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APRIL  2012

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Chattanooga Officials Admit Huge Loss for Taxpayers on Airport Project

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By Christopher Butler
TNWatchdog Staff on March 26, 2012


Chattanooga Metropolitan Airport officials admit their plan to use millions of taxpayer dollars to compete against a private company that services private jets is already losing money  -- more than $300,000 thus far, and counting.

Tennessee Watchdog reported in 2010 that Airport Authority officials would use $4 million in Tennessee Department of Transportation grants to establish a new Fixed Base of Operations (FBO). This new FBO would compete against TAC Air, which at the time was the only FBO at the airport.

"The new FBO has lost about $317,000 since it opened (last summer) through November of last year," said Christina Siebold, Airport Authority spokeswoman, when Tennessee Watchdog approached her about the matter.

According to traditional definitions, an FBO is a company that services general aviation aircraft (providing aircraft fuel, hangar storage and other facilities for airplane crews and passengers). Some FBOs operate privately, while others operate under the authority of a particular airport municipality.

Airport Authority officials chose Wilson Air as the company that would manage the taxpayer-subsidized FBO and compete against TAC Air. Airport officials wanted a second FBO at the airport for the stated purpose of providing more competition and lowering jet fuel prices.

TAC Air officials have already said that market conditions do not support a second FBO at the airport. Because of the recession, the private FBOs that once operated in Chattanooga either consolidated their operations with TAC Air or ceased doing business altogether.

"We aren't just crying because we have a competitor on our field. We are competing with our landlord and we are subsidizing their (FBO) facility with the land lease that we pay the airport, the two percent of gross receipts that we pay," said Pam McAllister, general manager for TAC Air in Chattanooga.

"All of that goes to the operating budget that they are using to fund the loss. So we are subsidizing our competitor. Who would want to be in this situation?"

TAC Air officials, along with the National Air Transportation Association (NATA), and a Seattle-based firm specializing in real estate issues in aviation have heavily criticized the taxpayer-subsidized FBO in a 2011 Tennessee Watchdog story. They said last year that the project is a no-win scenario for taxpayers.

Airport Authority officials told Tennessee Watchdog this month that the new FBO will continue to lose money for its first five years of operation before it turns a profit.

"From the beginning we talked about a five-year window," Siebold said.

"Any business that you look at has a startup period where they are getting their feet under them and introducing themselves to the market, and you'll sustain some early losses in the startup phase."

Siebold and other Airport Authority officials, however, could not provide any documentation that they had made such a claim while seeking state grant money to start the project.

Siebold said last year that Airport Authority officials are not willing to wait for a private company to establish a second FBO with its own funds.

Furthermore, the Tennessee Aeronautics Commission has awarded the airport an additional $5 million in grant money to establish new hangar space on the side of the airport nearest Wilson Air. TAC Air officials said a large number of customers are not flocking to the airport as they were five years ago -- and many hangars are empty as a result.

"There is currently 40,000 square feet of available hangar space, and we expect 20,000 more square feet of hangar space will be available once a new airport (in Cleveland, 35 miles away) opens," said Dave Edwards, TAC Air spokesman.

Airport Authority officials said in a grant request that new hangar space is needed because they anticipate that Chattanooga will boom with new industry in coming years -- including the new Volkswagen plant. Because of the new industry, more people will use the airport in the future, they said.

A spokesman for Volkswagen Chattanooga, however, would not say whether the company plans to make extensive use of the airport.

"I have no information to share on this subject and, as any answer I give would be pure speculation, I won't venture one," said Scott Wilson, speaking for Volkswagen.

Other than Volkswagen's occasional freight runs, McAllister said she and other TAC Air employees rarely see that company's aircraft fly into the Chattanooga airport.

State officials apparently gave the hangar grant money to the airport without determining for themselves if the airport was truly in need of it.

A spokeswoman for the Tennessee Aeronautics Commission told Tennessee Watchdog that Commission members do not independently verify the claims that Airport Authority officials make in their grant requests.

Meanwhile, a member of the Tennessee Aeronautics Commission, who voted to use taxpayer money to establish Wilson Air in Chattanooga, was that company's first tenant in Chattanooga, raising questions about a possible conflict of interest.

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The People News
PO Box 3921
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Pete Edwards, Editor - Publisher

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Copyright 2012 (All rights reserved)

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