By Dennis Seid/NEMS Daily Journal
TUPELO – Josh Abramson knows he’s asking for a lot.
The executive director of the Tupelo Regional Airport, like department heads across the city, submitted a budget request to the mayor and City Council for the upcoming fiscal year. Those requests will be discussed and voted on later this summer.
Abramson is asking for an unprecedented $355,144.
“Yes, it’s a large request, something that hasn’t been done in a long time,” he admitted.
Abramson, on the job for a little more than two years, says the downturn in the aviation industry – related to the overall economic downturn – combined with some inherited financial issues are the main reasons for the big budget request.
“I didn’t create them, but they’re my problems to handle,” he said. “It’s as simple as that.”
The two biggest challenges affecting the airport’s finances are commercial air service and debt. But they’re just the tip of the iceberg.
Commercial air service has taken a tremendous wallop since peak boardings at Tupelo Regional reached 31,344 in 2006.
Last year, the airport enplaned just under 12,000 passengers – a staggering 62 percent decline from five years earlier and 25 percent lower than in 2008.
“Since the Delta/Northwest merger in 2008, changes at the Tupelo Regional Airport have had the general public feeling like they are flying through a fog and not knowing which air carrier will be here and for how long,” Abramson wrote in his budget request. “Our enplaned passengers have continued to reduce with a lack of dependable air service.”
And air service, since 2009, has been subsidized through the U.S. Department of Transportation’s Essential Air Service program. Delta, which said it was pulling out of dozens of smaller and less profitable markets, is providing service only because it gets about $1 million a year. But Delta will be replaced by Silver Airways in October. Silver, too, is flying only because of an EAS subsidy.
But struggling commercial air service is just one component of the airport’s problems.
Overall operations – local and itinerant – have fallen off sharply as well.
Itinerant operations, which involve flights outside the normal local traffic patterns, were 40,388 in 2008. Last year the figure fell to 18,922
Local operations totaled 23,784 in 2008 and fell to 21,610 in 2011.
While fuel sales last year returned to 2009 levels, other revenue streams can’t keep up with the expenses.
The airport’s debt load has increased by more than $3.3 million. Five years ago, the Tupelo Airport Authority agreed to buy two privately owned fixed-base operators for nearly $1.5 million, and bought the former Army Aviation Support Facility – part of the National Guard – for more than $1.8 million.
The airport has to pay some $218,000 annually to service those two deals alone.
Add utilities, maintenance, salaries and benefits and other expenses, the budget can quickly go into the red.
While commercial air service to Atlanta instead of Memphis might help increase traffic, it likely won’t make up for the revenue loss by Silver’s replacement of Delta.
The airport expects to lose about $90,000 annually in rental income, plus another $30,000 in fuel sales as it transitions from Delta to Silver.
It’s also critically important passenger boardings stay above 10,000 annually. If not, the FAA provides only $150,000 in annual funding, compared to $1 million if that threshold is reached.
Cutting expenses is a necessity in balancing the books, and Abramson said the airport is learning to do more with less.
The number of employees had been cut from 23 when he started to 11, including four part-time workers.
But the airport also has been spending money on improvements it says will help generate revenue.
More than $50,000 has been spent to renovate existing facilities, Abramson said.
With the help of the CDF and the Mississippi Development Authority, the airport last year successfully recruited Universal Asset Management, an airline leasing and recycling company.
UAM promised to bring 100 jobs within three years to Tupelo and Lee County. The company now employs 62 employees between its disassembling operations in Tupelo and its warehousing operations in Verona.
The lease agreement will help meet – but not totally take care of – the note on the old AASF building. Even when UAM pays its agreed-upon maximum lease of $115,000 annually, that still leaves the airport $10,000 underwater on its loan.
The new $30 million AASF facility sits on land owned by the airport. The National Guard pays only $1 a year.
But locked into a deal, the airport may not be able to get more rent money from the Guard anytime soon.
Meanwhile, other tenants – the city, the Boy Scouts, BancorpSouth, Webb Flying Services and the Buffalo Park, contribute more than $125,800 in annual revenue.
The car rental companies – Hertz and Budget – along with the TSA, pay about $160,000 in rent each year.
But there’s plenty of available space for rent at the terminal.
“We’re at over-capacity there, with almost 14,000 square feet out of nearly 25,000 square feet available,” Abramson said. “It was overbuilt, but a lot of things were overbuilt back then. Just look around town.”
Abramson said 100 percent of the airport’s hangar space is occupied. However, it should be noted that the airport FBO, Tupelo Aviation Unlimited, leases all of the space from the airport. So from a revenue standpoint, the hangars are fully leased.
However, Abramson said there is a demand for more hangar space and estimates another 15,000 to 20,000 square feet of hangar space will be needed to accommodate future general aviation growth in the next few years.
The hangar rentals provide more than $142,000 in annual revenue, with TAU paying the bulk of it – $115,000.
But TAU will no longer be in the airport’s hands after five years, if everything goes according to plan.
Earlier this year, the board agreed to let Airport Management Solutions take over management of the FBO. The airport will pay AMS $50,000 annually to run the FBO’s day-to-day operations. The airport keeps the assets and controls pricing, but profits would be shared with AMS.
The airport projects net profit of about $47,000 for the next fiscal year, rising to $96,000 by FY2017.
THE BUDGET REQUEST
The $200,000 requested in the budget is to be paired with a $300,000 state grant to renovate the FBO.
According to Abramson’s request, the money will “go toward the renovation of the general aviation facilities, Tupelo’s front door to the movers and shakers of core businesses such as Toyota, BancorpSouth, Ashley Furniture, Cooper Tire and many more. The renovation and expansion of the facility is part of the airport’s multiyear capital improvement plan in realizing the full potential of the airport’s service to the community.”
The renovation would in effect combine the two former FBO facilities into one.
The $25,000 request will go toward marketing Silver Airways to potential flyers. Abramson submitted a grant request for $75,000 he hopes to combine with the city’s allocation.
“The latest changes to Silver need to be marketed through very strong advertising,” he said. “With funding from this grant, the airport plans to implement new ways to educate and familiarize the community with Silver Airways and its practices.”
Abramson acknowledged the airport has spent “a lot” of money, but said much of it has been used for much-needed updates for equipment and policies and procedures he said were not done or overlooked over the years.
“That being said, we’ve done what we can do and we will tighten the reins,” he said. “There’s still a lot of work to be done. The administration building needs a new roof, the terminal is still unfinished after all these years. … but we want continued development and improvement of our existing infrastructure and to make this airport a key part of economic development.”