“Winter is not a season, it’s an occupation, Sinclair Lewis”
is a thought that surely resonates with many of us this year as we work
on thawing from the deep freeze of the “Great Recession of 2008
General aviation has experienced its share of economic pain with sharp
declines in new aircraft production and ever-tightening budgets. But,
as we’ve seen with the recession of 1981 and post 9-11, GA will
rebound as the general economy recovers, with many opportunities to
engage even more of the flying public. Certainly, commercial aviation
has not become more user friendly in these turbulent times.
So the work of this winter is to become more efficient, complete unfinished
projects and look for alternate sources of financing and revenue, in
short, to be in a better competitive position when the action returns.
As you might expect, we have several suggestions when it comes to new
and existing hangars, which we cover in this issue.
Get creative with financing options to answer the demand for new hangars.
One such option is discussed below. Expand revenue sources from existing
hangars. Refer to a few ideas we have below.
Maintain and inspect your existing hangars. Whether you do it yourself
with our checklist on page four or use our experienced field personnel,
keep your investment in safe and efficient operating condition.
One goal all of us in general aviation can work on immediately is securing
Senate passage of HR 915, the FAA Reauthorization Act of 2009, or to
include it’s key funding related provisions in the current jobs
bill under consideration. Impress upon your Senators that the Airport
Improvement Program budget, tax relief for airport bond financing and
an increase in Passenger Facility Charges are critical to the aviation
community in keeping and creating well-paying jobs.
All too often strong demand exists for new hangars with no viable financing
options available. Public budgets are already bleeding red ink. Private
sources are limited due to complications of private development on public
land and severely restricted bank credit. As a result, years go by without
Assuming airport ownership will not agree to land lease terms for a
private developer to build new hangars, they may accept a plan to construct
and own hangars using private funding from individual aircraft owners.
The aircraft owners would receive long-term prepaid leases for their
hangar unit(s), while the airport retains ownership of the hangar preserving
the property tax exemption.
Because individual tenants fund the project, public financing is not
needed, although the airport would be responsible for maintenance and
operation of the hangars throughout the lease term. If the site needs
major preparation before hangars can be built (earth moving, taxilane
construction, long utility runs), the airport may be able to fund this
work with federal, state or local grants.
Aircraft owners will need a prepaid lease term long enough to fully
amortize their up-front investment. Establishing a prevailing rental
rate is necessary to determine break even points; but generally assume
a 10 year prepaid lease term in high rental areas up to as long as 25
year lease terms in lower rental markets. Once the prepaid lease period
ends, the tenant can execute a standard annual lease contract with the
airport to retain their hangar unit(s).
For example, let’s estimate the construction cost of a new 10
unit hangar project (less any portion funded by grants) to be $250,000.
Each tenant’s contribution and present value of their lease contract
would be $25,000. Amortized over 25 years at 5%, this would cost each
tenant $146 per month… a bargain rental rate in any market!
an additional $30. per month for the airport to provide property insurance,
utilities and maintenance on the building still results in below market
rents. We have sample prepaid hangar lease agreements and cash flow
analysis that incorporate these provisions to share with you.
The demand for hangars continues to increase as population centers
shift and security concerns for general aviation rise. Public and private
concerns must work together in these troubled economic times to make
hangars a reality. Please contact us for additional ideas, information
and assistance, at no obligation.
Expand, Improve & Maintain
all heard that the majority of new business is generated from existing
customers. That’s especially true in general aviation with fewer
new aircraft being produced each year. Generating additional revenues
generally requires enticing existing aircraft owners and hangar tenants
to relocate to your field, meaning your current customers become your
best marketing people.
One way to maintain happy customers that refer their flying associates
to your airport, is to keep an eye on their hangars. There are several
ways to do this without busting already thin budgets. Relatively small
investments made to expand, improve and maintain your existing hangars
now, during tough economic times, will be appreciated by your customers
and word will spread.
You can easily expand your existing Fulfab T-Hangars. Because our buildings
are assembled entirely with bolted connections, intermediate units can
be added quickly and efficiently. Two additional units of our Model
LK42 hangar would require an extension of the existing foundation of
only forty two feet. Because utilities and taxilanes are already in
place, this is the most cost-efficient means to building new hangar
can be made to improve your existing hangars, as well. Is condensation
a sore spot with your tenants? If so, ridge vents can be easily installed
in place of the existing ridge cap which will make the problem evaporate
overnight. Are utility bills out of control? Install one or two translucent
panels in place of the door panels to allow natural light to enter and
to discover when lights are left on.
Those end or half units at the corners of our T-Hangars are also potential
revenue producing areas. Special partition arrangements, removal of
columns to create clear-spans, personnel doors and windows, overhead
garage doors and bifold doors are all options available to convert these
areas into separate leasable space, or for adjacent hangar tenants to
customize to their specifications.
Finally, maintaining your hangars in a safe and efficient operating
condition will also maintain your existing customer base. A brief semi-annual
inspection of each hangar will alert you to any minor problems and unsafe
conditions and keep you “in the loop” with your tenants.
Our experienced field crews can provide these services at a nominal
fee, or have your staff perform the inspections using the checklist