I recently had the opportunity to meet with the Georgia State Legislature Joint Study Committee on Airport Infrastructure and Improvements. I presented findings evaluating Georgia’s current aviation infrastructure with a special focus on hangars. A clear plan for supporting development of state-wide hangar infrastructure in ensuring the growth of airports across Georgia, which serve as critical economic drivers for the state.
Meeting the Growing Demand for Aircraft Storage
General aviation is more popular than ever. This year, corporate flying is up 5 percent on a global scale, according to WINGX’s Global Market Tracker. Private jet travel has recovered far more quickly than commercial airlines. Private jet charter company Wheels Up reported a 68 percent increase in first-quarter revenue this year.
As private flying becomes more popular, the demand for aircraft hangar space in the U.S. far outpaces availability. According to a recent survey by Aircraft Owners and Pilots Association (AOPA), more than 70 percent of airports surveyed have a waiting list for their hangars with most airports having a more than six-month wait period. In Georgia, airports are seeing similar demand, with some reporting wait times up to 15 years with current capacity.
Clear Need for Aviation Infrastructure
There is an indisputable need for study and plans for improvements in airport infrastructure and services that are needed to meet the needs of Georgia’s aviation system users now and in the future. America’s airports are powerful engines for economic opportunity in local communities, generating more than $1.4 trillion in annual economic activity and supporting nearly 11.5 million jobs. While aviation traffic continues to grow at a record pace, our outdated aviation infrastructure cannot keep pace with this overwhelming demand.
Without any major update to federal funding options for airports in the last 20 years, airports have all but exhausted the financial resources available to them. Absent the funding necessary for improvements and modernization of facilities, airports have delayed projects, thus increasing the cost and prolonging construction times. Airports are struggling to update the nation’s aging airport system, including adding much-needed hangars, and are at risk of falling behind without funding relief.
We know the need and demand are there, so what’s stopping airports from building more hangars?
While aviation traffic continues to grow at a record pace, our outdated aviation infrastructure cannot keep pace with this overwhelming demand.
Funding New Facilities Faces Major Challenges
Funding and grant availability are major obstacles to hangar construction. Restrictive procedures and high costs associated with building hangars, including site development, permits, engineering, and design, are common challenges given the difficulty in understanding how quickly costs can be recouped and determining lease rates.
The degree of flexibility afforded individuals for designing, building, using and eventually disposing of a hangar varies with the type of airport on which it is to be constructed. Permitting and building requirements vary by community and require early communication with the authority having jurisdiction. Privately owned airports, which are generally precluded from FAA funding, often pose fewer restrictions on development as they do not have a mandate to protect the public. Public–use airports, those that accept federal Airport Improvement Program (AIP) funds, agree to run the airport under restrictive covenants as a condition of receiving money. These conditions are called grant assurances. Those airports have extensive power to regulate terms and conditions of hangar construction and use as well as the terms of the lease for the ground on which private entities build the hangar.
FAA Grant Assurance 38 calls for airport land leases for hangar construction to be “long term.” A ground lease must be long enough for the hangar owner to get a loan to build the hangar, pay it off and get value from use of the hangar. The FAA provides only loose guidance, giving the airport sponsor leeway in defining long term. Since an airport–owned hangar structure is leased at a higher rate than a ground lease, some airport sponsors may prefer to limit the term to gain the value of the structure asset. The tenant/user is motivated to maximize the use term of the facility that is constructed. The useful life and routine maintenance requirements are essential elements of consideration in a lease term.
A common rule of thumb for hangar rental prices is that the busier the airport (often due to popular locale), the more expensive the hangar rental rate. Rental rates also increase in relation to the quality of the hangar. If the hangar has electricity or a complex door installed, for example, higher rental rates can be charged. Many appraisers use proximate mini-storage warehouse rentals as comparable for use in estimating hangar rents. With current construction market conditions, this value offers little for airports or tenants to amortize their asset with a competitive return on investment. Airports are forced to make individual competitive market decisions when adjusting rental rates, fearing that rate increases will drive tenants to other locations. Georgia does not currently have a comprehensive rate analysis that allows airport sponsors to make informed decisions and limit their ability to abide by FAA rules regarding self-sufficiency.
How Are Other States Managing?
Minnesota Hangar Loan Revolving Account Program
The Minnesota State Hangar Loan Revolving Account Program provides an 80 percent interest-free loan to state system airports for building new hangars. The loans are paid back in equal monthly installments over 20 years. The current rate of interest on these loans is zero percent. Payment receipts, as they become available, are then loaned out again to other airports needing hangars. The hangar loan may be used to fund hangar site prep as well as the hangar building.
With a current capitalization of $4.4 million, the purpose of the program is to provide loans to publicly owned airports allowing them the ability to construct revenue-generating hangar facilities and provide protection to the fleet of general aviation aircraft. The Commissioner of Transportation maintains the account and loans are processed through the Minnesota Department of Transportation Office of Aeronautics.
To date, 75 communities have used 209 loans to build 1,118 aircraft storage hangars since the first loan was issued in 1959. Currently, there are about 10 airports with hangar loans being repaid.
Florida Department of Transportation Work Program
FDOT’s Work Program includes significant focus on the maintenance and construction of aircraft hangars. In total, $262,874,464 was requested from the state for these types of building projects, with $82,204,794 being funded in the current program.
In the next five years of the FDOT Work Program, $115,688,320 in aviation funds is expected to be spent on airports and aviation projects in Florida. As shown below, 6 percent of aviation funds will be spent on aircraft storage hangars.
Buildings Projects in the JACIP and FDOT Work Program (FY 17-22)
Funding by Project Type (FY 13-17)
Maintaining Market Rates for Hangars in Wisconsin
Each year, the Wisconsin DOT’s Bureau of Aeronautics (BOA) surveys public-use airports regarding rates, charges, and related activities. Airports are required to submit responses as a condition of receiving state funding. More importantly, the survey results serve as a comparative tool to help airports gauge financial practices and needs.
The most recent survey indicated the average annual ground lease rate for a private hangar increased by two cents to $0.16 per square foot. The most common rate also increased two cents to $0.10 per square foot.
A total of 48 airports in Wisconsin, more than half of the respondents, reported having T-hangars available to rent: seven commercial service airports, 12 large general aviation airports, 23 medium general aviation airports, and six small general aviation airports. Monthly, T-hangars rates were available at 40 airports and rates ranged from $40 to $300 per month for a Cessna 172, with an average rate of $155. Annual T-hangar rental rates were rare and varied greatly. Six airports reported annual rental rates for a T-hangar.
Several states find value in a systems approach to valuation of hangar and fuel pricing. Like the development of Georgia’s Statewide Aviation System Plan and Economic Impact Studies, states often take the lead in inventory and market analysis of aircraft tie-down rents, fuel prices, and hangar rents. This effort can be undertaken by a single airport, but individual airport sponsors have no means to compel neighboring airports to respond to a survey, often fearing loss of a competitive edge.
Results of a statewide analysis of hangar rates can be used to evaluate fair and equitable charges as defined in FAA’s grant assurances and could be used in a statewide effort to make system-wide adjustments. These adjustments would ensure proper return on investment for funded developments.
USDA as an Alternative Funding Source
In 2019, the U.S. Department of Agriculture under the leadership of avid aviation enthusiast Secretary Sonny Perdue, introduced the Community Facilities (CF) Direct Loan Program, providing affordable funding to develop essential community facilities.
Under this program, airport hangars are listed as an acceptable example of an essential community facility. There are other precluding factors such as the facility must be in a rural area and primarily serve rural residents and it must be operated on a nonprofit basis which does not include private affairs, commercial, or business undertakings.
The Path Forward
Traditional strategies used by airports, using different combinations of FAA AIP funding, tax-exempt bonds, state and local grants, and airport revenues to finance projects, are not able to keep up with funding demand. Small airports are more likely to be dependent on FAA AIP/GDOT grants than large or medium-sized airports.
FAA’s long-held Airways and Airports Trust Fund has been the primary funding source for General aviation capital expenditures. Under that program, general aviation, reliever, and nonprimary commercial service airports are apportioned 20 percent of FAA AIP funds subject to apportionment. From this share, all airports, excluding all non-reliever primary airports, receive the lesser of the following: $150,000; or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent National Plan of Integrated Airport Systems (NPIAS).
Any remaining funds are distributed according to a state-based population and area formula. FAA makes the project decisions on the use of these funds in consultation with the states.
Nearly all states provide financial assistance to airports, primarily in the form of grants used as matching funds for federal AIP grants or as separate state grants. States fund their grant programs through a variety of sources, including aviation fuel and aircraft sales taxes, highway taxes, bonds, and general fund appropriations. According to the results of a survey conducted by NASAO, states provided an annual average of $477 million to national system airports, with $345 million (72 percent) going to smaller airports and $131 million (28 percent) going to larger airports. Matching grants accounted for $345 million (72 percent) of the state grant dollars, and state-only grants accounted for $132 million (28 percent). According to FAA airports officials, states vary significantly from one another, with some states able to provide significant support to airports, while others are not due to a variety of factors.
Nearly all states provide financial assistance to airports, primarily in the form of grants used as matching funds for federal AIP grants or as separate state grants.
While there is no “silver bullet” funding solution for Aviation in Georgia, there are various ways in which the state can assist in the funding of airports development. Key mechanisms that should be explored by state leadership in support of airport development and operations include loans, loan guarantees, increased direct grants and equity injections, and discount on user charges funded through reinvestment of taxes of real property at airports into their maintenance upkeep.
Hugh F. Weaver, Jr., PE, LEED AP BD&C
Vice President - Aviation
A Civil Engineer and Airfield Designer, Hugh launched his career working with small, rural general aviation airports. Over time, he has been involved in an expanded resume of larger and more complex airports, including major airline hubs and military installations. Hugh has a Bachelor of Science in Civil Engineering Technology and is a registered professional engineer.
ATLANTA – (08.29.19) – Pond, an industry leader in architecture, engineering, planning and construction services is excited to announce recent promotions to Director at the firm. These six professionals have the proven experience to provide quality design and...
Aviation Infrastructure Solutions JV Team Awarded Contract with Hartsfield-Jackson Atlanta International Airport
Team will Provide Architectural and Engineering Services to Enhance Airport Experience ATLANTA – (01.15.19) The Aviation Infrastructure Solutions (AIS) Joint Venture was recently awarded a multi-year contract for Architectural and Engineering Design Services at...
Pond, an industry leader in planning, architecture, engineering and construction services, is proud to recognize individuals who demonstrate extensive knowledge in their respective fields with promotions to Senior Associate. These individuals are leaders in their...