The proposed $33.6 million 2017 operating budget for Bill and Hillary Clinton National Airport/Adams Field is driven by projected growth in passenger traffic for the first time in five years as well as an increase in fees charged to airlines operating at the airport.
The 2017 budget, which will go before the Little Rock Municipal Airport Commission for approval later this month, assumes that passenger boardings will increase 1 percent, to 1,014,002. Higher passenger volume typically translates into increased revenue in parking, concessions and car rentals, which will account for 51 percent of next year's operating revenue.
Clinton National is part of Little Rock government, with the seven-member commission appointed by the city Board of Directors, but the airport receives no money from the city and is required to be self-sufficient.
The 2017 budget projects a rise of 2.6 percent over the $32.7 million budget this year.
Expenses, meanwhile, are expected to rise 7.5 percent next year, to $22.8 million, in part because of increased employee health care costs and filling some employee vacancies, according to airport staff. It also includes 3 percent of total salaries, which will be used to give merit raises based on employee performance.
But net operating income is expected to fall 33 percent, to $8.2 million from $12.6 million in 2016, after accounting for depreciation and non-operating revenue. Much of the difference is attributed to airport staff anticipating receiving $7.7 million in local, state and federal grants in 2017, down from the $10.8 million the airport received this year.
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Virgil Miller Jr., chairman of the Little Rock Municipal Airport Commission, said he is confident with the numbers following a budget workshop held last week for commission members.
"This is about as thorough a budget presentation as anyone could ever ask for," Miller said. "They went over it line by line. Staff was very thorough. They answered all our questions. They addressed our concerns.
"I think it's extremely reasonable. And certainly the way we have held down costs to the airlines. I'm extremely happy with it."
Through Oct. 31, 832,243 passengers had boarded at Clinton National, according to airport data. That number is a slight decrease from the 832,432 that boarded in the first 10 months of 2015 and in line with expectations. Airport staff had projected passenger activity at the airport to remain flat in 2016 after three years of falling passenger numbers.
Miller also said he is optimistic the projected increase in passengers, modest though it may be, will materialize, thanks to increased airline service the staff has attracted recently.
"To me, it's just a reflection of the hard work the staff is doing," he said. "We were able to secure Allegiant [Air] to come to the market. GLO [Airlines] is here now."
Both airlines are low-cost airlines which target leisure travelers and serve tourism destinations, such as Fort Walton Beach and Orlando in Florida and New Orleans. They often fly for just parts of the year rather than year round.
Clinton National also is served by major carriers that include American Airlines, Delta Airlines, Southwest Airlines and United Airlines.
Miller said the passenger forecast for Clinton National is in line with the passenger growth forecast by Moody's Investment Services, the credit rating service.
This month, the agency reported it has a positive outlook for U.S. airports with passenger boardings forecast to grow 2.7 percent in 2017, thanks to continued economic growth combined with increased airline capacity.
"Emplanement growth, or the number of seats sold on a flight, is a key indicator for our outlook because it generally translates into higher parking airport-terminal revenue," the agency said.
Moody's, however, said small-hub airports, such as Clinton National, will "continue to lag behind in terms of emplanement growth" because they "are more likely to be served by the large legacy airlines through regional jets, which are likely to continue to be pressured by a pilot shortage."
Boardings rose 5.5 percent in 2015 -- the latest year for which the report provided data -- at large-hub airports and 6.5 percent at medium-hub airports while the boardings increased just 1.7 percent at small-hub airports.
Large-hub airports account for 1 percent or more of the nation's passenger boardings, medium hubs at least .25 percent and small hubs at least .05 percent, according to the Federal Aviation Administration.
In 2015, the latest year for which figures are available, the nation's airlines totaled 794.6 million boardings, which exceeded the previous high of 769.6 million in 2007, according to the FAA. During this period, international enplanements grew 57.2 percent and outpaced domestic enplanements, which grew 21.3 percent, the agency said.
Revenue from airlines in Little Rock is projected to total $11.4 million in next year's airport budget, 5.1 percent over the estimated airline revenue Clinton National will receive in 2016.
The increase is attributed in part to hikes in landing fees and the rental rate for the passenger terminal. The airport also will charge a $40 fee for every time an airline uses one of its new jet bridges. The fee will go toward a fund that will be used to pay to maintain the bridges, the airport staff said.
The landing fee will go from $4.05 per 1,000 pounds of landed weight to $4.12. That money is used to recover the cost of the airfield area, including runways, taxiways, associated navigational and operational aids and other airfield properties.
The rate includes a $3.7 million discretionary credit to "minimize the impact of rising costs on the airlines," according to the budget document. "Without the adjustment, the airlines would pay $6.91 per 1,000 pounds."
Landing fees are charged to all passenger and cargo commercial aircraft landings and all commercial and chartered flights from general and business aviation operations at the airport.
The passenger terminal rate for the airlines will go from $38.20 per square foot to $38.90. That money is used to recover the operating and capitalized costs for the terminal.
The rate structure allows the airport to transfer a pro-rate share of terminal costs to the airlines based on usable space. "As airlines lease less space, their relative cost per square foot goes up," the budget document said.
The airport also applies a $320,000 discretionary credit in the calculations to minimize the cost to the airlines. "Without the adjustment, the airlines would pay $43.19 per square foot," the budget document said.
Airline revenue, which accounts for about a third of the budget, is expected to total $11.4 million, or $1 million more than the airport expects to collect in 2016.
The increases come after five years of keeping the rates for the airlines flat, and the costs to airlines at Clinton National remain low compared to other airports, such as Memphis International Airport, said Ron Mathieu, the airport's executive director.
Metro on 12/12/2016