost fuct ion and, as a r e su l t , endure higher operating costs. While economic e f f i c iency in the operation of a i rports demands that users be charged the incremental cost that they impose upon the system, and the Ministry of Transport has been advocating a user-pay philosophy, this, c r i t e r i o n of economic e f f i c iency has not been used as a benchmark by C.A.T.A. This i s because, as de Neufv i l le explains in his book A i rport Planning the amount an a i rpor t might receive by applying th i s p r i n -11 c i p l e may have l i t t l e re lat ion to the costs incurred; and_CTA.T.A. has an incentive to determine i t s costs only to enlarge i t s budget and rea l i ze greater social benef i ts . Suppose that, for example, increased a i r trans-portation travel via better a i rpor t management benefits the users, and society in general, because of the savings in time resu l t ing in higher frequency of t r a f f i c . The maximization of to ta l benefits to a l l concerned requires that users be charged) f o r the i r d i rect costs on the a i r po r t , less the value of time, saved. By fol lowing the c r i t e r i o n of economic 12 e f f i c i ency , the a i rpo r t would then f i nd i t s e l f subsidiz ing the users. Natural ly, th i s goes against the grain of the management philosophy as outl ined above. I t i s raw"" more understandable why th i s behaviour of C.A.T.A. con-f l i c t s with the a i r l i n e s and the t r a ve l l i n g public who are respectively p r o f i t motivated, and cost conscious. The continual growth of expenditures by C.A.T.A. increases the cost of the a i rpo r t management system. The i n -creased burden i s passed on, d i r e c t l y and i n d i r e c t l y , to the shoulders of these two part ies . A i r l i n e s are charged higher landing fees which they eventually pass on to the passengers through higher fa res , and the pas-sengers encounter higher t i c ke t taxes. I t begins to make a b i t more sense when these part ies argue that the present course set by C.A.T.A., i f con-tinued unabated, w i l l impinge upon both a i r l i n e operations and a i r trans-portation t r a v e l . In l i g h t of the emphasis upon a bureau's a b i l i t y to maximize i t s bud-get, and given that a shortage of money in the Canadian government has led to a smaller flow of funds, C.A.T.A.'s behaviour may also be interpreted as a response to a r e s t r i c t i on in funds flow from the Treasury Board. I t i s attempting to seek out new means of funding through increasing a i r l i n e user charges (landing fees, f u e l ) , concession rental fees, and passenger t i c ke t taxes. The choice of these forced revenue increases over another pol icy i s easier f o r C.A.T.A. to implement because of i t s dominance as a major pressure group, and the general assumption made by the public that C.A.T.A. i s acting in i t s best interests to provide better service when i t raises taxes related to a i r t r a ve l . F i n a l l y , i t i s noted that C.A.T.A. i s responsible to the Min ister of Transport, who, as d i rector of Canadian transportation pol icy must be cognizant of the p o l i t i c a l implications of the a i rpor t management structure. Those groups which are d i s s a t i s f i ed with C.A.T.A.'s performance and possess some lobbying power, can harm the image of the Min ister and subsequently that of his government. Within the present system, operational subsidies (the loans and appropriations mentioned e a r l i e r are included) are large, and the a i r transportation industry, while complaining about the heavier burden of landing fees and other charges, believes the support i t receives in terms of, fo r example, the national a i r t r a f f i c control system, i s sacred. I f the r i gh t fu l dues were to be charged by C.A.T.A. v ia a change in the re spon s i b i l i t i e s of a i rpor t management, the concerned parties can generate powerful and damaging opposition to any pol icy changes. The j u s t i -f i c a t i o n of any type of subsidy l i e s in the value that society places on an increase in a i r t r a f f i c and judging from the present system, i t be-comes apparent that C.A.T.A. believes the value to be high. While a i r l i n e s may voice complaints, they represent ju s t as large a pressure group as general av iat ion which has supported, to a large extent, the present sys-tem of a i rpor t management. The user fees that general av iat ion pays are minimal, and local management does not hold e f fec t i ve control over th i s group. The pub l i c , largely on the basis of a lack of information and apathy, has not expressed a strong opinion about the decis ive issues, which gives good cause for C.A.T.A. to maintain the status quo. 33/ Chapter Three . CRITERIA If th i s analysis i s going to be of help to C.A.T.A., i t i s necessary to present the objectives of the study in as precise a fashion as possible. At th i s stage of development, i t i s s u f f i c i en t to maintain that the primary objective i s an improvement in the operational management of Canada's a i r -ports. The indiv idual objectives of groups in the industry have been ex-posed as broad and c o n f l i c t i n g , ranging from an increase in prestige and power for C.A.T.A.'s headquarters to regional development fo r po l i t i c i a n s and the pub l i c , to a larger degree of independence fo r local a i rpor t management. Cer ta in ly , part of the overal l goal of the paper i s to re-conci le th i s c o n f l i c t . This could be approached through any one of se-veral methods. A system of re l a t i ve values amongst the objectives could be establ ished, or a l l objectives save the most important one, could be converted into constraints by agreeing to a threshold level of attainment for the other object ives. I t i s argued that the method of ascr ib ing weights to goals be avoided as i t incurs a subjective assessment on the part of the author who may be unduly biased, e i ther consciously or unconsciously. The second method i s d i f f i c u l t to ascribe to , since i t involves a negotia-t ion of issues between the various groups. As w e l l , an agreement as to what i s the primary goal, and how the threshold level of attainment i s defined.,tmay not be reached. Underlying th i s approach i s the issue of whose objectives are the most important. The decision-maker, C.A.T.A., i s not the only one whose objectives should be considered, given the nature of complaints surrounding the present a i rpor t management system. Other par t ie s , such as the a i r l i n e s and the pub l i c , have established goals which cannot be imposed in an objective analys i s . What makes the task more d i f f i c u l t i s the concern over whose objectives are more important, which com-pletes the vicious c i r c l e becausel it has already been stated that i t i s unwise to resolve th i s by attaching subjective weights to various p a r t i c i -pants' object ives. The recognition of such diverse goals raises serious problems, and perhaps no more can be done than to describe some of the a l ternat ives ava i l able, given the nature of the problem and the reasons for i t s existence. In a l l p robab i l i t y , the appropriate objectives w i l l not be revealed unt i l the analysis i s complete. This creates a second dilemma, because a key to any analysis i s to make a choice from a l ternat ives that help to solve the problem, according to the de f i n i t i on of the r ight object ives. However, i f the objectives are not firmed up, how can the choice be made? One method i s to expand upon the general objective of improving the a i rpo r t manage-ment system through the establishment of concrete c r i t e r i a . With the i den t i f i c a t i on of spec i f i c c r i t e r i a to be used, the public object ives , a l -though broad in nature, can be somewhat s o l i d i f i e d in the sense that they indicate the extent to which a l ternat ive courses of action contribute to the object ives. Idea l ly , the c r i t e r i a chosen to r e f l e c t the objectives should lead to the choice^of an a l ternat ive course of management that i s opt ima l t i n the paVeto sense, whereby no further improvements ' can be made without a detrimental impact on^one of the parties involved. Given the nature of the problem, as defined e a r l i e r , i t i s d i f f i c u l t to f i nd an optimal so lu-t i o n , and the next best a l ternat ive i s a s a t i s f i c i n g approach, whereby lower bounds for goals are set, and a solut ion i s sought which i s 'good enough1 to exceed those bounds. Since th i s i s a complicated public po l icy issue, the various consequences associated with each a l ternat ive can be examined across the whole set of c r i t e r i a , and the question of what is 'good enough1 can be l e f t to a consensus of opinion on the parts of the interests involved. Again, the suspicion of doubt hovers over th i s approach because i t i s not c lear that a consensus of opinion can be reached. How-ever, at least th i s approach avoids the need to consider how objectives are ranked, and how the c on f l i c t between them can be resolved. When the term ' set of c r i t e r i a ' i s mentioned, th i s implies that there i s no s ingle c r i t e r i o n which w i l l be universa l ly acceptable. This makes sense, considering the nature of the objectives of the interests involved. As de Neufv i l le points out, the choice of an a l ternat ive represents at least an i m p l i c i t compromise between diverse objectives and views. The extent to which this balance is sat i s factory to anyone depends on t he i r social values, the i r sense of the public i n te re s t , as well as on the fac t s 13 of the case. Since this balance i s d i f f i c u l t to p red ic t , the scorecard approach outl ined above becomes an acceptable method of handling the c r i t e r i a problem, pa r t i cu l a r l y in l i g h t of the fact that no s ingle mea-sure dominates the f i e l d . I t also provides the venue to counter the biases of a l l parties and is an easy format for the public to understand. The set of c r i t e r i a that has been developed i s aimed pr imar i ly at the effectiveness of each a l ternat ive and how the a i rpor t management sys-tem i s improved. Each c r i t e r i on in the group has been formed out of the modeling framework and the problem out l ine. No weight i s a l l o ted to any c r i t e r i o n , as a l l are treated equally. The set consists of the fol lowing c r i t e r i a : y" 36 1. the amount of authority that accompanies the re spons ib i l i t y of local a i rpor t management to control a i rport operations; 2. the degree of power held by the bureaucracy at C.A.T.A. head-quarters; 3. the responsiveness of the a i rpor t management to the changing needs of part ic ipants or to changing e x te rna l i t i e s ; 4. the balance between the need for a national a i rport system and increased commercial v i a b i l i t y of certa in a i rpor t s ; 5. the incentive provided to e f f i c i e n t l y manage a i rpo r t s ; 6. the amount of input into p r i o r i t y planning and s t rateg ic dec is ion-making given to loca l a i rpor t management; 7. the amount of p o l i t i c a l i n f l u e n c e on a i rpor t operations; 8. the amount of control that C.A.T.A; possesses over a i r l i n e s ; 9. The ease of implementation, general cost, and p o l i t i c a l f e a s i b i l i t y . The levels of cost of each a l ternat ive are not as important at th i s junc-ture, because: (1) the fol lowing statement of a l ternat ives and the i r respective evaluation does not lend i t s e l f eas i l y to a costing out analy-s i s and (2) C.A.T.A., being a bureau, i s not overly concerned with min i -mizing costs. They are more interested in maximizing the benefits of the management system. Chapter Four ALTERNATIVE MANAGEMENT SCHEMES AND THEIR EVALUATION A. THE ALTERNATIVES The stage i s set for ident i fy ing pa r t i cu la r courses of ac t ion , which remedy the def ic ienc ies in the a i rpor t management structure. The genera-t ion of a l ternat ives i s an i t e r a t i v e procedure, and the a l ternat ives presented below have undergone several such reviews. I t can be safely stated that a good a l ternat ive i s formulated largely by what the analyst i s t ry ing to achieve. In th i s case, the options have been created with an eye to improving the a i rpor t management system. The problem statement and the modellingvframework are helpful because these analyses indicate the fau l t s in the present system and provide d i rect ion for the types of remedies needed to improve the s i tuat ion . While i t i s useful for the analyst to be as creative as possible and to think of options that are disguised from the parties ' involved because of the i r normal routines, i t i s d i f f i c u l t but nonetheless important to avoid the biases of those parties involved whose interests may obscure some options. The a l ternat ives below represent an attempt to avoid any paro-chial ism which would otherwise betray the work already performed. The search for a l ternat ives may be thought of as involving two tasks: one, the i d e n t i f i c a t i o n of classes of solutions and, two, the generation of solutions within a given c lass . As i t applies to the a i rpor t manage-ment structure, the f i r s t task discloses the changes in the organizational structure of the a i rpor t management system. The second discusses pol icy innovations within the ex i s t ing pol icy framework. I t i s easier to se-parate the two classes i n i t i a l l y to enable a better comprehension of the contr ibution of each a l te rnat i ve . This allows for the development, in the fol lowing chapter, of a matrix of feas ib le combinations between the two classes of so lut ions. I t should not be expected that the ensuing chapters w i l l resu l t in:..an\} optimal so lu t ion , according to the defined problems. While a solut ion pre-ferred by a l l major interests may also be impossible, the suggested so lu-tions should permit a better aggregation of knowledge and increased a b i l i t y for judgment on the part of the decision-makers, and at the minimum, the i r decision w i l l be a more informed one. Changes in the Organizational Structure 1. The Exist ing System Streamlined Option 1.1 The loca l a i rpor t manager reports d i r e c t l y to the Regional Administrator instead of the Regional Manager of Designated A i rpor t s . The loca l manager i s completely responsible fo r da i l y operations and i s given re spons ib i l i t y fo r helping in the planning funct ion. Outside assistance w i l l be required fo r the planning, design and construction of large projects. Local management continues to be subject to the Financial Administration Act , the Public Service Employment Act , and the Supply and Services Act. A l l proposals regarding p r i o r i t y planning would s t i l l be subject to review by the Regional Adminstrator. Option 1.2 The local a i rpor t manager reports d i r e c t l y to C.A.T.A. headquarters. The a i rpor t no longer becomes a subsidiary of the region in the same sense as other regional a c t i v i t i e s (e.g., radio a id s , a i r navigation serv ices) . The a i rpo r t manager i s en t i re l y responsible for operations including: finance and administrat ion, maintenance, terminal services and personnel, and may also maintain small core groups for plan-ning, design and construction (however, outside assistance would s t i l l be ava i l ab le ) . Local management i s s t i l l subject to the leg i s lat ion, . previously mentioned. 2. A i rport Commissions 2.1 Limited A i rport Commission The a i rpor t manager reports d i r e c t l y to the head of a national a i rpor t authority who in turn reports d i r e c t l y to the A i r Administrator, on behalf of a certa in group of a i rpo r t s . The a i rpo r t manager i s given authority concomitant with the r e spon s i b i l i t i e s of the functional operations, including finance and administrat ion, main-tenance, personnel and other areas as defined under the present role fo r local administrat ion. He i s given a budget and s ta f f associated with the new authority to e f f ec t i ve l y carry out operations., Small specialty, groups are established within the local administration at the a i rpo r t fo r the purpose of planning, design, and construction of small projects. He s t i l l r e l i e s , as in previous options, on outside help for large projects. This could come from the region, headquarters, or an outside consultant. Con-tacts between headquarters groups and loca l management would occur through the head of the national author ity. The authority would be responsible for ensuring that local management complied with standards developed by other parts of C.A.T.A. and would work with both parties to render reason-able standards. Likewise, the authority provides an interface between headquarters s ta f f groups and loca l management to allow for optimal p a r t i -c ipat ion by a l l part ies in matters such as national a i rpo r t planning and a i rpor t master planning. The a i rpo r t manager continues to be subject to the Financial Administration Act, the Public Service Act , and the Supply and Service Act. The author i ty ' s mandate i s narrowly defined to avoid a transfer of the a i rpor t manager's authority to headquarters over a period of time. 2.2 Extensive A i rport Commission A se lect number of a i rport s are converted (see Exhibit 3) to s e l f - s u f f i c i e n t a i rpor t au tho r i t i e s , possess-ing a board of d i rectors who appoint the local management. These a i rports could be c l a s s i f i e d as Crown Corporations ( federa l , p r o v i n c i a l , or municipal) or independent commissions run by a private body, butssubject to CTC regula-t i on . The author i t y ' s objective i s not to maximize p ro f i t s but to provide a level of a i rpor t service to a l l users which allows the a i rpor t to break even operat ional ly. The board of d i rectors and local management would be paid through in te rna l l y generated funds, although i n i t i a l l y , some form of government support may be needed. Financing i s done through equity or debt issues (most l i k e l y a form of revenue bonds) to the government, or the publ ic. The loca l management has f u l l control over a l l operations while the board i s responsible for f i nanc ia l planning, approval of major opera-t ional changes, and the development of strategies fo r marketing and per-sonnel. In reporting to the board, the a i rpo r t manager i s responsible for a l l a i rport .operat ions, as defined in e a r l i e r options, the submission of annual operating and maintenance and cap i ta l budgets to the board, and the development of plans in support of the board's po l i c i e s . Local manage-ment negotiates a l l contracts fo r terminal and other leases. Landing fees are set in such a way that they can be adjusted upwards to cover operating d e f i c i t s or downwards i f an operating surplus occurs. Any surplus required r "--i. [ %Q~r', debt servic ing of a spec i f i c project may be met through: (1) i f a 41 bond has been issued, the revenues of the project; (2) the funds a r i s i ng from an equity i s sue; jor (3) a clause attached to the c l a s s i f i c a t i o n of operating expenses, fo r the purpose of^covering-debt/servicing f,Tdm'-opera't-ing revenues. This a l te rnat i ve i s es sent ia l l y based on the same pr inc ip les as are American a i rpo r t au tho r i t i e s , except that they can receive various forms of cap i ta l assistance from the U.S. A i rports Trust Fund. A case in point i s the Metropolitan Nashvi l le A i rport Authority. I t i s a f u l l y s e l f - f i nanc -ing corporation, and the local management has complete authority to run i t s own operation. The Author i ty ' s goal i s to e f f ec t i ve l y manage and operate the a i rpo r t using pract ica l business pr inc ip les to maintain prudent control over operating expenses. I t operates in such a manner as to produce re-venues from concessionaires and tenants to reduce the l i a b i l i t y of a i r l i n e tenants. Debt service receives addit ional coverage by the sett ing of cer-ta in terminal charges at a rate s u f f i c i e n t to provide 125 percent coverage. Landing fees are adjusted every s ix months to ensure that operating ex-penses and debt service are f u l l y covered. Financing i s accomplished through the issuance of revenue bonds. 3. Changes in C.A.T.A. Pol icy 3.1 Airports Revolving Fund Before the new revolving fund i s put-l ined i t i s helpful to provide some background on the old fund. The o r i -ginal A i rports Revolving Fund was established in 1969 fo r the purpose of f inancing the operation and development of Toronto (Malton) and Montreal (Dorval) a i rpor t s . Included in the expenses were a l l operating expenses, capita l expenditures, loans and interest charges. The Treasury Board authorized the Ministry of Transport to finance these two a i rports from 42' loans. Underlying the advancement:of monies to these a i rport s was the requirement that the Min i s t ry generate adequate revenues through user charges, which would repay the loans and accompanying in teres t charges. In 1971, the a i rport s at Mirabel and Vancouver, and the land costs of the Pickering a i rpo r t s i tes were included in the Fund. Although the fund was o r i g i na l l y intended to be se l f - su s ta in ing , and despite the fact that, in the seven years to 1976, i t generated an operating surplus of $62 m i l l i o n , the fund was not f i n a n c i a l l y se l f - sus ta in ing . Loans to the fund were three times higher than forecast , and in teres t charges were higher. As of January, 1979, the fund had b u i l t up a debt of $655 m i l l i o n in loans and in teres t . As a resu l t of th i s dilemma, a new fund, e f fec t i ve Ap r i l 1, 1979, has been establ ished. The fol lowing terms and conditions pertain to the new fund: (a) The fund shal l apply to a l l a i rports and terminal control costs fo r 23 a i rport s (see Exhib it 2) plus the Pickering Land s i t e . (Terminal Control refers to A i r Navigational Services.) (b) Interest charges on loan balances in the ex i s t ing A i rports Revolving Fund shal l be reduced to zero and repayment of these loans shal l be suspended. (c) The sources of funds shal l be revenues, sales of cap i ta l assets and loans, and the funds shal l be applied to operation and maintenance of the a i r po r t s , cap i ta l pro-jec t s and loan repayments. Cash surplus i s to be held in the Consolidated Revenue Fund. (d) The terms of repayment fo r loans made to the fund sha l l be through mortgage type repayments, i . e . , loans shal l be repaid over a 20-year period in equal annual payments of combined pr inc ipa l and interest . (e) There shal l be f u l l cross-subs idizat ion among a l l 23 a i r -ports in the fund. 3.2 Cost Recovery Plan The objective of the plan i s f o r 23 a i rport s to eventually recover 100 percent of a l l legi.timate.:user;Cdsts while eleven more recover only the i r operating and maintenance expenditures. While the recovery based upon an annual percentage growth in revenues i s i n s u f f i c i e n t , according to estimates, to cover growing costs, the government plans to i n -crease landing fees, the fuel charges, the a i r passenger t i c ke t tax, and terminal fees. Table 8 below outl ines the annual increase necessary fo r a l l c l a s s i f i -cations of landing fees and terminal fees for the years 1981, 1983 and 1985, i f 100 percent cost recovery, as defined above, were to be achieved by these respective years. TABLE 8 Proposed Landing and Terminal Fee Increases at Canadian Airports to Achieve Ful l Recovery of User Costs 1981 1983 1985 Weighted % Increase Required for Landing Fees 34 22 20 Weighted % Increase Required for Terminal Fees 34 22 20 Source: The Federal Min ist ry of Transportation, "Proposals on Cost A l l o ca t i on , A i rport C l a s s i f i c a t i on and Fee Increases," CATA, 1975. The new approach that C.A.T.A. plans to take i s to increase landing fees by 30 percent annually at i n te rnat iona l , national and regional a i r -ports, ind icat ing that cost recovery should be completed by approximately 1982. The government also has the intent ion of ra i s ing the a i r t i c ke t tax from $8 to e i ther $12 or $15. The United States a i r t i c ke t tax, set at an open-ended eight percent of the f a re , corresponds in potential re-venue y i e l d to th i s proposal. B. EVALUATION This evaluative framework examines the a l ternat ives within the set of c r i t e r i a previously establ i shed, to discover the intended consequences of each proposal as i t applies to complying with the mult ip le objectives of the study. The analysis also touches upon the unintended consequences of the options. There are no re la t i ve weights attached to any of the c r i t e r i a , nortthe^objeetives. Although th i s detracts from a precise evaluation, and i s not a true decision-making veh ic le , th i s method i s a useful way of presenting the a l ternat ives to the f i n a l dec i s i on -maker ,— the federal government, with regard to the most appropriate means for im-proving Canada's a i rpor t management. 1. Streamlining the Exist ing system Option 1.1 The proposal to allow the a i rpor t manager to report d i r e c t l y to the Regional Manager of Designated Airports i s r e l a t i v e l y easy to implement and can be achieved without the costs in qua l i f i ed manpower and time associated with a major government reorganization. The a i rpor t manager's authority over functional operations i s one of the important objectives which can be achieved. Budget requirements depend upon any extra manpower requirement and the s p l i t of duties between the managers at the a i rpo r t and those at the regional l e v e l . The new control given to local management should provide an incentive to be more responsive to the needs of users; but the lack of input into p r i o r i t y decisions at the s t rateg ic level i s minimal because management i s , in e f f e c t , s t i l l report-ing to the centra l i zed bureaucracy. The bureaucracy, in turn, continues to maintain i t s monopolistic control over the system to ensure that i t s p r i o r i t i e s for the national system of a i rports are upheld. While giving more authority to loca l management, the proposal does not lessen the amount of p o l i t i c a l influence on a i rpor t operations. The provision of a id from the region for planning and other assistance ensures that the government's interest in providing a level of service according to the i r expectations w i l l not be ta inted. While th i s approach eliminates one level of management between the a i rpor t manager and the regional administrator, the local management i s s t i l l obliged to comply with the Financial Administration Act , the Public Service Employment Act and the Supply and Services Act, which somewhat re -s t r i c t the freedom to run operations. However, i f th i s a l te rnat i ve scheme results in an increase in s ta f f at the loca l l e v e l , without an accompanying change at the regional l e v e l , the costs of the system w i l l be increased, leading to a lower overal l level of product iv i ty. Option 1.2 The a i rpor t manager reporting d i r e c t l y to the A i r Ad-min ist rator while maintaining control over da i ly operations ensures an i n -creased amount of authority for local management and eliminates a l l levels of bureaucracy between loca l administration and C.A.T.A. headquarters. Considering that the A i r Administrator already possesses a busy schedule, th i s indicates a good degree of freedom in operational decisions for the a i rpor t manager. For problems requir ing consu l tat ion, the decis ion time i s reduced, and assumably, required action would be taken much sooner than i s presently experienced. The reorganization at the a i rpo r t regarding manpower would be minimal, and budget requirements would be a function of the increased need fo r re -sources l o c a l l y , and the s p l i t between duties performed l o c a l l y ( a l l opera-tions) and the region (engineering, planning). Since the region i s to continue with the planning funct ion, th i s constrains the amount of input into p r i o r i t y planning given to local management. I t may be assumed that as local management becomes more experienced with the new author i ty, i t s contr ibution to the st rateg ic planning process may increase in importance. The;.proposal does not af fect the p o l i t i c a l manipulation with in the a i rport system. However, to allowing loca l management more freedom and motivation to run i t s own a i r po r t , i t i s at least a step toward a better balance of authority and control between local and the higher levels of management. Bearing in mind the number of contentious issues regarding operational decisions concerning which local management w i l l seek consultation with C.A.T.A. headquarters, th i s may place too heavy a load on the A i r Admini-s t rator and his s ta f f . If th i s does mate r i a l i ze , two impacts could be f e l t . One, the delays in decisions w i l l become very burdensome to the parties involved (the a i r c a r r i e r s , and local management) and present problems regarding the complaints of the l a t t e r two part ies w i l l worsen; and, two, the A i r Administrator continues to re ly on his s t a f f groups as the decision-makers, and the resu l t ing s i tuat ion would not be very d i f -ferent from the status quo. 2. - A i rport Commissions Option 2.1. The establishment of a national authority cont ro l l i ng a select number of a i rports removes the management bottlenecks of the regional and headquarters groups and provides totail. authority to local management for running the a i rpo r t . The a i rport author i ty, by working with a i rport managers, establishes spec i f i c relat ionships between the two parties that w i l l balance local operating i n i t i a t i v e against the need fo r central pol icy d i rec t i on . By being given free reign to control opera-t ions , there i s more of an emphasis to allow users ( a i r ca r r ie r s ) to pay for what they want, not what the government imposes. The local administra-t ion becomes more prest ig ious, operating apart from the confines of the bureaucracy, and ^ at t ract s J more qua l i f i ed people to run a i rpo r t s . As the a i rpo r t authority must report to the A i r Administrator, the local administration i s not immunized from p o l i t i c a l interference, but at least i t lessens the problem of loca l a i rpor t managers being accountable t o , or d i r e c t l y dependent upon, a number of branch heads at headquarters or the regional l e v e l . This d i s t i n c t Tine of authority provides c learer guidance as to what can or cannot be done at the a i r p o r t , because the authority has j u r i s d i c -t ion of i t s own to make decis ions, and i t can also quickly d i rec t matters requir ing careful consideration to the A i r Administrator. The allowance for local management to have authority over i t s own operations w i l l develop i t s a b i l i t y to substantial ly: provide input into p r i o r i t y planning and s t rateg ic decision-making. There are several unintended consequences that are associated with th i s proposal. F i r s t , i t i s possible that the new authority w i l l develop into a centra l i zed bureaucracy accompanied by a p ro l i f e ra t i on of senior administrative posit ions whose interests may not coincide with e i ther the A i r Administrator or local a i rpor t management. The authority may act as a large bureau and maximize i t s budget instead of maintaining the balance between the need fo r a national a i rpor t system and increased commercial v i a b i l i t y fo r those a i rport s under i t s j u r i s d i c t i o n . Secondly, i t may be d i f f i c u l t to a t t r ac t a qua l i f i ed person to d i rec t the new authority i f the prestige of the posit ion i s l o w ^ i f he i s to act as an enforcer of C.A.T.A. -48 headquarters pol icy without any f l e x i b i l i t y for creative work and i f the posit ion i s viewed in a l i ne re lat ionsh ip with C.A.T.A.'s regional heads. F i n a l l y , i t may be assumed that given the grouping of the f i ve autonomous a i rports under one umbrella, th i s may provide a source of revenue to cross-subsidize the rest of the a i rports in Canada. Granted that a national sys--tem i s a p r i o r i t y , the a i r . c a r r i e r s and passengers may be no better of f i f they lose the control over the i r own l i a b i l i t i e s at the select a i rports as a resu l t of higher user charges. Option 2.2. The proposal c a l l i n g for a se lect number of a i rports to be converted to s e l f - s u f f i c i e n t a i rport au tho r i t i e s , i s most d i f f i c u l t to implement given the broad nature of reorganization. Each of the selected a i rports operates as a separate ent i ty accountable only to the Min ister of Transport in the case of a Crown Corporation or, in the case of an i n -dependent commission, to the munic ipal i ty or other governing body. A l l levels of bureaucracy at C.A.T.A.'s headquarters and regional levels are el iminated, allowing the local administration f u l l control over operations, and the freedom in i t s decision-making to respond to the needs of a l l users--the a i r c a r r i e r s , the local community, and various levels of government. There i s a b u i l t - i n f l e x i b i l i t y for the provision of f a c i l i t i e s and services in response to the business environment. Add i t iona l l y , the to ta l system's costs of decisions are subject to the scrutiny of the Board of Directors which furthers the cause of improved communication between a l l sides in recognition of the i r shared f inanc ia l r e spon s i b i l i t i e s . By a l l ocat ing legit imate costs as c lose ly as possible to users, the a i r -por t ' s management i s better equipped to achieve f u l l cost recovery. Landing fees can be set on a s i t e - s i t e basis across the indiv idual author i t ie s , and the extent of control of the bureaucracy over these author i t ies is reduced. 49 Because of t h i s , C.A.T.A. loses a main source of revenue which could be used to cross-subsidize the other a i rpor t operations in Canada. If i t ap-p l ies i t s cost-recovery pol icy to these a i rpo r t s , C.A.T.A. has the option of ra i s ing user charges to higher levels at these other a i rports which are not commissions. This move has sound economic backing and, given the assump-t ion that a i r l i n e s have the choice between serv ic ing an a i rport or not, they are not forced to pay these higher charges i f they do not want to service the a i rpo r t . In those cases where an a i r c a r r i e r may be required by federal law to serve the area, some form of government subsidizat ion to cover any operating d e f i c i t .resulting from higher charges to the ca r r i e r can be offered. The key issues a r i s ing from th i s proposal are the extent to which the costs of maintaining the new arrangement d i f f e r s from the status quo, and the extent to which f l i g h t frequency and service w i l l be res t r i c ted or cur-t a i l e d at some airports as a resu l t of higher user charges. F i r s t , while no estimate of the actual costs of the new system are ava i l ab le , they cannot be higher than the present system for the fol lowing reason. The costs of operating the national a i rpor t system have not increased as a whole. The difference i s a red i s t r ibut ion in the manner in which these costs are paid. With the status quo, the a i rport system i s f i n a n c i a l l y supported by a com-bination of loans and cross subsidizat ion which come out of the federal treasury, and operating surpluses from those a i rports that do w e l l , respec-t i v e l y . Under the new proposal, the formerly autonomous a i rports are turned into se l f - susta in ing commercial operations whose objective i s to break even and provide a return enabling debt-serv ic ing. Other a i rpo r t s , which can no longer re ly on cross-subsidizat ion from other a i rpo r t s , charge higher fees to users or are subsidized by the government in the interest of maintaining the national a i rpor t system. The point to be made is that in the end, i t i s the Canadian taxpayer who pays for the system, and what the new proposal does i s s h i f t more of the burden of payment onto the shoulders of the a i r -t r a ve l l i n g pub l i c , away from the non-f ly ing publ ic. The second issue regards the extent to which a i r car r ie r s may stop ser-ving some a i rports because of the large increase in user charges required to achieve f u l l cost-recovery. Judging from the f igures i n Table 7, d i sc los ing the addit ional revenue per passenger required to achieve th i s goal , there are a number of a i rports which, i f they were to increase charges to accommodate these f igures , i t may be assumed that car r ie r s would discontinue service to these a i rports because of unprofitable operations. This par t i cu la r s i tuat ion would necessitate some form of government subsidizat ion e i ther to the a i r -ports or to the a i r c a r r i e r s . For the majority of a i rpo r t s , i t i s reasonable to assume that they would be able to bear an increase in user charges, whether or not they are passed on in part or in f u l l to t he i r passengers. Cu l ley ' s report, c i ted e a r l i e r , demonstrated that a i r l i n e s ' demands for landings are pr ice i n e l a s t i c , and considering tht landing fees (the vehicle through which most user charges are increased) comprise only a small percentage of operating costs, the a i r l i n e s are capable of absorbing an increase in the charges. This discussion of two key issues, then, discloses that the proposal does have merit with respect to the red i s t r ibut ion of costs and the probable impact on a i r t r a ve l . If the author i t ies are operated as Crown Corporations, the margin for p o l i t i c a l interference widens somewhat compared to t o t a l l y independent au thor i t i e s , but they are s t i l l independent bodies and, moveover, the fact that the a i rport s would be u lt imately accountable to the government ensures that a balance i s maintained between the need for a national a i rpor t system and the need for better responsiveness to needs of users at the local l e v e l . If an independent commission reported only to the municipal i ty there i s a danger that the a i rpor t may become a tool of the regional government whose objectives do not match themselves with a federal a i rpor t system. There i s . so a problem that an indiv idual authority may not be capable of performing i t s own technical serv ices, such as engineering, that would o rd ina r i l y be provided through C.A.T.A.'s headquarters or region. Most l i k e l y , any re-quirement for technical or other services could be contracted out. A f i n a l comment, from the pos i t ive end of the spectrum, i s that an a i rpor t management system which i s responsive to the needs of a l l users may lessen the tension between C.A.T.A. and the a i r car r ie r s so as to permit a c learer communications-system at other a i rports across Canada. 3. Changes in C.A.T.A. Pol icy Option 3.1. The Airport Revolving Fund covering 23 a i rports uses cross-subsidizat ion as a means of achieving a better balance between the need for a national a i rpor t system and the need for increased commercial v i a b i l i t y at these a i rports (the 23 a i rports are l i s t e d in Exhibit 2). Those a irports which make an operating surplus can support those which are operating at a d e f i c i t . I t i s also r e l a t i v e l y easy to implement and, from a p o l i t i c a l stance, i s quite feas ib le . A th r i v ing fund w i l l eventu-. a l l y allow a l l 23 a i rports to cover t he i r operating costs. Concern has been expressed over the notion of the Revolving Fund be-coming a se l f - sus ta in ing ent i t y . The previous fund bu i l t up a debt of $655 m i l l i o n , and although the new fund i s introduced with an increase in user charges, i t s t i l l lacks a defined management control and accountabi l i ty s t ructure, and has l i t t l e c r e d i b i l i t y (obviously) with the a i r l i n e industry. The f inanc ia l projections of Exhibit 4 were prepared to show the effects of i n f l a t i o n on cash requirements for the fund. I t \ i s apparent from these numbers that given the current revenue base, an annual growth of 4 J percent plus 5 percent per year to o f f set the i n f l a ted level of costs, i s inadequate to produce a f i n a n c i a l l y sound fund. An operating d e f i c i t occurs each year, and loan interest at the end of the period equals 25 percent of revenues, while loans outstanding at the end of the period are $2.3 b i l - ' i l i o n . To overcome th i s d e f i c i t an extra $25 m i l l i o n must be raised i n i t i -a l l y (see Exhib i t 5). The government plans to ra ise roughly 85 percent of th i s amount through an increase in the A i r Transport Ticket Tax, but i t i s not c lear that th i s w i l l be a p o l i t i c a l l y acceptable move, given the potential backlash from passengers and a i r c a r r i e r s . Economists have also argued that cross-subs idizat ion i s an i n e f f i c i e n t means of a l l oca t ing resources. The transfer of a surplus of funds from one a i rpor t to another which i s not covering i t s costs does not compare the marginal cost of retaining the funds to the i r marginal benef i t . There are opportunity costs involved which are being ignored. Furthermore, the a i rpo r t that receives the funding i s provided with no incentive to change i t s management s ty le to r e f l e c t a better awareness and control of costs. This proposal does not lessen the degree of monopolistic control that C.A.T.A. possesses over the a i rpo r t s ; in f ac t th i s i s a move toward the s o l i d i f i c a t i o n of the centra l i zed management system. The amount of authority held by loca l management, i t s input into strategic decis ion-making, and i t s responsiveness to the business environment, are not changed with th i s new po l i cy . Option 3.2. The cost recovery plan i s an attempt to allow a i rports to recover the i r legit imate user costs which creates more of a balance be-tween the need f o r a national system and the need fo r commercial v i a b i l i t y and provides addit ional benef i t s , described e a r l i e r under Option 2.2, when i t i s combined with the concept of independent author i t i e s . As a s ingle po l i c y , i t i s an economically sound proposal, d i s t r i bu t i ng the burden of costs to those that use the a i r p o r t ' s f a c i l i t i e s . However, there i s a question as to the impact upon local management that an increase in land-ing fees to achieve cost recovery w i l l have. I t may be that increasing landing fees to s ix times that of the present level does not provide an incentive to local managers to be properly concerned about the i r opera-t ional costs. The proposal does not bear upon the amount of author i ty , or the input into s t rateg ic decision-making that the local administration ; possesses. The option i s eas i l y implemented from C.A.T.A.'s viewpoint and i s p o l i t i c a l l y acceptable as the notion of 'cost-recovery ' indicates a governmental concern fo r maintaining some form of cos t -e f f i c iency . The amount of control that C.A.T.A. possesses over the a i r ca r r ie r s i s not changed and, in f a c t , the l a t t e r group bears the brunt of increase in charges resu l t ing from th i s po l icy . The use of landing fees as a catch-a l l element makes the a i r l i n e s responsible for the recovery of a i r -port and terminal control costs which i s reasonable assuming that they are the main benef ic iar ies of the a i r po r t s ' services. This also assumes that the costs of operation are under cont ro l . If they a ren ' t , i t i s not f a i r to hold the a i r l i n e s responsible for paying these costs d i r e c t l y . Whether or not the costs are under control i s an unresolved issue at th i s point in time. Summary of Evaluation The fol lowing matrix provides a comparison of a l l the options against the nine previously established c r i t e r i a . Each square of the matrix i s marked with e i ther a more, l e s s , or stable index. Each proposal i s a l l o -cated an index which i s interpreted in the range of good - bad choices according to the fol lowing chart: C r i t e r i a Index I n t e r p r e t a t i o n 1. Amount of a u t h o r i t y g iven more good to l o c a l management l e s s bad 2. Degree of power he ld by more bad C.A.T.A. headquarters and reg ion l e s s good 3. Responsiveness of A i r p o r t en? , more good v i ronmentsto the needs of l e s s bad p a r t i c i p a n t s 4. Balance between the need f o r a more good na t i ona l system and the need f o r l e s s bad more commercial v i a b i l i t y 5 . I ncent i ve to manage a i r p o r t s e f f i - more good c i e n t l y and e f f e c t i v e l y on the l e s s bad par t of l o c a l a d m i n i s t r a t i o n 6. Amount of i nput to p r i o r i t y p l a n - more good ning possessed by l o c a l managers l e s s bad 7. Amount of p o l i t i c a l i n f l u e n c e more bad on a i r p o r t management l e s s good 8. Amount of c o n t r o l C.A.T.A. more bad possesses over a i r l i n e s l e s s good 9. Case of implementat ion, p o l i t i c a l easy, cheap good f e a s i b i l i t y and general cos t ha rd , c o s t l y bad An opt ion which does not a f f e c t any of the c r i t e r i a i n comparison to the s ta tu s quo i s g iven a s t a b l e index. The cha r t i s based on the intended and unintended consequences of the o p t i o n s , which accounts f o r the range of i n d i c e s i n some squares. The d i f f i c u l t y i n a s ses s ing t h i s type of a n a l y s i s i s t ha t no one c r i t e r -ion i s ab so l u te . As a r e s u l t , each opt ion must be examined across a l l c r i ^ -t e r i a . No attempt has been made to weigh any of the c r i t e r i a , as t h i s would i nvo l ve making assumptions which the author i s not prepared to sup-port a t present . I d e a l l y , i t would be s imple to examine each opt ion to determine which one maximizes the number of p o s i t i v e i n d i c e s over negat ive Matrix 1 1 . Option C r i t e r i a Changes in Organization 1.1 A i rport Manager reports to Regional Administrator 1.2 A i rport Manager reports d i r e c t l y CATA H.Q. 2.1 Limited A i rport Commission 2.2 Extensive Ai rport Commission Changes i n Pol icy 3.1 A i rport Revolving Fund 3.2 Cost Recovery Plan Amount of authority a t . l oca l level S l i gh t l y more S l i gh t l y more Sl i ght ly more s l i g h t l y less A l o t more Stable Stable 55 2. 4. Degree of power held at CATA H.Q. Responsiveness of a i rport environment to needs of part ic ipants Balance between need for a national a i rpor t system and increased commercial v i a b i l i t y Stable Stable S l i gh t l y more -s l i g h t l y less Less Less Less Stable-less Stable S l i gh t l y more -s l i g h t l y less More Stable -less Less Stable S l i g h t l y more More S l i g h t l y more -S l i gh t l y less More More 5. Incentive manage Option e f f i c i e n t l y 1.1 Stable-less 1.2 Stable 2.1 S l i gh t l y more -s l i g h t l y less 2.2 More 3.1 Stable 3.2 Stable 56 6. Amount of input to p r i o r i t y plan-ning possessed by loca l managers Stable Amount of p o l i t i c a l .influence on a i rpor t management Stable 8 . Amount of control CATA possesses over a i r l i n e s  Stable 9. Ease of im-plementation and p o l i t i c a l feas ib i1 i t y , general cost easy, inexpensive Stable S l i gh t l y more S l i g h t l y more Stable Stable Stable Stable S l i gh t l y more s l i g h t l y less Stable -less Stable -less Stable More -stable S l i gh t l y more s l i g h t l y less Stable -less Less easy, inexpensive hard, expensive hard, most expensive easy, least expensive easy, least inexpensive ind ices , but th i s i s made d i f f i c u l t because of the var iat ion in indices due to the possible unintended consequences. This may be interpreted as a form of r i sk associated with the par t i cu la r option. It has been stated previously that i t i s not the intent of the study to choose an optimal so lu t ion , mainly because an optimal solut ion in the pareto sense i s d i f f i c u l t to r ea l i ze . What the analysis has sought i s a better solut ion that what at present ex i s t s in the way of a i rpo r t manage-ment. Although the f i n a l decision must be l e f t to decision-makers at high levels within the c i v i l serv ice, the analys is has indicated that the proposal to convert the a i rport s l i s t e d in Exhib it 2 to independent a i r -port author i t ies i s one of the better solutions to the problems posed in th i s study. Certainly i t i s a major and expensive reorganization, but i t s adaptab i l i ty to the c r i t e r i a i s very good. The amount of authority at the loca l level i s raised with an accompanying reduction in the degree of power held by C.A.T.A. The a i rpor t environment i s deemed to be more responsive to the needs of users, and the loca l administration i s provided with a better incentive to e f fec t i ve l y run the i r a i rpo r t . The proposal s t i l l contains certa in grey areas of uncertainty with respect to the amount of p o l i t i c a l influence and C.A.T.A.'s control over the a i r l i n e s , but the other proposals contain a roughly equivalent amount of uncertainty with respect to other c r i t e r i a . Considering th i s recommendation, i t becomes worthwhile to examine the management system for a i rports in the United States, which operates on a p r inc ip le s im i l a r to the one espoused above. An in-depth look at the United States concept of an author i ty , the i r ex i s t ing l e g i s l a t i o n , and a comparison of the performance of the two systems provides an ins ight into the usefulness..of the recommendation to consider f i ve Canadian a i r -ports for conversion to author i t ie s . I t may be that , given the nature of our unique country, the performance of our system under the authority concept w i l l not improve as expected, but th i s cannot be assumed without the necessary i t e r a t i on of such a comparison. Chapter Five THE UNITED STATES AIRPORT SYSTEM INTRODUCTION In the United States, a i rport s are one of the most important and widely used public f a c i l i t i e s . As of January 1, 1971, there were ,13,380 a i rports in the U.S. Of those a i rport s open to the public and owned by the pub l i c , there are roughly 2700 a i rports which have at least one paved and l ighted runway. The 2700 a i rport s which are publ ic ly owned include the majority of the.nation 's busiest a i rpo r t s . Public a i rports are t yp i c a l l y owned by c i t i e s or mun ic ipa l i t ie s as i n -14 dependent author i t i e s . The focus of th i s section pertains to these a i r -ports. The premise that c i t i e s should reta in control and operation of t he i r a i rpor t f a c i l i t i e s i s conditional upon the i r operation by a private manage-ment team which has f u l l control over operations, a l l expenditures, the budgeting process, h i r i ng of personnel, and operates free from any p o l i t i c a l domination. This type of management team operates the authority in the public i n te re s t , which, in turn, d i r e c t l y shapes the nature of a i rpor t management. It i s the American philosophy that public in teres t groups part ic ipate in the areas of an a i r p o r t ' s operations that d i r e c t l y impact upon them. This has the consequences of ensuring that public access to information and input to any project, or pol icy decis ions, be ava i lab le to a l l interested pa r t i e s , and creates a system of checks and balances which supposedly ensures a f a i r e r treatment of a l l concerned and l im i t s the power of any one group to dominate any decis ion. The concept of the public interest also influences the c r i t e r i a fo r the evaluation of projects at the a i rpor t . For example, the American emphasis i s on standards of performance and safety whi le , in other countr ies, publ ic interest may d ictate an emphasis upon the achievement of a soc ia l optimum. Public i n -terest has also imposed the rule of thumb of encouraging competition amongst a i rpo r t s , which gives each management team ikn incentive to be as e f f i c i e n t and e f fect i ve as possible. In addit ion to f u l f i l l i n g the publ ic i n te re s t , there are certa in other advantages to vesting the authority of a i rport management in an independent commission. The idea of independence at t racts top-notch indiv iduals to manage the f a c i l i t i e s . Various loca l groups may be represented on the com-mission, continuity of po l icy is ensured, and an e f fec t i ve communications system, f l e x i b l e to the surrounding business environment resu l t s . The extent to which a i rport author i t ies ex ist iacross the United States i s very broad, and while exact numbers are not known, the i r existence i s generally only of interest to the largest a i rpo r t s , c l a s s i f i e d as a i r ca r r i e r a i rpor t s . There are four categorizations of publicly-owned a i r -ports. They are: 1. A i r Carr ier Airports 2. Commuter Service Airports 3. Rel iever Airports 4. General Aviat ion A i rports . There are two a i r c a r r i e r a i rports served by over 15,000 da i l y f l i g h t s . These a irports are served by c e r t i f i e d car r ie r s and, in 1977, approximately 232 m i l l i o n passengers were carr ied by the major a i r l i n e s which serve about 620 a i rpor t s . These airports are sub-categorized into " large hubs" (more than 2.2 m i l l i o n enplaned passengers), "medium hubs" (.5 m i l l i o n -2.2 m i l l i o n enplaned), and "small hubs" (.1 m i l l i o n - .5 m i l l i o n enplaned). Commuter a i r l i n e s are a i r taxi operators of small a i r c r a f t which operate more than f i v e round t r i p s per week. A commuter service a i rpo r t i s regular ly served by a commuter a i r l i n e enplaning more than 2,500 passengers per year. With the near disappearance of passenger r a i l service to small communities, the commuter a i r l i n e as a common ca r r i e r i s more important. I t i s quite com-mon for the CAB to grant c e r t i f i e d car r ie r s permission to suspend serv ice, conditional upon a commuter a i r l i n e providing substitute service for the departing c e r t i f i c a t e d a i r c a r r i e r . A re l i eve r a i rpor t i s a metropolitan area general av iat ion a i rpo r t which serves:ito reduce a i r c a r r i e r congestion by d ivert ing general av i a -t i n a c t i v i t y from major a i r c a r r i e r a i rpo r t s . Before a re l i eve r i s i n -cluded in a metropolitan system plan, consideration i s f i r s t given to the development of short runways for the exclusive use of small a i r c r a f t at the major a i rpo r t . Some 16 m i l l i o n passengers t rave l led on in t ras tate and commuter a i r l i n e s which serve approximately 781 a i rpor t s . The general av iat ion a i rpor t system includes those a i rport s not c l a s s i f i e d under a i r c a r r i e r , commuter service or re l i eve r a i rpor t s . In 1977 an estimated 200 m i l l i o n passengers used th i s form of av ia t ion . Be-fore the ex i s t ing l e g i s l a t i on for a i rport s i s reviewed, i t i s useful fo r a better understanding of the a i rpor t system to examine the history of federal aid and l e g i s l a t i on for a i rport s from the beginning of th i s century. HISTORY OF FEDERAL AID FOR AIRPORTS IN THE UNITED STATES (1911-1969) Federal a id for airports.ihas been in existence in various forms since 1911, but i t was not un t i l a f te r World War II that a progam s im i l a r in slope to the current A i rport Development Aid Program (ADAP) came into being. A l i s t i n g of Federal assistance l e g i s l a t i on pr ior to World War II includes: 1911 - The Post Of f ice Department has an appropriation approved f o r a i rpo r t development. 1933 - The C i v i l Works Administration provided $15,000,000. 1934 - The C i v i l Works Administration provided $934,000. 1935 - The depression-born Works Program Administration (WPA) provided $324,000,000 in Federal funds to match $111,000,000 local funding. I t also provided $29,000,000 in Federal loans fo r a i rpo r t purposes. I t i s interest ing to note that the A i r Commerce Act of 1926--the f i r s t major l e g i s l a t i on passed with the spec i f i c intent of foster ing and encour-aging a v i a t i o n — s p e c i f i c a l l y prohibited Federal a id fo r a i rport s under the Act. In 1938, the C i v i l Aeronautics Act included a i rports along with other navigational aids as e l i g i b l e technical improvements but prohibited acqu i s i -t ion of any ap'rport by purchase or condemnation. However, the Act•authdrized a study to determine i f the Federal Government should part ic ipate in the construct ion, improvement, development, operation, or maintenance of a national system of a i r po r t s . The study resu l t s were presented to Congress in 1939, with recommendations that an adequate system of a i rports be re -cognized as a matter of national concern and a proper object of Federal expenditure. During World War I I , the exigencies of national defense spurred de-velopment in av iat ion and construction of many a i rpo r t s . In 1940, $40 m i l l i o n was appropriated to construct, improve and repair up to 250 public a i rports a f te r determination was made that they were essential f o r national defense. This was the f i r s t appropriation by Congress d i r e c t l y to a federal c i v i l av iat ion agency s p e c i f i c a l l y fo r a i rpo r t s . The program was ca l led the Development of Landing Areas for National Defense Program (DLAND) and eventually resulted in appropriations of $383,031,875 fo r 535 a i rpor t s . In 1944, an addit ional $9,513,995 was spent under a s im i l a r program, the Development of C i v i l Landing Areas Program (DCLA) for 29 a i rpor t s . In 1945, l e g i s l a t i on was introduced for Federal a id for a i r po r t s , but no action was taken during the Congressional Session. S imi lar l e g i s l a -t ion was;introduced by the fol lowing Congress and on May 13, 1946 the Federal A i rports Act was signed. This Act was extended or amended at various times and i t remained in e f fect to provide federal a id for a i r -ports through 1969. The record of accomplishment under the Federal Aid for A irports Program (FAAP) between 1946 and 1969, shows there were 1.2 b i l l i o n federal do l la r s matching 1.3 b i l l i o n loca l funds, fo r a tota l investment of 2.5 b i l l i o n . This money was used for 7,964 projects at 2,316 a i rpor t s . There were $377,000,000 fo r land purchases; fo r a i rpor t purposes, including land for approach l i g h t systems—$269,000,000 for bui ld ings; 1.8 b i l l i o n fo r construction of a i r c r a f t operating areas.and on-airport roadways; $35,000,000 for runway, taxi-way and apron l i g h t i n g . By the l a te 1960's, the Federal Aid to A i rports Program, which appropriated money from the General Treasury Fund, was seen to be inade-quate as the demand for a i rpor t development a id was in excess of a v a i l -a b i l i t y of funding. This, plus the rapid growth in a i r t r a f f i c leading to excessive delays at major a i rports by 1968, led to concerted e f fo r t s by the Federal Government and Industry that resulted in the enactment of a two- t i t l ed piece of l e g i s l a t i on which has guided the development and f inancing of the a i rpor t system through the 1940's. The Act , Public Law 91-258, runs from 1940-1980, at which time new l e g i s l a t i on w i l l be i n t r o -duced. The possible d i rect ion of the new l e g i s l a t i on i s discussed at the end of the fol lowing sect ion. A REVIEW OF THE EXISTING AIRPORTS ACT T i t l e One of the Act i s the A i rport arid Airway Development Act, and T i t l e Two i s the A i rport and Airway Revenue Act. Under t i t l e two, user charges on passenger fa res , f u e l , a i r c r a f t and passengers are lev ied to be used to defray costs incurred under t i t l e one, the A i rport and Airway Development law. The major features of th i s Act are discussed below, with T i t l e I I , the A i rport and Airway Revenue Act , being examined f i r s t . T i t l e II The A i rport and Airway Revenue Act This Act comprises l e g i s l a t i on covering the source of f inancing and management.df the A i rport and Airway Trust Fund. Under i t s auspices, the Secretaryoof the Treasury assumes control of the Trust Fund and i s charged with: 1. Determination of the amounts to be appropriated from the General Treasury to the Trust Fund. 2. Holding the Trust Fund, and upon consultation with the Secretary of Transportation, reporting to Congress each year on the f i nanc ia l condition and the resu l t of the Trust Fund during the preceding f i s c a l year and/or i t s expected condit ion during the next f i v e f i s c a l years. 3. Investing such portions of the Trust Fund as are not required to meet current withdrawals. The sources of the funds to be held in t rus t accrue from taxes pn: ( i ) gasoline ( i i ) other l i q u i d fuels ( i i i ) a i r c r a f t t i r e s and tubes (iv) passenger t i c ke t tax - domestic and international (v) a i r f re i gh t tax (vi) c i v i l a i r c r a f t tax Detai ls on these taxes may be found in Exhib i t 6 in the appendix. The contents of the Trust Fund are ava i lab le for making expenditures to meet the obl igations incurred under t i t l e one of the Act—the A i rport and Airway Development Act. These f a l l under the major headings of: 65-(1) operations (2) grants - in-a id for a i rports (3) f a c i l i t i e s and equipment (4) research and development As part of his duty to control the Fund, the Secretary.of the Treasury must remit certa in amounts from the Trust Fund to the General Treasury Fund in the case of certa in usages of fuel which are tax-exempt. I t i s also his duty to invest those portions of the Trust Fund which are not required to meet current withdrawals in interest-bearing obl igations guaranteed by the United States. These re spon s i b i l i t i e s are detai led in Exhibits 7 and 8. Table 9 below outl ines the status of the Trust Fund as of September 30, 1976, at which time a surplus of $2.7 b i l l i o n ex isted. C lea r l y , the excess of receipts over expenditures i s f a r greater than o r i g i n a l l y a n t i -c ipated, and th i s surplus is expected to grow unt i l the present l e g i s l a -t ion i s changed. T i t l e I The A i rport and Airway Development Act of 1970 There are three separate components to the Act: 1. National A i rports System Plan (N.A.S.P.) 2. Planning .Grant Program^ P. G. P.) 3. A i rports and Airway Development Program (A.A.D.P.) 1. The National A i rport System Plan i s a continuous planning process, re f lec t ing changes in trends and technology through an i t e r a t i v e process in which current a c t i v i t y and current forecasts are used to determine physical development at a i rpo r t s . The object of the federal involvement i s to provide reasonable access to a safe and adequate a i r transportation system. The coordination of the N.A.S.P. i s conducted through eleven re-gional o f f i c e s . In t o t a l , about t h i r t y F.A.A. o f f i ce s contribute to i t s TABLE 9 Status of A i rport and Airway Trust Fund, United States September 3G, 1976 FISCAL YEAR TO DATE I. BALANCE-BEGINNING OF PERIOD $ 2,550,201,746.83 II. RECEIPTS: A Excise Taxes (Transferred frcm General Fund).... 1. Any liquid fuel other than gasoline 2. Tires used on aircraft 3. Tubes used on aircraft 4. Gasoline: 6,915,915.00 210,000.00 20,000.00 a. Commercial 4 cents tax b. Nan-ccrrmercial 4 cents tax ' c. Ncjn-ccmrnercial 3 cents tax 300,000.00 4,054,712.00 3,043,534.00 5. Transportation by Air, seats, berths, etc 6. Use of international travel facilities 7. Transportation of property, cargo 8. Use of c i v i l aircraft 225,131,258.67 15,695,366.00 14,373,615.00 7,735,142.38 Total Tax Receipts 277,479,543.05 B. Less reimbursement to General Fund-Refund of Taxes and Estimated Tax Credits: 1. Ccmmercial Aviation Gasoline 2. Non-Conmercial Gasoline 3. Ci v i l Aircraft 4. Any Liquid Fuel other than Gasoline Total Reimbursement for Tax Refunds 300,000.00 4,874.74 204,849.25 69,308.14 579,032.13 Net Tax Receipt 276,900,510.92 C. Federal Payments -0-D. Transfers from the General Fund -O-E. Interest on Investrnent 936,863.39 277,837,374.31 III. EXPENDITURES: A. Federal Aviation Adriinistration 2. Grants-in-aid for airports 3. Facilities and Equipment 4. Research and Development 15,664.10 25,503,476.97 48,363,867.77 18,092,209.32 B. C. Aviation Advisory Ccnrnission - Salaries and Expenses Interest on Refund and Taxes Total Expenditures -0-25,922.66 92,001,140.82 IV. BALANCE END OF PERIOD 2,736,037,980.32 formulation. The preparation i s coordinated with: (1) a i r car r ie r s (2) a i rport management (3) other modes of transport (4) federal departments (communications, defence) (5) C i v i l Aeronautics Board (6) Public pressure groups. An aviat ion advisory commission has been established to i dent i f y long range needs of av iat ion including N.A.S.P. Appropriations not exceeding $2 m i l -l i o n are avai lable from the Trust Fund for i t s use. The national consis-tency of the N.A.S.P. i s assured through guidelines prepared by the co-ordinated ef for t s of F.A.A. headquarters and regions and the use of common entry c r i t e r i a . The basic c r i t e r i o n for entry into the N.A.S.P. i s that an a i r ca r r i e r a i rport must be served by a n ' a i r l i n e holding a Ce r t i f i c a te of Publ ic Convenience and Necessity from the C.A.B. Other c r i t e r i a ex i s t fo r the d i f fe rent c l a s s i f i c a t i on s of a i rpor t s . Af ter entry into the N.A.S.P. i s determined, development projects are funded under the fol lowing system of p r i o r i t i e s (on a descending sca le) : (1) Items needed for instrument f l i g h t capab i l i t y at busy a i rpor t s . (2) Items needed for fundamental a i rpor t conf igurat ion. (3) A i rport capacity items to reduce delays and re l ieve ground congestion. (4) Support items such as service roads, taxiways to hangars, addit ional entrance roads, boundary and perimeter fencing. At present there are 3,137 a irports which currently meet the N.A.S.P. entry c r i t e r i a , two-thirds of which are general av iat ion a i rpor t s . In the revised N.A.S.P. for 1978-84, development costs are $10.6 b i l l i o n . New a i rpor t costs are only $1.5 b i l l i o n . The revised plan attempts to maximize the use made of ex i s t ing a i rports with a lesser emphasis on the construction of major new a i rpor t s . High cap i ta l costs and local r e s i s t -ance to large scale a i rpor t construction mandate that a c r i t i c a l need for addit ional capacity be evident before major new a i rport development i s undertaken. 2. The Planning Grant Program provides grants to be used in various types of a i rpor t plans so as to promote an e f fect i ve locat ion and develop-ment of indiv idual a i rports and the development of an adequate N.A.S.P. There i s an authorized P.G.P. funding level of $15 m i l l i o n per year. The amount of funds ava i lab le to sponsors in any one state i s l imi ted to ,1:0 percent of the $15 m i l l i o n . Since 1970, there have been 1,400 grants—1,250 fo r a i rpor t master plans and 150 for system.plans;„ System,plans i dent i f y av iat ion f a c i l i t i e s required to meet immediate and future a i r transportation needs and the goals of the state. Master plans ident i f y the development at indiv idual a i rports based on f i v e , ten, and 20-year forecasts of av iat ion a c t i v i t y . (Note that the NASP i s more than a summation of f i f t y S.A.S.P.'s because while the l a t t e r are consulted, some of them may not be included due to d i f fe rent entry c r i t e r i a . ) The federal share of P.G.P. grants i s : (1) 75% fo r system plans (2) 75% for most master plans (3) up to 93% for master plans for small a i rports on public land s i t e s . 3. A i rport Development and Aid Program. This program was set up to provide fo r the a l l oca t i on of funds according to the proposed physical de-velopment of a i rports in the N.A.S.P. The funding leve l s from 1976-80 for a i r c a r r i e r and general av iat ion a i rport s are outl ined in Table 10. Under the same program, grants are ava i lable for airway navigational f a c i l i t i e s , 69 TABLE 10 The United States A i rport Development and Aid Program Funding Levels fo r A irports 1976-1980 (Mi l l ions of Dol lars) A i r Carr ier General Aviat ion Year A i rport (Mil.) A irports (Mi l . ) Total 1976 $ 435 $ 65 $ 500 1977 440 70 510 1978 465 75 540 1979 495 80 575 1980 525 85 610 $2.36 b i l l i o n $375 m i l l i o n $2.73 Source: B. Baldwin and R.L. Munroe, "The U.S. A i rport System." (Ottawa: Federal Task Force on A i rport Management, 1978) TABLE 11 The United States A i rport Development and Aid Program Grant Levels fo r 1970-1980 Purpose of Grant Amount Acquis i t ion of A i r Navigational F a c i l i t i e s 1971-75 1976 > > $250m. per year $312.5m. per year 1977-80 > $250m. per year Research and Development 1976 = $109.35m. per year 1977 = $85.4m. per year 1978-80 = $50.0m. per year Services provided under international agreements and maintenance of a i r navigational f a c i l i t i e s 1977 1978 1979 < < $250m. per year $275m. per year $300m. per year 1980 < $325m. per year Source: B. Baldwin and R. L. Munroe, "The U.S. A i rport System." (Ottawa: Federal Task Force on A i rport Management, 1978) 70 research and development, and f a c i l i t y maintenance. These are deta i led in Table 11. A l l funding for re l i eve r a i rports i s included with general av iat ion a i rpor t s . The establishment of a commuter service a i rpor t system comprising 130 a i rports i s e l i g i b l e for grants from a $15 m i l l i o n annual fund set aside off the top of the A.D.A.P. The.federal share of AVD.A.P. grants i s given below in Table 12. •,. TABLE 12 The United States Federal Government Share of A.D.A.P. Grants for American Airports 1976-1980 Year Large and Medium Airports Small A i rpor t s , General Av ia t ion , Rel iever, Commuter 1976 75% 90% 1977 75% 90% 1978 75% 90% 1979 75% 80% 1980 75% 80% Source: B. Baldwin and R. L. Munroe. "The U.S. A i rport System." (Ottawa: -Federal Task Force on A i rport Management, 1978). The funds accorded to each type of a i rpor t development a c t i v i t y are done so through a very complex apportionment system using passenger en-planement formulae, and area/population r a t i o s . In 1976, amendments a t -tempted to s impl i fy the system by a l l o t i n g two-thirds of a i r c a r r i e r a i rpor t A.D.A.P. funds as a separate apportionment fund, and then leaving the re -maining one-third as a discret ionary fund. The deta i l s of the complex sys-tem are provided in the appendix in Exhibit 9. The re lat ionsh ip between the Trust Fund, N.A.S.P., P.G.P., and A.D.A.P. i s summarized in Diagram #2 below. The Links Between the Programs Comprisi ng The Financia l ;Ai ' r Administration of American Airports I Use of -com-mon entry c r i t e r i a ---% NASP "Airport Master Plans State A i rport System .Plans Flow P.G.P. Trust Fund Land Congress ADAP Flow Serves as a guide fo r federal investment Airport must be in NASP to be e l i g i b l e for ADAP funding Projects fo r A i rport Development 4/ ' Fire/Rescue I Airport L ight ing 'Passenger 'Equip. Terminal ' Access Runways ' Taxiways 72 The present l e g i s l a t i on w i l l terminate in 1980. At present, the F.A.A. i s busy working on new l eg i s l a t i on which w i l l examine issues surrounding the A i rport and Airway Trust Fund and Cost A l locat ions ; Intergovernmental Respon-s i b i l i t i e s fo r a i rpor t planning; a i rpor t f inancing and l e g i s l a t i on dra f t ing . The spec i f i c questions and i n i t i a l recommendations that have emerged are re-viewed in the fol lowing pages, and have been taken d i r e c t l y from the F.A.A. Task Force's i n i t i a l report. Question 1: Should there be a post-1980 Federal Aid Program fo r a i rports? Recommendation There should continue to be a Federal Aid Program for a i rpor t de-velopment. It best meets the national and broader public needs for those a i rports determined to be part of the "national system." Further, state and local governments and a i rpor t sponsors can-not, in many instances, develop the necessary level of f inanc ing, and some states have no mechanism fo r e f f ec t i ve l y providing needed development and improvement funds to the i r a i rpor t s . Question 2: Should the Airport and Airway Trust Fund be retained? Recommendation Retain the Trust Fund. It has wide support and has been e f fec -t i ve in providing f i nanc ia l resources to carry out the national a i rpor t and airway development program. Question 3 - has three sub-issues which are: A. What FAA costs are of s u f f i c i en t national interest and general public benefit to warrant t he i r exclusion from the costs att r ibuted to users of the a i rpor t and airway system? B. What types and levels of a t t r ibutab le costs chould be recovered from system users? C. What means should be used to recover costs? The respective recommendations to each sub-issue are: Recommendation - Sub-Issue A Exclude a l l costs l i s t e d in Table 13 including costs associated with the provision of subsidized a i r transportation service to small communities and the added costs of.imaintaining maximum safety character i s t i c s in a j o i n t use system. TABLE 13 Post-1980 U.S. A i rport Leg is lat ion -A c t i v i t i e s to be Considered for Exclusion From the General System User Cost Recovery Base 1977 Cost (M i l l ions ) Costs of Support, Tra in ing, and Research for Safety, Aviat ion Medicine, and Environment $ 90 Regulatory Costs 153 Costs of Providing Weather Data to NOAA 26 Costs of M i l i t a r y Features of A i rport and Airway System Design--UHF Communications and TACAN ' 84 Subtota l - " 353 Costs Incurred in the Provision of Subsidized A i r Transportation Service to Small Communities 42 Subtotal, ; _ 395 Added Costs of Serving General Aviat ion in a Jo int Use System While Maintaining Maximum Safety Standards 275 Total \ $ 670 1. Does not include reimbursed cost items or costs of serving m i l i t a r y a i r c r a f t using j o i n t use features. Source: U.S. Dept. of Transportation. "Task Force on Post-1980 A i r -port and Airway Development Leg is lat ion - I n i t i a l Options Paper." Spring, 1979. Recommendation- Sub-Issue B While immediate f u l l cost recovery i s desirable i t probably i s not atta inable in one overt act ion. Pol icy i n i t i a t i v e s should concen-trate on feas ib le options which gradually increase the degree of user f inancing of a i rpor t and airway costs. Recommendation - Sub-Issue C Introduce .new ind i rec t user taxes on general av iat ion (consist ing of an ad valorem fuel tax and ad valorem taxes on new a i r c r a f t and avionics equipment sa les ) ; reta in other types of i nd i rec t taxes with potential rate adjustments as required to achieve equity among the users. This recovery option provides a way of gradually increasing tax recovery through the ad valorem mechanism, and the tax on new purchases, without a need fo r continual in teract ion with Congress. Direct charges would be strongly opposed by the users, pa r t i cu l a r l y general av ia t ion . Question 4. What d i spos i t ion should be made of the A i rport and Airway Trust Fund Surplus? Recommendation Linking depletionoof the surplus to recovery of an increased portion of FAA O&M costs. Concurrently, taxes w i l l be modified as appropri-ate to accomplish cost a l l oca t i on and cost recovery object ives. The one-time expenditures should include (a) "extraordinary" projects (see Issue #9), (b) h i gh .pr io r i t y safety projects (separate paper i s being prepared on th i s subject), and (c) the improvement or pur-chase of re l i eve r a i rpor t s . Question 5. What should be the s t a te ' s role in the administration of Federal a i rpo r t grant- in-a id programs? No recommendations have been made regarding the s ta te ' s role in the administration of the Federal grant- in-a id program. Question 6. Should provision be made to re late indiv idual a i rpo r t capita l improvement grants to metropolitan a i rpo r t system planning and coordination? Recommendation Provide incentives within.ithe grant program designed .to . . foster enhanced voluntary regional approaches to a i rpor t system development in major metropolitan areas. A combination of s ta tu -tory and administrative incentives may be employed. In the be-l i e f that improved areawide planning to meet a i rpor t capacity needs in major metropolitan areas w i l l be in the interest of the national a i r transportation system, the Task Force f e l t that th i s option can produce meaningful results while avoiding d is rupt ive and serious controversy. I t also may be a reasonable i n i t i a l step toward an approach which, i f successful , can undergo further evolution as needed. ( If th i s general approach seems acceptable, further analysis—aTreadyuuriderway—wil 1 be needed to develop proper incentives that w i l l be e f fect i ve in encouraging workable v voluntary regional approaches.) Question 7. Should indiv idual a i rports be allowed to "opt out" of the Federal a i rpor t development program and—having doner.so—be permitted to levy passenger enplanement charges? Recommendation Retain the status quo. While there i s interest on the part of some a i rpor t operators in having the option of levying head taxes re-stored, such interest cannot be characterized as "strong" or persua-sive in support of change. The l i k e l y negative effects on the over-a l l equi l ibr ium of the Federal a i rpor t development program, admini-s t ra t i ve complexities associated with the levying and co l l e c t i n g of taxes, and the weakness of the countervai l ing benefits would appear to make other a l ternat ives unattract ive. Question 8. Should a multi-purpose (vs. project spec i f i c ) grant approach be incorporated in any future a i rpor t grant program? Recommendation Use the multi-purpose grant approach for entitlement grants only. Given the ex i s t ing entitlement basis fo r granting more than half of ADAP funds and the i n i t i a t i v e which th i s affords rec ip ients in select ing projects, th i s would appear to represent simply a next step in the benef ic ia l streamlining of the present program. The fact that user taxes support ADAP in f u l l argues in favor of returning some of the funds to the points where they are generated with a minimum number of " s t r ings " attached. Question 9. How should "extraordinary" a i rpor t development needs be funded? Recommendation Creation of a special d iscret ionary account for "extraordinary" de-velopment. To overcome the potential disadvantages c i ted above, a suitably r e s t r i c t i v e de f i n i t i on or c r i t e r i a fo r funding would have to be developed. Each qual i fy ing project would require spe-c i f i c approval by the Secretary (or possibly the Administrator) before i t could be funded. An i n i t i a l appropriation of about $300 m i l l i o n should be adequate for at least f i v e years; i f not, consideration could be given to supplementing the account with addit ional funds from the Trust Fund whenever the balance drops below some speci f ied l e v e l . Question 10. What av iat ion program leve l s should be authorized for the post-1980 years? Recommendations - on fol lowing page. 7 6 Program Category Fundi ng Levels Airports  Program F a c i l i t i e s & Equipment LEVEL I LEVEL II LEVEL III LEVEL I LEVEL II LEVEL III Research, LEVEL I Engineering, & Development LEVEL II LEVEL III RECOMMENDATIONS SUMMARY OF PROGRAM LEVEL OPTIONS 10-Year Total (1981-1990) (Mi l l ions of Constant 1978 Dollars) $ 6,250 7,380 8,870 $ 3,050 3,592 4,136 $ 986 1,165 1,416 Accomplishment at Funding Level Adequate to meet/ high p r i o r i t y needs. Major hub a i rports expected to experience a high level of congestion. Provide higher level of p r i o r i t y to increasing system capacity at congested hubs and higher level of p r i o r i t y to upgrading a irports to FAA standards. Fu l ly fund current NASP needs and f u l l y fund new environment i n -centives. Stretch out of major r e t r o f i t programs creating r i s k of system deter iorat ion. Establishment of f a c i l i t i e s and services at less than optimum rate. Rate of implementation of major r e t r o f i t programs to assure non-deter iorat ion of serv ice. Establishment of new f a c i l i t i e s and services at less than optimum rate. Major r e t r o f i t programs accomplished in an optimum or in most cost benef ic ia l manner. F a c i l i t i e s and services meeting c r i t e r i a i n s ta l l ed in a timely fashion. Stretch out most current major system programs but allow comple-t ion of programs well under way (e.g., TIPS, E-TABS, FSS Automa-t i on , e t c . ) . Limited amount of new major systems development i n i t i a t e d . Engineering development necessary f o r systems already in place accomplished to insure continuing i n teg r i t y of national aviat ion systems. Carry current major system developments to completion. Allows introduction of development programs to meet enhancement needs of 1980's such as computer replacement. Provides major accelerat ion of enhancement developments. Rapid t rans i t ion to advanced generation enroute and terminal automation would be supported. 7? Chapter Six THE CONCEPT OF THE AUTHORITY In the United States there are both combined seaport-airport au tho r i t i e s , such as the.New York Port Author ity, or the Sea-Tac Port Author i ty, and i n -dividual a i rpor t author i t ies such as the Metropolitan Nashvi l le A i rport Authority. The majority of the author i t ies are owned and operated as muni-c ipal corporations ( for example, Los Angeles, and New York), while some states such as Maryland and Alaska run the i r own author i t ie s . One a i r po r t , Dulles International in Washington, D.C, i s run by the federal government. The existence of combined port author i t ies and s ingle a i rpor t author i t ies does not complicate the intended presentation of the management structure of an author ity. The combined port authority possesses a number of manage-ment levels in excess of those for a s ingle authority because of the need to administer two functions instead of one. However, the management s t ruc-ture for the a i rpor t in the larger authority i s e s sent ia l l y no d i f fe rent from that of the s ingle one. The information fo r the fol lowing sketch i s drawn from a co l l e c t i on of the management charters of the Metropolitan Nashvi l le A i rport Author i ty, the Baltimore/Washington International A i rpo r t , the New York Port Author i ty, and the Seattle-Tacoma Port Authority. To s t a r t , a general statement on the a i rpor t authority lends i t s e l f as a good basis fo r del ineating management roles in more d e t a i l . The Authority represents a management serv ice, and does not operate with the goal in mind of maximizing i t s return on investments through p r o f i t s . On the other hand, as the authority i s generally operated without the benefits of local tax do l l a r s , prudent business management po l i c ie s are required to ensure that a l l d i rec t and ind i rect expenses are covered by operating re-venues, save the expenditures associated with capita l improvements. The authority practices a centra l ized organizational system, whereby i t possesses operational independence, and i t s s ta f f has an internal capab i l i t y of prov id-ing a l l services on the a i rpor t premises, including actual construction of capita l improvements (generally smaller improvements, although th i s depends on the indiv idual a i rport ) ) The value of any services received from the government (excepting l eg i s l a ted aidfprograms) are paid for by the author i ty. Being a s ingly enclosed public agency, the authority possesses i t s own authority to set i t s po l i c ie s in accordance with goals of any authority to provide e f f i c i e n t service and level charges in order that the operations at the a i rpor t break even. The fol lowing out l ine comprises a descr ipt ion of the author i t y ' s cen-t r a l funct ion, i t s organizational s t ructure, the legal framework, the i n -dividual funct ions, and an economic view of a l l a c t i v i t i e s associated with the a i r p o r t ' s operations. The a i rpor t authority has the authority and re spons ib i l i t y fo r a l l property . and operations at the a i rpo r t . I t has no taxing author i ty , and no zoning authority and i t i s pr imari ly dependent on the revenues generated from operations, although federal a id in the form of grants i s ava i lab le through the A i rport Aid and Development Program from the A i rport Trust Fund. The authority does pay taxes on non-aviation a c t i v i t i e s such as leases and contracts. Each authority has a board of commissioners, usually e lected, which oversees the operations of the a i rpo r t . This board i s responsible fo r 79: h i r ing the Executive Director of the a i rpo r t . While the l a t t e r acts as Chief Administrative O f f i ce r , and he and his s ta f f are f u l l y responsible for the operation of the a i r po r t , the Board's approval i s required in the s p i r i t of the "check and balance" system for the fol lowing types of pro-grams: the annual operating-maintenance budget; the capita l improvements program; the c i v i l service program—wages and sa la r i e s ; purchases or con-tracts in excessoof $100,000; a l l contracts fo r professional services; a i rpor t master plans and land use;.plans; annual leases in excess of $50,000; and a l l d i spos i t ion of real property. The typ ica l management hierarchy under the a i r po r t i s chief o f f i c e r consists of the fol lowing d i v i s i ons : f inance, a i r serv ices, personnel, administrat ion, planning and engineering, operations and maintenance, public serv ices, and legal a f f a i r s . The or-ganizational structures fo r Nashvi l le A i rpo r t , and New York—John F. Kennedy—may be found in Exhibit #10. As i t works independently, the authority i s not without contact with other important private and public sector groups. The authority works with the C i v i l Aeronautics Board fo r a i r services advice; with the F.A.A. fo r administration of f i nanc ia l grants, a i r t r a f f i c cont ro l , a i rpor t c e r t i -f i c a t i o n , planning, and secur i ty. Each indiv idual authority also has a working re lat ionship with the state in which i t operates through the Depart-ment of Transport for further f i nanc ia l assistance and planning. The author i t ies that are municipal corporations consult regularly with local government agencies with regard to zoning, community planning, rules and regulations fo r operation, and land acqu i s i t i on . As w e l l , the local com-munities work with the a i rpor t to promote proper planning, the promotion of safety, tourism, business and f l y i n g clubs.. Natura l ly , the authority also has a close working re lat ionship with i t s a i r l i n e partners, i t s f i xed base operators and a l l lessees. The legal framework of the authority consists of three components: the state l e g i s l a t i o n , the a i r l i n e use agreement, and the bond indenture. The state l eg i s l a t i on creates the authority as a legal public corporation which has no taxing power, and i s tax exempt, except fo r certa in non-aviat ion taxes mentioned previously. The corporation has the r ight to sue and i t , in turn, can be sued. The l e g i s l a t i on declares that the authority i s an independent f inancing veh ic le , which must, outside of the federal or state a id i t may receive, r a i s eMt s capita l fo r projects through debt or equity f inancing in private markets. The state l e g i s l a t i on also sets up the posit ions of the board and chief administrative o f f i c e r , which have been previously discussed. The a i r l i n e use agreement covers a broad area of overlapping operations between the authority and the a i r c a r r i e r s . Foremost in th i s agreement are the terms of the author i ty ' s f i nanc ia l opera t ions. These include the del ineation of items to be included in operating revenues and expenditures, and any extra expenditures that would be re-covered through user charges. I t also includes the agreement as to what charges may be changed to accommodate for f luctuat ions in the business cycl so as to reduce an excess operating surplus or d e f i c i t . In the case of the Nashvi l le A i rport Author i ty, which pa ra l l e l s most other au tho r i t i e s , the landing fees are adjusted every s ix months to adequately r e f l e c t the f inanc ia l status of the author i ty ' s operations. If the operations show an increasing d e f i c i t , landing fees w i l l be ra ised. On the other hand, i f a surplus occurs, excessive to the terms of the agreement, the a i r l i n e s re-ceive a rebate through lower landing fees. A l l other charges are set every three years to r e f l e c t trends in the economics of operations. The a i r l i n e s , by agreeing to th i s clause according the authority to the a i rpo r t to change landing fees^are ensuring the f inanc ia l i n teg r i t y of the .a irport; The agreement by the a i r l i n e s also accords permission to the a i rpor t ad-min ist rat ion to finance capita l costs through a certa in form of f inanc ing, usually by the sale of revenue bonds, which are discussed below. The operat-ing budget prepared annually fo r the aitrport by the authority i s reviewed by the a i r l i n e s , and usually there i s an agreement that a i r l i n e s may appeal the budget to the board of commissioners i f the budget exceeds the previous year ' s by a certa in percentage. (In the case of Nashvi l le A i r po r t , the f igure i s 10 percent over the previous year.) Capital improvements must be budgeted for by the author i ty, and they are subject to the approval by\ a major i t y - in - in te res t of the a i r l i n e s . Emergency repairs are not subject to approval. The bond indenture applies to the control and placement of the author i ty ' s f inances. The authority controls a l l investment programs, with the condition that a l l surplus funds which a ren ' t returned to the a i r l i n e s via lower landing fees, are directed to a cap i ta l improvement fund, and there i s a lso a discret ionary fund set up to which annual de-posits are made from revenues, to be a l located at the d i scret ion of the author ity. The indenture also gives permission to finance capita l costs with debt f inancing. The functions of the d i f fe rent levels of organization within the authority are es sent ia l l y the same duties as ex i s t fo r Canadian a i r po r t s , with the important exception that the United States a i rports possess much more authority and independence with regard to indiv idual duties. The management roles of the respective departments in the authority are out-l ined in Table 14 below. TABLE Management Roles at Name of Department Administration and Business Management Personnel Finance Planning and Engineering Operations and Maintenance Safety and Security Legal A f f a i r s A i r Service Community A f f a i r s 14 American Airports Functions Purchasing, Stock Management, Inventory Controls, Property Management, Leasing, Insurance Personnel Management, Salary and Wage Administration F i sca l Management, report ing, accounting, responsible for maintenance of independ-ent balance accounts, budgeting, internal aud i t s , economic analysis Long-range planning f o r expansion of f a c i l i t i e s , design and engineering of f a c i l i t i e s , preparation of plans, performance of en-gineering support serv ices, maintenance of a i rpor t master plans Day-to-day operation of a i rport s run by the author i ty , maintenance of a l l a i rpor t f a c i l i t i e s , preparation of a i rpor t rules and regulat ions, implementation and i n -spection of a i rpor t security Crash, f i r e , rescue and protective services Preparation of contracts, leases and re-presentation in claims and su i t s . Coordination and Monitoring of A i r Service Matters Preparation and Dissemination of Publ ic Information Source: Interviews with various American a i rpor t general managers, 1978-1979. The actual d i v i s i on of duties varies from one authority to another. For example, maintenance duties are c l a s s i f i e d with engineering dut ies , and planning r e spon s i b i l i t i e s are combined with operations at the Metropolitan Washington A i rpor t s . The economics of the author i ty ' s operation are es sent ia l l y s im i l a r to the Canadian system with respect to revenue and expense c l a s s i f i c a t i o n s , the benef ic iar ies of respective f a c i l i t i e s at the author i ty. The r e l a t i o n -ship amongst these components are i l l u s t r a t e d in Table 15. In summary, the organization and management roles of the United States A i rport Authority are s im i la r to the Canadian system in certa in respects. The authority i s answerable to a higher body--the s tate, as our a i rports are answerable to the federal government. S imi lar revenues are co l l e c ted , and the centra l ized approach to management within each authority i s s im i la r to the approach used for our national system. The essential differences are: (1) the independence given to each authority to manage i t s own opera-tions and f i nance i i t s own projects and cap i ta l investments; and (2) the philosophy of self-sustenance which i s not yet appl icable to Canada's a i r -ports save in a few exceptions. I t should also be noted that author i t ies in the United States are also permitted access to federal and state a i d , according to the provisions in the A i rport Aid and Development Program. While the form and amount of a id i s c l ea r l y more defined in the United States, i t i s s im i la r in nature to that offered by the Federal Government of Canada. The concept seems to possess certa in advantages over our present sys-tem, but i t i s s i g n i f i c an t , however, to study the actual management of i n -dividual a i rports to discover what problems e x i s t , and whether or not they are s imi la r to the ones experienced at Canadian a i rpo r t s . '84-TABLE 15 F a c i l i t y The Relationship Between F a c i l i t i e s , Benef i c ia r ie s , Revenues, Expenses for American Airports Beneficiary Income Type Expenses (not related) Landing Area A i r l i n e s Private A i r c r a f t M i l i t a r y A i r c r a f t Other Operators Landing Fees Permit Charges A i r c r a f t Tax Gasoli ne Tax Salar ies Supplies Materials Services U t i l i t i e s Fixed Costs Hangar Area A i r c r a f t Owners Bui lding & Land P i l o t Training Rentals Repair Shops Receipts from Sales A i r c r a f t Storage Terminal Area Tenants: A i r l i n e s Space Rentals Concessions % of Gross A i r Travelers Receipts Other Farming Land or Community Development Bui lding Industrial:, Commercial Rentals Businesses :85 Chapter Seven THE MANAGEMENT STRUCTURE OF THE" UNITED STATES AIRPORT " " AUTHORITIES AND; ASSOCIATED" PROBLEMS ' THE AIRPORT MANAGER'S ROLE Under the concept of the American a i rpor t author ity,r the key to the suc-cess of the operation i s the general manager (referred to previously as chief executive o f f i c e r ) . Not only must he possess a good business and administrative a b i l i t y to oversee the operations, he should also be conver-sant with av iat ion matters, and be a good public re lat ions o f f i c e r with a l l those who use the a i rpo r t . I t i s not that the re spon s i b i l i t i e s have changed over the years—Table 16 below, out l in ing the spec i f i c duties of an a i rpor t manager, was drawn up in 1944 by John Frederick in his book, A i rport Manage- ment—rather, the importance of being able to effectively!.handle those duties in an environment where more people, more opinions, and more potential fo r interference with the management of an a i r po r t , has grown over the past t h i r t y years. In Canada, the re spon s i b i l i t i e s are es sent ia l l y unchanged, but the a i r -port manager i s not s t r i c t l y held to a l l of these re spon s i b i l i t i e s because of the capab i l i t i e s of the regional and headquarters s ta f f to manage the a f f a i r s of the a i rpor t s . Thus, the burden of duties is more spread out. However, while the a i rpor t manager of an authority has heavier duties because more i s expected of him, and he i s subject to closer scrutiny by the various interest groups that ex i s t (the government of the s tate, local business, environ-mental i s ts , a i r c a r r i e r s , general av i a t i on ) , he does have more administra-t i ve author i ty, unl ike his Canadian counterpart, over everything perta in-ing to the operation and maintenance of the a i rpo r t . One problem that TABLE 16 Duties of an A i rport Manager Preliminary preparation of the municipal a i rpor t department budget in conjunction with the c i t y ' s budget department. 2. Supervision of expenditures for the a i rpor t in accordance with the muni-c ipal a i rpor t department budget. 3. Supervision of maintenance of the a i r po r t , and maintenance of city-owned bui ldings on the a i r po r t , in conjunction with the c i t y ' s publ ic works department. 4. Responsib i l i ty fo r the co l l ec t i on of fees, rents, and other revenues. 5. Responsib i l i ty fo r i n i t i a t i n g purchases for the a i rpor t and fo r coopera-t ion with the c i t y purchasing department in the completion of such purchases. 6. Respons ib i l i ty for recommendation of proper insurance for the c i t y ' s protection from loss. 7. Enforcement of the provisions contained in leases and agreements between the c i t y and tenants of a i rpor t leased property. 8. Supervision of the accounting methods to be employed by the c i t y to r e f l e c t properly the f inanc ia l a f f a i r s of the a i rpor t department. 9. Respons ib i l i ty for developing a l l pract icable sources of a i rpor t re-venue which are in l i ne with the general po l i c ie s of a i rpor t f inancing as set forth by the c i t y ' s chief executive and the c i t y counc i l . 10. Control of a l l ' f l i g h t a c t i v i t y over the a i rpo r t . 11. Control of a l l general safety procedures on the a i rpo r t . 12. Dissemination of f l i g h t information to the publ ic . 13. Assumption of re spons ib i l i t y fo r representing the c i t y in a l l contact with the State Department of Aeronautics and the C i v i l Aeronautics Administra-t ion or other governmental agencies concerned with aeronautical a c t i v i t i e s . 14. Respons ib i l i ty fo r the transmission to the c i t y ' s chief executive and to the c i t y council of a l l general aeronautical information which i s of im-portance in planning c i t y p o l i c i e s . 15. Responsib i l i ty fo r foster ing and promoting av iat ion a c t i v i t y and com-merce in the community. Source: J . H. Frederick, A i rport Management (Chicago: Aldine Atherton, 1946) ex ists i s whether or not he s t i l l has s u f f i c i en t authority to accommodate the re spons ib i l i t y of the job. In an interview with the Director of Av ia-t ion at Seat t le ' s A i rport Author ity, i t was f e l t that at present there was a s u f f i c i en t level of authority to ensure that the a i rpor t was well managed. The d i rector can set up any system of p r i o r i t i e s as long as safety stand-ards are met. He has f u l l control over the da i l y operations, and stressed the importance of the integrat ion between the a i rpor t manager and the com-munity. If th i s l i nk was to break due to a lack of author i ty, i t would have severe consequences on the operation of the;a i rport . This problem i s not as important in Canada, because the role of the a i rpor t manager has yet to be b u i l t up to th i s leve l of importance. The higher level of authority places the general manager of an authority in a more favourable posit ion compared to his Canadian counterpart, notably with the a i r l i n e s . His reputation i s superior and his a b i l i t y to work with a i r l i n e s i s more developed, to the point where the author i t y ' s administration and the a i r ca r r ie r s t reat each other as business partners. Natura l ly , there are problems which w i l l be discussed below, but, on the whole, i t i s a much more harmonious re lat ionsh ip than that which ex ists in Canada between those who control the administration of the a i rport s and the a i r c a r r i e r s . The " b u i l t - i n " independence in the posit ion of American a i rpor t manager i s much more s im i la r to that possessed by a senior executive in a private corporation. The management and methods used are comparable to those of a modern business enterprise rather than those of the government. The a i rpo r t manager i s not subject to the degree of p o l i t i c a l influence that i s im-pressed upon the Canadian a i rpor t managers. COORDINATION WITH OTHER PARTIES The Director of Aviat ion at Seat t le , and the Director of Aviat ion Plan-ning at New York both stated that the i r a i rports were responsive to the loca l government, public interest groups, the F.A.A., a i r ca r r ie r s and a l l users of the a i rpo r t . Each authority possesses several consultat ive committees that the a i rpor t administration works with in order to c o l l e c t the informations necessary to. make knowledgeable decisions regarding items such as F.A.A. standards on noise, the National A i rport Systems Plan, and local economic development. In Canada, th i s form of consultation occurs at the majority of our a i rpo r t s . However, the i r effectiveness i s l imi ted by the lack of authority that the loca l administration possesses. The committees, in the words of one Canadian manager, are not e f fect i ve with the exception that those involved can explain the i r troubles to the administrat ion, and re-l i eve tensions. Because the a i rpor t manager can only c o l l e c t opinions expressed and pass them on to his regional administrator, the responsive-ness of management to the interest groups is somewhat slowed. In the United States, the potential problem i s of a d i f fe rent nature. -It i s one of ensuring that these committees are properly contro l led and that a work-ing re lat ionship i s maintained. I t seems that th i s potential has not been allowed to grow as there i s a good degree of coordination because a l l com-mittees work with the same local administration toward the goal of provid-ing a safe and convenient service to the publ ic . As in Canada, author i t ies re ly on experts fo r certa in central services. At Seat t le , the Port Authority of Seattle provides forward planning, legal a i d , and lease negotiations for the local a i rpor t administrat ion. At New York, legal serv ices, personnel serv ices, f i nanc ia l serv ices, engineering and technical serv ices, are provided to the a i rpor t by the New York Port Authority. At Baltimore-Washington Internat ional , which i s one of the v :v.' few state-operated a i r po r t s , the state works in cooperation with federal agencies ( i . e . , F.A.A. and others) which provide planning and capita l grant funds, promulgate technical procedural gu idel ines, review/approve trans-portation plans/programs/projects fo r consistency with requirements and regulate inters tate common ca r r i e r s . Problems such as bureaucratic delays 89^ crop as they do in Canada, but to a lesser degree because of the b u i l t - i n independence in the local management's decision-making a b i l i t y . FINANCIAL OPERATIONS The nature of the f i nanc ia l operations at the authority i s an inde-pendent and prof i tab le one. The finance department within each authority controls a l l f i s c a l management of operations from budgeting through to f inancing major cap i ta l expenditures. I t operates using t r ad i t i ona l business p r i n c i p l e s , with the exception that i t s main goal i s not to maximize share-holders ' wealth. Since i t i s the function of an a i rpor t to provide a ser-v i ce , the f inanc ia l manager at the a i rpor t i s concerned with a cost recovery strategy rather than a profit-making strategy. The revenue and expense categories are no d i f fe rent from those encountered at Canadian a i rpor t s . The essential difference i s that a l l a i rpor t user charges are set d i r e c t l y by the author ity. A l l charges are arranged through a.lease negotiated l o ca l l y between the respective part ies . For example, a i r l i n e s sign a lease for landing fees, fo r fuel taxes, and fo r terminal f a c i l i t y charges. The source of complaints about the fees charged emanates from the a i r c a r r i e r s , who t r a d i t i o n a l l y want to be charged as l i t t l e as possible. The s ize of th i s problem has been diminished by an agreement between the a i r -port authority and the a i r c a r r i e r s , as business partners, to pe r iod i ca l l y review the lease to ensure that rates are not too high or too low to create an unnecessary operating d e f i c i t or surplus. At Seattle a i r po r t , while other leases are negotiated every three years, landing fees are reviewed every s ix months and raised or lowered accordingly to allow for the author-i t y to achieve i t s budgeted revenues for the pertinent f i s c a l year. Gener-a l l y , the a i r l i n e s are s a t i s f i ed with th i s arrangement according to the \ a i rpor t manager at Seat t le , and no o f f i c i a l complaints have been lodged by a i r vear r ie r s with respect to th i s arrangement. However, beyond th i s arrange ment, a i r l i n e s have no appeal mechanism regarding landing fees except to take the authority to court and challenge i t . This has yet to occur, f o r -tunately. The co l l ec t i on of user charges i s performed according to the fol lowing method: routine bu i ld ing , u t i l i t y and maintenance charges are handled by the local finance d i v i s i on . Landing fees, fuel taxes, a i r c r a f t taxes and other mentioned as comprising the revenues that make up the Trust Fund, go d i r e c t l y into the Fund. A l l other charges go d i r e c t l y to the F.A.A. fo r red i s t r ibut ion at a l a te r time. As mentioned above, each authority works by a cost recovery plan whereby the objective i s to recover a l l of i t s operating and maintenance costs each year and to generate s u f f i c i en t revenue to cover any a l located overhead and to pay of f the debt service (pr inc ipal and interest ) on any bond issues used to finance major cap i ta l expenditures. The agreement at most author i t ies i s such that the a i rpo r t breaks even annually. If the a i rpor t runs a d e f i c i t at year end, i t i s recovered by ra i s ing the landing fees the fol lowing f i s c a l year. If the a i rpor t runs a surplus at year end, then th i s w i l l be credited back to the a i r c a r r i e r s , creating a very f l e x -i b l e system. There i s the problem that unexpected variances in the a i r -port ' s operations may resu l t in the a i r ca r r i e r s paying very steep landing fees i f a large d e f i c i t occurred, and they may be expected to lobby against the increases i f they bel ieve them to be unfa i r . The authority would then be faced^with the dilemma of having to take the car r ie r s to court, or f i n d -ing an alternate means of recovering the d e f i c i t . This would provide a perfect forum through which the car r ie r s could publ ic ly demonstrate i n e f f i c i e n t management. No such a l ternat ive ex ists for Canadian a i r l i n e s . Thus f a r , the experience has been good. At Seat t le , the peak landing fee in th i s decade was $1.60, and i t i s now down to $1.21. At Seat t le , when determining the landing fees, the a i rpo r t ca lcu lates: 1) the operating expenses for the year; 2) the a l located administrative overhead; 3) the debt service payment; 4) the estimated revenues from a l l other sources save landing fees; 5) thecdifference between the sum of items 1) to 3), and item 4); 5). by d iv id ing the difference by the estimated landing weights the landing fee i s obtained. The authority also possesses the independence to i n i t i a t e projects of a self-supporting nature whereby the a i rpor t r e l i e s on the revenues from the a i rpor t rather than on funds provided through taxat ion. The projects are i n i t i a l l y financed by vfche,; issuance of bonds which are underwritten by the a i r l i n e s . This stems from the 1950's O'Hare agreement when revenue bonds were issued to finance Chicago's O'Hare A i rpor t . The a i r l i n e s pledged that , i f a i rpor t income f e l l short of the tota l needed to pay off the pr inc ipal and interest on the bonds, they would make up the difference by paying a higher landing fee rate. Under th i s type of arrangement, landing fees—the amount b i l l e d to an a i r l i n e each time one of i t s airplanes lands on a run-way—are per iod ica l l y raised or lowered to compensate for shortages or excesses in income in the preceding period. The h i s t o r i c O'Hare agreement demonstrated that a i r po r t s , backed ^: by the a i r l i n e s that use them, could ra ise the money they need on the f i nan -c i a l market without depending on general tax funds, and a i rpo r t revenue bonds . became the accepted way of f inancing capita l improvements where funds were not provided through the A i rport Aid and Development Program. The costing philosophy at Houston International A i rpo r t , which opened in 1968, i s . t o set landing fees at a rate which w i l l help repay the cap i ta l costs and cover the operating expenses. The a i rpor t does not expect to make a p r o f i t from landing fees, but concession income has been set up so a to return a surplus for future development. Seattle-Tacoma International A i rpo r t , in the midst of a $150 m i l l i o n expansion project, signed new 29-year leases with i t s a i r l i n e s in 1970. The charges were calculated at 135 percent of the tota l needed to r e t i r e the revenue bonds. The 35 per-cent surplus i s transferred to a reserve and capita l improvement fund. The difference between a general obl igat ion and a/revenue bond i s that the l a t t e r i s secured by a pledge only of revenue derived from an income-pro-ducing municipal enterpr ise. There i s no debt l im i t a t i on on revenue bonds, but there i s a higher interest cost and banks are not allowed to deal in these bonds. The important covenant appl icable to revenue bonds i s the agreement which must be made to set charges for the services of the enter-prise which are s u f f i c i en t to meet a l l obl igations of the bond. The fac t that the author i t ies guarantee the i r bonds places them in the rather i n -f l e x i b l e posit ion of ensuring that th i s pledge i s not broken; otherwise, there would be severe legal ramif ications for the a i rpor t s . As a r e su l t , there are a number of c r i t e r i a which must be met before an issue can be don sidered a 'good' issue by investors. These are: a wel l -establ i shed record of performance by the a i rpor t or the a i rpor t system; competent engineers; adequate landing fees; an equal l i f e f o r concession agreements and bonds; a proper bond counsel; and an expected coverage by annual net revenues of 1.5 times the annual debt service requirements. Most of.these c r i t e r i a can be met, but they do pose a potential problem in increasing the load of re spons ib i l i t y on the shoulders of the local administrat ion. The author i ty ' s budgeting i s done l o c a l l y at the a i r po r t , and reviewed by the author i ty ' s board of d i rector s . There i s usually a close l i a i s on between the author i ty ' s finance department and any f i nanc ia l review committees. FEDERAL AID AND THE AIRPORT AUTHORITY Although there i s provision for federal a id to a i rports in the two-t i t l e d Airports Act, complaints have been voiced regarding the build-up of a surplus of $2.7 b i l l i o n in the Trust Fund. The fund i s s i t t i n g in the hands of the F.A.A. and i t i s becoming more apparent to the a i rpor t managers that unless a plan i s devised to a l locate the surplus, some federal govern-ment body w i l l f i nd a use for i t and take i t off the i r hands. The prob-lem has been recognized by the policy-makers as seen through the recommen-dations previously presented, with regard to a i rpor t l e g i s l a t i on in the 1980's. The same opinion applies to the discret ionary fund, the balance of which has been set aside for extraordinary needs. At present, the fund is not used. The a i r l i n e s and other interests are also aware of the problem, and although no major complaints have been reg istered, due mainly to the ex i s t ing l e g i s l a t i on which carefu l ly -de l ineates how funds are a l l o -cated, some a i r l i n e s are asking the author i ty ' s management why they should have to pay higher user charges i f a larger d e f i c i t occurs when there i s $2.7 b i l l i o n of co l lected user charges s i t t i n g unused in the Trust Fund? As partners in business with the author i ty, they do not desire to pay fees twice to the a i r po r t , when the amount co l lected through the or ig ina l user charges was s u f f i c i en t . The f l y i n g publ ic has also been a lerted to the fact that i f th i s surplus in the Trust Fund was put to good use in the a i rpor t system, the costs of f l y i n g and using the a i rpor t probably would be cheaper. These are genuine problems that detract from a better system, and ...must be considered ser iously when considering the authority concept. There are no complaints regarding the speed of federal approval for projects e l i g i b l e for federal a i d , and once the project receives approval, the funds ar r ive very quick ly. The p r i o r i t y of projects to be handled i s f u l l y determined by the a i rpor t manager and fe l low directors of the author i ty. Natura l ly , t he i r decisions are based on promoting safety f i r s thand, a f te r that, they use the i r own set of c r i t e r i a . Generally, the Director of Aviat ion at Seatt le said. } th i s works w e l l , although there are' inev i tab le complaints from lobbying user groups to the extent that they do not always receive the f u l l attent ion of the authority when projects are chosen. PERSONNEL The personnel operation i s very large at a l l au tho r i t i e s , and yet the problems encountered are s im i l a r to those found in the Canadian system. Most author i t ies have the i r own personnel departments, and provide on-s ite t ra in ing for most of the i r employees (unl ike Canada), save f i r e departments and pol ice which t ra in t he i r own personnel. Quite o f ten, there are prob-lems with outdated job descr ipt ions, and i t i s an annoyance to update them, although i t i s not a pressing p r i o r i t y . There i s good f l e x i b i l i t y in the h i r ing system that allows for the acqu i s i t ion of temporary help; however, there are the usual bureaucratic processes encountered when h i r ing permanent help. Unions seem to pose a problem, especia l ly with respect to the dismissal of incompetent help, which i s p r a c t i c a l l y impossible to do. There are several c r a f t unions on each authority who perform the i r work s t r i c t l y in accordance with the union contract. Because of the contract, i t i s d i f f i -c u l t to dismiss a man/woman unless there i s ample evidence of incompetence, and there are usually appeals and formal complaints which cost the authority money, and may hurt i t s image of an e f fect i ve management serv ice. Salar ied personnel can cause s im i la r problems, but the management at Seatt le have provided more of an incentive to work by sett ing up a merit fund, whereby recommendations can be made by supervisors or fe l low workers to give a merit increase to an indiv idual who performs above the c a l l of duty. A d i f f i c u l t re spons ib i l i t y encountered by the management of an author i ty, which i s not found in Canada, i s the degree of coordination required to manage the large number of people employed at the a i rpo r t . For example, at.New York, one of the largest a i rports in the world, there are over 41,000 employees working at the a i rpo r t . While only about one thousand of these are under the d i rect authority of the general manager, i t requires an e f fec t i ve com-munications system to manage the varied interests of d i f fe rent groups and the i r employees. To a degree, the large number of employees i s due to the larger s ize of American a i rpo r t s , but i t i s also due to the independence of the operating author ity. Because the l a t t e r group i s the central f igure in the a i r p o r t ' s operation, and people tend to locate near the source of power, i t i s understandable that the number of people employed i s so large. OTHER AREAS OF MANAGEMENT The a i r car r ie r s do not own any f a c i l i t i e s at the a i r p o r t — a l l f a c i l i t i e s are leased on a 5-20 year basis. The a i rpo r t i s responsible for providing a l l forms of service (maintenance and upkeep) to a l l leased f a c i l i t i e s . This i s e s sent ia l l y the same as the s i tuat ion in Canada. Unlike our system, where some gates at a i rports are owned by a i r l i n e s , a l l gates are leased by a i r ca r r ie r s with the exception df a few gates which are l e f t fo r non-signatory ca r r ie r s which are-charged a t a r i f f per. use. The or ig ina l negotiations d ictate which a i r l i n e gets what gate, and the negotiations can be tough as each a i r c a r r i e r has a con f l i c t i n g pre-ference for gates. On the whole, the att i tude of general managers at the author i t ies of New York, Baltimore-Washington, and Seat t le , have expressed the opinion that there i s a cordial re lat ionship between the a i r p o r t ' s users and loca l management. There i s only one party with which the author i t ies would l i k e to change the i r ex i s t ing re la t ionsh ip , and that i s general av ia t ion. General av iat ion i s a heavy user of an a i r p o r t ' s f a c i l i t i e s , yet i t s c o n t r i -butions to the revenues of these a i rports are r e l a t i v e l y i n s i gn i f i c an t . This s i tuat ion stems from the time (roughly ten years ago) when general av iat ion was a rather small av iat ion group, with respectively small f i nanc ia l bases. As an incentive to the i r development, general av iat ion users were charged minimal fees for the use of a i rpor t f a c i l i t i e s . The growth of general a v i -at ion has largely exceeded that of other av iat ion groups, and i t was e s t i -mated in 1940 that over one-third of general av iat ion a i r c r a f t were owned and operated by.jbusiness firms whose f i nanc ia l soundness was manifested by the i r a b i l i t y to use corporate a i r c r a f t in t h e i r businesses. Ten years l a t e r , i t l i s reasonable to assume that these numbers have grown and general av i a t i on , having become a f i n a n c i a l l y sound sector, can be expected to pay fo r a greater portion of the costs of the i r use of a i rpor t f a c i l i t i e s . The s i tuat ion in the United States pa ra l l e l s that in Canada. A i rport managers believe i t i s time to raise the charges to general av iat ion through some combination of fuel tax, parking t a r i f f , and landing fee. If th i s i s not leg i s la ted in the U.S. A irports Act, congestion w i l l worsen at a i rports and i t may be that a i r ca r r ie r s w i l l commence a strong lobby-ing e f fo r t against general av iat ion. Another potential problem i s the recent deregulation of the a i r i n -dustry. No one can rea l l y t e l l what e f fect th i s w i l l have on the manage-ment of an a i r po r t , but i t i s possible that there may be quite a few new non-signatory a i r l i n e s which may create problems with negotiations for bases, personnel, gates, investment for expansion, how to accommodate the present car r ie r s with the expected in f lux of new f l i g h t s , and how costs w i l l be shared amongst a l l part ies . What th i s portends fo r Canada i s an increased burden for the headquarters and regional s ta f f of C.A.T.A. i f a s im i la r s i tuat ion occurs in Canada. However, i f our system were to be con-verted to au tho r i t i e s , i t is' doubtful that the author i t ies would not be able to cope with the changes. It would only resu l t in an increased amount of re spons ib i l i t y fo r the local management. Assuming the management to be capable, th i s extra burden would only require extra e f f o r t on the part of the s t a f f . ..98'-Chapter Eight THE COMPARISON OF CANADA'S MANAGEMENT SYSTEM TO THE UNITED STATES MANAGEMENT SYSTEM The comparison of the two a i rpor t systems cannot be done without a set of c r i t e r i a common to both. I t was noted e a r l i e r in the paper that most c r i t e r i a regarding a i r po r t s , such as manpower, passengers handled, and the capacity of the f a c i l i t y are exogeneously determined-. . While they help in providing an understanding of the types of a i rports being compared, they do not properly r e f l e c t management performance. Besides being d i f f i c u l t to generate acceptable c r i t e r i a , i t i s also quite an endeavour to f i nd appropriate data for both countries. Certain f i nanc ia l resu lts are not in the publ ic domain in Canada and the United States, which mitigates '/ against a broad set of measures. The fol lowing set of c r i t e r i a has been formed as a resu l t of research performed in meetings and correspondence performed both as a member of the Federal Task Force on A i rport Management under the d i rect ion of Mr. Mel Hagglund, and as a graduate student at the Centre for Transportation Studies in Vancouver. F i r s t , in order to i l l u s t r a t e the comparability of various a i rports in Canada and the United States, c r i t e r i a including annual a i r c r a f t movements, annual passenger movements, and manning levels are developed. Second, a descr ipt ion of broad revenue and expense classes fo l lows, and from th is are patterned charts of operating revenues versus expenses for the largest a i rports in both countries. Th i rd , the operating and mainten-ance receipts and expenditures for certa in American and Canadian a i rports are deta i led. Fourth, the level of debt service fo r these author i t ies i s contrasted with the cost recovery levels in the Canadian a i rpor t s . 99 F i f t h , various a i r c a r r i e r charges are compared and a comparison of landing fees i s made. F i n a l l y , while i t may be redundant to review the non-quanti-f i a b l e c r i t e r i a developed in Chapter Three which played the major role in the decision to pursue a more detai led examination of the a i rpo r t authority system, i t s t i l l i s useful to take th i s set and re-examine the strength^of the American system based on the f indings in Chapters Six and Seven. 1. A i r c r a f t Movements and Passenger Enplanements The idea behind the comparison of annual a i r c r a f t movements and passenger enplanements i s to enable a better understanding of the s ize and degree of a c t i v i t y at the various a i rports being considered from both systems. The evidence reveals that the American author i t ies are s l i g h t l y more act ive than the i r Canadian counterparts on a systems bas is , which i s a r e f l ec t i on upon the higher demand fo r a i r travel because of the larger population den-s i t y of the United States. I t may also be attr ibuted to the cross-section of a i rports chosen in the United States which include three of that nat ion ' s busiest a i r po r t s , John F. Kennedy in New York, Los Angeles, and Washington; and two medium hubs, Seattle-Tacoma, and Nashvi l le. The f i v e a i rports selected fo r Canada are also the top s ix in our nation for i t i ne ran t a i r c r a f t movements. Table 17 discloses the i t i ne ran t a i r c r a f t movements over the period 1974-1976. As evidenced by th i s tab le , the choice of a i rports affords a c lear picture of where the f i ve Canadian a i rports stand against a se lect ion of American a i rports which, although they possess a wider range of annual movements, also represent f i v e of the nat ion ' s busiest a i rpo r t s . Using the data from 197;6 in th i s tab le , the fol lowing ranking i s obtained indicat ing the posit ions held by the Canadian a i rpor t s : 100 TABLE 17 I t inerant A i r c r a f t Movements at Selected Canadian and American A i rport s 1974-1976 (excluding general av iat ion) Canada 15 Toronto Vancouver Dorval Calgary Winnipeg Mean (x) United S t a t e s 1 6 Los Angeles John F. Kennedy Washington Nat. Seatt le Nashv i l le 1974 226921 180759 186097 110266 112942 163397 342536 284193 202759 105466 51398 1975 228688 198416 187860 117750 114459 169435 344945 285425 203039 108859 59226 1976 235998 211102 157,711 124159 115569 168908 346540 285281 206712 114958 57237 Mean (x) 147620 200299 202146 Sources: S t a t i s t i c s Canada, A i r c r a f t Movement S t a t i s t i c s - Annual ;'Report (Ottawa: Av iat ion S t a t i s t i c s Centre, 1977). Pa t r i c i a Watson, FAA A i r T r a f f i c A c t i v i t y (Washington, D.C.: Federal Dept. of Transportation, 1974-1977). 1. Los.iAhgeles 2. John F. Kennedy 3. Toronto 4. Vancouver 5. Washington National 6. DprvaV "> 7. Calgary 8. Winnipeg 9. Seatt le 10. Nashvi l le. Table 18 shows^ the other dimension for comparison of a i rpor t s - - that of annual passenger enplanements at the a i rports fo r the years 1974 and 1975. The f igures for both countries exh ib i t trends s im i la r to a i r c r a f t movements, lending credence to the be l i e f that the chosen cross-section of a i rports in the United States, while s l i g h t l y larger and busier than the Canadian ones, possess a diverse range of a i rpor t s izes which provides fo r a more meaning-fu l comparison of management systems. It should be noted that while i t i s desirable to obtain a broader cross-section of U.S. a i rpor t au tho r i t i e s , information i s at present l imited and most U.S. data was co l lected as a resu l t of personal v i s i t s to a i rpor t author i t i e s . The man-year allotments at each a i rpo r t in Canada can be compared to the i r annual passenger enplanements to determine the r a t i o revealing the average number of passengers enplaned per man-year. Table 19 presents the man-years and the result ing rat ios for the f i v e a i rpor t s . Vancouver and Calgary a i rpor t s possess the lowest r a t i o s . Assuming that the man-years are a l located according to need by C.A.T.A., th i s r a t i o does provide a par t i a l ind icator of the performance of the a i rports administrat ion. Some complaints may be voiced as to the existence of exogenous factors which may bias these numbers. While there may be certa in cases of p o l i t i c a l i n -terference, for example at Dorval a i r po r t , which saw i t s annual passenger 102 TABLE 18 Annual Passenger Enplanements at Selected Canadian and American A i rports ( inc lus ive of Domestic, International and Transborder t r a f f i c ) 1974-1975 1974 1975 Canada 1 7 Toronto 4,002,769 4,642,824 Dorval 3,394,257 2,773,233 Vancouver 2,085,336 2,260,646 Calgary 1 ,045,167 1 ,106,454 Winnipeg 919,167 963,276 Mean (x) 2,289,365 2,349,287 United S t a t e s 1 8 Los Angeles 8,320,175 8,503,405 Washington National 4,552,280 4,482,565 John F. Kennedy 3,971,200 3,985,435 Seatt le 2,548,430 2,713,410 Nashvi l le 565,020 536,550 Mean (x) 3,991,421 4,044,243 Sources: Federal M in i s t ry of Transport Canada, "Canadian A i rpor t Database," 1978. P r o f i l e s of Scheduled A i r Car r ie r Passenger T r a f f i c f o r the Top 200 U.S. A i rports (Washington, D.C: FAA 1975-76). , 103 -TABLE 19 Budgeted Man-Years.for Selected Canadian Airports 1976 Toronto Dorval Vancouver Calgary Winnipeg Authorized Man-Years 481 284 163 66 63 Annual Passenger Enplanements 5,006,319 2,745,153 2,864,599 1 ,163,483 970,930 Man-Years Per Pas-senger Enplanement 9.6 x 10" 5 10.3 x 10" 5 5.7 x 10" 5 5.7 x 10 " 5 6.5 x 10 " 5 Source: The Federal Min istry of Transport, Ottawa. TABLE 20 Budgeted\Man-Years fo r Nashvil le A i rport 1977 Authorized Man-Years Annual Passenger Enplanements Man-Years Per Pas-senger Enplanement Nashvil le 138 1,991,362 6.9 x 10 -5 Source:-Metropol itan Nashvi l le A i rport Author ity, Annual Report 1977. enplanements f a l l when i t s international t r a f f i c was transferred to Mirabel , these have been balanced out usually by reducing man-year a l l o ca t i on s , or t rasnferr ing surplus labout to other a i rpor t s . Information ava i lable from the Metropolitan A i rport Authority in Nashvi l le deta i l s the man-year a l l o -cations for 1977. In Table 20 a s im i l a r r a t i o i s calculated for the man-years per passenger enplanement for 1977. The ra t i o i s s l i g h t l y higher than that for e i ther Calgary, Vancouver or Winnipeg, but i s not as high as the other Canadian a i rpo r t s . 2. System i.RevenuessandLiExpensess The comparison of f i n anc i a l statements offers another ind icat ion of how the two a i rpor t systems d i f f e r . A broad comparison of operating re-venues and expenses i n i t i a t e s th i s discussion. (A descr ipt ion of the com-ponents of revenues and expenses and how they d i f f e r between the two 19 countries may be found in Exhib it 12 in the appendix.) In Graph #1 below i t i s apparent that for the majority of Canadian a i r po r t s . i n 1973-74, annual expenses exceeded annual revenues, excluding Toronto, Dorval and Vancouver,. which a l l ascribe to passenger enplanement levels greater than two m i l l i o n . This includes the two other a i r po r t s , Calgary and Winnipeg. I t would seem that in Canada, only those a i rports with scheduled passenger enplanements greater than two m i l l i o n have the good fortune of experiencing annual revenues in excess of expenses. The gap i s widened,;i,n th i s diagram as debt service costs are also included. Nonetheless, these costs are important to consider as noted several times previously in th i s paper. The picture changes somewhat when only operating revenues and expenses are considered. Table 21 deta i l s the operating surpluses (de f i c i t s ) at the f i v e Canadian 20 a i rpor t s . Without the burden of debt serv ice, a l l f i ve were turning surpluses by the year 1976-77. 105 TABLE 21 Operating Surplus (Def ic i t ) 1971/75 - 1976/77 For Selected/Canadian Ai ($000's) (a) Toronto* (b) Dorval* ( 0 Vancouver* (d) Calgary** (e) Winnipeg** (f) Mirabel* (g) Ottawa** 1971^72 1972-73 1973/74 1974/75 1975/76 1976/77 3,521 3,591 540 4,675 15,288 22,369 3,953 5,035 5,847 6,706 9,669 1 ,983 (227) 302 635 1,257 1,845 5,722 73 174 42 458 3,263 4,468 (1,455) (1,811) (1,726) (2,882) (880) 2 (18,382) (49,821) (1,965) (2,178) (2,497) (2,725) (2,040) (787) *These a irports are in revolving fund, financed with i n te re s t -bearing loans. Other a i rports are financed with budgetary appropriations. *The surplus or [ d e f i c i t ] for these a i rport s has been re-calculated for each year to exclude any return/.on investment or cap i ta l charge. The d e f i c i t at Mirabel A i rport in 1976-77 i s largely due to i n -t e r e s t on loans of $29 m i l l i on and depreciation of $16 m i l l i o n . For 1975-76, the period covered i s December 1, 1975 to March 31, Data for the period Apr i l 1, 1977 to September 30, 1977 i s not ava i lab le at th i s time. House of Commons Debates, December 9, 1977. Notes: Source: i 6 r a p h 1 - Trends of Revenues, Expenses Versus Passengers Enplaned for the Top 23 A i rports 1973/74 In Ca'nada to o cu 10 a> Q . X co 0) c CU > CU DC Z 3 C c •1 . Source: Scheduled Passengers A r r i v ing and Enplaned - M i l l i o n s Mai ton, Dorval and Vancouver are excluded from the chart , to make a more convenient scale to i l l u s t r a t e the smaller points. Their values remain included in the trend ca lcu la t ion which i s therefore ident ica l to those in Chart 1. Expenses are maintenance + operating + debt service at 6 percent, 40 years. J . Smith, "Considerations in Local Administration of A i rpo r t s , " Annals of A i r and Space Law, Vol . I l l (Montreal: McGil l Univ. 1978) In the United States, the trend between annual costs and revenues d i f -fers from Canada's. Whereas the break even point fo r operations at Canadian a i rports (operating revenues vs. operating expenses) was in excess of two m i l l i o n passengers in 1973, i t was roughly 625,000 passengers in 1966 in the United States for a l l expenses, including depreciation. Graph #2 21 i l l u s t r a t e s th i s point. While there i s a difference of seven years between the two, the difference between the mean enplanement levels i s \\ m i l l i o n , and i t i s reasonable to assume that over seven years from 1966 to 1973 the re lat ionship between the growth of costs and revenues did not substant ia l ly change for the whole of the United States a i r c a r r i e r a i rpor t system. If th i s i s the case when debt servic ing i s included in the annual costs, and the major a i rports are s t i l l running a surplus, the i r performance exceeds that of the Canadian a i rpor t s . When only operating revenues and expenses are included, the surplus for a i rports with greater than one m i l l i o n en-planements generated a surplus in 1967 of roughly $6 m i l l i o n (see Graph #3 22 below). The average for the f i v e Canadian a i rpo r t s ' surpluses in Table 21 in 1971 was 1.2 m i l l i o n and in 1976 6.9 m i l l i o n . Thus, the 1976 average for the most f i n a n c i a l l y so l i d Canadian a i rports s l i g h t l y exceeds that of the whole United States a i r c a r r i e r system ten years previous. This i n d i -cates, amongst other things, a lengthier period of f i nanc ia l s e l f - s u f f i c i ency f o r the United States. While th i s i s not tantamount to absolute super ior i ty in management systems—there are the mit igat ing factors mentioned in Chapter Two that make the management of our a i rport s unique—the results above emenate from a comparison of a i rports that are roughly equal. If the United States a i rports can generate a surplus even with debt service included, whereas Canadian a i rports encounter greater d i f f i c u l t y in reaching th i s goal , i t says something fo r the U.S. a i rports in the way that they are managed. It now becomes useful to study individual a i rports in d e t a i l . Graph 2. 10000 5000 4000 3000 H 2000 1000 CO s-o CO T3 CO 500 400 300 200 100 20 Relationships of 1966 A i rport Operating Revenue and Expense to Annual A i r Car r ie r Passenger Enplanement Level Operating Expense plus Depreciation Operating Expense Assumption: That the Mid-point of a given a c t i v i t y c e l l i s the mean for that c e l l . Cel l of over 1000 was assumed 3000; Operating Revenue •2 5 TO 20 50 100 625 (under 10) (10-49) (50-249) (250-999) Thousands of Passenger Enplanements Source: 1968 Senate Aviat ion Subcommittee Report. foToQo (over 1000) 109 Graph 3. Trend of the Mean of Operating Revenue and Expense for Airports of Given Annual A i r Carr ier Passenger Enplanement Levels / 10000; 5000 A000 3000 2000 -1000 -V. u a) o 03 c B 01 3 o .c H 500 AOO-j 3001 200 1 0 0 ^ 50 AO 30 20 . RevE E x p , O p e r a t i n g M a r g i n Over 1 m i l l i o n a n n u a l e n p l a n e m e n t s (21 a i r p o r t s ) 2 5 0 , 0 0 0 t o 1 m i l l i o n (32 a i r p o r t s ) 5 0 , 0 0 0 t o 2 5 0 , 0 0 0 (55 a i r p o r t s ) K e v , t x p . Rev„ — ' E x p , E x p 2 R e v . 1 0 , 0 0 0 t o 5 0 , 0 0 0 (68 a i r p o r t s ) Under 1 0 , 0 0 0 (5A a i r p o r t s ) O p e r a t i n g D e f i c i t 1963 196A 1965 Y e a r 1966 1967 1 . Rev and E x p r e f e r t o o p e r a t i n g r e v e n u e s and e x p e n s e s , . r e s p e c t i v e l y . • 2 . The s u b s c r i p t s i d e n t i f y w h i c h c a t e g o r y o f a i r p o r t s t h e p a r t i c u l a r c u r v e r e p r e s e n t s , e . g . 1 = 0 - 1 0 , 0 0 0 a n n u a l e n -p l a n e m e n t s . S o u r c e : 1968 S e n a t e A v i a t i o n S u b c o m m i t t e e ' s q u e s t i o n n a i r e no 3. A i rport Revenues and Expenses Table 22 outl ines the annual operating and maintenance expenditures fo r the f i v e Canadian a i rports and the fol lowing American a i rpor t s : Washington Nat ional, and the Metropolitan Nashvi l le a i rpo r t . These f igures do not indicate much in themselves, but a useful ins ight can be provided when they are compared with the annual passenger enplanements to determine the r a t i o of the expenditure per passenger enplaned. These are given in Table 22(b). (Since enplanement date i s given only for 1974 and 1975, the ra t io w i l l be calculated only for these years.) Unfortunately, there i s a lack of data at present for the U.S. a i rports but, given what l i t t l e there i s , the do l l a r expense per passenger enplanement reveals a wide range of f igures which cannot eas i ly be explained. It appears that Dorval and : Toronto possess higher rat ios than the i r smaller Canadian counterparts. One could conclude from th i s that economies of scale have not been real ized at these larger a i r po r t s , but the reverse seems to be true between Washington and Nashvi l le a i rports in the United States. I t i s reasonable to assume that there must be some exogeneous fac to r s , which may account fo r th i s pe-c u l i a r i t y . If there a r en ' t , then the two largest Canadian a i rport s lag well behind the pack in terms of th i s performance r a t i o , while the medium-sized a i rports in Canada seem to hold the i r own against the two U.S. author i t ie s . This only reveals what would seem to be larger-than-average expenditures, but at least i t a le r t s us to be aware of any further rat ios which may r e f l e c t the larger Canadian a i rports in a poor l i g h t . Table 23 discloses the gross annual revenues at the same a i rpor t s . Again, the two largest Canadian a i r po r t s , Toronto and Dorval, have r e l a -t i v e l y high annual revenues compared to Washington Nat ional, an a i rpor t TABLE 22(a) ANNUAL OPERATING EXPENDITURES" ($) AT SELECTED CANADIAN AND AMERICAN AIRPORTS 1974 - 1977 1974 1975 1976 . 1977 Toronto 24,227,840 23,458,368 29,355,504 ::29; 9057949 Dorval 20,702,400 18,235,498 20,753,360 20,564,923 Vancouver 3,252,026 5,067,435 9,233,090 13,079,083 Calgary 1,940,832 2,540,220 2,729,945 3,139,158 Winnipeg 2,458,464 2,826,148 4,001,104 4,130,044 Washington National 8,453,092 8,196,692 10,245,865 Nashvi l le 1 ,988,765 2,102,596 2,198,400 2,508,200 Sources: The Federal Task Force On Ai rport Management, Ottawa, 1978. Metropolitan Nashvi l le/Airport Author ity, Annual Report, 1977. Washington National A i rport Financial Statements, 1977. " TABLE '22(b) ANNUAL DOLLAR EXPENDITURE/PASSENGER ENPLANEMENT AT SELECTED ." CANADIAN AMD AMERICAN AIRPORTS 1974 - 1975 1974 1975 Toronto 6.07 5.05 Dorval 6.10 6.58 Vancouver 1.56 2.24 Calgary 1.86 2.30 Winnipeg 2.67 2.93 Washington National 1.85 1.83 Nashvil le 3.52 3,92 Sources: The Federal Task Force On Ai rport Management, Ottawa, 1978. Metropolitan Nashvi l le A i rport Aughority, Annual Report, 1977. Washington National A i rport Financial Statement, 1977. 112 TABLE 23 GROSS ANNUAL REVENUES ( $ ) 2 4 AT SELECTED CANADIAN AND AMERICAN AIRPORTS 1974 - 1977. 1974 1975 1976 1977 Toronto 21,445,784 28,786,504 43,984,507 53,406,418 Dorval 21 ,603,305 25,181,159 33,564,219 24,189,095 Vancouver 8,401,495 9,604,561 15,389,437 21,827,845 Calgary 3,161,000 4,131,633 4,564,068 5,796,736 Winnipeg 3„516,242 3,979,654 4,558,821 5,218,957 Washington National 15,591,460 16,709,887 18,232,080 Nashvi l le 2,725,487 2,834,466 4,016,504 4,338,000 Sources: The Federal Task Force On Ai rport Management, Ottawa, 1978. The Metropolitan Nashvi l le A i rport Author ity, Annual Report, 1977. Washington National A i rport Financial Statement, 1977. ... TABLE 24 ANNUAL REVENUE CONTRIBUTION PER PASSENGER ENPLANED ($) AT SELECTED CANADIAN AND AMERICAN AIRPORTS 1974 1975 Toronto 5.36 6.20 Dorval 6.37 9.08 Vancouver 4.03 4.25 Calgary 3.02 3.73 Winnipeg; 3.82 4.13 Washington National 3.42 3.72 Nashvil le 4.82 5.28 Notes:.::The Revenue Contribution i s calculated by d iv id ing the gross annual revenues of an a i rpor t by the annual passengers enplaned at that a i rpo r t . 1 1 3 which has roughly a s im i la r number of passenger enplanements per annum. The revenue contr ibution per passenger enplaned i s provided in Table 24 and contains two interest ing resu l t s . F i r s t , the highest ra t io s belong to Dorval and Toronto, which i s not surpr is ing given the i r high levels of expenditures. However, Washington, an a i rpor t of s imi la r s ize and a c t i v i t y , has a lower r a t i o . Although i t s operating expense r a t i o i s also low, the two rat ios combined indicate that for a roughly equal number of passenger enplanements, Washington i s more e f f i c i e n t in i t s a l l ocat ion of resources than e i ther Toronto or Dorval: It would be useful to examine th i s resu l t to establ i sh whether or not th i s i s typ ica l of a l l large author i t ies by ca lcu lat ing rat ios^at other U. S. a i rpor t s . Unfortunately, th i s information i s not ava i lab le at present. Second, the ra t i o sc fo r the other three Canadian a i rports appear reasonable when compared with Nashv i l le, which pa ra l l e l s the resu l t of the rat ios calculated for the do l l a r expen-diture per passenger enplanement. If Nashvi l le i s assumed to be represen-tat i ve of the medium-sized a i rport author i t ies in the United States, then the chosen Canadian a i rports perform quite well in terms of these f inanc ia l c r i t e r i a , when both rat ios are combined and contrasted to those belonging to the American authority. At the same time that do l l a r per enplanedj-passenger rat ios are of i n te re s t , a further analysis of operating revenues and expenses can be performed for the indiv idual components of revenues and expenses at Vancouver, Dorval, Toronto, Nashvi l le and Kansas City (which has an annual passenger . enplanement level approximately equal to that of Vancouver). The results are found in Table 25(a) and (b). The analysis of the rat ios for the com-ponents of a i rport revenues provides evidence that the Canadian a irports de-pend more heavily upon the contr ibution made by revenues from the landing area re l a t i ve to the United States a i rports which make use of landing fees as 114 TABLE 2 5 2 5 (a) ANALYSIS OF AIRPORT REVENUES AT SELECTED CANADIAN AND AMERICAN AIRPORTS $ per enplaned passengers 1976/77 Kansas Toronto Vancouver Dorval C i ty Nashvil l i Landing Fees and Assessments 1.44 1.17 1.11 .67".' .58 Rentals and Concessions 2.12 1.87 1.63 2.24 1.91 Other .12 .13 .12 .09 .32 TOTAL 3.68 3.17 2.86 3.00 2.81 E/D Passengers OOO's 12,147 5,344 5,680 4,400 1,800 (b) ANALYSIS OF; AIRPORT COSTS $ per enplaned passengers 1976/77 Sa lar ies , Wages A and fringe. . benefits 176 .63 .98 .96 .90 Other Operating Expenses 1.39 1.28 1.51 .69 .54 Overhead .51 .45 .61 -- --Depreciation .70 .89 .57 .98 .60 Interest 1.17 1.56 .82 .37* .59* Other .19 .24 .64 .16 -TOTAL 4.72 5v05 5.13 3.00 2.79 * Tax-free revenue bonds Sources: Transport Canada Br ie f ing of I.A.T.A., A.T.A. and A.T.A.C. 15 June 1978. Kansas City International A i rport Income StatementJ977., Metropolitan Nashvi l le A i rport Author ity, Annual Report 1977. 115 as the f i n a l remedy to cover a i rport expenses. As a r e su l t , there i s a r e l a t i v e l y greater tendency for American a i rports to c o l l e c t more rental and concession revenue per enplaned passenger. I t i s d i f f i c u l t to a t t r i -bute any s i gn i f i can t meaning to the th i rd component, "other" revenue, as the indiv idual revenues that comprise th i s d i f f e r from a i rpor t to a i rpor t . I t i s not meaningful to a t t r ibute the differences in these revenue rat ios as a consequence of more or less e f f i c i e n t management. At f i r s t glance, the higher rat ios in the landing area for Canada may be interpreted as being a-signuof better management, and more act ive business volume at the a i rpor t . But there are two factors that render th i s worthless. F i r s t , as mentioned above, the American author i t ies purposefully shy away from asing landing fees as a primary source of revenues—their emphasis i s upon con-cession revenue and lease arrangements. Second, the main point of having the high rat ios at Canadian a i rports i s to combat the equally huge expense rat ios per enplaned passenger. Although labour cost rat ios seem to be about 20 percent below the two American a i rports in 1976/77, the other expense components are much greater in magnitude. '."These include a l l other operating costs (over 100 percent higher), overhead (non-existent in the American a i r po r t s ) , depreciation (approximately equal) and interest (over 140 per-cent higher). From th i s table alone, the Canadian a i rports are outper-formed by the American a i rpo r t s , and th i s i s tangible evidence that the authority concept of management has succeeded in areas of f i nanc ia l manage-ment whereas the Canadian a i rports are somewhat weaker. A more basic c r i t e r i a for comparison i s the cost recovery level attained by the a i rpor t s . This i s a measure of the percentage of costs (operating and maintenance, f r inge benef its , overhead, grants in l i eu of taxes, depreciat ion, and interest ) that are recovered by a l l a i rport 116 revenues (landing fees, general terminal fees, concessions, and other re-venue). For a l l American a i rpor t author i t ies studied the goal of the management i s to achieve 100 percent cost recovery, and the majority of the a irports have reached i t . The Director of Aviat ion at Seatt le notes that his a i rpor t maintains f u l l cost recovery at present, using the method previously described to adjust landing fees each s ix months to ensure f u l l recovery. Table 26 deta i l s a s im i la r procedure for Nashvi l le A i rport which also maintains f u l l cost recovery at present. The level of cost recovery at Canadian a i rports i s much d i f fe rent . For the f i s c a l year 1976/77, only Toronto achieved f u l l recovery at 102.2 percent. The other four a i rports 0 " -achieved the fol lowing degrees pf recovery: Dorval - 93.8 percent, Van-27 couver - 63.1 percent, Winnipeg - 60.5 percent, Calgary - 56.2 percent. On th i s basis, the Canadian a i rports do not achieve the same degree of e f f i c i e n t f inanc ia l management as the i r American counterparts. 4. A i r Carr ier Charges I t i s impractical to a t t r i bu te differences in most of the user charges ( f ue l , concessions, u t i l i t i e s , passenger secur ity) to the s t y le of manage-ment because these charges do not vary s i g n i f i c an t l y between countries, and • any var iat ions are caused by local factors outside of management's j u r i s -d i c t i on . However, one major user charge—landing f e e s — i s worth sc ru t in i z ing because these are within the control of loca l management i n the United States. Table 27(a) and (b) provides information on both a do l l a r per 1000 lbs . of landed weight and do l l a r per 747 landing basis for a i rports in Canada and the United States. 117 TABLE 26 NASHVILLE METROPOLITAN AIRPORT OPERATING AND MAINTENANCE BUDGET JULY 1, 1978-JUNE 30, 1979 Comparison of Operations by F i s ca l Year ($) ( in do l la r s ) Operating Receipts Excluding A i r l i n e Landing Fees Less: 0 & M Expense Non 0 & M Expense Required A i r l i n e Landing Fee 2,246,757 1,988,465 _73£ i722 478,730 2,341.840 2,102,596 492,626 253,382 3,445,032 2,351,123 1,655,381 561,472 3,872,300 2,351,123 1,669,300 465,700 Source: Metropolitan Nashvi l le Ai 1978/79 Estimate 4,076,900 2,586,800 1 ,936,400 846,300 ' Po r t Authority, Annual Report 1977. TABLE 27(a) UNITED STATES 1978 LANDING FEE RATES 2 8 (dol lars ) $ per 10.00 lbs...of $ per 747 gross landed weight1 landing Chicago .696 407 Los Angeles .200 117 John F. Kennedy .500 292 Washington National .310 181 Seatt le 1.30 760 Kansas City .380 222 Dallas .830 486 Source: J . Smith, "Discussion of the Assertion "User Charges Wi l l Solve Our Transport 'Broblemsi '". jCanadian Transportation Research Forum Proceedings, 7 June 1979. TABLE 27(b) CANADA INTERNATIONAL AIRPORT SYSTEM29 LANDING FEES 1976 '(.dollars) Domestic International Transoceanic Per 1000 lbs . $ .39 $ .65 $ < 1 s96 On B747 a i r c r a f t 302.00 504.00 1,519.00 Source: The Federal Min ist ry of Transportation, Cahadian^Air, Trans portat ioh ' Admin 1 strationV' " l 9787' ~" -1 1 8 The major difference between the fee structures of the two countries i s that in Canada a l l a i rports charge the same fees (set by CATA) with the only differences being between the domestic, i n te rnat iona l , and trans-oceanic t r a f f i c sectors. In the United States, the fees are var iable with each a i rpor t authority negotiating i t s own set of fees with the a i r l i n e s . The Canadian landing fees fo r domestic t r a f f i c are within the range of the American fees as are the international t r a f f i c landing fees. The trans-oceanic fees are quite high re la t i ve to the American fees. There are various rat ional arguments set forth by the C.A.T.A. to account for these d i f ferences, but i t i s not the intent of th i s paper to discuss them here. What is of interest are the proposed increases in the Canadian landing fee structure which would ra ise the fees to a much higher level than the American fees. The fee increase i s C.A.T.A.'s answer to helping the a i rports achieve a higher degree of cost-recovery, as reviewed in Chapter:Four. In 1976, in 30 an unpublished study forecasted the required uniform landing fee rate i f 100 percent cost recovery were to be achieved by 1977/78. The rate per 1000 lb s . rose to $2.25 and the rate on a B747 landing was $1 ,744--higher than any American a i rpor t at the time. The report also calculated the average annual percentage increase in landing fees in the 1976 rates to equal a breakeven point by certa in years. These are provided in Table 31 28. For the purposes of comparison of what these fees would have been in 1978 i f the increases had been i n s t i tu ted in 1976, the actual fees have been calculated i>nlTable 29..<W Any of the target years selected results in a fee level higher than that of the United States. The important question, .'now that i t has been2 proved that the fee structure i s and w i l l be higher in Canada than the United States, i s whether or not these fees are ind icat ive of the :.. . 119 TABLE 28 AVERAGE ANNUAL %' INCREASE IN CLASSES OF LANDING FEES FROM 1976 TO ACHIEVE FULL COST RECOVERY BY SELECTED TARGET YEARS 1980 - 1987 FOR ALL CANADIAN AIRPORTS 1980/81 1982/83 1984/85 1986/87 Domestic 54 33 29 22 International 36 23 21 16 Transoceanic 3 2 5 4 Source: The Federal Min istry of Transportation, Canadian A i r Transporta-t ion Administrat ion, "Proposals on Cost A l l o ca t i on , A i rport C l a s s i f i c a t i o n , and Fee Increases", Ottawa, 1975. TABLE 29 CANADIAN LANDING FEE LEVEL IN 1978 IF FEES WERE INCREASED ACCORDING TO % INCREASES OUTLINED IN TABLE 28 1980/81 1982/83 1984/85 1986/87 Domestic .93 .69 .65 .58 International 1.20 .98 .95 .88 Transoceanic 2.08 2.04 2.16 2.12 120 management a t each a i r p o r t . In essence, l and ing fees a re a revenue source used to cover expenses, and i n the case of the two coun t r i e s s tud ied here , h igher fees i n d i c a t e h igher expenses a t an a i r p o r t . U n f o r t u n a t e l y , there i s no hard and f a s t r u l e f o r determin ing i f h igher expenses are due to i n t e r n a l management p o l i c i e s or ex te rna l f a c t o r s . But c e r t a i n l y i n the United S tates a i r p o r t managers possess the freedom of independence to con-t r o l t h e i r expenses and t h e i r f e e s . With the system of checks and balances t ha t ex i s tsbetween management and u se r s , i t i s doubt fu l t ha t unwarranted expenditures and any i n e f f i c i e n t or wastefu l a l l o c a t i o n of resources would go unnot i ced. In Canada, the s i t u a t i o n i s d i f f e r e n t , where the l o c a l management has l i t t l e c on t r o l over expenditures or the fee s t r u c t u r e . With C.A.T.A. a c t i n g as a monopol i s t there i s no way of determin ing,pr ima f a c i e evidence of i n e f f i c i e n c i e s , o ther than through the compla ints of a i r l i n e s whose b iased statements do not always c a r r y t ha t much weight w i th the govern-ment. ^ . To summarize, i t i s f a i r to say tha t because of the d i f f e r e n c e s i n the a d m i n i s t r a t i o n of the two systems i t i s d i f f i c u l t to conclude t h a t d i f f e r -ences i n the l and ing fee s t r u c t u r e are d i r e c t l y a t t r i b u t a b l e to poor manage-ment. The p o l i c i e s of the Canadian government toward the a i r p o r t system are d i f f e r e n t from the Un i ted S t a t e s , and they have r e s u l t e d i n l a r ge ex-pend i tures i n our a i r p o r t system. To the extent t h a t revenues are best used to cover c o s t s , then the proposed fee inc reases i n Canada are very e f f e c t i v e indeed. About the best statement t h a t can be made r e l a t e s to the fee s t r u c t u r e s a t a i r p o r t s i n Canada and the United States w i t h a p p r o x i -mately equal enplanement and manpower l e v e l s . I f an a i r p o r t i n the United S tates w i t h a comparable degree of a c t i v i t y to one i n Canada has a lower fee s t r u c t u r e , then t h i s i s probably the r e s u l t of lower expenses (assuming 121 other sources of revenue to be roughly equal), and one plaus ible interpre-tat ion of th i s i s that the a i rpor t with lower expense levels i s more e f f i -c i en t l y managed. 5. Non-Quantifiable C r i t e r i a Having concluded in Chapter .Four, that an extensive a i rpor t commission was the best solut ion to;the]problems of the Canadian a i rpor t system, i t i s useful to review the findings of th i s and the preceding Chapter to v ve r i f y t h i s . Without a doubt, the majority of American a i r po r t s ' management possess an equal amount of authority to accompany the re spons ib i l i t y of a i rpor t operations. Certa in ly th i s i s not to say they do not have any problems, as was noted in the previous chapter. However, the extensive system of checks and balances provides the degree of responsiveness to a i rpor t users that would be expected of a commission, and at least a framework of consulta-t ion ex ists fo r attacking any problems that need to be dealt with. I t appears that the balance between the needs fo r a national a i rpor t system and i n -creased commercial v i a b i l i t y has been struck in the United States, although th i s task has been developed over many years and with a larger population, while in,,Canada,; the^need for a»; greater balance i s only now becoming apparent, and our country i s not densely populated. From the accounts in the previous chapter, i t appears that we l l - qua l i f i ed men are managing a i rports which, in i t s e l f , i s an ind icat ion that there i s a good incentive to work at that* leve l of management. Again, to refer to the responsive environment set up, the local management has the incentive to do a good job; otherwise, many complaints would be voiced through the channels ava i lab le to a i rpor t users. 122 CONCLUSIONS The objective of th i s paper has been a detai led invest igat ion of the management of a i rpor t operations. The major issues are the de f i n i t i on of proper management at an a i r po r t , whether or not Canadian a i rports are properly managed, and what improvements |an .be^made;to t^e. present system'."''' •: The f i r s t issue i s d i f f i c u l t to resolve, because of the existence of a very complex management system. Several important pressure groups, key to the operation of an a i rpor t - - the federal government, the a i r l i n e s , the a i r -t r a ve l l i n g publ ic and the loca l management at a i rports—have been i d e n t i f i e d . Each one has i t s own de f i n i t i on of proper management, and the three that stand out are those belonging to the federal government, the a i r l i n e s , and local a i rpor t management. The federal government i s of the opinion that good management enta i l s an emphasis upon the provis ion of a system that answers d i r e c t l y to the policy-makers with in the headquarters branch of the Canadian A i r Transportation Administrat ion, a d i v i s ion of the Federal M in i -stry of Transport. I t i s the intent ion of the federal government to run a national system of a i r po r t s , based on a system of cross^subsidization be-tween the a i rports that operate with surpluses and those that operate with d e f i c i t s . The commercial a i r l i n e s operating in Canada define proper manage-ment as being responsive to the needs of the primary users of an a i r p o r t ' s f a c i l i t i e s ; they believe a i rpor t management ex ists to serve the needs of a i r l i n e s and not vice versa. The local administrations at major a i rports across Canada interpret proper management as possessing complete authority and independence to accompany the heavy re spons ib i l i t y placed on t he i r shoulders in the operation of an a i rpo r t . Although these views are 123 fsomewhat c o n f l i c t i n g , and hinder the formation of an acceptable d e f i n i t i o n , they shed l i g h t upon the issue/that a l l part ies believe that the present management system does not match '' t he i r expectations and could do with some changes. Even the role played by the federal government—which has been examined and found to be that of a monopolist possessing control over the management of a i rpo r t s , being responsive to i t s own goals, and the public i n t e r e s t — i s not without i t s fau l t s and doubts as evidenced by the appoint-ments of a two-year Task Force on A i rport Management to study a lternat ives to the present system. The structure of the present system has been aptly described as a totem pole of managers with the power being held at the top by the head-quarters of C.A.T.A., the s ix regional administrations being in the middle to ensure po l i c i e s from the top are in place, and the local a i rpor t manage-ment at the bottom, responsible for operating the a i rpo r t , but possessing l i t t l e independence to manage the operations ( f i nanc i a l l y and otherwise). When the complaints of the a i r l i n e s and local management are investigated to disclose the extent of the problems with the system, they reveal several s i gn i f i can t aspects. The a i r l i n e s do not believe that increasing user charges i s the most e f fec t i ve way of reducing the cost-revenue gap at most a i rports . Local a i rpor t administration lacks author i ty, input in sett ing p r i o r i t i e s , and has l i t t l e control over the f i nanc i a l operations; ;at the a i rpor t . To be f a i r to the government in assessing these problems, i t i s important to comprehend i t s behaviour. It i s operating the a i rpor t system with the aim of maximizing the socia l benefits of i t s po l i c i e s without possessing any incentive to minimize the private of soc ia l costs of i t s a c t i v i t i e s . I t i s easy to understand how th i s c on f l i c t s with p ro f i t - con -scious a i r l i n e s and price-conscious a i r t r ave l l e r s i f the government, in i.24 search of greater benefits in the 'pub l ic i n te re s t ' cont inual ly increases expenditures to finance the a i rpor t system. This raises the cost of a i rport operations to a l l users. The government also y ie ld s to considerable p o l i -t i c a l interference for regional and national development reasons which do not always pa ra l l e l the goals of the primary users. The resu l t of the analysis created a set of c r i t e r i a that can be used to define proper a i rpor t management. The c r i t e r i a incorporated the fol lowing ideas: a strong degree of authority and independence for the local administration at the a i rpo r t , a responsiveness by loca l management to the business environment surrounding the a i rpo r t , a balance between the need for a national system and increased commercial v i a b i l i t y , a lack of p o l i t i c a l interference in operations, and an incentive to work hard at providing e f f i c i e n t , e f fect i ve and safe a i rpor t management services. After reviewing several proposals ranging from changes i n pol icy to organizational changes, the concept of an independent a i rpor t commission emerges as the most promising so lut ion. Five a i rports—Toronto, Dorval, Vancouver, Calgary and Winnipeg—are chosen to be converted to s e l f -s u f f i c i en t author i t ies possessing an elected board of d i rectors who appoint loca l management. Not co inc identa l l y , these a i rports are among the f i ve largest in Canada and possess the most l i ke l ihood of surviving as indepen-dent a i rpor t commissions. Each a i rport becomes an independent body subject only to federal government regulation for safety and a i r t r a f f i c contro l . The primary objective of management i s to cover a l l a i rpor t serv ices, i n -cluding any debt servic ing ar i s ing from debt f inancing. The APM i s res-ponsible for and has authority over a l l operations ( including budgeting andtthe sett ing of landing fees) and can determine p r i o r i t i e s in consultation •125 ( with the primary users of the a i r p o r t ' s f a c i l i t i e s (commercial a i r c a r r i e r s , m i l i t a r y ) . Local a i rpor t management i s also dedicated to maintaining an e f fec t i ve communications and consultation system with a l l pa r t ie s , so as to be more responsive to the i r needs. As evidenced by the descr ipt ion of the new management system, i t s adaptab i l i ty to the set of c r i t e r i a i s good. Although i t i s not an optional solut ion whereby a l l part ies are s a t i s f i ed and no im-provements can be made without worsening someone's pos i t i on , i t i s an improve-ment upon the present system. At these f i ve a i rports the authority to control operations i s put in place, and there i s a b u i l t - i n f l e x i b i l i t y to provide f a c i l i t i e s and management services in response to the business environment needs. P o l i t i c a l interference and bureaucracy have been reduced, and by a l l ocat ing legit imate costs c loser to the users, there is a better chance of f u l l cost recovery. The federal government retains control over the majority of the system's a i rpor t s , enabling i t to maintain a national system. Because the most p r o f i t -ableaairports are converted to independent operations whose main objective i s to break even, the government i s losing a major source of revenues which at present, i t depends upon for the cross-subsidizat ion of other a i rport opera-t ions. C.A.T.A. has the option of ra i s ing user charges at the a i rports i t s t i l l controls to achieve a higher percentage of cost recovery. Culley has demon-strated that a i r l i n e s can bear an increase in landing fees to support th i s ob-j e c t i v e , and the increase in landing fees required at a large.-numberrof a i r -ports i s not that substant ia l . Some subsidizat ion may be necessary for the smallest a i rports where the increase in user charges w i l l be too large to support the continuation of commercial a i r service. Overa l l , the new pro-posal should not increase the costs of operating the new system, as i t i s merely red i s t r ibut ing more payments from the general treasury to the a i r -t r ave l l i n g public and other users of the a i rpor t . This i s a more va l id user-pay philosophy than the government has been supporting. -"126 To determine whether or not th i s proposal performs as well in pract ice as on paper, an examination of the United States a i rpor t authority system reveals that a i rports are t yp i c a l l y owned by c i t i e s or munic ipa l i t ies as legal public corporations. They are run by private management teams which have tota l control over a l l operations. The a i rpo r t author i ty , although i t has no taxing author i ty, i s an independent f inancing vehic le which can issue bonds to finance projects. There i s also deta i led a i rpor t l e g i s l a t i on which provides extensive federal aid to a l l types of a i rpo r t s . Through the A i r -port and Airway Development Act , funds are ava i lab le f o r a i rpo r t master plans, and various projects. The funds are ava i lab le from a Trust Fund which co l l ec t s taxes on f u e l , passengers and a i r c r a f t at a i rports across the United States. The aim of thesauthoftcity management i s to break even annually. Public interest groups and a i r l i n e s are ac t i ve l y encouraged to part ic ipate in pol icy decisions that d i r e c t l y a f fec t the i r i n te res t s , and the i r involvement provides an e f fec t i ve system of checks and balances against local management. The authority concept i s not without i t s problems. Research performed on the actual workings of the management structure provides several ins ights. The increased amount of authority allows local management to be subject to c loser scrutiny by users, and creates pressure on a i rpo r t management to be well-respected and capable. This infers that highly qua l i f i ed people must be sought to f i l l these posit ions and the lack of spec i a l i s t s in th i s f i e l d can be a problem. The open consultations have allowed primary users, in pa r t i cu l a r , a i r l i n e s , to become business partners with the loca l administra-t i on . As a r e su l t , there are complaints emanating from both sides that the other partner i s vying for control of power. This reinforces the need for strong leadership at the helm of the administrat ion. Personnel problems with unions, job-descr ipt ions and feather-bedding, s im i l a r to those in Canada, ex i s t at the author i t ies studied. Also s im i la r to complaints voiced at Canadian a i r po r t s , but to a lesser extent, are the claims made by a i r -l ines that i t i s unfair to use landing fees as a catchal l to cover expenses. They are pr imar i ly concerned that unexpected variances in the a i rpo r t s ' cost-revenue gap w i l l be passed on to the i r shoulders through landing fee i n -creases. The management of the Trust Fund has given r i se to some concern. The fund has b u i l t up a gigantic surplus of over two b i l l i o n do l la r s which has yet to be a l located. A i rport managers and users would prefer to see the surplus put to good use, preferably to help lower the costs of operation, which the a i r l i n e s could pass on to the a i r - t r a v e l l e r s in the form of re-duced fares. A growing problem at the majority of United States a i rports i s the small burden of user charges borne by general av ia t ion . With con-gestion worsening, and commercial a i r car r ie r s encountering r i s i n g costs, i t i s f e l t that i f general av iat ion i s to use a commercial a i r c a r r i e r de-signated a i r po r t , then they should pay the f u l l cost of using that f a c i l i t y . The U.S. has moved forward and created funds for the further development of general av iat ion a i rpor t s . The f i n a l concern expressed by local admini-s t rat ion i s the prospect of a i r l i n e deregulation, and the..ensuing problems with more f l y -by-n ight car r ie r s and the p o s s i b i l i t y of increased congestion. The examination, then, of the management structure at certa in U.S. author i t ies disclosed a number of problems which we should expect to be associated with any business operation. On the whole, the i r degree of seriousness i s no worse than that facing Canadian a i rpor t s . The comparison of selected American a i rports to the f i v e Canadian a i r -ports using f i nanc ia l rat ios disclosed that between a i rports with s im i la r a c t i v i t y l e v e l s , / the American a i rports outperform Canadian a i rport s . Without the burden of debt serv ice, the f i v e Canadian a i rports operate with a surplus, ind icat ing that they do have the potential to become autonomous e n t i t i e s . When the debt service i s included, the«Canadian a i rpo r t s , save Montreal, Toronto,and Vancouver, run large d e f i c i t s . When rat ios were calculated for do l l a r expense per passenger enplaned, the larger a i rports in the United States real ized some form of economies of scale as the i r rat ios were lower than other smaller U. S. a i rpor t s . In Canada, the comparable rat ios were higher for a l l f i ve a i rpo r t s , with the added twist that the two largest—Dorval and Toronto—possessed the largest ra t io s . An analysis of the components of expenses revealed higher operating expenditures and higher debt service costs in Canada. Higher costs do not d ictate i n e f f i c i e n t management practices in themselves, for the Canadian government purposely i n s t a l l ed a management system which operates to promote a national system in the public in teres t . However, when combined with the character i s t i c s of a i rport management being powerless to control costs, and the absence of a comparable system of checks and balances such as ex ists in the United States, there i s no i n -centive or b u i l t - i n deterrence to aim for lower costs of running an a i r -port. Bearing th i s in mind, the ra t i o can be re-examined and i t i s a reasonable conclusion that the government i s wasting cap i ta l resources in the a i rpor t system i f comparable a i rports in the United States can operate with lower costs. Opponents may defend the higher costs as the pr ice for maintaining a national system but, from the evidence in th i s paper, th i s would seem a tenuous cla im. The United States has an e f f i c i e n t a i rpor t management system, and no claim can be made regarding the absence of a •national system in the United States. The F.A.A. ex i s t s to maintain national safety standards and other regulatory matter, but they leave the business operations in the hands of the a i rpor t managers. As further support, growing expenditures for the operations of our a i rports add to the burgeoning federal d e f i c i t . I f i t i s a goal of the newly-elected government to search for serious ways of reducing th i s d e f i c i t , perhaps a hard look at maintaining a national system of a i rports in the public interest i s ca l led for . The comparison of do l l a r revenue co l lected per passenger enplanement reveals higher rat ios for the Canadian a i rports which follows from the higher level of costs incurred in the i r operation:.;, The major area of difference between the two systems i s the present level of landing fees which exceeds the average fees set i nd i v idua l l y by a i rports in the United States, even though the Americansuuseilandvfees as a ' c a t c h a l l ' to ensure that breakeven i s reached. The Americans, in turn, depend more heavily upon revenues generated by rentals and concessions. Given that the re-venue ratios.:are higher in Canada in the attempt to match the high expense rat ios has not been successful. Most a i rports in the United States do achieve 100 percent legit imate user cost recovery which in Canada only Toronto rea l i zed th i s percentage in 1976-77. The evidence in the paper points to the American a i rpor t authority concept as a more properly managed system according to the c r i t e r i a de-veloped to i dent i f y t h i s . The Canadian a i rpor t management system has developed serious fau l t s that deter i t s effectiveness and e f f i c i ency . While the recommendation made requires a major organizational change, i t i s the most sensible one developed in the framework of th i s paper and, on the strength of what th i s author believes to be a purely objective ana lys i s , i t i s hoped that the recommendation w i l l be given serious con-s iderat ion by the decision-makers within the government. The author would l i k e to acknowledge the advice and d i rec t ion pro-vided by Dr. Karl Ruppenthal, Dr. Aidan Vining and Dr; B i l l Watters in the development and wr i t ing of th i s thes is . Special thanks are extended to the Director of the Federal Task Force on A i rport Management, Mr. Mel Hagglund, and i t s members whom the author worked with during i t s i n i t i a l phase of research. F i n a l l y , a special note of appreciation i s given to Mr. Larry Potvin, Director General of Po l icy and Programming in the Canadian A i r Transportation Administration whose advice was instrumental in the choice of th i s top ic . .131 APPENDIX i LIST OF EXHIBITS Exhib it Page Exhibit 1'.-- Abstractions From Federal Legis lat ion „ on Canadian Airports 1^33. Exh ib i t 2 - T r a f f i c Volumes and Operating Expenditures (thousands of people dol lars ) at Pr inc ipa l A i rports in Canada 140. Exhibit 3 - Airports to be Considered for Conversion to Commissions in Canada ... vi 41 Exh ib i t 4 - Canadian A i r Transportation Administration New Airports Revolving Fund 23 Airports and Terminal Control";5% Revenue Increases -Inf lated $Mi l l ions .142 Exhibit 5 - Canadian A i r Transportation Administration New Airports Revolving Fund 23 Airports and Terminal Control 5%^Revenue3lncreases (Assuming I n i t i a l Revenue Base Increased) Inf lated V i . / A Mi l l i on s 144^ . Exhib it 6 - The United States A i rport and Airway Trust " .' .... Fund '146;, Exhibit 7 - The Reimbursements to Trust Fund of the United States Exhib it 8 - Possible Investments fo r the Surplus of the United States Trust Fund 148 Exhibit 9 - Apportionment of Grants Under the A i rport and Airway Development Fund " 149-. 132, LIST OF EXHIBITS CONT'D Exhibit ~ .Page-Exhibit 10 - Nashvi l le A i rport Authority .152 Exhibit 11 - Organization Structure - John F. Kennedy International A i rport 1978 153 Exhibit 12 - Description of Operating Revenues and A i rport Expenses 1,54 EXHIBIT 1 ABSTRACTIONS FROM. FEDERAL LEGISLATION ON ...CANADIAN AIRPORTS AERONAUTICS ACT The Minister of Transport supervises and promotes the development of a l l matters connected with aeronautics. The Act empowers the Min ister to construct and maintain a l l government a i rpo r t s , including a l l necessary p lants, machinery and bui ld ings. The current pol icy i s to develop and maintain a l l government a i rpo r t s , including a l l necessary p lants, ma-chinery and bui ld ings, International and National a i r po r t s , as well as s a t e l l i t e s i tes to re l ieve congestion at major a i rpor t s . I t i s the pol icy of the government to accommodate immigration f a c i l i t i e s , t ickeg agencies, post o f f i c e , banks, restaurants, f i r e and ambulance service and commer-c i a l r e t a i l e r s . Special contractual requirements with respect to A i r Canada ex i s t under the recently passed A i r Canada Act (see Volume 3, No. 2 Canada Gazette Part I I I ) . To ensure proper supervis ion, the government can prepare regulatons for the control or operation of aeronautics in Canada. These regulations may concern i ) the l icens ing of a l l aerodromes and a i rpo r t s ; ( i i ) the height, use, and locat ion of buildings and structures s ituated on the lands adjacent to or in the v i c i n i t y of the a i rpo r t ; ( i i i ) the designation of lands adjacent to an a i rpor t as a protec-t ion area to prevent the use or development of such lands (to be used as a l a s t resort i f a l l other e f fo r t s have f a i l e d ) ; (v) zoning of land. The Ministry of Transport cent ra l l y administers the a i rpor t planning function through master plans and a..national plan. These plans are drawn up according to forecasts of a i r transportation demand, ICAO standards for f a c i l i t i e s , and any other factors which may uniquely pertain to an a i rpo r t . The design of a i rports i s based on the operational character i s t i c s of c r i t i c a l a i r c r a f t with consideration given to route structures, a i rpor t re-ference temperatures and payload demand. The Canadian A i r Transportation Administration w i l l on ly issue an operating c e r t i f i c a t e to an a i rpor t i f the manoeuvering areas and other f a c i l i t i e s are safe for the operation of the c r i t i c a l a i r c r a f t proposed. A i r Navigation f a c i l i t i e s and services are the re spons ib i l i t y of the Director General of C i v i l Aeronautics within the federal government. These encompass f a c i l i t i e s necessary for the navigation of a i r c r a f t (enroute a i d , terminal aids and landing aids) and operational services (aeronautical i n -formation serv ice, a i r t r a f f i c serv ice, inspection and ca l ib ra t ion serv ice, communication service and av iat ion weather service) which permit an orderly flow of a i r c r a f t within the structure of the a i rpo r t . The government also provides a i r t r a f f i c services at 57 a i rport s and 15 terminal areas; radar and radio coverage in a l l high level airspace and 49,000 nautical miles of low level airways. The Canadian A i r Transportation Administration develops and administers po l i c ie s to enhance av iat ion safety that encompass the basic functions of operating airway f a c i l i t i e s , a i r t r a f f i c control serv ices, the national a i r terminal system and'the regulation of most av iat ion a c t i v i t i e s ( a i r -worthiness c e r t i f i c a t i o n , l i cens ing of a i r po r t s , a i r t r a f f i c control and the i r serv ices) . The Minister of Transport assumes the fol lowing r e spon s i b i l i t i e s in support of the a i rpor t security programme: i ) i n s t a l l a t i o n of physical security measures; 135 i i ) provision of a security force staffed by the RGMP at major domestic a i rpor t s ; i i i ) f a c i l i t i e s to implement security measures; iv) ; communications network and emergency coordination; v) provision of funds fo r research and development. The a i r ca r r ie r s have the fol lowing re spon s i b i l i t i e s fo r secur i ty: i ) provision of personnel to carry out authorized search of passengers; i i ) security measures fo r i t s own assets. Under the Aeronautics Act , there ex ists a National C i v i l Aviat ion Security Co-ordinator who i s provided with the authority fo r security mea-sures including the search of passengers and ensuring that a l l owners and operators of a i r c r a f t comply^with the law. FINANCIAL ADMINISTRATION ACT The Treasury Board has j u r i s d i c t i o n over matters of f i nanc ia l manage-ment including: estimates of expenditures, f i nanc ia l commitments, charges for the provision of serv ices, renta l s , revenues, annual and longer term expenditure plans of the various departments of government. This control i s l inked to the national a i rpor t system under the control of the Ministry of Transport. The Treasury Board controls the Consolidated Revenue Fund (C.R.F.) which i s the aggregate of a l l publ ic monies that are on deposit tp; the cred i t of the Receiver General. The l a t t e r keeps accounts d i sc los ing re-cords of expenditures made under each cash appropriat ion, or loan, revenues of Canada, and other payments in and out of the C.R.F. Money received for a special purpose i s paid into the C.R.F. and held therein un t i l a drawing i s required. For example, Transport Canada provides subsidies to a i rports that i t does not operate. They are e l i g i b l e fo r an annual operating subsidy up to 100 percent of the d e f i c i t and f i nanc ia l assistance equal to 100 percent of the approved cap i ta l expenditures (e.g., Churchi l l Fa l l s and Dryden). Mun ic ipa l i t ie s which operate a i rports of local i n te re s t , or wish to develop anoairport, are e l i g i b l e for cap i ta l f i nanc ia l assistance toward construction and/or improvements. I t i s a term of every contract providing for the payment of any money from the C.R.F. that the payment i s subject to there being an appropriation fo r the pa r t i cu la r service for the f i s c a l year in which i t occurs. When there i s an appropriation by Parliament, the person charged with the/admi.ni.s t ra t ion of a service prepares a divs ion into allotment in the form de-ta i l ed in the parliamentary estimates. The Treasury Board may a l so , in re la t ion to i t s r e spon s i b i l i t i e s fo r personnel management: i ) determine the manpower requirements of the publ ic service and provide fo r the i r a l l o ca t i on ; i i ) determine the requirements for the t ra in ing and development; i i i ) provide for c l a s s i f i c a t i o n of pos i t ions; iv) determine and regulate the pay to which persons employed in the public service are e n t i t l e d ; v) es tab l i sh standards of d i s c i p l i n e ; v i ) establ i sh standards governing physical working condit ions; v i i ) determine and regulate payments made for t r a ve l l i n g expenses; v i i i ) make regulations for the purpose of ensuring e f fec t i ve co-ordination of administrative services within departments and for the establishment of administrative standards of performance; ix) require from any public o f f i c e r any account or document that . the board considers necessary for the due performance of .its dut ies. Under the Financial Administration Act , the Auditor General i s en t i t l ed to free access to the accounts of every department to ensure that the public ' 137; accounts are reconc i lab le; that a l l public money i s accounted for and has been expended for the purposes for which i t was appropriated. The Auditor General can inquire into the f inanc ia l a f f a i r s of any organization that receives f inanc ia l a id from the Canadian government. NATIONAL TRANSPORTATION ACT While th i s Act impinges on the management of a i rports in a rather broad fashion with respect to national goals, the federal po l icy regarding a i r c a r r i e r serv ices, and the c a t a l y t i c role that the CTC may play are worthy of note. In establ i sh ing in ternat iona l l y scheduled a i r services the government has predetermined that a l l routes should be economically v iab le . A l l i n t e r -nat iona l a i r services are operated on the basis of a b i l a t e r a l agreement. The goals of international scheduled a i r transport are to: i ) meet the needs of the t r a ve l l i n g publ ic; i i ) meet the requirements of f re i gh t fo r scheduled a i r transport; i i i ) encourage economic growth of Canadian c i v i l av iat ion in the internat ional f i e l d ; iv) achieve the maximum advantage fo r Canada in terms of trade, commerce and tourism and improve re lat ions with other countries. These po l i c ie s favour the increased u t i l i z a t i o n and development of the major a i rports in Canada and have an impact—d i rect l y on the amount of a i r t r a f f i c and i nd i r ec t l y upon the business that is generated. They can also d ictate the degree of importance of a i rpor t s . For example, the de-velopment of Toronto as an international a i rpor t and the r i s e in importance of that c i t y as a t r a f f i c generating centre have led to a growing demand for access to Toronto from foreign ca r r i e r s . To protect the Montreal gate-way, the government has taken a l l reasonable steps in b i l a t e r a l negotia-tions to d i rec t t r a f f i c into and out of Eastern Canada to and through that (138 gateway. As the rapid growth has led to congestion at Mai ton, a moratorium was declared in 1976 on further a i r c a r r i e r access to Malton un t i l addi-t ional f a c i l i t i e s become ava i lab le . The federal pol icy regarding regional a i r services i s to regulate the competitive posit ion among regional c a r r i e r s ; between regional and the two mainline ca r r i e r s ; and to provide opportunities for expansion of a c t i v i t i e s in order to safeguard the i r f i nanc ia l v i a b i l i t y . Since the regional car r ie r s (which would include A i r Canada and CP A i r - -our two national car r ie r s ) serve the national and regional a i r po r t s , th i s pol icy statement i s in the interests of these a i rports and encourages continued a i r t r a f f i c a c t i v i t y and the re-su l t ing business that i t generates. On the domestic charter f r on t , services may only be operated on the route of a scheduled ca r r i e r unless thesscheduled c a r r i e r agrees to the proposed route or the A i r Transport Committee authorizes the serv ice. Re-gular ca r r ie r s have introduced Charter Class Fares (465,000 seats in the peak 1978 season) and more recently l im i ted Advanced Booking Charters have been introduced to national and regional c a r r i e r s . If the demand fo r these charter services develops as forecasters pred ict , then a greater number of passengers w i l l flow through a i rpor t s . Within the boundary of the National Transportation Act , the Canadian Transportation Committee i s ordained to perform the functions vested in i t by th i s Act , the Railway Act , and the Aeronautics Act , with the object of coordinating and harmonizing operations of a l l ca r r ie r s engaged in opera-t i on . Their actions could i nd i r e c t l y impact (pos i t i ve ly or negatively) upon the amount of a c t i v i t y at a given a i rport in Canada. The duties of the CTC are as fo l lows: i ) to inquire into measures to a s s i s t in a sound economic development of the av iat ion mode; ^ 1 3 9 i i ) To inquire into measures to be adopted in order to achieve coordination in the development and regulation of various modesoof transport; i i i ) to inquire into f i nanc ia l measures required fo r d i rec t assistance to av ia t i on ; iv) to advise the government on the overal l balance of expenditure programs of various government departments for the provision of transportation f a c i l i t i e s in the various modes of transport. , The CTC has also established the A i r Transportation Committee which may exercise all ":the powers and duties of the CTC. The CTC acts as a cata lys t with respect to the economic aspects of the management of a i rpor t s . Through the i r recommendations and measures of economic development they have a f a i r degree of control as a watchdog over a i r c a r r i e r s . Since the l a t t e r are the prime c l i en t s of the a i rpor t the managers of the l a t t e r should be well aware of the a c t i v i t i e s of the CTC i f they are to maintain a broad understanding of the "powers that be" in Ottawa. EXHIBIT 2 j . TRAFFIC VOLUMES A p OPERATING EXPENDITURES (thousands of people d o l l a r s ) , ; ^ IN CANADA AIRPORTS T r a f f i c Vol . ,.- ' 1-977' umes Direct A i rport O&M Expenditures 1977/78 Enplaned & , Deplaned : Revenue Pas-sengers (OOO's) I t inerant A i r c r a f t Movements (OOOi's.)} Person Years Operating and Maintenance Expenditures ($000's) 1. Toronto 11,544.9 232.7 465 19,865.0 2. Dorval 5,386.1 157.3 337 12,608.0 3. Vancouver 5,106.0 232.2 170 8,565.0 4. Calgary 2,736.8: 134.5 109 4,481.6 5. Winnipeg 1 ,959.1 108.3 145 4,665.7 6. Edmonton 1 ,627.7 58.8 130 4,349.8 7. Ottawa 1,611.1 84.6 122 4,594.3 8. Mirabel 1,445.3 44.1 373 16,537.0 9. Hal i fax 1 ,289.7 49.0 118 3,985.3 10. Quebec 575.8 85.2 53 1,959.5 11. Regina 520.9 61.0 34 1,197.2 12. V i c to r i a 463.8 96.3 30 1,059.6 13. Saskatoon 447.2 60.5 36 1,240.6 14. St. John's 432.4 22.1 ' 60 1 ,689.5 15. Thunder Bay 337.3 38.8 32 992.6 16. Windsor 265.8 32.1 37 1,078.0 17. London 262.8 61.8 37 1,146.8 18. Moncton 201.1 36.5 57 1,865.9 19. Fredericton 194.0 30.0 35 920.4 20. Sydney 183.4 12.7 44 1 ,089.4 21. Saint John 169.4 22.2 38 1,066.1 22. Charlottetown 165.9 18.3 27 751.0 23. Gander 159.5 27.2 131 3,782.3 Source: The Federal Min istry of Transport, Canadian A i rport Database 1978. EXHIBIT 3 Airports to be Considered For Conversion to Commissions ..in Canada Mai ton Dorval Vancouver Calgary Winnipeg 142 EXHIBIT 4 Canadian A i r Transportation Administration New Airports Revolving Fund 23 Airports and Terminal Control 5% Revenue Increases - Inf lated $Mi l l ions Total Revenues Total Costs P r o f i t (Loss) Depreciation P r o f i t (Loss) Interest P r o f i t (Loss Add Depreciation Cash Flow from Operations Loans Received Total Sources of Funds Capital Expenditures Loan Repayments Surplus Cash Increased Total Appl icat ion of Funds 1979/80 100.5 1980/81 1981/82 1982/83 1983/84 140.9 219.9 5-year Total 234.0 257.7 283.9 312.6 344.4 1432.5 232.3 249.3 266.4 283.4 298.1 1329.5 1.7 • 8.4 17.5 29.2 46.2 103.0 64.8 68.4 76.2 85.4 90.4 385.2 (63.1) (60.0) (58.7) (56.2) (44.2) (282.2) 7.9 18.9 34.0 47.7 108.5 (63.1) (67.9) (77.6) (90.2) (91.9) (390.7) 64.8 68.4 76.2 85.4 90.4 385.2 1.7 .5 (1.4) (4.8) (1.5) (5.5) 98.8 140.4 221.3 207.1 344.8 1012.4 100.5 140.9 219.9 202.3 343.3 1006.9 100.5 130.8 214.5 191.1 326.2 971.2 2.1 5.4 11.2 17.0 35.7 202.3 343.3 1006.9 143 EXHIBIT 4 - continued Total Revenues Total Costs P r o f i t (Loss) Depreciation P r o f i t (Loss) Interest P r o f i t (Loss) Add Depreciation Cash Flow from Operations Loans Received Total Sources of Funds Capital Expenditures Loan Repayments Surplus Cash Increased Total Appl icat ion of Funds 1934/85 379.8 313.8 66.0 93.9 (27.9) 70.5 (98.4) 93.9 (4.5) 334.9 330.4 303.7 26.7 330.4 1985/86 425.6 330.5 95.1 98.6 (3.5) 92.0 (95.5) 98.6 3.1 333.7 336.8 300.0 .36.8 336.8 1986/87 479.6 348.0 1987/88 523.7 366.4 1988/89 10-Year Total 572.1 385.9 131.6 106.9 157.3 137.1 186.2 140.0 24.7 112.7 20.2 133.0 46.2 148.9 (88.0) 106.9 (112.8) 137.1 (102.7) 140.0 18.9 339.7 24.3 285.2 37.3 288.3 358.6 309.5 325.6 311.0 47.6 250.2 59.3 255.3 70.3 358.6 309.5 325.6 3813.3 3074.1 739.2 961.7 (222.5) 665.6 (888.1) 961.7 73.6 2594.2 2667.8 2391.4 276.4 2667.8 SOURCE: Transport Canada - F i l e A1024-5 1 4 4 EXHIBIT 5 Canadian A i r Transportation Administration New Airports Revolving Fund 23 Airports and Terminal Control M t ! a A \ 5% Revenue Increases"(Assuming I n i t i a l Revenue Base Increased) Inf lated $Mi l l ions Total Revenues Operating Costs P r o f i t (Loss) Depreciation P r o f i t (Loss) Interest P r o f i t (Loss) Add: Depreciation Cash Flow from Operations Appropriations Received Loans Received Surplus Cash Increased Capital Expenditures Loan Repayments 1979/80 1980/81 1981/82 1982/83 1983/84 5-year Total 100.5 145 EXHIBIT 5 - continued 1984/85 1985/86 1986/87 1987/88 1988/89 10-Year Total Total Revenues 433.7 485.9 546.8 597.6 653.0 4347.7 Operating Costs 313.8 330.5 348.0 366.4 385.9 3074.1 P r o f i t (Loss) 119.9 155.4 198.8 231.2 267.1 1273.6 Depreciation 93.9 98.6 106.9 137.1 140.0 961.7 P r o f i t (Loss) 26.0 56.8 91.9 94.1 127.1 311.9 Interest 54.1 70.7 85.5 99.4 107.8 497.2 P r o f i t (Loss) (28.1) (13.9) 6.4 (5.3) 19.3 (185.3) Add: Depreciation 93.9 98.6 106.9 137.1 140.0 961.7 Cash Flow from Operations 65.8 84.7 113.3 131.8 159.3 776.4 Appropriations Received Loans Received 258.2 243.3 233.8 162.6 147.1 1820.7 324.0 328.0 347.1 294.4 306.4 2597.1 Surplus Cash Increased Capital Expenditures 303.7 300.0 311.0 250.2 255.3 2391.4 Loan Repayments 20.3 28.0 36.1 44.2 51.1 205.7 324.0 328.0 347.1 294.4 306.4 2597.1 SOURCE: Transport Canada - F i l e A1024-5 ,146 EXHIBIT 6 .THE UNITED'STATJS tlRPORT AND AIRWAY TRUST FUND SOURCES OF FUNDS A. EXCISE TAXES 1 . ANY LIQUID FUEL OTHER THAN GASOLINE A tax of 7<t per gallon on a l l av iat ion fuels purchased by non-commer-c i a l av iat ion (general aviat ion) in the United States. 2. TIRES USED ON AIRCRAFT A tax of 5<£ per pound on the to ta l weight of a i r c r a f t t i r e s sold (exclusive of rims). 3. TUBES USED ON AIRCRAFT A tax of 9ct per pound on the tota l weight of of a i r c r a f t tubes so ld. 4. GASOLINE A tax of 4<£ per gallon i s lev ied on gasoline used for a i r c r a f t i n -volved in commercial av ia t ion . A tax of 7<£ per gal lon i s levied on gasoline used for fuel in a i r c r a f t involved in non-commercial av ia t ion . 5. TRANSPORTATION BY AIR An 8% tax on a i r l i n e fares appl icable to the transportation of persons by a i r within the 50 States. 6. INTERNATIONAL TRAVEL A tax of $3.00 per passenger departing from any of the 50 States on an internat ional f l i g h t . 7. TRANSPORTATION OF PROPERTY/CARGO A tax of 5% on a i r f re i gh t rates, appl icable to a i r f re i gh t trans-portation within the 50 States. 8. USE OF CIVIL AIRCRAFT An a i r c r a f t tax of $25.00 annually appl icable to a l l c i v i l a i r c r a f t ( a i r l i n e and general av iat ion) plus a tax annually of 3.5<£ per pound for a l l turbine engine a i r c r a f t , and a tax annually of 2c£ per pound for a l l piston engine a i r c r a f t weighing more than 2,500 pounds, maximum c e r t i f i c a t e d takeoff weight. Source: The Federal Aviat ion Administrat ion, A i rport and Airway Revenue Act of 1970. EXHIBIT 7 THE REIMBURSEMENTS"TO TRUST FUND OF THE UNITED STATES ^ Secretary of Treasury pays amounts into General Treasury Fund from the Trust Fund. Fuels ( including gas) that have been taxed are subject to refunds in the fol lowing cases: ( i ) public land transportation ( local t r an s i t ) ( i i ) non-highway use of gasoline (farms) ( i i i ) fuels used fo r non-taxable purposes other than for the use sold ( i . e . , not as fuel in a i r c r a f t or other transportation veh ic les ) . Refund of c i v i l a i r c r a f t tax where a i r c r a f t i s used in business of transporting persons or property by a i r in foreign a i r commerce. Source: The Federal Aviat ion Administrat ion, A i rport  and Airway Revenue Act of 1970. EXHIBIT 8 POSSIBLE INVESTMENTS FOR THE SURPLUS OFATHE UNITED.,STATES TRUST FUND Portions of the Trust Fund which are not required to meet current withdrawals may be used fo r investment purposes. Investments are made only in interest bearing o b l i -gations guaranteed (inbboth -principal and interest ) by the United States. Such obl igations can be acquired: 1) on or ig ina l issue at the issue pr i ce ; 2) by purchasing outstanding obl igat ions at market pr ice. Special obl igations are also ava i lable exclus ively fo r the Trust Fund's investment purposes, i f Secretary determines purchase of other interest bearing ob l i ga -tions of the United States/'is not in the pub l i c ' i n t e re s t . Source: The Federal Aviat ion Administrat ion, A i rport  and Airway Revenue Act 1970. 149 EXHIBIT 9 APPORTIONMENT OF O R A N T L J a g E R T H Q l R P O R T AND AIRWAY D F V F T . O P M T 7 M T M J M TYPE OF GRANT A i r p o r t s s e r v e d by a i r c a r r i e r s c e r t i f i e d by C.A.B. TYPE OF APPORTIONMENT ^ 33% o f amount 33% to t h e s p o n s o r s o f t h i s t y p e o f a i r p o r t ^ 33% t o d i s c r e t i o n a r y f u n d FURTHER, BREAKDOWN OF APPORTjONMENT WHERE APPLICABLE p 97% o f t h i s t o U.S. S t a t e s 3% t o o t h e r U.S. d i s t r i c t s 50% of t h i s i n p r o p o r t i o n w h i c h the p o p u l a t i o n of each s t a t e bears t o the t o t a l p o p u l a t i o n o f a l l s t a t e s . 50% t o the p r o p o r t i o n which the a r e a of each s t a t e bears t o t he t o t a l a r e a o f a l l the s t a t e s 35% t o H a w a i i 30% t o P u e r t o R i c o 15% t o Guam 15% t o V i r g i n I s l a n d s d i s t r i b u t e d i n same r a t i o as no. of pa s s e n g e r s e n p l a n e d a t each a i r p o r t o f the s p o n s o r bears to the t o t a l no of p a s s e n g e r s enplaned a t a l l such a i r p o r t s 150 EXHIBIT 9 - continued TYPE OF GRANT Airpor t s serving segments of aviation other than c e r t i f i e d a i r c a r r i e r s . For developing a i r c a r r i e r a i r p o r t s . TYPE OF APPORTIONMENT 73.5% to major U.S. States 1.5% to other ^ U.S. D i s t r i c t s 25% to discretionary fund To each sponsor of an airport (other than commuter service airports) For those a i r c a r r i e r airports served by a i r c r a f t heavier than" 12,500 l b s . takeoff (other than commuter service a i r p o r t s ) _ FURTHER BREAKDOWN OF APPORTIONMENT WHERE APPLICABLE 50% i n proportion which the population of each state bears to the t o t a l population o f , a l l the States. 50% i n proportion which the area of each state bears to the t o t a l area of a l l the states. 35% to Hawaii 35% to Puerto Rico 15-% to Guam 15% to V i r g i n Islands $6.00/passenger for 0-50,000 passengers $4.00/passenger for 50-100,000 passengers $2.00/passenger f o r 100-500,000 passengers $ .50/passenger for 500,000 passengers — 3 > for 1976 - $187,500 <: x < $12,500,000 ~ 1977-80 - $150,000 C x < $10,000,000 per year 151 E X H I B I T 9 - c o n t i n u e d TYPE OF GRANT For d e v e l o p i n g a i r c a r r i e r a i r p o r t s ( c o n t ' d ) TYPE 0"F APPORTIONMENT Fo r those a i r c a r r i e r a i r p o r t s s e r v e d by a i r c r a f t l i g h t e r t h a n 12,500 l b s t a k e o f f ( o t h e r t h a n commuter s e r v i c e a i r p o r t s ) F o r Commuter s e r v i c e a i r p o r t s , any amount l e f t o v e r a f t e r the S above a p p o r t i o n m e n t s s h a l l be d i s b r i b u t e d a t the d i s c r e t i o n o f the s e c r e t a r y . FURTHER BREAKDOWN OF APPORTIONMENT WHERE APPLICABLE 1976 - $62,500<1 x $12,500,000 1977-80 - $50,000 ^ . x ^ $10,000,000/year 1976 - 4 1977-80 the l i m i t s a r e $18,750,000. the l i m i t s a r e $15,000,000. For d e v e l o p i n g g e n e r a l a v i a t i o n a i r p o r t s . Any amount l e f t a f t e r t h i s a p p ortionment goes back t o a i r c a r r i e r a i r p o r t s . 75% t o major U.S. S t a t e s .50% i n p r o p o r t i o n w h i c h t h e p o p u l a t i o n of each s t a t e b e a r s t o t h e t o t a l p o p u l a t i o n o f a l l s t a t e s . 50% i n p r o p o r t i o n w h i c h the a r e a o f each s t a t e b e a r s t o the t o t a l a r e a of a l l t he s t a t e s . -} l l / l l P v e r t ° R T C ? ' ^ A m e r l c a n S a " ° a > T r u s t T e r r i t o r y of t h e P a c i f i c I s l a n d s ) and the V i r g m I s l a n d s to be d i s t r i b u t e d a t the d i s c r e t i o n o f t h e s e c r e t a r y . 24% t o the d i s c r e t i o n a r y Fund. 152 L E G A L A F F A I R S AIR S E R V I C E EXHIBIT 10 NASHVILLE AIRPORT AUTHORITY B O A R D O F C O M M I S S I O N E R S E X E C U T I V E D I R E C T O R C O M M U N I T Y A F F A I R S P L A N T S A F E T Y P E R S O N N E L F I N A N C E P L A N N I N G a E N G I N E E R I N G S M Y R N A A I R P O R T ( R U T H E R F O R D C O . ) S E N I O R D I R E C T O R O P E R A T I O N S a M A I N T E N A N C E N A S H V I L L E M E T R O P O L I T A N ( D A V I D S O N C O . ) I S P R I N G F I E L D A I R P O R T ( R O B E R T S O N C O . ) S A F E T Y a S E C U R I T Y A D M I N I S T R A T I O N ft B U S I N E S S M G T . Source: The Metropolitan Nashvi l le A i rport Authority 1977. 153 EXHIBIT 11 GENERAL MANAGER FINANCIAL PLANNING ADMINISTRATIVE AND PERSONNEL PROGRAMS AERONAUTICAL SERVICES DIVISION PUBLIC SERVICES DIVISION RAMP SERVICES AND SOUND MONITORING OPERATIONS SERVICES POLICE PLANT & STRUCTURES DIVISION CONSTRUCTION HIGH TENSION CONTROLLER BUSINESS ADMINISTRATION DIVISION PLANNING SUPERVISOR ENGINEERING PROJECTS AIRPORT MAINTENANCE SERVICES BUILDING SERVICES PASSENGER SERVICES TRANSPORTATION ENVIRONMENTAL CONTROL GENERAL MAINTENANCE ELECTRICAL POWER PLANT SANITATION ORGANIZATION STRUCTURE - JOHN F. KENNEDY INTERNATIONAL AIRPORT 1978 Source: The Federal Task Force on A i rport Management, Ottawa, 1978. f L 5 4 \ EXHIBIT 12 DESCRIPTION OF OPERATING REVENUES AND AIRPORT EXPENSES Es sent ia l l y , the same receipts and expenditures are appl icable to most a i r po r t s , with the main difference being, the manner in which they are categorized. In Canada, operating revenues are categorized by: landing fees, general terminal fees, concessions ( including f u e l ) , renta l s , the A i r Transportation Tax, and other revenue including a i r c r a f t parking, permits, l i censes , sales of u t i l i t i e s , and service fees. In the United States, operating revenues are c l a s s i f i e d s l i g h t l y d i f f e r e n t l y , but i n -clude the same items. They are set out as fol lows: 1. Landing area - landing fees - parking ramp fees 2. Terminal area - concessions - terminal bui ld ing f a c i l i t i e s 3. A i r l i n e leased areas - ground rentals - cargo terminals - o f f i ce rentals - t i c ke t counters - operations and maintenance areas - hangars 4. Other leased areas - f i xed base operations - ground rentals - cargo terminals - fuel - agr icu l ture %155 5. Other - sale of u t i l i t i e s - equipment rentals - sale of insurance General a i rpor t expenses in Canada are divided into the followihggareas: (1) operations and maintenance—including the d i rec t costs of sa lar ies and wages and other goods and services normally charged to the operating bud-get; (2) i nd i rect expenses—including employee f r inge benef i t s , overhead, and grants in l i eu of taxes; (3) depreciat ion; (4) in teres t . In the United States, operating expenses are c l a s s i f i e d into the same headings as operat-ing revenues, namely: 1. Landing area - operating and maintenance 2. Terminal Area - operating and maintenance 3. Hangars and Cargo - Operating and maintanence. There is a separate category appl icable to depreciation and interest pay-ments, which i s bas ica l l y the same category that ex i s t s in Canada. ';i 156 FOOTNOTES 157 FOOTNOTES 1. K.. Ruppenthal, Towards a Rational Canadian Transportation System,,-speech given to the Conference Board in Canada (Vancouver:.June 2, 1977). 2. A i rport A c t i v i t y S t a t i s t i c s , S t a t i s t i c s Canada, 1974. 3. J . Smith, Considerations in Setting A i rport User Charges in Canada, Annals of A i r and Space Law (McGill Univers ity: November, 1976) and R. S. Doganis and G. F. Thompson, "Establ i sh ing A i rport Cost and Revenue Functions," Aeronautical Journal, Ju l y , 1974/ 4. A i rpor t A c t i v i t y S t a t i s t i c s , U.S. Dept. of Transportation, F.A.A., 1974, Enplanements x 2. 5. House of Commons Debates, December 9, 1977. 6. The major a i rports that are experiencing f i nanc ia l d i f f i c u l t i e s are Mirabel and Calgary. Mirabel required an i n i t i a l investment of $400 m i l l i o n do l l a r s , and i t s minimum operating cost at present i s $74 m i l l i on ( including debt serv ice). The objectives set for Mirabel by C.A.T.A. were: ( i ) to maximize performance at minimum cost, ( i i ) to allow a i r l i n e s to provide e f f i c i e n t , convenient and economic service to the i r customers with minimal operational prob-lems. Both C.A.T.A. and the a i r ca r r ie r s agree that the f i r s t ob-j ec t i ve has yet to be met, and a i r car r ie r s have voiced reservations about the p r a c t i c a b i l i t y of the second object ive, given t he i r exper i -ence to date. At Calgary, a new terminal has been completed at the cost of $127 m i l l i o n—on l y $57 m i l l i o n was budgeted. The a i rpor t i n i t i a l l y cost $30 m i l l i o n , and with the costs of the new terminal included, the gap between revenues and expenses has widened considerably. 7. E. K. Cul ley, A i r l i n e Impact of A i rport F a c i l i t y Charges, Canadian Transportation Commission, Research Publ ications (Ottawa: 1972). 8. W. A. Niskanen, J r . , Bureaucracy and Representative Government (Chicago: Aldine Atherton, 1971), Part V. 9. C. D. Foster, "The Public Corporation: A l l ocat i ve E f f i c iency and X -E f f i c iency , " From Pol icy to Administrat ion, J.A.G. G r i f f i t h , 1973. 10. Ib id. 11. 12. Ib id. 1T58; 13. Ib id. 14. Ownership of a i rports by. statejgovernments al so occurs in Alaska, Maryland, and Hawaii, while the federal government owns Dulles International A i rpor t . 15. A i r c r a f t Movement S t a t i s t i c s , Annual Report, Av iat ion S t a t i s t i c s Centre, (Ottawa: S t a t i s t i c s Canada, 1977). 16. Pa t r i c i a Watson, E.A.A. A i r _T ra f f i c A c t i v i t y (Washington: Federal Dept. of Transportation, 1974-1977). 17. Federal Min istry of Transport, Canadian A i rport Database, unpublished, 1 9 7 8 > = 18. P ro f i l e s of Scheduled A i r Carr ier Passenger T r a f f i c fo r the Top 100 U.S. A i rpor t s , (Washington: U.S. Dept. of Transportation, F.A.A., 1975-76). 19. J . Smith, Considerations in Local Administration of Airports in  Canada, Annals of A i r and Space Law, (Montreal: McGill Univers i ty, 1978), Vo l . I I I. 20. House of Commons Debates, December 9, 1977. 21. S. Bauml, A Study of the Financial Aspects of A i rport Operation, Masters Thesis, F l i gh t Transportation L ibrary , M.I.T., 1970. 22. Ib id. 23. Figures for expenditures at Canadian Airports are taken from the Canadian A i rport Database developed within the j u r i s d i c t i o n of the Federal Min ist ry of Transport; f igures for expenditures at the U.S. Airports are supplied through the Federal Task Force on A i rpor t Management. 24. Ib id. 25. Transport Canada b r ie f i ng of IATA, ATA, and ATAC, June 15, 1978, for 1978/79 BAA Annual Report 1976/77. Kansas City International A i rpo r t , Income Statement, 1976/77. Metropolitan Nashvi l le A i rport Authority-;. Annual Report 1977. 26. Metropolitan Nashvi l le A i rport Authority Annual Report 1977. 27. Federal Ministry of Transport, A i rport Sub-Class i f icat ion Index, 1976, Cost Recovery Levels, revised Apr i l 6, 1978. 28. J . J . Smith, Discussion of the Assertion "User Charges Wi l l Solve  Our Transport Problems", Canadian Transportation Research Forum, June 7, 1979. 159. 29. Obtained from the Federal Min istry of Transportation, Canadian A i r Transportation Administration D iv i s ion. 30. Federal Min ist ry of Transportation, Canadian A i r Transportation Ad-min i s t ra t i on , Proposals on Cost A l l o ca t i on , A i rport C l a s s i f i c a t i on  and Fee Increases, unpublished paper, 1975. 31. Ib id. SELECTED BIBLIOGRAPHY BIBLIOGRAPHY Bauml, S. "A Study of the Financial Aspects of A i rport Operation." Masters Thesis. F l i gh t Transportation L ibrary. M.I.T. 1970. Baldwin, B., and Munroe, R. L. "The United States A i rpor t System." The Task Force on A i rport Management. Ottawa: August,/ 1978; (typed), Baldwin, B l a i r . "A i rport Management in Canada: A Pol icy Analys i s . " Vancouver: 5 A p r i l , 1979. (typed) The Canadian Treasury Board. "Revolving Funds and Working Capital Ad-vances" The Treasury Board C i rcu la r . Ottawa: 8 January, 1970. Cul ley, E. K. A i r l i n e Impact of A i rport F a c i l i t y Charges. Canadian Transportation Commission - Research Publ icat ions. Ottawa: 1972. De Neu fv i l l e , Richard. A i rport Systems Planning: a c r i t i c a l look at the methods and experience; with prefaces by Norman J . Payne and John . R. Wiley. 1st American ed i t i on . Cambridge, Mass.: M.I.T. Press, 1976. Descarie, J . , .General Manager, Ottawa International A i rpo r t , Ontario. Interview. May-June, 1978. The Federal Government of Canada. House of Commons Debates. Dec. 9, 1977. 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