North Austin News

Understanding the financial mechanisms that keep airports operational can provide valuable insights into the aviation industry. John Gallo, manager of the Aviation Administrative and Business Development Division at Austin-Bergstrom International Airport (AUS), offers an overview of these processes.

AUS operates as an enterprise fund, generating its own revenues to sustain operations. Unlike other City of Austin departments funded by local taxpayer dollars, AUS relies on diverse income sources to cover expenses and fund capital projects. "The airport is its own unique ecosystem, and it's almost like a city within a city. Airports have to be self-sustainable," said Gallo.

Revenue for AUS primarily comes from three streams: airline fees and rents, grants, and bonds. Airline fees are charged for using airport facilities, including landing fees, terminal rentals, and gate leases. Additional revenue sources include parking fees, ground transportation fees, concessions, advertising, rental cars, and land leases.

Contracts with airlines and business partners form the backbone of airport financing. These agreements outline terms of engagement and revenue-sharing arrangements essential for compliance and maximizing revenue generation.

For large-scale projects such as the Journey With AUS expansion program, airports often rely on bonds backed by airport revenues to raise funds while spreading costs over time. Grants from the Federal Aviation Administration (FAA) support airfield improvements and security enhancements. Passenger facility charges (PFCs) collected from passengers finance terminal upgrades and other initiatives.

Balancing financial sustainability with affordability for airlines and passengers is a key challenge in airport financing. Negotiating airline agreements is a complex process involving multiple stakeholders that dictate terms between airports and airlines regarding fees, gate access, and service requirements.

Airline lease agreements play a significant role in determining how airline fees are set up. AUS has had an airline use and lease agreement since 1999 but is currently negotiating a new ten-year agreement with seven signatory airlines out of nineteen serviced.

Signatory airlines are those that sign the use-and-lease agreement under specific parameters such as activity level or rent paid to the airport. These airlines are contractually obligated for ten years but must continue paying if they leave before the term ends. Non-signatory airlines pay higher rates on month-to-month contracts without long-term obligations but can join the lease agreement anytime if they meet signatory status criteria.

Regarding profitability, Gallo explained that airports maintain days of cash on hand mandated by the FAA to ensure operations during catastrophic events or pandemics without relying on airline support or revenues. Currently, AUS has over 600 days of cash on hand—a healthy amount for a large airport—which represents its profit margin.

Importantly, AUS does not receive local Austin taxpayer dollars; all generated revenue remains within AUS's operations rather than contributing to the city's general fund.