Pond Ingenuity V26 I1 - Winter 2022

6 Pond | www.pondco.com Pond Ingenuity Winter 2022 7 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 While aviation traffic continues to grow at a record pace, our outdated aviation infrastructure cannot keep pacewith thisoverwhelmingdemand. 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 While aviation traffic continues to grow at a record pace, our outdated aviation infrastructure cannot keep pace with overwhelming demand.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 AIRCRAFT STORAGE HANGARS E V A L U A T I N G G E O R G I A ’ S A V I A T I O N S Y S T E M AND THE NEED FOR

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