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Friday, October 19, 2007
Bullish on Airports
By host @ 1:06 PM :: 5747 Views
 

SANTA MONICA, CA – American Airports Corporation, based adjacent to the Santa Monica Airport here, already has a number of private management contracts in place and officials say they are now in position to get significantly more active in the U.S. airport market, seeking agreements to privately manage facilities as well as to develop them. Central to the plan is the infusion of new capital brought about by the sale in February of the golf interests of David G. Price, president of American Airports.

The company’s most recent activity centers around being selected to privately operate the New Orleans Lakefront Airport, as part of the FAA’s airport privatization pilot program. That deal is pending. Other airports already under contract management include:

  • Altoona-Blair County Airport, Martinsburg, PA;
  • Winder-Barrow Airport, Winder, GA;
  • Newnan-Coweta County Airport, Newnan, GA;
  • Los Angeles County Airport System, under which it manages five general aviation facilities;
  • Midway Island Airport

The company also offers other airport consulting services, and operates the SUPERMARINE FBO complex at Santa Monica Airport that was originally built to house historic aircraft owned by its founder, David G. Price, who made his fortune operating golf courses across the U.S.

A BACKGROUND IN AVIATION
Price, 71, says he originally caught the aviation bug at this same Santa Monica Airport, watching World War II aircraft being built and flown by the Donald Douglas Company. “I’d watch them make bombers and DC-3s,” he recalls. “I’d come here at lunch to watch the B-19 take off. I think it’s a privilege to still be a part of the business and to still get to fly airplanes.”

He served as a jet fighter pilot in the U.S. Navy in the 1950s and earned his B.A. in economics at USC and a law degree from UCLA.

In 1971, he bought his first golf course, which led to the formation of American Golf Corporation and in time the contract management of some 250 golf courses. He also became chairman of National Golf Properties, a publicly traded real estate investment trust that owns some 116 courses in 22 states.

In February, Price sold his interests in the golf companies to an investor group comprised of GS Capital Partners 2000, Capital Partners 2000, Goldman Sachs Whitehall Real Estate Fund 2001, and Starwood Capital Group. The deal is reported to be valued at $1 billion, including assumption of debt.

Explains Price, “The great thing about this deal is, it provides capital to grow American Airports. It’s an exciting thing for me because it’s the first time in my life that I’ve had capital to do that. In the past, it’s always come out of operations.”

GOLF COURSES VERSUS AIRPORTS
Price says that many of the things he learned in the private contract management and development of golf courses apply to airports, particularly since he has been a lifelong user of the aviation system. The key to success in both, he says, is paying attention to customer needs and providing value.

“In New York City we took over the golf courses 20 years ago and a lot of people were afraid when they heard the word privatization,” he explains. “But the truth is, government is not well known for its efficiencies.”

“When we went there, they had 27,000 rounds per annum. People were sleeping in sleeping bags to get key starting times on weekends. We came in and operated the courses better and pleased the customers. And we spent more, while also increasing the annual number of rounds to 99,000. A lot of people think you’re going to make money by not spending so much, but that’s not how it works. You need to have a great operation, make it so people love to be there, and give them great value. Then you can make progress.”

Just as golfers feared privatization on the courses, he relates, many in aviation fear private operators at airports, particularly the tenants. And although his company owns the SUPERMARINE at Santa Monica, he says his company is more interested in airport management and development and not being a competitor.

“The FBO at the airport is one of our customers,” says Price. “We can’t offend them; we’ve got to please them. That doesn’t necessarily mean lowering the rent, but it means having a better facility so that the airplane owners, the pilots, enjoy it.”

“You can get past the objection that ‘we’ve never done it that way,’ that the city has always run the airport. Well, that’s great, but the airport is losing money. The only way it works is if you deliver a better product at a value price that people can afford, which is what we did with golf. Our average green fee still today is $20. I’m an airplane owner; I understand what’s affordable.”

Reprinted with permission from Airport Business.
 

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