Gary/Chicago International Airport - Strategic Business Plan

202 Pages·2010·4.12 MB·English

by  Landrum & Brown

THE GARY/CHICAGO
INTERNATIONAL AIRPORT
STRATEGIC BUSINESS PLAN

April 2010

Prepared By:

Landrum & Brown

FIRM PROJECT ROLE

Landrum & Brown Project Management and
Oversight, Strategic Vision, Air
Cargo, Airport Operations and
Land Utilization
Colliers Land Utilization and
Commercial Development
Indiana Strategic Resource Group Business, Community, and
Political Issues
RLM Associates Commercial Passenger and
General Aviation Uses
Unison Consulting Finance and Governance Issues
THE GARY/CHICAGO INTERNATIONAL AIRPORT
STRATEGIC BUSINESS PLAN FINAL
ACKNOWLEDGMENTS

The Landrum & Brown Team would like to formally thank the following stakeholders
for their guidance and participation in the conduct and development of this report:

 The Honorable Rudy Clay, Mayor
 Gary/Chicago International Airport Board and Management
 Northwest Indiana Regional Development Authority

In addition, we would like to express our appreciation to all those
individuals, organizations, and businesses listed in Appendix K whose
candor and willingness to participate in the process was so valuable.

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STRATEGIC BUSINESS PLAN FINAL
TABLE OF CONTENTS
CHAPTER PAGE
ACKNOWLEDGMENTS ................................................................................... i

ACRONYMS .................................................................................. Acronyms-i

EXECUTIVE SUMMARY ........................................................................Intro-1

I. RECOMMENDATIONS ......................................................................... I-1

II. NEXT STEPS...................................................................................... II-1

III. BACKGROUND AND FINDINGS ........................................................ III-1
Section III-1 - Aviation Business Development
Section III-1A Analysis of Airline Industry Trends of
Fundamental Importance to Gary ........................ III-2
Section III-1B Feasibility of Scheduled Passenger Services at Gary .. III-7
Section III-1C Feasibility of Low Frequency Scheduled and
Charter Services .............................................. III-16
Section III-1D Feasibility for Corporate/General Aviation Service .... III-21
Section III-1E Feasibility of Air Cargo and Logistics ...................... III-32
Section III-1F Maintenance and Other Supporting Services ........... III-42
Section III-1G Alternative Aviation Uses ..................................... III-46

Section III-2 - Land Utilization ................................................. III-49
Section III-2A Airport Property and Operating Requirements ......... III-49
Section III-2B Collateral Land Development Opportunities ............. III-66

Section III-3 - Finance Considerations ...................................... III-79

Section III-4 - Governance ....................................................... III-92

Section III-5 - Business and Community ................................... III-98
Section III-5A Gary, Indiana History .......................................... III-98
Section III-5B Historical Sequence of Events ............................... III-99
Section III-5C Local and County Taxes ..................................... III-105
Section III-5D Interview Findings ............................................ III-107

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TABLE OF CONTENTS, (CONTINUED)
APPENDIX PAGE
Appendix A: Strengths – Weakness - Opportunities - Threats ........................A-1
Appendix B: Airline Industry Trends of Peripheral Importance To Gary............B-1
Appendix C: Statistical Analysis of Northwest Indiana Scheduled Traffic..........C-1
Appendix D: Passengers on Domestic Low Frequency Scheduled ....................D-1
and Charter Services
Appendix E: Passengers on International Low Cost Carrier and......................E-1
Charter Travel from Chicago
Appendix F: Area Business Profile, Within Theoretical F-1
10-Minute Drive of Site
Appendix G: Demographic Profile Within Theoretical ....................................G-1
10 and 20-Minute Drive Time of Site
Appendix H: Labor Market Characteristics, .................................................H-1
Gary Metropolitan Division
Appendix I: Employment Profile, Gary Metropolitan Division .......................... I-I
Appendix J: Retail Buying Profile Within Theoretical .....................................J-1
10 and 20-Minute Drive Time of Site
Appendix K: Interviews and Contacts.........................................................K-1

LIST OF EXHIBITS
EXHIBIT PAGE
III-1 Traffic Potential for the Gary Airport................................................ III-8
III-2 Passenger Traffic at Stewart Airport and Palmdale............................III-10
III-3 Passenger Traffic at Gary..............................................................III-10
III-4 On-Time Performance at 31 Largest Airports...................................III-11
III-5 The South Shore Line...................................................................III-14
III-6 Estimated Low Frequency Scheduled and Air Charter........................III-17
Activity at Midway and O’Hare – Enplaned and Deplaned Passengers
III-7 Allegiant Airlines Passengers, Rockford and South Bend....................III-18
III-8 General and Corporate Aviation at Gary..........................................III-22
III-9 General Aviation at Chicago Regional Airports .................................III-23
III-10 Based General Aviation Aircraft at Chicago Regional Airports .............III-24
III-11 Corporate Offices and Airports in Greater Chicago............................III-25
III-12 Number of Corporate Aircraft by Airport Nearest to Place of...............III-27
Registration
III-13 Crosswind Runway Analysis ..........................................................III-56
III-14 Railroad Relocation Options...........................................................III-60
III-15 Potential Areas for Development....................................................III-64
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LIST OF EXHIBITS, (continued)
EXHIBIT PAGE
III-16 Regional Target Prioritization.........................................................III-73
III-17 Organizational Relationships .........................................................III-80
III-18 Financial Relationships – 2008 Actual.............................................III-81
III-19 Summary of Qualification Requirements for Airport ..........................III-96
Authority Membership in Selected States
III-20 Key Regional Connections...........................................................III-108

LIST OF FIGURES
FIGURE PAGE
III-1 Gary-Chicago Airport 10 – (red), 20- (green) and 45-minute.......... III-66
(blue) drive time areas)
III-2 Gary-Chicago Airport 10 – (red) and 20-minute (green)................. III-67
drive time areas)
III-3 GYY and immediate (10-minute) draw area (red).......................... III-67

LIST OF TABLES
TABLE PAGE

III-1 Gary/Chicago International Airport – Income Statement ...................III-84
III-2 2009 Rates and Charges...............................................................III-87
III-3 Capital Improvement Program – Gary/Chicago ................................III-89
International Airport – FY 2010-2014
III-4 Gary International Airport – Survey Results of General .....................III-90
Aviation and Non-Hub Airports, Comparison of Director
Salary, Staffing and Annual Operating Expense

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ACRONYMS

AIP Airport Improvement Program
ALP Airport Layout Plan
AOA Airport Operations Area
ARFF Aircraft Rescue and Firefighting
BLS Bureau of Labor Statistics
CGRAA Chicago/Gary Regional Airport Authority (Board)
CN Canadian National Railroad
COIT County Option Income Tax
DUAB Distressed Units Appeal Board
EIS Environmental Impact Statement
ERA Economic Revitalization Area
EZ Enterprise Zone
FBO Fixed Base Operator
FTZ Foreign Trade Zone
GA General Aviation
GCIA or GYY Gary/Chicago International Airport
GCIAA Gary/Chicago International Airport Authority (Board)
GSE Ground Service Equipment
IEDC Indiana Economic Development Corporation
ILS Instrument Landing System
LOI Letter of Intent
LOIT Local Option Income Tax
MDW Midway International Airport
MRO Maintenance, Repair, and Overhaul
ORD Chicago O’Hare International Airport
PFC’s Passenger Facility Charges
RDA Northwest Indiana Regional Development Authority
VLJ Very Light Jet

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STRATEGIC BUSINESS PLAN FINAL
GARY/CHICAGO
INTERNATIONAL AIRPORT
STRATEGIC BUSINESS PLAN

EXECUTIVE SUMMARY

An operational airport, with infrastructure and facilities in place, represents
enormous economic potential for a region provided that the potential can be
realized. The Gary/Chicago International Airport is faced with the challenges of a
diminishing local commercial market, a struggling regional economy, diminishing
revenues, adverse impacts from a modified tax structure, aeronautical
infrastructure that cannot meet the operating needs of passenger and cargo
carriers, complex negotiations linked to enabling the planned capital program, and
a general perception of the City of Gary as a place in which to do business.

The Gary/Chicago International Airport (GCIA or GYY) in partnership with the
Northwest Indiana Regional Development Authority (RDA) issued a Request for
Proposals to select a team of industry experts that would develop a Strategic
Business Plan. A team of experts, led by Landrum & Brown, an international
aviation consulting firm, was selected through a competitive bid process. Through
the development of the Strategic Business Plan, GCIA and the RDA sought to:
 “Affirm the vision that the Gary/Chicago International Airport should become
the third major airport in the Greater Chicago Area; and identify the key
steps that need to be taken to actualize that vision and the timetable to be
followed;
or
 Demonstrate why that vision is not achievable and identify the preferred
alternative and outline how it should be pursued.”

Simply stated, the questions are whether or not the Airport is or can be a viable
aviation asset, and if so, how should its resources be structured and focused. The
development of this strategic business plan for the Gary/Chicago International
Airport is predicated upon several key assumptions. The first, and most obvious, is
that this is an Airport. For the facility to survive in that capacity it was first critical
to determine whether there is a realistic aviation role that the Airport could play
that would provide sufficient funding to offset growing deficits and sustain the
operation financially. The identification of a Core Aviation Function – i.e. the
determination of a basic Mission, became the most critical element of the
work. This required an examination of the primary aviation elements – passenger,
cargo, maintenance, and general aviation to assess their potential for Gary.

The operating systems of an airport must also be reviewed in the broader context
of its physical properties including its land assets dedicated to aviation support as
well as land available for the development of non-aviation functions. Current
practice in the airport industry is to also explore where appropriate the potential
utilization of properties adjacent to the airport to create a larger development
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district that integrates airport planning with regional economic development, land
use, and transportation planning. The possibility of capitalizing on the on-and
off airport land assets became the second major area of focus for the
Team. This included linking on- and off-airport development, and the potential
disposition of Airport land which is an extremely complex process particularly if the
property was donated by the Federal Government, or acquired or developed
through Federal Aviation Administration funding.

The management of an airport’s finances, operations, maintenance, properties, and
development involves challenges that diverge substantially from the management
of most businesses. The sources and potential uses of funds, the establishment of
rates and charges, and matching budget and staffing allocations for continually
evolving and changing tasks are often unique to the industry and can be daunting
given the linkage to federal, state, and municipal guidelines, regulations, and
constraints. The third and fourth elements of the planning effort focused on
the financial structure and management of the Airport and the complex
governance issues under which it operates.

As a final element of the planning effort, the Team explored the regional
business, community and political context in which the Airport operates.
How a “City” airport, particularly when its population base is by itself insufficient to
sustain a commercial operation, is best integrated in a broader geographic region is
essential to identifying opportunities for success. The importance of a regional
partnership was raised frequently during the course of the work. There are
financial, business, development, and management implications associated with
“regionalization” that are addressed in the Plan.

The Team worked diligently over a six month period conducting extensive due
diligence including interviews with more than 100 firms and individuals, and
reviewed a broad range of industry and regional studies, publications and trends, as
well as analyses of Airport plans, financial documents, and governance procedures.
The Team then used their specialized knowledge and experience to integrate the
study and evaluation into a realistic and fiscally prudent Plan for the Airport and the
Region to pursue. Because of its length, the document has been structured in four
sections:
1. Recommendations
2. Next Steps
3. Background and Findings
4. Appendices

A key element in shaping the report was the development of a comprehensive
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis. This Analysis
is available at Appendix A. The Team developed a listing of issues identified in the
initial due diligence efforts. This listing was evaluated using criteria developed
specifically for this planning effort to assist in prioritization.

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