Airport Can't 'Buy' Air Seats

October 15, 2007
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GRAND RAPIDS — Work on the $138 million parking ramp and terminal building project has begun at Gerald R. Ford International Airport, but there still seems to be some misunderstanding about how airports are financed, and Aeronautics Director James Koslosky wants to clear the air.

Koslosky said there’s a general belief that rather than spending money on parking and terminal building improvements the airport should be using that money to buy airline service. However, under federal law the airport can’t use airport funds to subsidize air service, Koslosky told the Business Journal. The community could subsidize air service, which is what some other communities have done, he said.

“We can, in a reasonable and non-discriminatory fashion, offer incentives, and we do that for any carrier, including existing carriers, that give us new service or new routes. We can waive fees for six months or a year,” Koslosky explained. “Depending on the size of the aircraft and the number of aircraft, that can amount to a half million to a million dollars a year or more.”

Airlines don’t pay for parking. The airport is operated on a cost-center basis because under federal law it can only charge the airlines for the services and facilities they use. There is no cross subsidy permitted — that would be revenue diversion, and the airport can’t do that for either a new entrant or existing carriers, Koslosky pointed out. 

The parking improvements will stand on their own, and the airlines won’t pay a dime for them. The project is being paid for through a structured financing plan that combines bond financing, airport revenue and rental car fees. Airport users will pay for the improvements through deferential rate structures for valet parking, the parking ramp and express parking. Koslosky said the parking improvements are necessary on several levels to support the airport and West Michigan’s economic development. 

“The airport has to have sufficient capacity and has to provide the proper image as a gateway facility for all of West Michigan, and that has been our goal for the last 15 years going back to the 1992 master plan,” Koslosky said.

“The parking improvements are the last piece of the 15-year-old master plan that gets us through the next 20 years.”

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