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2012-12-05 Regular Meeting New Hanover County Airport Authority December 5, 2012 Page 1 NEW HANOVER COUNTY AIRPORT AUTHORITY REGULAR PUBLIC MEETING December 5,2012 CALL TO ORDER The New Hanover County Airport Authority met on Wednesday, December 5, 2012, at Wilmington International Airport, 1740 Airport Boulevard, Wilmington, North Carolina. Chairman Kays called the meeting to order at 5:01 p.m. Airport Authority members present were Charles Kays, Chairman; Tom Barber, Vice-Chairman; John Lennon, Secretary; Carter Lambeth; and Al Roseman. Also present were Jon Rosborough, Airport Director; Julie Wilsey, Deputy Airport Director; Jim Morton, Finance Director; Gary Broughton, Operations Director; Whitney Prease, Facilities Director; Rose Davis, Executive Assistant; Wanda Copley, New Hanover County Attorney; Richard Masters, The Masters Group, Inc., and Steve Bright and Amy McLane, Talbert & Bright, Inc. Also present were Corey Crews and Kevin O'Connell from the public. APPROVAL OF MINUTES The Authority has reviewed the minutes of the Regular Public Meeting on November 7, 2012. Mr. Barber MOVED, SECONDED by Mr. Lambeth, to approve the minutes of the November 7, 2012 Regular Public Meeting as submitted. Upon vote, the MOTION WAS APPROVED UNANIMOUSLY. PUBLIC INTRODUCTIONS Dr. Kays welcomed the guests and invited them to introduce themselves. Mr. Crews is the owner of the FBO in Jacksonville/Onslow County and Mr. O'Connell flies with Dr. Roseman and came to observe the meeting. SPECIAL EVENTS There were no special events to discuss at this meeting. FINANCE REPORT Mr. Morton reviewed actual revenue and expenses for the month of October. Mr. Morton reviewed ILM's cash report and summary of accounts for the month of October. Mr. Morton reported that work continues on the PFC application. The airlines are coming in December 19th for consultation and review of the 40 proposed projects and begin the process of applying to the FAA. Mr. Morton informed the Authority that approximately 4 to 4.5 million dollars will need to be borrowed in order to move forward with building the rental car facility. Staff is working with the county regarding the best way to borrow those funds. The 3 options include joining with the county when the county borrows funds through bonds for county projects, if timing works out and we need funds at same time; borrow directly on our own from a bank; or borrow funds New Hanover County Airport Authority December 5, 2012 Page 2 straight from the county. Mr. Morton reported that funds were borrowed from the county in the past for the Customs Building and it worked well for everyone concerned. Mr. Morton reported that the county tentatively agrees to loan ILM the money straight from the county and then in approximately 18 months, when the county needs funding for its projects, ILM will group with them and do a bond issue at that time. This option gives ILM great flexibility, is quick and easy and is what staff recommends the Authority pursue. This option would still require commissioner approval but on a staff level the county is agreeable. In response to Mr. Barber's question about the interest rate differential between the county and the bank, Mr. Morton commented that previously bank rates were 5% and we received 2.55% through the county so ILM should be able to get favorable interest rates with this option. There was further discussion about the increased flexibility and decrease in paperwork and approvals by going with this option, as well as timing of accepting bids. Staff indicated they would work on the details and try to have everything ready for approval at the February board meeting. Mr. Lennon asked that the presentation aspect of the loan be made very clear that the county will be paid back, what the county's collateral is, and ILM's cash flows that will pay the county back so there is no misconception that the county is "giving" the airport this money. Mr. Morton responded to Dr. Kays' question about the projected cost for the rental car facility that the construction loan will be between $4-4.5 M but other design work and pipe work will be necessary and staff is trying to keep the project under$4.7 M for everything. Mr. Morton presented the following three Finance action items for Authority members' approval: 1) Request for approval of a 1 year residential lease for 1902 Farley Drive at $750.00 per month. The tenant moved out in November and staff has a tenant interested in moving in January 1St 2) Request for approval to amend Air Wilmington lease—A survey was completed in 2006 which changed the footprint at the FBO increasing its size by 3.6 acres but Air Wilmington was not charged rent for that additional acreage. Staff has computed the back rent which should have been charged to be $195,000.00. Air Wilmington's lease has credits going forward for another 121/2 years due to money Air Wilmington put into renovation of the airport's old maintenance hangar. Staff would like to apply Air Wilmington's credits towards the back rent owed. This will reduce Air Wilmington's credits. Staff is seeking approval that Air Wilmington pay the back rent in full with credits going forward. In addition to that, Air Wilmington will begin paying more rent to TT M for the additional 3.6 acres — approximately $32,000 more a year to ILM in revenue. Mr. Lennon initiated discussion about the FBO lease amendment being approved tonight and how this was going to be handled. Mrs. Copley indicated a lease amendment would New Hanover County Airport Authority December 5, 2012 Page 3 be prepared once the exact numbers were provided by the surveyor and the credits were taken into account by staff and that the contract amendment would be brought to the Board for approval. Mr. Morton indicated he would like to get approval pending final numbers so the new rent amount begins January 1, 2013. Mrs. Copley indicated the Board can approve the negotiation of the lease amendment contingent on final numbers. 3) Request for approval of Christmas bonus— Mr. Morton initiated the discussion which was continued by Dr. Kays concerning the Christmas bonus for ILM full time employees. Dr. Kays recommended keeping the same bonus as last year which was $900 and asked for approval. Dr. Roseman MOVED to approve the three Finance action items but before his motion was seconded, Mr. Lennon asked and Dr. Kays agreed it would be best to approve the FBO lease amendment as a separate action item for the record. Dr. Roseman then MOVED, SECONDED by Mr. Lambeth to approve the two Finance action items regarding the lease of Farley Drive and the full time employee Christmas bonus. The MOTION WAS APPROVED UNANIMOUSLY. Regarding the third Finance action item for amendment to the Air Wilmington lease, Mr. Lennon MOVED to instruct staff to negotiate a lease amendment with Air Wilmington FBO which includes language to insure repayment in full of monies owed through the use of credits and/or additional payments. Mr. Barber SECONDED. The MOTION WAS APPROVED UNANIMOUSLY. FACILITIES Mrs. Wilsey presented three action items for Authority members' approval, including: 1) Approval of a State Energy Grant to purchase 2 new propane Ventrac mowers to replace 2 diesel mowers. The grant is for 25% of the purchase price of 2 mowers not to exceed $13,750. 2) Contingent upon grant strings being met and the grant being approved, staff would like approval to purchase the 2 new mowers. That cost is not to exceed a total of$55,000 and that is with Blade Equipment Company. 3) Approval for a work authorization with Talbert& Bright in the amount of S43,500, so Talbert &Bright can start survey and subsurface investigation on RWY 17/35 and once preliminary work is complete, start designing the project for our FY13 AIP Grant. Mr. Lennon MOVED, SECONDED by Mr. Barber to approve the Facilities action items listed above. The MOTION WAS APPROVED UNANIMOUSLY. Mrs. Wilsey updated Authority members on current projects to include the Kerr Avenue project, TWY B, C, J and G and RWY 17 extension and the Water Project Grant. New Hanover County Airport Authority December 5, 2012 Page 4 Regarding the rental car project, Mrs. Wilsey reported that the project should be ready to bid the first week of February 2013. Mrs. Wilsey updated the Authority on the status of storm water ordinance discussions with the state and county and indicated that on the state level it is understood that airports are different, and are low impact developments. ILM staff continues to work with the county staff, County Manager and Representative Elect Catlin. Mr. Barber initiated discussion about Mr. Catlin's continued involvement in the project and how this might be resolved. Mrs. Wilsey responded that staff is keeping Mr. Catlin in the loop because he understands how ILM is different. Staff will probably go back to the county with another proposal to see what can be done to streamline the permitting process. Mr. Catlin is a big advocate and still very interested in this matter. Mrs. Wilsey reported that Maintenance staff has finished retrofitting Rescue Base and Maintenance Base with new LED lights. Beginning in January, staff will start tracking the utility bills at those buildings and should be able to see how much money is saved. Dr. Roseman initiated a discussion about the FAA's 10 year modernization plan and questioned where H M falls in the 3,335 airports under the FAA. Mrs. Wilsey indicated that ILM is classified as a small hub airport and after further discussion staff agreed that ILM probably falls in the top 150 airports. In further response to Dr. Roseman, Mrs. Wilsey responded that the FAA does not do a plan for every airport in the system but relies on the individual airports to do their own Master Plan. Dr. Roseman asked that staff look into the FAA's recent publication and Mrs. Wilsey indicated she would follow up on the request. GOVERNMENT Mr. Rosborough reported that the Anti-ETS Bill was signed into law. This was the European Union's Emissions Trading Scheme and a means for the EU to get money from anyone flying into their airspace by paying a tax for carbon emissions. Many countries, including the US, had a problem with that and signed bills that they are not going to pay, so the EU has put this bill on hold. Mr. Rosborough stated that the TSA signed their Collective Bargaining Agreement with the American Federation of Government Employees (AFGE). A few years ago, TT.M staff questioned whether checkpoint employees should be on ILM payroll or become a part of TSA and the decision was made that it was advantageous to have them on TSA's payroll. Now some airports are looking at going back into the private option due to unionization. Staff makes no recommendation at this point. On a humorous note, Mr. Rosborough reported that TSA has come up with a "watch list" for pre- check rejects, those frequent flyers that applied for the pre-check program but were disqualified for various reasons. The TSA now has these people on a new TSA Watch List. Mr. Broughton responded to Mr. Lennon's question about progress made at H M with the slow security lines in the mornings that TSA has addressed that concern by opening checkpoints New Hanover County Airport Authority December 5, 2012 Page 5 earlier and opening both lanes and it seems to be moving faster with it taking no longer than 10 minutes to process through security. Mr. Rosborough reported that TSA is more customer friendly, not just at ILM but elsewhere, with BDOs going forward and helping people get through security, especially during the holidays when there are older passengers and less frequent flyers mixed in with business passengers. MARKETING AND PUBLIC RELATIONS Mr. Morton reported that staff is still marketing LGA but the major focus now is on the new expanded DCA service for weekday travel that starts February 1, 2013. Dr. Roseman reported that he and Mr. Morton had discussed opportunities for exposure for the airport at little or no expense and invited each board member to go on TV or radio to talk about what is happening at TT,M. Dr. Kays suggested that it be a board member and a staff member and everyone agreed. Mr. Barber commented that Mr. Rosborough had just been on TV and Mr. Rosborough confirmed that he was on TV twice in the last week. There was further discussion about the current ad campaign with the flight attendant which has been running for 3+ years and the intent to keep advertising local as much as possible by inviting local advertising agencies to give presentations at a board meeting. Dr. Roseman commented on the email blast newsletter that staff recently sent out and suggested that would be good to get in the hands of the radio stations in the area for exposure. PLANNING & DEVELOPMENT Mr. Morton reported that he and Mr. Lennon reviewed several hotel feasibility studies and selected one to move forward with. This proposal has an economic component built into the study. Mr. Morton further reported that Summit Smith received their Certificate of Occupancy for the VA Outpatient Clinic last week and today the VA went thru the punch list and accepted the building. Dr. Kays recognized Mr. Morton for all his hard work on the VA project. Mr. Morton stated that the VA is targeting February to open but it will more realistically be into March. The VA will plan an open house at that time for the community. Staff continues to market the AAI building. Regarding the Business Park, Mr. Morton informed the Authority that staff received approval this week for permits on the pretreatment swells and is moving forward with other design work the Authority approved a couple of months ago with road and infrastructure issues. Dr. Kays stated a friend that works at the VA has offered the opportunity to walk through the VA building one Wednesday afternoon and asked that anyone interested in going, please let him know. New Hanover County Airport Authority December 5, 2012 Page 6 OPERATIONS REPORT Using charts for illustration, Mr. Broughton reported ILM's airport statistics for the month of November, including fuel price comparisons, fuel flowage amounts, airfare comparisons with MYR and RDU, total passengers handled and total seats available. Mr. Lambeth commented that gas is $4.96/gallon at Wallace and that many locals go there to purchase fuel. Dr. Kays initiated discussion about tracking the fuel volume sold per FBO on a monthly basis and whether or not that would be beneficial to monitor. Discussion followed about area airports, what they charge for gasoline and the impact their lower gas prices have on TT M. In response to Mr. Barber's question of how we are impacted with the FAA as a result of our gas prices, Mrs. Wilsey indicated there is little impact as we get credit for all aircraft worked by the tower in IT M airspace. Mr. Rosborough continued the discussion about what the FAA looks into, and Mr. Broughton responded that when the FAA looks at tower classification it is based on all the traffic handled by the tower that passes through ILM airspace which includes general aviation, along with a formula that has variables such as traffic mix, runway configuration, class of airspace, and terrain. Mr. Broughton indicated that fuel flowage was up 20.8 % from last year and that this was still tied to the military traffic and with the increase due to the Thanksgiving holiday. Traffic was up at customs with an increased number of Net Jets aircraft on FBO and customs ramps. Regarding airfare comparisons, Mr. Lambeth questioned whether US Airways fares are cheaper than Delta fares in general and Mr. Broughton confiiuied that is correct. Mr. Masters commented on the conflict between airlines and airports on profits, saying that airlines only look at the yield and the load factor really isn't important any more. Mr. Masters indicated it is the opposite for airports. Airports look at flow of passengers through the airport. Mr. Masters indicates fares will likely continue to rise. What TIM charges airlines is about the cheapest in the southeast and that has helped ILM get additional service but the load factor is not a good barometer any more. Mr. Masters talked to Delta about their fares to LGA being $100 more than US Airways and Delta is comfortable with that. Delta is flying 72% load factor and is satisfied. Delta is making more money than US Airways was with fewer passengers. Mr. Barber commented that at Continental, they sometimes looked at load factor, sometimes at fares or yield. What Continental finally figured out, was what they really want is revenue per available seat mile (ASM). The airlines should be smart enough to realize the overall revenue per ASM on the plane is what they should be going after rather than yields or load factor. Mr. Masters indicated that what is keeping airlines flying today is the baggage fees, everything else is break even. Mr. Broughton reported the total number of passengers handled in November was 63,696, which is 6 % less than November 2011 and 9.3 % less than November 2010; and the total passengers handled year-to-date was 671,275, which is flat versus last year. New Hanover County Airport Authority December 5, 2012 Page 7 TT M's load factor for November 2012 was 84.6 % which was up 1 % and the reason for that is that enplanements went down 9 %; available seats went down 13 %, which drives our load factor up. Mr. Broughton reported the total number of seats available during the month of November was 37,644, down 13 % from November 2011. Mr. Broughton reported ILM's international traffic using US Customs statistics for November: 152 aircraft were cleared, which was up 2.7 % from November 2011; and 818 persons were cleared, which was up 4.5 % from November 2011. Year-to-date, US Customs has cleared 1,444 aircraft, which was 9.9 % less than 2011, and 7,881 persons cleared, which is 12 % less than 2011. DIRECTOR'S REPORT Mr. Rosborough turned things over to Mr. Masters for his quarterly update. Mr. Masters updated Staff on the visit to Chicago with United Airlines. United wanted to know what happened to American at ILM and United was provided with current data and monthly data for 1 year. Last week United said H M was not on the current list for new service in the near future. United indicated H M had a good load factor but the money wasn't there. United said they could not make ILM's numbers work. Mr. Masters reported that ILM is still carrying Chicago customers; they are just traveling on US Airways or Delta. What ILM is down is the 15% nonstop added. Mr. Masters stated Allegiant is looking for some international destinations. Customs Facility information has been sent to Allegiant and Allegiant has been talking to Mr. Masters for 2 years about Cancun service from ILM being a good market for them. Mr. Masters advised that ILM needs to look for another Orlando discount carrier. In the past ILM had a rule to not recruit a competitive market from another airline for one of our existing carriers. However, Allegiant shuts down 6 weeks in the fall and last week said they are going to shut down 6 weeks in the spring, so they are down to 40 weeks a year. Orlando is our number 2 or 3 destination and it is basically because of Allegiant and their cheap fares but if they continue to cut 6 week slices out of the calendar it will be tough to maintain that market. Mr. Masters initiated a discussion about Frontier Airlines and asked if the board wanted him to recruit a competitive airline to Orlando, with the thought that if the other airline operated 2 different days of the week than Allegiant does, then it might be a market for both of them. Mr. Barber commented he knew Frontier's Chairman and CEO and that he could probably help in this regard. The consensus of the board was to pursue a competitive carrier. Mr. Rosborough commented that staff also knows Robert Ashcroft who left Allegiant and now is working for Frontier. Mr. Ashcroft is familiar with ILM and how to operate going into Florida and being able to compete with his old air carrier may be enticing to him. Mr. Masters reported that he met with Jason Reisinger, Director of US Airways Route Planning Schedules in August when he visited TT,M and talked to the Business Leaders Focus Group. New Hanover County Airport Authority December 5, 2012 Page 8 Those meetings resulted in the non-stop service to DCA. Mr. Masters pointed out the value of bringing these folks in to see what they have here at ELM. Mr. Masters updated the board on the possibility of a merger between American and US Airways. Analysts in NY are all saying if they don't merge one or more of them may not exist. American is coming out of bankruptcy in March and they want to come out on their own before they negotiate with US Airways. Mr. Masters thinks this merger will happen sooner or later but there are still a lot of administrative issues American has to deal with, particularly as pertains to labor issues such as approved contracts with pilots and flight attendants. After a brief discussion regarding the 2013 Airport Authority proposed meeting schedule, it was agreed that the January and July meetings would be moved to the 2' Wednesday of the month, January 9th and July 10th. Dr. Kays questioned whether the meeting time should be returned to 4 pm instead of 5 pm. There was a split decision with Mr. Lambeth and Dr. Roseman preferring it stay at 5 pm and Mr. Barber and Mr. Lennon preferring it return to 4 pm. Dr. Kays, being the deciding vote, decided to leave it at 5 pm for now. Dr. Roseman initiated a brief discussion about diseases and immunizations and the need to keep employees health to keep sick time and health insurance costs down. ITEMS BY TILE PUBLIC There were no comments from the public. OLD BUSINESS There was no unfinished business for discussion at this meeting. NEW BUSINESS Dr. Kays initiated a brief discussion about the Authority Christmas Social December 12, 2012 at 6 pm at The Port Land Grille. Dr. Kays recognized Wanda Copley's birthday in appreciation for her work for the Authority. ADJOURNMENT There being no further business to come before the Board, Mr. Barber MOVED, SECONDED by Mr. Lambeth to adjourn. Upon vote, the MOTION WAS APPROVED UNANIMOUSLY. Chairman Kays adjourned the meeting at 6:20 p.m. Prepared by: Respectfully Submitted: Rose M. Davis John D. Lennon, Secretary