## Airports as Creative Free Enterprise Centers: a new model for governance and growth

by Aron Faegre faegre@onemain.com

Aron Faegre & Associates

520 SW Yamhill Street Portland, Oregon 97204

November 10, 2003 (Draft)

Freedom is one of our most important and ba sic American values. Thus it should be no surprise that the first successful pow ered aviation vehicle was created in our country, and that this new mode of transportation has been nurtured, grown, and matured here . This is because aviation, at its root, is about freedom. Flying is mans ability to have freedom in

the third – vertical – dimension. After 10,000 years of mankind's wandering to and fro over the horizontal plane, American invent ors Orville and Wilbur Wright, created the first successful "air-plane", that allowed us to begin exploring the freedom of this vertical plane – this "air-plane."

And this airplane, using the term here to m ean a machine, not a place, has revolutionized our world. For travel, no one would consider heading out on a 2000 mile hike to visit grandma. Yet people fly 2000 miles every day to go visit grandma. So it has allowed us to connect with people – more people – on shorter notice and with more regularity.

Thinking back to the origins of our countr y, when Benjamin Franklin and John Adams and Thomas Jefferson were in France trying to drum up support and cash to fund an American revolution against England, they would be making solicitations, but were never sure whether a war had already b een won or lost. It would often take a year or more to even find out whether they were negotiating the right treaty. With cell phones and the internet, the speed of the ai rplane has become the norm fo r all of our communications, personal and business.Airports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 2 of 9 In spite of the slow communi cation of the old days, the Revolutionary War was won – John Adams did get the Dutch to loan Amer ica more money and the ragtag American army won freedom from the Monarchy that wa s England. The origins of our nation rest on this kind of creative, entrepreneurial spirit.

Two hundred twenty seven years after the Revolution, one hundred years after the invention of the airplane, we have a c ountry with 5,300 public use airports and 14,000 private use airports sprinkled from sea to sea, and 240,000 airplanes available to travel

this 3-D freedom between air ports. And we have a system of government – first the CAA, then the FAA – that has worked hard to promote and develop this great aviation system.

But now – under that paradigm – the number of airports and aircraft has for the moment reached its peak. The number of airports, in fa ct, has been declining slightly year to year. Our aviation system appears to have reached a phase of initial maturity. It is an open and friendly system. Pretty much anyone over th e age of 17, who is reasonably healthy, can train and become a pilot.

A small two place aircraft can be rented at mo st airports for about the hourly rate that a union carpenter, plumber, or electrician gets pa id. The number of airports is sufficient, and their spacing such, that ev en a small two place aircraft can wend its way to anywhere in the country, and can count on finding plenty of places with fuel and services. Our American aviation system is accessible, functio nal, and usable by all of the public. In this sense, it is quite a success.

Do we rest on our laurels and congratulate ourselves on a "job well done?" Or do we ask "Who are the people who are attracted to the air-plane?" and "How can we grow this great invention to an even higher level of accomplishment?" In this essay, we argue for

the latter.Airports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 3 of 9 Who are these people of the air-p lane? They tend to be peopl e who are attracted to this dream of flying – this freedom in the third di mension. They tend to be people who think creatively – inventors who are searching for new ways to accomplish things. They tend to be people who are strong indi viduals with leadersh ip skills – when piloting in the airplane, unless it is a helicopter, one must have a good plan of action filled with contingencies. When things get tough it is no t possible to just pull ove r to the side of the road and stop. The pilot must creatively imagine ahead the multiple variety of pathways that a 3-D flight might entail, including one s in unexpected winds, through flocks of birds, under thunderheads, or even through hail.

This brings up the fact that there are people who do not like this air-p lane idea. There are some who are so opposed, by nature, that they are terrified to even sit in a monstrous Boeing 747 or an Airbus. My mother-in-law is one of these. To her it seems unnatural that anything man-made should be up in the air. And human nature being what it is, she doesn't trust that the captain and crew ar e necessarily sober and sane. Given the September 11 th use of aircraft as a kind of terrorist bomb, this mistrust of aviation certainly can be understood. For those of us in the other camp, September 11 th represented, rather, an almost unbelievable nightmare. How c ould this wonderful freedom be so cruelly misused?

Many non-air-plane people are less extreme in their concerns, like my wife. She just thinks that these air-planes are noisy, sme lly machines that can be put up with on occasion. But they are not things to be cel ebrated. If man had been meant to fly, he would have wings. But she would admit, begrudgingly, that airp lanes sure are handy, when you want to go to Ireland for two weeks of hiking in the countryside.

Where is this little essay going? Why is it titled " Airports as Creative Free Enterprise Centers: A new model for governance?" We ha ve considered that airplanes and airports are new to human life. They give us a new fr eedom that some of us have longed for, and they have sped up our lives, and made our wo rld smaller. But more importantly, they are attractors for the kind of people who love freed om, who think creatively, and are to someAirports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 4 of 9 extent natural leaders. And it is in this re gard that as a society and culture, we might do well to look at airpor ts with a new eye.

Air-ports are the places where people who love the air-plane go to hang out. Of course "port" means door, so the air-por t is the doorway to the vertic al dimension – the air – and as such, a doorway to an exciting sense of fr eedom. Airports are places that can serve as much more than just a place to put an airplane. They should be looked at as places where creativity can be nurtured. They should be looke d at as places where le adership skills can be learned and tested. They can be places where the old fashioned American "Yankee Spirit" can exist and thrive.

The traditional model of governing airports has been to have them 100% owned by the government, and all activities c ontrolled, to ensure that when a plane needs to take off there is fuel available. Originally, the gove rnments owned the fuel tanks and the service station, to ensure that the system worked. Bit by bit, through th e years, we now more often than not have service st ations (fixed base operators – FBO's) that are privately owned. In Oregon we've progressed to allowi ng private enterprise card-lock self-serve fueling by the pilots themselves.

In fact, private enterp rise is now in control of these basics of aviation. The days of government controlled and/or funded scheduled airlines are gone. The private sector has

taken over. At internationa l airports today, no significan t facility decision is made without the written appr oval of the major airlines serving that airport – i.e. the private sector. And in true American fashion, competition has worked wonders. If you plan ahead a little, you can visit gra ndma 2000 miles away for half the cost of driving there, and get there ten times as fast. The same is tr ue for smaller aircraft and smaller airports. There is no longer a reason to protect or subsidize FBO's, training schools, or repair stations. The number of airpor ts and available services is great and well established. There is no longer the slightest concern that a pilot could travel cross country and be hindered by lack of services. The private sector is in cont rol. Private enterprise is working.Airports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 5 of 9 So what model of government is needed for airports today? Obvi ously, the runways and taxiways, the lights and navigati on systems are used by all pilo ts, and thus are needed to be in public ownership and cont rol. We are a nation that be lieves in the "rule of law." Control towers are good. They create order and safety. Stan dard airport traffic patterns and procedures are good. They create order and safety. But the supply of services, of hangars, and facilities – this can be left to private enterprise. The competitive spirit of business and private enterprise will invent the best ways that these can be accomplished.

There are many added benefits of allowing pr ivate enterprise to become the standard provider of airport faci lities and services. First, the ow nership of land and buildings is a basic element of our normal American system. The traditional model for development is that banks finance facilities only when the la nd is also owned, and th e bank is in first place should a default occur. And this is because the bank wants to be able to immediately find a new owner who can use the facility, and get it up and running again. Otherwise the bank is losing money. When a governmental agency owns the land, and a facility goes into default, th ere is no built-in need to get the facility up and running again, beyond a kind of communal goodness. Another piece of this puzzl e is that when a person or company owns the land and facilities outri ght, they have a vested interest in making sure it keeps working. A person who owns a house and a garage either lives in it, and puts a car in the garage. Or th ey rent it out to someone who li ves in it and has a car to put in the garage. No-one in their right mind just lets it sit. Private ownership of facilities on an airport functions with the sa me mentality, because it is in the self-interest of a private owner to do it that way.

Surprisingly, it is in the public interest to do it this way as well! When private development occurs, it is taxed in order to f und the basic police, fire , and other essential

services that are n eeded by all. When government development occurs, those same police, fire, and other essent ial services must be provide d, but without the benefit of added tax revenues. Thus, the other privat e development – homeowners and businesses – must shoulder the burden of the governmental deve lopment. This is fine, as long as it isAirports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 6 of 9 essential development that the private sector cannot provide. But wh ere it is development that the private sector can pr ovide, it would be fairer to use the standard model.

There is an even stronger reason to go to a more deliberate public-p rivate partnership at airports than the common sense "developer-mi nded" ones, or the adva ntages to the public in increased taxes. Airports have reached th eir limit in growth as basic "hangar" sites.

The number of aircraft has more or less leveled off. The number of airports is starting to decline. So it is time for a revolution in use, at airports.

Airports have always been centers of creativ e activity. It is now time to free them up to function in this way to a much higher extent . Airports must be freed up to become

centers of creative ente rprise. Where an airport has av ailable surrounding lands that are compatible with airplanes, they can be used as an expansion area to allow for the basic airport to become a center for creative en terprise, including e xpanded employment and job creation.

Aviation is still a new field. Though often c onsidered as environmentally unfriendly due to the noise, aircraft are e ssential in our current efforts at environmental protection and enhancement. The use of aircraft as pl atforms for high-tech sensors to map and understand our earth is opening up whole new fiel ds of business and research to promote the protection of our environment. Aircraft allow us to finally "see" the whole of our

land. New business and research is also opening up on the designing of new kinds of aircraft, new ways of manufacturing parts, new materials for construction, new kinds of propulsion systems, quieting t echnology, special security syst ems, weather and climate analysis equipment, advanced integrated elect ronic flight systems ... the list of new areas of work in the air-plane (place not machine) is staggering. And it will only grow with

time.

Airports were historically sited outside of citie s, or at their edge. This allowed plenty of open space for the approaches and departures of aircraft, during which they are low to the ground. Having airports outside of a city also promotes noise compatibility and safety, asAirports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 7 of 9 it can keep the low flying aircraft more ge nerally away from people. Adjacent areas typically considered compatible include fa rm or forest lands, industrial lands (since people don't sleep there), and open water bodies. Yet, when we l ook at the kinds of businesses, jobs, and research th at airports can foster, we see that the airport itself should

be considered a kind of miniat ure city in its own right.

In Oregon we try to keep cities and rural areas distinctly separated, in order to protect our

natural resource areas. We have laws that require that urban uses stay in cities, and only be allowed in rural areas by sp ecial permission. To allow air ports to develop as we are considering, our land use laws must be cha nged to automatically consider airports as special exceptions to this overall goal. Ai rports should be given an "employment" type zone that outright allows it to have this wi de variety of commercial and industrial uses. And as there are a certain class of people who use their aircraft the same way that others use their cars, airport residential areas (f or which a house has a hangar attached) should also be allowed outright.

Airports should be thought of as a kind of "m ixed use" zone, which are similar to those of an urban area, except that there is one gove rning proviso: any use must be "airport related" or "airport dependent." This concep t would be formed similarly to how "water related" or "water dependent" rules were created to allow development along rivers and lakes, while preventing development which is not related or dependent. Oregon has the beginning of a rule like this ca lled the "airport prot ection act," but to function as we are proposing, it must be enacted into law (there is no time limit for making it apply at any particular airport), and it must be amended to include an exception to State Goals 14 and 11 (urban uses and services), so that it becomes usable as a practical matter when the airport is located outside of the city limits.

Most airports are still being governed under an old model that views them as places that must be highly regulated and controlled, not just for safety, but for ensuring the providing of services. This kind of governance is obsolet e. It misses out on the power and strength of the private sector, and the essential need fo r freedom inherent in creative enterprises.Airports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 8 of 9 It often results in a reverse resultant – a dampening of the providing of public facilities or services, since governments are generally fi scally weak. Across the nation, for many years, there has been a ta x revolt of sorts, and most airports under governmental ownership just don't have any funds to build fa cilities. They barely have adequate funds to manage the airport, and the manager is of ten overworked to the point that they barely have time to even help the privat e sector initiate projects.

Under this new model, aviation development w ill create new facilities and jobs, and these will in turn create additional pr operty, income, and sales taxes. It will allow airports to be more capable of becoming self sufficient, as it will diversify the kinds of income resulting from the airport. A totally govern ment controlled operation has no easy way to become self sufficient in this way.

Aviation is a field that by its fundamental natu re needs freedom, to be able to continue to grow. Airports are already becoming desire d places for setting up new creative business enterprises, in spite of the difficulties of the old model of governance. When we look at the airports that are showing the strongest gr owth and development, it is those that have found ways to develop strong pr ivate-public partnerships. Le t's not look at this as an anomaly, but rather as the new ec onomic model for the future.

In conclusion, this paper suggests that our airports can quickly become new creative free enterprise centers by:

☼ understanding the history of airp lanes, airports, and aviation,

☼ recognizing the vast new transportation and technology advances that have evolved around aviation, which now are so important in serving our society and the larger global environment,

☼ recognizing that airports are a particularly appropriate place to encourage further research, development, and use of these advances,Airports as Creative Free Enterprise Centers (Draft) November 10, 2003

Page 9 of 9 ☼ adopting a vision for how these new aviati on related fields can be combined to create a synergy at an air port that in turn becomes a new economic development engine for the larger community that the airport serves,

☼ giving airports land use zones that outrig ht allow airport re lated and dependent

uses,

☼ providing Goal 14 and 11 exceptions to rura l airports, so that they can outright have these same basic airport related and dependent uses, and

☼ promoting a governance structure that suppor ts private enterprise as the active partner in the creation of these facilities.

What would be the next step in working to ward these goals? It is recommended that a group be assembled, of business, citizen, and governmental representa tives interested in furthering this concept. Th is group would be charged w ith developing the framework and tasks necessary to accomplish these goals. In doing so, analysis of airports that are already functioning (at least in pa rt) in meeting these goals, can be used as case studies to

better understand the nature of this new creative free enterprise center, and how best to let it grow.