Airport Strategy – Invest in Assets that Reduce Costs

Most public agencies are dependent on revenues from taxes or fees, with constant pressure to deliver service for the minimum absolutely necessary.  While airports are usually self-supporting and funded with rents and fees, there is always pressure to economize.

A simple example is relocating concessions from before a security check point to after.  Because of Transportation Security Administration restrictions, concessions revenue at locations before security check points have fallen dramatically since 2002.  Most airports have now readjusted and reallocated concessions to post-security locations.

Armstrong Airport in New Orleans is seeking to reinvent itself with a much larger concept, to create a facility that reduces its costs by increasing revenues and limiting the burden on its rate payers, the commercial air carriers leasing terminal space.  By re-configuring concessions and right-sizing its new terminal, Armstrong seeks to reduce its operating costs while increasing sales, thus producing more revenue with a public asset and delivering the same or better service, i.e. more flights to more places, with the same cost.

Contributed by:

Ross Chapman
Principal
rfc@tmg-consulting.net or 504.569.9239

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 Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

Practice Highlight: Engineering Economics

Given  the current economic climate and a focus on project impacts, engineers are challenged to go beyond solid, functional design work and enter the realm of economics to prove that a given project will bring real and tangible benefits. Engineering economics is the application of economic methods and models to project evaluation. This evaluation could include:

  1. Overall worthiness of a project in terms of return-on-investment
  2. Benefits and costs of design, construction, implementation and operation of the project
  3. Alternatives analysis for project financing
  4. Impacts of projects in terms of jobs, income & taxes on a geographical area or governmental unit
  5. Life cycle cost analysis

Measurements of some costs are relatively easy; e.g. design and construction cost. Establishing the value of driving time saved for a highway widening project or the value of a human life for a safety enhancement project  requires more expertise. Implementation costs are usually one-time, while operating costs and benefits are computed on an annual basis and translated to present value. Finally, incorporating uncertainty in project impacts can complicate the project evaluation.

Benefit-cost analyses have been completed by TMG Consulting for Richmond International, Mobile, Houma, and Louis Armstrong New Orleans International airports. TMG Consulting has completed impact studies for numerous private and  public clients in locales such as Missouri, Louisiana, Delaware, Massachusetts, and Florida, helping them to reach their development project goals.

Nowadays, many engineering projects require the use of engineering economics in project evaluation, a discipline in which TMG Consulting has long standing experience and expertise.

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.