We# have# reviewed# the# Mutual# Receipt,#

Release#and#Indemnifica8on#Agreement#(“the#

S e ? l e m e n t# A g r e e m e n t ’ )# b e t w e e n#

AeroPremier#Jet#Center,#LLC#and#the#Board#of#

Commissioners#of# the#Orleans#Levee#District,#

and# Orleans# Levee# District,# Division# of# nonK

Flood# Asset# (“OLD”).# #We# reviewed# the# FBO#

leases#between#AeroPremier# Jet#Center,#LLC,#

Flightline# Ground,# Inc.# and# Million# Air# New#

Orleans# (now# Landmark# Avia8on)# and# the#

New# Orleans# Levee# District.# # We# have# also#

reviewed# the# complaint# filed# by# Flightline#

Ground# against# the# New# Orleans# Levee#

District#and#other#par8es,#and#the#affidavit#of#

Michael# A.# Hodges,#MAI.# We# examined# FAA#

records# and# and# financial# reports#pertaining#

to# the# Lakefront# Airport.# # We# interviewed#

management# personnel# at# the# airport,#OLD,#

and#at#the#FBOs.# #Our#conclusion#is#that#the#

se?lement# agreement# is# fair# to# all# par8es.#

The#basis#for# this#conclusion#is#backed#up#by#

this#report.

Our$Experience

The#Avia8on#Group#is#made#up#of#individuals#

who# have# held# senior# posi8ons# with#

companies#that#are#involved#with#the#general#

avia8on# industry.# # We# have# advised# and#

consulted# with# general# avia8on# airports,#

FBOs,#aircraW#manufactures,#general#avia8on#

aircraW# operators# (frac8onal,# charter,# and#

nonKcommercial#aircraW).# #We#have# advised#

investors# (private# equity# firms,# investment#

banks,# individuals,# and# others)# on# this#

industry.# # This# assignment# for# OLD# is#being#

handled#by# Jim# Haynes#and#Ed#Ahrens.# # Jim#

Haynes# is# the# founder# and# president# of# The#

Avia8on#Group.# #He#owned#and#managed#an#

FBO# before# founding# The# Avia8on# Group# in#

1995.# # Ed# Ahrens# held# senior# management#

posi8ons# with# Garre?# Avia8on# and# Atlan8c#

Avia8on.# # Both# of# these# companies# were#

large#mul8Kservice#FBOs.# #In#2004#one#of# our#

consul8ng#assignments#involved#site#visits#to#

the# Lakefront# airport.# # Jim# Haynes# and# Ed#

Ahrens#lead#this#New#Orleans#project.# #They#

interviewed# the#airport#manager,# the#senior#

management,# and# inspected# the# facili8es# of#

the# three#FBOs#that#were#then#opera8ng#on#

the#airport.

Review$of$the$Facts

Hurricane# Katrina# stuck# New# Orleans# the#

morning#of#August#29th,#2005.# #This#was#one#

of# the#largest# natural#disasters#to# strike#the#

United#States.# #Over# 1,800# people# died# and#

property# and# economic# damage# has# been#

es8mated# at# over# $81# billion.# # While# large#

por8ons#of#the#Gulf#Coast#were#affected,#the#

majority# of# deaths# and# physical# damage#

occurred# in# New# Orleans# when# the# levee#

system#failed.

The#New#Orleans#Lakefront# Airport# (NEW)# is#

appropriately# named# as# it# sits# on# the#

southern# shore# of# Lake# Pontchartrain.# # The#

airport# was# built# adjacent# to# the# Industrial#

Canal,#on# a#manKmade#arrowhead# peninsula#

jufng#into#Lake#Pontchartrain.##To#make#land#

available# for# this# elaborate# project,# the#

Orleans# Levee# Board# drove# a# 10,000# foot#

retaining# wall# into# Lake# Pontchartrain# and#

pumped#in#six#million#cubic#yards#of#hydraulic#

fill#to#raise#the#field#above#the#water.

Prepared'For'the'New'Orleans'Non2Flood'Asset'Protec5on'Management'Authority

June'2011
New# Orleans# is# located# in# a# bowl,# much# of#

which#is#below#sea#level,#surrounded#by#Lake#

Pontchartrain#on#the#north#and#on#the#other#

three#quadrants#by#the#Mississippi#River.

When# the# levee# system# failed# Lakefront#

Airport# became#a#part#of# Lake# Pontchartrain#

and#every#hangar,#office#building,#aircraW#and#

any# piece# of# equipment# standing# on# the#

airport# at# the# 8me# was# either# totally#

destroyed#or#received#major#damage.##Today,#

almost# six# year# later,# the# recovery# from# the#

ravages#of# Katrina#in#New#Orleans#is#s8ll#not#

complete.

The# recovery# at# the# Lakefront# Airport# has#

been# remarkable.# # While# many# felt# this#

airport# would# never# reopen,# as# the# data#

below#shows#aircraW#opera8on#are#at#almost#

60%# percent# of# preKKatrina#numbers.# # With#

the#excep8on#of# the#successor# to#Million#Air#

of#New#Orleans,# none#of# the#FBOs#opera8ng#

at#the#airport#preKKatrina#are#there#today.

New$Orleans$Lakefront$Airport

The#New#Orleans#metropolitan#area#is#served#

by# two# airports.# # Louis# Armstrong# New#

Orleans#Interna8onal#(MSY)#is#the#largest#and#

provides# commercial# airline# service# to# the#

area.##The#second#airport#is#Lakefront#Airport#

(NEW),# which# provides# the# majority# of# the#

General# Avia8on# services# to# the# area.# # The#

Lakefront# Airport# is# owned# by# the# Orleans#

Levee#District#and#managed#by#the#NonKFlood#

Protec8on# Asset# Management# Authority#

(“Authority”).# # Lakefront# Airport# is# the#

favored# airport# for# General# Avia8on# as#it# is#

closer# to# downtown# New# Orleans# and# has#

less#air#traffic.# #Both#of# these#factors#account#

for#customers#favoring#Lakefront#Airport#over#

Louis# Armstrong# New# Orleans# Interna8onal#

Airport# for#convenience#and#efficient# private#

air#travel.

Lakefront# Airport# has# a# proud# history# of#

servicing# General# Avia8on# customers.# # The#

airport# had# all# the# aeronau8cal# and# land#

infrastructure# to# provide# safe# handling# of#

aircraW#and#their#passengers.##The#airport#had#

three# FBOs# that# provided# fuel,# hangars,#

passenger#and#pilots’#lounges,#flight#planning#

facili8es,# and# all# the# other# support# services#

required# for# a# successful# General# Avia8on#

airport.# # The# three# FBOs# were# Million# Air,#

Atlan8c# Avia8on,# and# AviaPort.# # All# three#

were#poised#for#growth#prior#to#Katrina.##

Million# Air# captured# the#majority# of# the#fuel#

business# and# was# part# of# a# large# na8onal#

chain#of# FBOs#located#throughout#the#United#

States.

Atlan8c# Avia8on,# one# of# the# the# largest#

operators#of# FBOs#in#the#U.S.,#purchased#the#

Lakefront# Airport# FBO# in# 2004# and# was#

planning# expansion.# # The# Atlan8c# Avia8on#

FBO#was#located#in#the#“McDermo?”#hangar.#

While#the#hangar#and#offices#were#physically#

func8onal#and#a?rac8ve,# the#loca8on#on#the#

airport# was# very# inconvenient# for# public#

customers#and#passengers#who#had# to#drive#

onto# the#airport# to# reach# this# FBO# loca8on.#

The#McDermo?#hangar#building#was#formerly#

the# base# of# a# corporate# flight# department#

that# serviced# the# oil# industry# and# did# not#

conduct#business#with#the#public#or#transient#

aircraW.# # Atlan8c# Avia8on,# while# occupying#

this#building,#was#ac8vely# working#on#leasing#

the# Chevron# hangar,# located# on# the# south#

side# of# the# airport.# # This# hangar# had# easy#

access#from#the#public#streets.

AviaPort# was# a# smaller# FBO# operator# that#

provided# fuel# and# services# to# complement#

the#other#FBOs.

The# based# aircraW# popula8on# at# Lakefront#

Airport# in# the# five# years# prior# to# Katrina#

2
averaged# between# 215# to# 250# aircraW.# #The#

majority# at# the# 8me# of# Katrina# were# small#

single# engine# aircraW.# # About# 10%# were# jet#

aircraW.# # In#addi8on# to# the#aircraW# based#at#

Lakefront# Airport,# the# airport# had# a# very#

ac8ve#“i8nerant”#flow#of#aircraW#opera8ons.##

“I#nerant”* is* used* to* describe* aircra2*

opera#ons* where* an* aircra2* arrives* from*

another* airport* and* departs* to* another*

des#na#on,*or*an*aircra2*departs* the*airport*

and* leaves* the* airport*area.* *The* opera#ons*

of*aircra2*based*at*the*airport*are*considered*

“local”*when* the* aircra2* departs* the* airport*

but*stays*in*the*airport*area*and*returns.

The# following# chart# shows#the#opera8ons#at#

Lakefront#Airport#from#2002#to#2010.

!"

#!$!!!"

%!$!!!"

&!$!!!"

'!$!!!"

(!$!!!"

)!$!!!"

*!$!!!"

+!$!!!"

%!!%" %!!'" %!!)" %!!+" %!#!"

,-./01.2"

34516"

The# financial# life# blood# of# General# Avia8on#

airports#and#their#FBOs#are#fuel#sales,#jet#and#

avgas.# # The# following# chart#shows# the# total#

number# of# gallons# sold# at# the# airport# from#

2002#to#Katrina.##

!"

#!!$!!!"

%$!!!$!!!"

%$#!!$!!!"

&$!!!$!!!"

&$#!!$!!!"

'$!!!$!!!"

'$#!!$!!!"

&!!&" &!!'" &!!(" &!!#"

)*+"

,-./0"

In# summary,# preKKatrina# Lakefront# Airport#

was# a# very# ac8ve# General# Avia8on# airport#

p o i se d# f o r# g r o w t h# a n d# c o n 8 n u o u s#

improvement#of#its#services#to#the#public.

Hurricane$Katrina

The# Lakefront# Airport# sustained# the# worst#

natural#disaster#damage#in#U.S.# history.# #The#

airport# was# further# impacted# as# the# whole#

New# Orleans# metropolitan# area# and# region#

around#the#airport#was#virtually#destroyed#by#

the# effects# of# Katrina.# # This# prolonged# the#

period#to#rebuild.##The#basic#infrastructure#for#

the# whole# region# had# to# compete# for#

contractors# and# funding# to# rebuild# their#

proper8es.

Post$Katrina

Immediately#aWer#the#storm,#the#airport#was#

closed# to# opera8ons# but# within# weeks# was#

able# to# handle# emergency# and# support#

flights.# #With#the#tower#and#radar#opera8ons#

all# out# of# service# at# Lakefront# Airport,# the#

airport# began# its# recovery# with# the# help# of#

the# MSY# towe r# and# rada r# se rvices.#

Unfortunately#it#wasn’t#un8l#late#July#of#2007,#

almost#2#years#aWer# Katrina# struck# the#area,#

that# the# Lakefront# Airport# tower# was#

reopened#with#basic#services.##

Immediately# following# Katrina# the# Lakefront#

Airport# began# dealing# with# sefng# up# basic#

services,# removing# debris,# and# iden8fying#

buildings#that#were#beyond#repair.##

The# Million# Air# facility# was# completely#

destroyed.# # Million# Air# was# able# to# restart#

fueling# opera8ons#working# out# of# temporary#

trailers.

Atlan8c# Avia8on# elected# to# not# return# to#

opera8ng# an# FBO# at# Lakefront# Airport# and#

their# lease# was# terminated.# # # (Atlan8c#

Avia8on#had#an#FBO#at#MSY#and#consolidated#

opera8ons#there.)

The#AviaPort# facility# was#also#destroyed#and#

they#elected#not#to#return#and#their#lease#was#

terminated.##

During# the# recovery# stage# OLD# and# the#

Lakefront# Airport# began# dealing# with# the#

complex#issues#of#insurance#claims#and#FEMA#

funding# to# rebuild# the#facili8es#that#could#be#

3
salvaged# and# those# that# needed# to# be#

demolished.# # During# this# process,# the#

Lakefront# Airport# management# iden8fied#

buildings# that# could# be# renovated# and#

proper8es# that# could# be# leased# for# new#

structures.

The#Chevron#hangar#(a#prime#loca8on# for#an#

FBO# as# evidenced# by# the# fact# that# Atlan8c#

Avia8on# wanted# this# for# their# FBO)# and#

several#other#structures#were#iden8fied#to#be#

demolished.# # The# Louisiana# Na8onal# Guard#

hangar# and# some# other# buildings# in# the#

complex# were# deemed# repairable.# # The#

Louisiana#Na8onal#Guard#elected#to# relocate#

to# another# airport# and# the# complex# was#

returned# to# Lakefront#Airport.# # This#opened#

up#a#major#opportunity# for#Lakefront#Airport#

to#rapidly#add#much#needed#hangar#space#to#

the# airport# to# replace# those# facili8es# that#

were#destroyed.# #The#first#repair# step#at#the#

former#Na8onal#Guard#site#was#to#repair#the#

roof# of#the#hangar,#however#the#shops,#office#

space,# and# other# areas# needed# substan8al#

repair#and#renova8on.

In#summary,#this#was#a#very#difficult#8me#for#

the# Lakefront# Airport# as# they# were# dealing#

with# the# monumental# tasks# of# removing#

d e b r i s ,# r e s u m i n g# o p e r a 8 o n s# w i t h#

rudimentary# facili8es# and# communica8on,#

and# dealing# with# the# very# complex# FEMA#

funding#processes.

Lakefront$Airport$Management$Decisions

Eventually# the# Lakefront# Airport# plans# for#

building# sites# became# public# knowledge.#

With# the# # exit# of# Atlan8c# Avia8on# and#

AviaPort# # a#number# of# unsolicited# inquiries#

about#leasing# space#and# establishing# an# FBO#

were# received.# # This# is# evidenced# by# the#

public# minutes# of# the# Joint# Mee8ng# of# the#

Planning# Engineering# and# Construc8on# and#

Finance#Commi?ee#held#in#May#of#2006.

As# interest# in# adding# FBOs# again# at# the#

Lakefront#Airport#grew,#the#return#of# aircraW#

opera8ons#also#began#to#grow.##AWer#Katrina,#

many# private#General# Avia8on# aircraW# used#

MSY# as# a# temporary# base.# # The# following#

chart#shows#the#change#in#opera8ons#ranging#

from#before#Katrina#to#current.##Note,#during#

the# remainder# of# 2005# (September# forward)#

and# 2006,# the# FAA# records# show# no#

opera8ons# at# the# Lakefront# Airport.# # The#

reason# for# this# is# that# there# was# no#

func8oning# tower# or# radar# facility# at#

Lakefront# Airport# during# this# period.# # There#

actually#were#some#limited# opera8ons#going#

on# but# were# not# captured# in# the# FAA#

database.

!"!!!!

!#$%$$$!!

!&$%$$$!!

!'$%$$$!!

!($%$$$!!

!)$%$$$!!

!*$%$$$!!

!+$%$$$!!

&$$(! &$$)! &$$*! &$$+! &$$,! &$$-! &$#$!

./0!!

123!!

The# Airport# also# started# seeing# customers#

returning# to# base# their# aircraW# at# Lakefront#

Airport.# # While# it# is# difficult# to# determine#

exactly# how# many# aircraW# were# based# at#

Lakefront#Airport#in#the#immediate#year#aWer#

Katrina,# it# appears# that# the# number# was# in#

the#low#90s.##Each#subsequent#year#saw#more#

based#aircraW.##The#following#chart#shows#the#

change#in# based#aircraW#at# Lakefront#Airport#

over#the#period#of#2002#to#this#date.

!"

#!"

$!!"

$#!"

%!!"

%#!"

&!!"

%!!!" %!!%" %!!'" %!!(" %!!)" %!$!"

!"#$#%&'(%)*+'!,'-./'

*+,-,./"0.123"*4"567"

The# combina8on# of# increasing# opera8ons#at#

the# airport# and# the# return# of# based#

customers# accelerated# the# interest# and#

viability# of# addi8onal# FBO# businesses# at#

Lakefront# Airport.# # The# exit# of# Atlan8c# and#

AviaPo r t# se t# up# a# ve ry# compe88ve#

4
environment# for# new# FBOs# at# Lakefront#

Airport.

In# lieu# of# rebuilding# on# their# old# site,# the#

Million# Air# lease# was# amended# to# include# a#

new# lease#site#just# west# of# the# old# terminal#

building.# # The# following# drawing# shows# the#

loca8on#of#the#sites#for#FBOs.##(Larger#images#

are# available# in# the#appendix# at# the# end# of#

this#paper.)#

All#three#sites#are#at#a#prime#loca8on#on#the#

airport#with#excellent# street#side#access#and#

convenient#airside#access#and#space.

The#Airport#nego8ated#and#awarded#leases#to#

Flightline# First# and# AeroPremier,# two# new#

FBOs,# for# hangar# space# and# the# rights# to#

provide# FBO# services.# # Flightline# First#

obtained# a#site#just# east# of# the#old# terminal#

building# in# a# hangar# referred# to# as# the#

Williams#Hangar.# #AeroPremier#was#awarded#

the#lease#for#the#Na8onal#Guard#complex#and#

the#McDermo?#hangar#(located#on#northeast#

side#of#airport).##

Million#Air#elected#to#build#a#new#hangar#and#

office#building# on#their#new# site.# #Million#Air#

was#sold#to#Odyssey# Avia8on.# # In#early# 2011#

Landmark# Avia8on# purchased# Odyssey#

Avia8on.# # Landmark#is#one#of# the# top# three#

FBO#chains#in#the#U.S.#and#is#owned#by#GTCR,#

a#large#Chicago#based#private#equity#firm.

The# Flightline# First# FBO# building# required#

major# repairs# and# renova8on.# # The#

AeroPremier# site# at# the# McDermo?# hangar#

required#some#repairs.##The#AeroPremier##site#

at# the# former# Na8onal# Guard# complex#

required#major#repairs#and#renova8on#to#the#

main# hangar,# offices,# shops.# # Several#

outbuildings# on# the# site# needed# repair# or#

removal.# # The# old# Chevron# hangar# was#

scheduled#for# demoli8on#and# has#since# then#

been#removed.

Keys$for$FBO$Success

To#understand#the#se?lement#agreement#It#is#

important# to#understand# the# success#factors#

for# an# FBO# in# the#General# Avia8on# industry.#

FBOs#are#very#specialized#service#providers#to#

private#aircraW#owners/operators##Because#of#

the# high# value# or# their# aircraW# and# the# VIP#

status# of# their# passengers,# private# aircraW#

owners#set# a# very# high# standard# for# service#

from#FBOs.##Many#of#these#aircraW#are#valued#

at# between# $5# and# $50# million# and# are#

owned#by#large#businesses.##Senior#execu8ves#

and# key# personnel#are# transported# in# these#

airplanes.

Business# aircraW# owners# expect# FBOs# to#

provide# safe,# secure,# comfortable,# and#

convenient# facili8es# for# the# aircraW,# crew,#

and#passengers.# #The#Avia8on#Group#is#highly#

experienced# in# valida8ng# the# importance# of#

t h e s e# n o n K fi n a n c i a l# p e r f o r m a n c e#

expecta8ons.##As#stated#above#we#have#been#

retained# by# numerous# private# equity# firms,#

interna8onal#bankers,#and#other#investors#to#

evaluate# how# these# factors# will# affect# the#

financial#success#of# an#FBO.# #While#there#will#

always#be# debates#about# the# importance# of#

the# price# and# brands# of# fuel,# these# factors#

become#secondary#to#a#safe#and#secure#flight#

and# the# handling# of# passengers# and# crew.#

FBOs# in# a# market# place# such# as# Lakefront#

Airport# also# have# to# be# able# to# offer#

addi8onal# nonKfueling# services.# # Leasing#

5
ha nga r# a n d# offi ce# s pa ce,# p r ovi di ng#

maintenance#services,#flight#training,#charter,#

and#other#ancillary# services#is#very#important#

to#the#financial#viability#of#an#FBO.##

On# the# websites# of# the# three# FBOs# at#

Lakefront# Airport# each# state# that# these#

services# add# value# to# the# services# their#

companies#provide.# # AeroPremier’s#business#

plan,# with# the# lease# of# the# Na8onal# Guard#

complex# and# the# McDermo?# Hangar,# was#

intended# to# provide# the# highest# level# of#

service#and#support# to# based# operators#and#

transient# customers# at# Lakefront# Airport.#

Their# lease# provided# for# extensive# hangar#

square# footage# for# aircraW# storage# and#

abundant# space#for# nonKfueling# ac8vi8es.# #It#

was# with# this# expecta8on# and# plan# to#

execute,# that# Advantage# Capital# elected# to#

invest# in#AeroPremier.# # Private# equity# firms#

such#as#Advantage#Capital#are#experienced#in#

analyzing# business# plans.# # Their# investment#

return#depends#on# these# business#plans#and#

their#execu8on.##

AeroPremier# also# understood# that# Odyssey#

(now# Landmark)# was# a# wellKrecognized# and#

heavily# marketed# compe8tor# and# that#

AeroPremier’s#service#level#would#have#to#be#

extraordinary.# # Their# facili8es#would#have#to#

be#in#excellent#condi8on.# #Flightline#First#also#

recognized# this# and# invested# heavily# in# the#

renova8on# of# their# office# area# to# impress#

customers.# # Both# AeroPremier#and#Flightline#

First#understood# that#Odyssey# had# been# the#

only# FBO# for# several# years# and# they# would#

have# to# compete# to# take# customers# away#

from# Odyssey’s# previous# 100%# share# of# the#

market.

What$Went$Wrong?

The# intense# compe88on# between# FBOs# on#

airports#everywhere#also# #naturally#existed#at#

Lakefront#Airport.# #Tensions#increased#in#late#

2008# with# the# major# U.S.# and# Global#

economic#recession#that#significantly#reduced#

aircraW# opera8ons.# #Fuel#sales#at#all#airports#

dropped# drama8cally.# # Fuel# margins#

decreased# as# fuel# prices# climbed.# # FBOs#

focused#more#than#ever##on#customer#service.

AeroPremier’s# lease# provided# that# specific#

repairs# would# be# made# by# OLD# to# the#

Na8onal# Guard# hangar# complex# and#

completed#within#14#months.##While#the#roof#

of# the# main# hangar# had# been# repaired,# the#

rest#of# the#structure#remained#unsuitable#for#

most#customers.##As#such,#the#lease#provided#

reduced# rates# un8l# the# repairs# were#

completed.# # Unfortunately# at# this#point# the#

apparent# confusion# surrounding# the# use# of#

FEMA# funds#to#complete#the#repairs#resulted#

in# no# repair# ac8vity# on# the# Na8onal# Guard#

hangar.# # It# soon# became# obvious# to#

AeroPremier#that#the#comple8on#date#for#the#

repairs#could#not#be#met.

AeroPremier#was#fortunate#to#have#the#lease#

on# the# McDermo?# Hangar# (the# McDermo?#

Tidewater# hangar# MT).# # AeroPremier# was#

able# to# use# this# site# to# supplement# their#

efforts#at#the#Na8onal#Guard#site.# #While#the#

McDermo?# hangar# is# excellent# for# hangar#

storage# of# high# value# aircraW,# the# loca8on#

does# not# lend# itself# to# being# a# convenient#

FBO#site#due#to#lack#of#street#side#access.

AeroPremier#con8nued#to#a?empt#to#execute#

their# business# plan# to#establish# the#Na8onal#

Guard# complex# as# a# first# class# FBO# with#

excellent# facili8es# and# service# levels.# # The#

poor#condi8on#of#the#hangar#and#office#areas,#

windows# (doors# and# other# security# barriers#

were# missing)# was# not# conducive# to# a?ract#

new# based# customers# or# increase# transient#

fuel# sales.# Nor# was# AeroPremier# able# to#

provide#a#high#level#of# maintenance#service,#

flight# training,# and# other# avia8on# support#

ac8vi8es.# # The# cri8cal# success# factors# of#

providing# a# safe# and# secure# facility# to#

customers#were#all#missing.# #In#addi8on,#the#

revenue# from#nonKfuel#ac8vi8es#in# a#market#

the# size# of# Lakefront# Airport# is# vital# to# the#

financial#success#of# the#FBO.# #This#inability#to#

a?ract# and# hold# customers# at# the# Na8onal#

Guard#site#totally# disrupted# the#AeroPremier#

and#Advantage#Capital#business#plan.

6
As# the# repairs# to# the# various# airport#

proper8es#progressed,#in#par8cular#along#the#

south# ramp# where# the# three# FBOs# are#

located,# there# were# 8mes# when# temporary#

use# of# space# outside#of# the#individual#FBOs#

leasehold# was# used# by# another# FBO# for#

aircraW# parking,# fueling,# and# other# support#

ac8vi8es.# # This# added# to# the# tensions#

between# the# FBOs# and# a# mistrust# of# the#

airport# management.# # The# delays# and#

confusion#in# funding# the#Na8onal#Guard#site#

repairs#added#to#this#situa8on.##

AeroPremier# paid# rent#as# called# for# in# their#

lease#from#June#of#2008#un8l#May#of# 2009#at#

which# 8me# they# stopped# making# payments.#

They#believed# that#the#airport#was#in#default#

of# the#lease.# #This#resulted#in#a#lawsuit,# #The#

court# found# the# airport# had# violated# the#

lease.# #A# Se?lement#Agreement#was#entered#

into#by# the#par8es#to#this#lawsuit#as#a#result#

of#media8on.##As#the#public#became#aware#of#

the# details# of# the# se?lement,# the# current#

legal#proceedings#were#ini8ated#with#the#FAA#

by#a#compe8ng#FBO,#Flightline.

The$SeHlement$Agreement

The#Se?lement#Agreement#gave#rent# credits#

to#AeroPremier#and#Advantage#Capital#as#well#

as#relief# from#some#obliga8ons.# #A# rent#credit#

for# past# rental# payments# of# $473,000# was#

granted# to# AeroPremier# as# well# as# rent#

credits#for#some#future#rental#payments#un8l#

such# 8me# as# repairs# are# completed.# # Both#

par8es,# OLD# and# AeroPremier,# presented#

their# projec8ons#of# current#and#future#losses#

that# ranged# from# a# low# less# than# $200,000#

from#OLD# to#a#high#of# over# $2,000,000# from#

AeroPremier.# #The#OLD#report#was#narrow#in#

scope#as#it#only#considered#fuel#sales#and#not#

all#the#other#nonKfuel#revenue#poten8al.##The#

8me# period# for# future# losses#extended# only#

to#2012.

The#effect#of#losing#customers#because#of#the#

lack# of# proper# facili8es# can# have# longKterm#

implica8ons.# # Once# AeroPremier’s# new#

facili8es#are#completed,# they# may# be#forced#

to# market# their# facili8es# and# services# at#

below# market# prices# in# order# to# a?ract#

customers.#

The#recent#purchase#of#Odyssey#by#Landmark#

Avia 8 o n# c o n 8 n ue s# t o# i n c rea se# t he#

compe88ve#pressure.##Landmark#is#a#na8onal#

brand.# AeroPremier# is#an# unknown# FBO.# #In#

addi8on# to#opera8ng#out#of#subpar# facili8es,#

AeroPremier#was#unable#to#secure#customers#

for# nonKfuel# services# at# the# Na8onal# Guard#

site.# # Maintenance#providers,# flight# training#

companies,#and#others#were#lost#to#the#other#

FBOs# on# the# airport.# # Other# corporate#

customers# like# Houghtaling# have# recently#

departed.

In# addi8on# to# aeronau8cal# services,#

AeroPremier#is#unable#to#provide#office#space#

to# poten8al# customers.# # Private# aircraW#

owners#need#office#space#for#pilots,#crew,#and#

mechanics#offices,# #storage#of# aircraW#record,#

flight# and# repair# manuals,# etc.# # Customers#

that# need# office# space# typically# have# an#

immediate#or#very#near#term#requirement#for#

space.

AeroPremier#is#unable#to#assure#customers#of#

when#and#what# space#will#be#available.# #This#

loss# of# rent# con8nues# to# nega8vely# impact#

their# revenue#stream.# #Snapshot# projec8ons#

of# financial# performance# that# both# par8es#

presented#during# the# se?lement#hearing#are#

difficult# and# obviously# open# to# much#

cri8cism.# #However,#as#8me#has#passed#since#

these#projec8ons#were#made,#the#con8nued#

effects#of# the#lack#of# the#expected#renovated#

Na8onal# Guard# facility# reinforce# that# the#

amount#of#the#se?lement#was#appropriate.

The# Se?lement# Agreement# also# provided# a#

$500,000# transferable# rent# credit# to#

Ae r o P remie r# o r# A dva n tage# Ca pi tal.#

Advantage# Capital# is# a# successful# private#

equity# firm.# # The# Avia8on# Group# has#

extensive# experience# working# with# private#

equity# firms# that# have# invested# in# FBO#

businesses.

7
Private#equity# firms#such#as#Advantage#oWen#

have# an# interest# in# avia8on# related#

businesses.###Their#interest#in#inves8ng#in#this#

type# of# business# is# heightened# when# the#

poten8al# company# they# are# considering# is#

poised#for#immediate#growth.##Private#equity#

investments# usually# turnover# every# 5# to# 7#

years.# # Advantage# undoubtedly# saw# their#

ini8al# investment# in# AeroPremier# as# fifng#

this#8meline.

Flightline#First’s#owners# also# have#extensive#

private#equity#experience#and#saw# the#same#

p o t e n 8 a l# f o r# a n# F B O# i n v e s t m e n t .#

Unfortunately# the# Na8onal# Guard# facility#

delay# has#significantly# impacted# the# current#

investment#in#AeroPremier.

The#future#value#of#AeroPremier#will#con8nue#

to#be#nega8vely# impacted# as#AeroPremier#is#

unable#to#keep#pace#with#the#other#FBOs#that#

now# have# proper# facili8es.# # The# sale# of#

Odyssey# to#Landmark#highlights#the# fact#that#

an#FBO#with#high#quality#facili8es#and#service#

is#valuable#property.# #This#rent#credit#applied#

over# a# 5# year# period# is# appropriate# for#

Advantage#to#use#in#order#to#try#to#recapture#

the#lost#value#in#their#investment.#

AeroPremier# was# also# released# from# the#

o b l i g a 8 o n# t o# i n v e s t# $ 2 8 5 , 0 0 0# i n#

improvements#in# the#Na8onal#Guard#hangar.#

This# obliga8on# was# in# the# original# lease# in#

2008.# #It#will#now#be#3#or#more#years#before#

Ae r o P remie r# will# be# a ble# t o# make#

improvements# to# the# facility# as# projected.#

AeroPremier# plans# to# make# investments# in#

the# facility# aWer# the# OLD# repairs# are#

completed.# # They# understand# that# this#

investment# is# cri8cal# to# their# business,# and#

they#plan#to#build#a#first#class#facility#that#will#

include:

• 15,000% square% foot% FBO% office,% more% than%

double% the% size% of% any% other% FBO% at%

Lakefront%Airport

• 27,000%square%foot%hangar%large%enough%for%GEV%

aircraG

• Luxurious% two% story% lobby,% with% comfortable%

siJng% areas% and% featuring% aviaLon% and% New%

Orleans%themed%art

• 20'%granite%customer%service%counter

• Coffee% Bar% featuring% variety% of% coffee,%tea% and%

espresso%drinks

• Hospitality%Bar%and%Lounge%with%expansive%view%

of% the% airport,% offering% complementary% snacks%

and%beverages

• Media%room,%with% state%of%the%art%movie%

theater%with%satellite%TV%and%DVD%library

• Game% room,% with% electronic% games% and%

pool%table

• Private%passenger%lounge

• Private%sleep%rooms

• Separate%crew%lounge

• Workout%facility%with%sauna%and%showers

• State%of%the%art%flight%planning%office

• Large% conference% room% with% mulLmedia%

projector% and% other% presentaLon%

capabiliLes

• Business% center% for% passengers% and%

crews,% offering%facsimile,%photocopy%and%

other%services

• Corporate% flight% department% offices%with%

administraLve%support

• Private% VIP% Suite% with% siJng% area,%

conference%table%and%wetbar

• Covered%passenger%auto%entrance

• Wifi%throughout

• State%of%the%art%video%security%system

• Catering%kitchen

• Private%courtyard%with%puJng%green

• Indoor%car%parking

• Expansive% concrete% aprons,% with% ample%

room% for% parking% and% maneuvering%

aircraG%of%all%sizes%and%types

Since# AeroPremier# projects# to# spend# a#

significant#amount#to#improve#the#facility,#the#

relief#of#the#specific#amount#of# the#obliga8on#

appears#appropriate.

The# Agreement# also# waived# some# rent#

obliga8ons# for# the# Na8onal# Guard# hangar#

during#the#repair#period#or#when#the#current#

used#space#was#unusable#by#AeroPremier.##As#

discussed#above,#un8l#the#hangar#and#offices#

are# completed,# and# can# provide# a# safe# and#

8
secure#environment,#poten8al#customers#will#

not#be#confident#in#AeroPremier.##

Construc8on#ac8vi8es#in#par8cular#are#a#high#

risk#when#aircraW#are#in# the#immediate#area.#

Poten8al# accidental# damage,# either# obvious#

or# hidden,# is# always# of# concern# to# crew#

members# of# the# aircraW# as# well# at# to# the#

contractors.# # Repair# and# renova8on# to# the#

Na8onal# Guard# building# will# be# disrup8ve.#

The#following#email#is#an#example:##

Date:&Wed,&6&Apr&2011&11:16:54

From:&Vick&Corso

To:&Rolando&Gonzalez

Good&morning&Rolando,

As& requested& per& our& conversaFon& 4/6/11& the&

construcFon& inside& hanger& will& start& this& coming&

Monday& 4/11/2011.From& this&day& on& Fll& the&first&

week& of& June& we& will& need& total& access& to& the&

hangar& from& 7am& Fll& 4:30& pm& MondayRSaturday&

and& possible&Sunday.&If& and&event&we&are&working&

later& hours& that& day& you& will& be& noFfied& that&

morning.& There& can& be& no& planes& in& the& hangar&

due& to& the& working& in& progress.& The& inside& of&

hangar& will& be& staging& area& to& prep& materials& to&

be&installed,&sprinkler&systems,&fire&alarm,&coil&door&

install,& and& hangar& glass& replaced.& I’m& not& sure&

how& this& will& affect& using&it&aXer& hours&but& if& you&

feel&that&the&aircraX&will&be&safe&being&stored&with&

equipment& and& hardware& that& will& be& your& call.&

Please& let&Anthony& know& if&you& have& any& request&

day&to&day.&Thanks,&Vick&Corso

Vick&Corso

C.E.O.&Corso&Companies/

Anode,&Inc

This#email#highlights# the# fact# that# important#

safety# and# security# items# like# the# sprinkler#

system,#fire#alarm,#doors,#glass,# etc.#are# just#

now#being#installed.

We# believe# that# the# waiver# of# select# rents#

during# this# period# for# AeroPremier# was#

appropriate#under#the#circumstances.

AeroPremier# was# also# granted# the# right# to#

cancel# the# lease# on# the# McDermo?# hangar#

with#60#days#no8ce.##We#understand#that#it#is#

not#the#intent# of# AeroPremier# to#cancel# this#

lease#as#the#hangar#is#currently#occupied#and#

profitable.#The#intent# of# this#concession#was#

to#reduce#AeroPremier’s#financial#obliga8ons#

in#the#event#that#the#Na8onal#Guard#complex#

renova8on#con8nues#to#be#delayed.

Comments$on$the$Complaints

1.$Diversion$of$Funds

It# was#alleged# that# OLD# violated# FAA# grant#

agreements#by# diver8ng# revenue.# # Typically#

the#diversion#of# revenue#would#be#viewed#as#

using# airport# funds# for# nonKairport# related#

ac8vi8es.# #In#this#complaint,# the#allega8on#is#

that# rental# payments# from# Flightline# First#

were# used# to# give# AeroPremier# unfair#

advantages.# # This# would# imply# that#

AeroPremier# would# have# the# advantage# to#

undercut# the# other#FBOs#in# fuel# and# hangar#

prices# to# gain# market# share.# # A# review# of#

public,# published# fuel# prices# showed# no#

significant#fuel#price#cuts#by#AeroPremier.# #In#

fact,# Flightline# First# typically# led# any# price#

reduc8ons.# # The# current# excess# supply# of#

hangar# space# makes# for#a#compe88ve# price#

among# the#FBOs.# # It#is#our# opinion# that# this#

allega8on#is#false.

2.$DiscriminaNon$of$Rates

Another# allega8on# stated# that# that# OLD#

discriminated#on#rates#and#fees.# #A# review#of#

the# lease# ra tes# showed# only# mino r#

differences# in# the# FBO# lease# rates# for# the#

various# por8ons# of# the# leasehold# K# hangar,#

offices,#ramp,#etc.# #While#the#FBOs#may#have#

argued# that# the# rates#were#too# high# for# the#

post#Katrina#period#when#business#was#at#an#

all# 8me# low,# the# rates# were# consistently#

applied.# # Fees# for# fuel# are# also# consistently#

applied.# #It#is#our#opinion#that#this#allega8on#

is#false.

3.$Sublease$Rights

Another# allega8on# stated# that# OLD# gave# up#

airport# rights# when# they# agreed# to# allow#

AeroPremier# to# sublease# 2nd# floor# office#

space#(when#completed)# without#approval#of#

OLD.# # From# our# lease# experience,# language#

that#permits#subleasing#is#usually#included#in#

9
FBO#building#leases.##Excep8ons#might#be#for#

prospec8ve# tenants# who# would# compete#

with#a#company# in# the#terminal# building.# # A#

restaurant# or# food# service# facility# would# be#

an#example.# #Common#language#in#an#airport#

lease#is#that#the#right#to#sublease#shall#not#be#

unreasonably# withheld.# # However,# the#

business#view#at#the#airport/FBO#level#is#that#

this# applies# to# the# sublease# of# the# whole#

leasehold# or# approval# to# a# change# of#

ownership.##The#usual#excep8on#for#obtaining#

specific#sublease#approval#is#for#leases#where#

customers# that# provide#a# service# that# could#

be# viewed# as# compe88ve# to# airport#

opera8ons#or# those#whose#ac8vi8es#are#well#

outside#of# normal#avia8on#support#business.#

Many# of# the# subleases# for# FBO# support#

ac8vity# are# short# term.# # Keeping# up# with#

these# frequent# approvals# becomes# an#

unnecessary#burden#to#the#airport#authority.#

This# par8cular# concession# also# provides# the#

airport#the#right#to#subKlease#the#space.##This#

concession# appears# to# be# more# of# a#

coopera8ve#effort# by# both# AeroPremier# and#

OLD#to#find#customer/s#for#this#space.#It#is#our#

opinion#that#this#allega8on#is#false.

4.$Airport$Management

OLD# is# alleged# to# be# improperly# managed#

with# the# result# being# that# the# Lakefront#

Airport# is# not# a#selfKsustaining# airport.# #OLD#

has# endured# incredible# obstacles# and#

challenges#to#successfully#operate#the#airport#

through# the#worst#natural#airport#disaster# in#

U.S.# history.# # While#recognizing# that# Katrina#

imposed#huge#business#and#personal#trauma,#

it# does# not# totally# excuse# individuals# from#

making# poor# decisions.# # In# reviewing# the#

management# of# Lakefront# Airport# over# the#

past#few#years,#it#is#easy#to#cri8cize#individual#

ac8ons#and#communica8ons.##However#when#

looking# at# the# whole# airport# opera8on# and#

direc8on,#our#view#is#that#the#airport#is#being#

managed# to# be# selfKsustaining# while# under#

extremely# difficult# condi8ons# –# both#

p h y s i ca l l y# f r om# t he# h u r r i ca ne# a n d#

economically#from#the#recession.

For#example:

The#return#of# the#Na8onal#Guard#complex#to#

the#airport,#in#spite#of# ul8mately#crea8ng#the#

current# legal# controversy,# has# added# large#

and# valuable# hangar# space# to# the# airport.#

This#will#develop#lease#revenue#from#property#

that# previously# was# not# producing# any#

revenue.

The# airport# now# has#3#FBOs#on# the#airport.#

This# is# the# same# level# as# before# Katrina.#

Making# the# decision# to# add# the# FBOs# back#

c rea te s# a n# a p p r o p ria te# c om pe88ve#

environment# for#excellent# customer# op8ons.#

Each# FBO# is# very# compe88ve# which# should#

work# to# create#more# ac8vity# at# the#airport.#

Adding#an#FBO/s#to#an#airport#is#always#highly#

debated# as# evidenced# by# the# currently# on#

going# very# public# arguments# about# the#

Cha?anooga,# TN# (CHA)# airport# adding# a#

second#FBO.##While#it#will#take#some#years#for#

Lakefront# Airport# to# return# to# the# level# of#

opera8ons#prior#to#Katrina,#the#infrastructure#

of# FBO# services# is# now# poised# for# airport#

growth.# #We#already#see#more#improvement#

in#based#aircraW# than#was#projected.# #At#the#

end#of#January#there#were#113#aircraW#and#in#

May#the#number# had#increased# to# 153.# #The#

compe88ve# spirit# among# the# three# current#

FBOs# to# have# the# best# facili8es#and# services#

will# con8nue# to# improve# the# preference# of#

Lakefront#Airport#as#a#favored#airport.

The# airport# is# finalizing# the# updated# Airport#

Master# Plan.# #OLD#was#granted#AIP#funds#in#

mid# 2008# for#the#plan.# #Later#that#year,#URS#

Corpora8on# was# selected# to# update# the#

Airport# Master# Plan.# # Crea8ng# or# amending#

an#airport#master#plan#is#a#huge#challenge#for#

normal#airports.##Doing#the#one#for#Lakefront#

aWer# Katrina# has# been# excep8onally#

challenging.# # The# engineering# work# to#

redefine#almost#everything#on#the#airport#has#

taken# 8me.# # However# the# plan# is# almost#

complete.# # There# was# a# public# open# house#

recently#to#show#the#plan#and#it#is#an8cipated#

that# final# submission# will# take# place# in# the#

next#few#weeks.#

10
As# part# of# the# master# plan,# the# airport# is#

projec8ng# adding# hangar# space# in# the# next#

few#years#to#increase# revenue#opportuni8es.#

An# image# of# part# of# the# airport# layout# plan#

showing#the##expansion#is#in#the#appendix.###

The#financial#records#for#the#annual#opera8ng#

results# for# Lakefront# Airport# are# publicly#

available#on#the#Louisiana#Legisla8ve#Auditor#

web# site.# # While# each# of# the# recent# years#

results#have# differed# in# revenue#and#cost# of#

revenue#categories#(due#to#Katrina#ac8vi8es,#

maintenance,#grants,#etc),#the#Profit#and#Loss#

result# trends#have#not#changed#significantly.#

The# results# for# the# year# ended# June# 2010#

were#actually#the#second#best#year#in#the#past#

7#years.##

The# Avia8on# Group# has# visited# Lakefront#

Airport# numerous# 8mes# over# the# past# 20#

years.# # With# the# new# structures# already# in#

service# and# the# comple8on# of# the# Na8onal#

Guard# complex,# the# airport# is# far# more#

a?rac8ve# to# business# than# in# the# past.#

Unfortunately# this# improvement# came# at# a#

high# price# but# the# results# are# very#

encouraging# for#the# future#of# the#airport.# #In#

summary,#while#there#may#have#been#lapses#

in# individual# performance,# the# airport# is#

making#progress#toward#being#selfKsustaining.

11
Appendix

FBO'Loca5ons

Construc5on'ac5vity'at'AeroPremier'(former'Air'Na5onal'Garrd'site)