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Business Observer Friday, Sep. 30, 2016 3 years ago

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Punta Gorda Airport's deep discount approach is a winner with carriers. Is the strategy sustainable?
by: Ted Carter Contributing Writer

Executive Summary
Company. Punta Gorda Airport Industry. General and Commercial Aviation Key. Airport's new executive director, James Parish, will continue the low-debt philosophy of his predecessor.

Punta Gorda Airport's James Parish learned the give and take of deal making through nearly 10 years of bargaining with ultra low-cost airlines, rental car companies and other prospective tenants.

Parish prefers to work the “giving” side, having concluded that generosity is a virtue for small airports like the one he runs, Punta Gorda Airport in Charlotte County. The airport, 35 miles from Southwest Florida International and 62 miles from Sarasota-Bradenton International, is one of the fastest-growing airports in the state.

Giving discounts to lure business, but done the right way, Parish says, can bring nifty returns.

For example, Punta Gorda Airport assesses no air carrier landing fees and no counter rents for either carriers or car rental companies — a practice common at many other airports. In return, the airport gets service to and from nearly three dozen national destinations and is home to more than 1,100 rental cars. Allegiant Air is the dominant commercial air carrier.

Use of the airport is not entirely free. Each car rental carries a 20% excise fee that goes to the airport's $9 million annual budget. And each landing and takeoff costs the air carrier, just not very much.

Not everyone is happy with the strategy Parish and Gary Quill, the executive director Parish recently replaced, initiated nearly a decade ago.

The commercial sweeteners take money off the table that could further enhance the airport, especially general aviation, the airport's primary mission, say critics like as Mark Futch, a private pilot and former owner of Boca Grande Seaplane Service. (Futch ran an unsuccessful campaign for a seat on the Charlotte County Airport Authority against incumbent Pam Seay, losing in the recent Republican primary.)

“Hangar rates are going to go up for general aviation because they aren't charging enough to Allegiant,” Futch says.

Airport officials counter that the $300 monthly rents on the airport's 218 hangars have not gone up in the past 12 years. The money earned from commercial operations, add airport officials, is how those rates stay low.

And now, as Punta Gorda Airport looks to rack up its first year of 1 million passengers at a terminal it just expanded by 42,000 square feet, neither Parish or Quill hold any regrets over the strategy.

“People say we give things away,” Parish says, a claim he won't dispute. “Bring me a business plan where I can make this kind of money, and I will give it to you, too.”

Commercial aviation-related revenue brought the airport $5.6 million in fiscal 2016-2017, a figure that includes a projection for September and money generated from parking and car rentals.

Figures on a carrier's cost to board a passenger at Punta Gorda, code designation PGD, show just how deeply the airport does discount, Quill acknowledges.

“When you look around the country,” says Quill, “you can see ranges from $5 up to the low $20s. Our cost per enplanement is $1.”

Quill calls it a survival strategy at a time other small airports are losing commercial carriers. Sarasota-Bradenton International Airport is one such airport that has struggled to build its flight portfolio during the past decade.

In short, says Parish: Give an air carrier a cost advantage, and it will come.

Robust time
Well-known commercial aviation consultant Mike Boyd says Allegiant can make Punta Gorda a low-cost gateway to Southwest Florida. Quill recounts a line Boyd is fond of saying, that if you want to grow your airport, find Allegiant or find oil.

The airport executives found Allegiant Air in 2009, slightly more than 10 years after Las Vegas-based Allegiant launched with a single scheduled route to Fresno, Calif.

The business models for Allegiant Air and today's Punta Gorda Airport could have been created in the same room at the same time, says Keith Hansen, Allegiant's executive vice president of government affairs and airports.

“They are very similar business models,” Hansen says. “The proof is in the numbers.”

For Allegiant Air parent Allegiant Travel, that entails providing passengers discount travel packages that include air transportation, hotel stays, car rentals and tickets to theme parks and events. “We leverage those relationships” with car rental companies and others to get the traveler the best deal possible, Hansen says.

The foundation of the package is an air fare typically less than half of that charged by larger domestic air carriers.

For PGD, Allegiant's strategy equates to 32 consecutive months of passenger growth. This year has been especially robust. In June, for instance, the airport tallied 98,000 passengers, double the count for June 2015. And surpassing 1 million passengers, if and when it happens, puts PGD in the neighborhood of St. Pete-Clearwater International Airport, which also relies on Allegiant.

Parish and Quill use a simple arrangement to keep Allegiant happy and will do the same for Frontier Airlines, which recently announced service to Punta Gorda from Chicago, Philadelphia and Trenton, N.J., this fall.

The arrangement: The airport limits use charges to a “turn” fee that covers each use of the airport, whether for takeoff or landing. “We don't do incentives,” Parish says, contrasting the airport to others in the region.

Cost effective
A University of Florida civil engineering grad, Parish handled engineering work on airport facilities as a consultant in the early 2000s. In 2004, the Sarasota resident signed on full time, for what he thought would be a couple years, to help PGD rebuild after Hurricane Charley made a wreck of the place, destroying 18 buildings. The airport, however, stayed in a perpetual state of construction and Parish became assistant executive director in 2007.

Quill, who had been executive director since 2001, announced his retirement this summer. The 49-year-old Parish got the nod to replace Quill from the Charlotte County Airport Authority, which, by a 4-1 vote, rejected a proposal for a national search.

Seay, with the authority, credits Parish with persuading the Federal Aviation Administration and federal and state transportation departments to fund such projects as the airport's air control tower, expanded terminal and runway upgrades. “They initially told us we were not eligible,” Seay says.

Parish, she says, got them to change their minds.

Parish acknowledges relationships helped him get through doors to see the right people. “But at the same time, we have been good stewards. We aren't building a $60 million facility. We're building an $8 million facility,” Parish says, referring to the new terminal.

Doing more with less money puts you in line for more of the money, adds Parish, a Navy vet who sports a military-style haircut and prefers polo shirts, khakis and loafers on most work days. Doing more with less also includes eliminating the assistant director's job once he takes over, Parish says.

Parish is a disciple of low debt, a calling he shares with Quill. They've avoided long-term bond debt and what Quill calls the “edifice complex.” They instead have built in increments, Quill says. Today's debt, a 10-year state infrastructure loan at 2.25%, is $4.8 million.

Taken together Quill believes Parish is the MVP of PGD's transformation into the nation's lowest cost airport.

“Parish is the one who figured out how to do it cost effectively,” Quill says. “We built this for approximately $14 million, counting parking. There are airports out there with this kind of capacity that have spent $150 million” for the same capacity.

At a glance: Airports

Cost per enplaned passenger is considered an important metric in an airport's financial operations. The figure is the average passenger airline payments to an airport per enplaned passenger. It's for the one-way trip, not the return trip to the airport.

Two important caveats: An airport's cost per enplaned passenger can drop without changing or improving the airport's cost structure if the airline brings more passengers in because it increases the denominator. Also, according to airline industry data analysis firm DWU Consulting, U.S. airports report multiple cost per enplaned passenger figures to multiple agencies and associations. It's not uncommon to see an airport reporting different CPE numbers in the same fiscal year, the firm states in a report.

Cost per enplaned passenger
Airport Cost

Sarasota-Bradenton International $10
Southwest Florida International $6.39, 2014 ($7.22 in 2012, $7.09 in 2013)
Tampa International $5.02, 2016 ($5.20 in 2014)
St. Pete-Clearwater International $1.65
Punta Gorda Airport $1

Operating budgets/revenues
Airport Budget

Tampa International $211 million (fiscal 2016)
Southwest Florida International $93.4 million (fiscal, 2015)
Sarasota-Bradenton International $18 million (fiscal, 2015)
St. Pete-Clearwater International $12.3 million (fiscal 2016)
Punta Gorda Airport $11.1 million (fiscal 2016-2017)

This story has been updated to correct the spelling of James Parish's name.

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