Aviation Market Assessment for Central Texas Airport

The essence of General Aviation is on-demand transportation, which is a principle reason for its importance. More than 11,300 U.S. businesses and corporations operate over 16,400 turbine-powered GA airplanes, according to the tracking service JetNet and its subsidiary AvData. While 60% of the U.S. turbine fleet of General Aviation airplanes consist of business jets, at least 6,500 turboprops also are engaged in serving the travel needs of companies and individuals. Many small companies and private pilots use piston-powered GA, which collectively total more than ten times their turbine-powered counterparts, for purposeful transportation.

Higher fuel prices are predicted to remain part of the environment for aviation. Recent fuel price increases caused severe adverse impacts throughout the aviation industry contributing to unprecedented financial losses, consolidations and/or failures by many commercial air carrier and cargo transport companies on a global scale. Airlines and cargo carriers responded with increased prices, reductions in frequency of flight options and curtailment of services. With adverse prognoses looming for the commercial aviation and air cargo industries the future prospects for general aviation are improving to fill in for the unmet demands of business and private travelers and cargo. The way in which airside property is utilized on airports is also presented an opportunity to evolve and change.

Although turbine-oriented and business flying is generally lumped in with general aviation with regard to a general activity category, the two are quite different in terms of their capacity to generate feasible and desirable economic return to those who develop revenue streams from their activities. General aviation runs the gamut from hot air ballooning, hang gliders, and pleasure flying all the way up to the operation of sophisticated piston and turbine-powered cabin class aircraft. For the most part, the constituency at this level of general aviation consists of individual and group owners of smaller single- and multi-engine piston-powered aircraft.

While this constituency generates a lot of activity in the area of numerical airport operations and overall based aircraft, the financial benefits it offers are limited and less attractive than those found in turbine-oriented aviation. The general aviation marketplace has been plagued with a number of particular and idiosyncratic problems that have existed since the late 1970s. There are fewer new aircraft manufactured today than in any other time in the last sixty years. The bulk of the new aircraft that are manufactured by those manufacturers are high-end turbo prop and turbo jet aircraft in turbine-oriented aviation.

One of the most powerful features of Central Texas Airport (CTA) is that it brings the dynamic energy of the private sector to an area that is almost entirely controlled by slow-moving and inefficient government entities. Any attractive features and economies that a publically owned and operated airport offers a potential user can be completely cancelled out through delays caused by an overly cumbersome, time-consuming and expensive approval process, political infighting or simple administrative incompetence. Every year, millions of dollars are wasted on public airports in lost opportunity time and delay. A typical cycle applicable to a significant airport property development project is a year to eighteen months to negotiate and approve a ground lease; another year or two to obtain all the needed approvals; and yet another year to build the actual project. This means that something as basic as a 25,000 foot pre-engineered steel aircraft hangar can take as long as five years to go from concept to reality. From the time they first started work to basically invent the modern aircraft, to their first flight at Kitty Hawk, took the Wright Brothers just under three and one-half years.

Because CTA is to be privately owned, the facility can be far more competitive with regard to aggressively pursuing advantageous real estate transactions than larger municipally owned facilities. In the case of publicly owned airports, the airport sponsor must provide as fair and competitive an environment as is possible. In the case of the Central Texas Airport, airport ownership can create an environment that allows the entity to freely develop property without the potentially adverse economic consequences of a second or third fixed-base operation on the facility. Because the airport ownership controls the fuel sold on the airport, this can be offered to potential tenants as an incentive to locate at the facility.

The private airport concept would also provide a great deal of operational economies with regard to the nuts and bolts management of the physical airport property. Given the fact that a major stipulation of government money is to provide unfettered access to the airport by the public, there is an inherent cost in maintaining an airport that must be operationally ready more or less 24 hours of the day. A private airport is under no obligation to operate in such a manner to receive unscheduled transient activities. This could essentially realize many desirable economies with regard to airport maintenance, such as grass cutting, repair and replacement of the airport lighting system, pavement maintenance, and a number of other requisite segments of airport operation.

A private turbine-oriented aviation airport can essentially earmark different portions of airside land for development in such a manner that responds specifically to the demands of the marketplace. This provides the greatest flexibility with regard to maximizing potential revenue streams, and minimizing expenses connected with the ongoing operation of the facility. The spectrum of potential tenants will include corporations, high net-worth individuals, repair and maintenance facilities, jet aircraft management organizations, and any number of air charter entities. Undeveloped airside land in relative abundance will be marketed in appropriate sizes, directly to users. This marketing will be accomplished via direct sale of the improvements, with the ownership responsible ultimately for the property's operational development, or with the property leased to potential users.

The most desirable operational structure will be to fashion a viable airport that can be operated utilizing the absolute minimum of money and manpower during the incipient phase of the property's evolution. As the property is developed over time, the entire range of necessary and normal aviation services will be developed by the property's operator. Although this eventuality exists in the future, the ultimate success of the Central Texas Airport as a turbine-oriented facility with limited operations will make this a viable alternative, and the ultimate success of the property with regard to providing an employment base for the surrounding community and also increasing the property tax basis for Bastrop County will make the continual expansion of the airport a desirable evolutionary development for the local community.

The general aviation marketplace in the Central Texas region is in an unprecedented state of flux. One of the major results of this situation is that the cost of doing business on Austin-Bergstrom International Airport (ABIA) will continue to be difficult for general aviation airport tenants. In addition to the less-than-optimal conditions at ABIA, there is a scarcity of real property assets to the other major facilities that surround the metropolitan area. Locations such as the Central Texas Airport, which will be able to offer both abundant airside land and more competitive prices for facilities, are in a position to make significant strides in terms of growth and development of real property assets. The development and marketing program for Central Texas Airport will be directed at the turbine-oriented aircraft population that exists not only in the Austin area but also in the broader Central Texas region. By focusing on these particular aircraft, the property at CTA can used for what has been consistently demonstrated to be the most lucrative form of general aviation. In addition to the monetary benefits, turbine airplanes have demonstrated the most dynamic growth over the last ten years. The Central Texas Airport, due to its proposed highly developed infrastructure, is in an excellent position to realize the benefits of what is generally acknowledged to be the most lucrative and stable form of general aviation utilization business and turbine-oriented aviation.

Although the use of the turbine-oriented aircraft for business travel began in the mid-1930s, as technological advances such as the monocoque aluminum structure and the evolution of the high-powered radial aircraft engine allowed aircraft to fly higher and faster than previously possible, the true beginnings of turbine-oriented aviation more properly began with the end of World War II. The large surplus of aircraft that the wartime production effort created meant that a high performance, multi-engine airplane could be obtained for very little cost. The first business oriented airplanes of this period were reconditioned and refurbished medium bombers, such as the B-25 and B-26. Although these aircraft were more primitive than the airliners (few were pressurized), the differences in their respective performances were not that great, and parts for both the airframes and engines were abundant and inexpensive. As the airlines began to proliferate and serve more destinations in the country, the growth of turbine-oriented aviation began to level off in the mid-1950s, as the piston-engine airliners of the mid to late 50's began to open a technological gap that the war surplus business aircraft could not match. It became clear to several aircraft manufacturers and modifiers that new designs, specifically tailored to the requirements of turbine-oriented aviation, would have to be created if business flying were to grow.

By 1960, the airlines had embarked on the jet age, and air travel experienced a quantum leap in technology, speed and efficiency. The aircraft that could be viewed as the catalyst for the modern era of turbine-oriented flying was the Lear Jet. Introduced in 1964, the Lear offered cruising speeds that could match the air-carrier DC-8's and 707's, and it essentially defined the turbine-oriented airplane's shape and function for the next 20 years. Although the Lear offered less in the way of space than its piston-engine predecessor (it was derisively called by some "Bill Lear's executive mailing tube"), it soon became clear that speed was the element that was most important to companies if the capital expense of an aircraft and flight department was to be justified.

The mid-1990s and the last decade saw an overall expansion of the number of users of business aviation. The generally favorable economic conditions that have existed have had, as a natural by-product, the expansion and the utilization of business aircraft by businesses and individuals that had not previously been part of the business aircraft market. Many flight departments have expanded beyond their initial acquisition of one airplane to three or four aircraft operations, and a number of companies have purchased aircraft that they utilize for their own transportation needs and are able to also place in the hands of an FBO or charter operator to produce revenues via lease to others, when the aircraft is not needed by its owner.

The expansion of the market for turbine-oriented aircraft had a generally positive effect in several key geographic locations. At airports in and around the Texas area, construction of both hangars developed by and for turbine-oriented entities, and also speculatively built hangar space to accommodate one and two aircraft operations has taken place. The requirement for adequate support and storage facilities for aircraft that can in some cases cost $50,000,000 is an important aspect of turbine-oriented aviation. The real property component of any turbine flight department serves a necessary and critical function in guaranteeing the safe and efficient operation of the flight department. The existence of a viable base of operation must go hand in hand with a fully capable airport facility, where sophisticated aircraft can reliably operate in all but the most severe weather conditions. Lately, there has been a trend exhibited among large turbine-oriented operators to be less dependent on airport facilities that are geographically approximate to the corporate headquarters. This particular philosophy recognizes that land costs, construction costs and ancillary cost of living expenses for flight department personnel are often extremely expensive in areas that are adjacent to large metropolitan areas. Some aircraft operators have recognized that aircraft are mobile, and therefore can be strategically positioned to accommodate the travel schedule of executives by flying them to particular locations. This particular approach results in a lower overall cost of them maintaining a flight department in a "high rent" area like Dallas or Houston.

Another critically important factor in the decision of where to base aircraft is that of commercial insurance carriers’ requisites related to varying aircraft operational requirements. Each class of aircraft has basic operating requirements based upon size, speed, gross landing weights and other factors established by the manufacturer and the Federal Aviation Administration. Safety factors, facilities, instrumentation, fire and rescue capabilities and other elements along with margins for error instituted by insurers establish the insurability of airport facilities. An aircraft or commercial carrier utilizing a non-qualified airport could find itself uninsured. CTA will offer an 7,200-foot runway, parallel taxiways designed to accommodate backup runway capabilities (phased as needed), all navigational equipment, and other accoutrements necessary to provide “reliever airport” capabilities to Austin Bergstrom International Airport in the event of emergencies. Meeting requirements for insurability to all but the “super heavy” classes of aircraft is a designed standard, and the airport’s ongoing standard of management and maintenance will always reflect that standard.

Due to the fact that CTA will be a privately operated and owned facility, it solely controls its own ability to pump both wholesale and FBO retail fuel at prices at or below those that prevail in the immediate vicinity of the airport. This option will be used to offer a great incentive to those entities that will be drawn to the facility. CTA is located less than ten miles from the jet fuel pipeline-served depot that is less the half the distance from Austin Bergstrom International Airport. This depot and the jet fuel refinery in Corpus Christi, Texas, are privately owned by the largest private company in America: the Wichita, Kansas-based Koch Industries. Koch operates under Flint Hills, LP and offers wholesale fuel from this Bastrop, Texas, depot to CTA at a $0.10/gallon flowage fee plus dedicated truck-carrier delivery for less than $0.03/gallon. Due to the much greater volume of Jet A that is burned by jet airplanes, the lower prices at CTA will greatly reduce the costs of operation for the variety of turbine-oriented users who are anticipated to occupy property at CTA. Due to the dramatic run up in the costs of all types of aviation fuel that has occurred in 2008, this feature of the marketing program is anticipated to boost property absorption time at the facility.

In addition to having full control of the fuel supply, the ownership also intends to operate the Fixed Base Operation at CTA, and offer very attractive ''retail" prices to both based aircraft and transient aircraft that are expected to regularly fly into the airport. The unserved existing aviation demand, in conjunction with the general aviation demands created by the Villa Muse, Inc. project, and a currently undisclosed internationally significant development, as a preferred point of entry into the entire Austin region creates an unprecedented advance market demand for a new general aviation airport facility.

Although the main focus of the CTA’s business plan will be on turbine aircraft, there is also a sizable population of piston-powered planes that will be attracted to the T-hangar program that will be built at CTA. These hangar improvements will be sold with underlying long-term ground leases and are expected to exceed the quality of T-hangars found in the local market. Attractive fuel pricing will also be offered to the primarily piston engine owners who are expected to occupy this portion of the airport.

CTA will offer a wide variety of facilities and hangar options for turbine users. For high net worth individuals and corporations that require large open bay hangars for storage of Gulfstream-class aircraft and super mid-size planes, like Falcon and Bombardier products, there will be lease or purchase options for hangars ranging in size from 13,000-25,000 square feet. These corporate-size hangars can be built with any and all amenities desired to support the aircraft owners and support personnel who comprise their respective flight departments. Due to the scarcity of developable land at Austin-Bergstrom International Airport (limited by flood plain and buried military munitions, medical and other wastes), it is expected that the market will find Central Texas Airport to be attractive as it offers significant economies of operation, with no compromises with regard to either operational efficiency or quality. The abundance of adjacent land will offer commercial and industrial customers ownership options and services with unique “through the fence” accessibility to the airport.

Due to the growth of aircraft management and maintenance as a necessary and logical adjunct to the growth in turbine airplanes, CTA expects to attract Aircraft Management and Part 135 charter operators to the airport. These entities will also be attracted to the below-market fuel that can be purchased at CTA. Due to the nature and speed of modern jet aircraft, it has been found that management and charter companies can base their clients airplanes in relatively distant locations and still be able to have the aircraft where and when the ownership demands it. There are many management and air charter operators in Houston and Dallas that do not have adequate facilities available in the airport environment that surrounds those metropolitan locations. Support facilities can be built both faster and cheaper at CTA. Due to the synergy of Villa Muse and the currently undisclosed new area industry, CTA will also offer a common origin and destination location for the movie, music and video game development businesses, and new business that has very specific demands for both high-volume users of turbine aircraft transportation systems and international flight capabilities. With one advance operation already committed, it is expected that several sizable open bay hangar/office complexes will be purchased or leased by major aircraft management and charter operators at CTA.

In the market area between the large intercontinental corporate type jets and the smaller piston-powered general aviation airplanes, it is expected that the Central Texas region will also support growth in the emerging sector of turbine personal transportation. The Austin metropolis is among the hottest investment and development markets in the United States and the free world. International and national investment interest in this economic region expands the aviation requirements beyond the facilities that presently exist. CTA offers the “missing link” of service, accessibility and facilities that an emerging aviation supported region needs. Turbine aircraft will offer the ultimate in personal transportation systems, and CTA, with its 7,200-foot runway, attractive fuel prices and flexible program of airside property development expects to be the preferred home base for these airplanes. Some 25 new business jet models are expected to enter service in the next 10 to 12 years. Some are derivatives of older models, but many—particularly the personal jets, or very light jets (VLJs)—are fresh off the drawing board. Very Light Jets go by many other names including Microjets, Personal Jets, and Minijets. Their manufacturers are scheduled to begin deliveries worldwide within the next year, and are already reporting advance sales of several years of production of these new planes. Their customers are air-taxi fleet and charter operators, private owners, owner/pilots, and fractional ownership providers. A number of custom type hangars that are smaller than larger corporate style units, but still large enough to support the demands of this customer base and high net worth individuals, will be offered for sale or lease.

Due to the highly evolved nature of the Major Repair and Overhaul (MRO’s) business in Texas and the southwest, CTA also intends to aggressively market to MRO's who could be in locations where expansion is impossible or economically unfeasible. Bastrop county offers an attractive tax structure, abundance of labor and a lower cost of living than major metropolitan areas in Texas, and in conjunction with the "clean piece of paper" that CTA offers, these factors make CTA a highly-competitive location for MRO's that want to make strategic decisions about their long-term cost of occupancy and their overall capacity to develop their businesses.

The necessary characteristics are present at Central Texas Airport to provide an operational facility that can serve the inevitable growth of turbine-oriented demand that is likely to continue over the next 30 to 50 years in the Central Texas metropolitan area. In addition to the size of the facility, its location is ideal based on the development planned for the area east of metropolitan Austin. Austin-Bergstrom International Airport is the only airport capable of handling these higher-performance type of aircraft in the Austin region, but it does not have the facilities available to support them, nor will it make land available for private ownership and operations. The Austin Chamber of Commerce and Austin Aviation Department note in their 2007 joint aviation study recommendations that Austin-Bergstrom International Airport today only has 38% of the general aviation aircraft hangar capacity (129) that it had at the old Robert Mueller Airport (400), when it was closed in 1999. Those aircraft were forced to outlying airports that do not adequately or conveniently support Austin’s existing and growing aviation demands. There is no better airport location for a future business aviation airport with regard to demand, supporting affluence and proximity to a major metropolitan area, than Central Texas Airport—a fact that is supported by top Federal Aviation Administration and Texas Department of Transportation–Aviation Division officials.

Airport & Aviation Appraisals, Inc.

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