The Little Rock Municipal Airport Commission on Tuesday approved a lease agreement with an American Airlines subsidiary, which said it is adding a maintenance facility, up to 60 jobs and a $2.5 million investment to the state's largest airport.
The commission also approved a contract worth $852,384 to modify the doors to the hangar Envoy Air Inc. will use and other improvements to the building at Bill and Hillary Clinton National Airport/Adams Field.
State incentives will cover $500,000 of that cost while the airport will pay the rest, said Ron Mathieu, executive director for Clinton National. Mathieu said the airport will recoup its investment in about 18 months through the five-year lease Envoy Air signed with the airport. It calls for the company to pay $21,131.35 a month to lease 47,626 square feet, or half, of the hangar.
The deal helps to cover the hole left in the airport's bottom line when Hawker Beechcraft vacated its aircraft completion center at Clinton National after the aircraft manufacturer exited bankruptcy three years ago. The airport receives no money from the city or the state and must cover its operations with its own revenue.
"We're getting about $250,000 a year from American over the next five years, where today I'm getting zero," Mathieu said.
At the time Hawker Beechcraft used the facility, it was paying $50,000 monthly to lease 400,000 square feet of enclosed hangar space, as well as offices and 11.5 acres of ramp space.
In addition to the Envoy lease, the airport has a lease with a general aviation center called Arkansas Air, which is paying about $23,000 a month to base its operations in one of the former Hawker Beechcraft hangars. Dassault Falcon, another aircraft manufacturer with a completion center at the airport, leases the other half of the hangar Envoy will use, paying $17,000 a month to store some of its aircraft.
Those leases total more than $61,000 a month.
"It's already more than what we were taking in from Hawker Beechcraft," Mathieu said, adding that the former Hawker Beechcraft complex still has two hangars and an administrative building that are being marketed to potential tenants.
The construction contract with Flynco Inc. of Little Rock will retrofit both sides of the hangar Envoy and Dassault are sharing with new doors that can accommodate the larger aircraft Envoy will be taking in for light maintenance.
Mathieu said he invoked his emergency powers to execute the lease agreement and the construction contract before it was approved by the commission. Gov. Asa Hutchinson and other dignitaries, including executives from the airline, held a news conference at the hangar to announce the deal.
"What we decided to do is do both sides of the hangar to make it easier for them to expand, and so we don't have to do this again if we get another tenant," Mathieu said. "It's a smart thing to do and we have a fairly low bid, and time is of the essence so it makes sense to go ahead and do both sides.
"We anticipate American is going to have to grow a bit. If we don't do this, we're not going to be in position to take advantage of that growth."
The deal also comes in the same year that Clinton National signed an agreement with Cantrell Drug to lease the old Southwest Airlines Reservation Center.
All told, the deals with Envoy, Arkansas Air and Cantrell Drug will allow the airport to realize $782,772 in revenue next year, according to Sage Partners, a local commercial real estate firm that has teamed with an international commercial real estate firm, Jones Lang LaSalle, to market the Clinton National properties.
Those same leases are projected to provide $443,607 in 2016. In 2015, the same properties yielded $33,723 for the airport.
"Those increases in revenue are pretty dramatic," Mark Saviers of Sage told the commission Tuesday.
Saviers also said the state has given it permission to mention the availability of state incentives in its marketing material.
The increase in revenue from building, land and terminal leases is reflected in the airport's latest financial reports.
Through August, it has collected $2.4 million in revenue from leases, or 5 percent more than it collected during the same period in 2015, according to the documents.
Revenue from leases amounted to 11 percent of Clinton National's total operating revenue of $21.7 million in the first eight months of 2016. Operating revenue also includes items such as landing fees, parking, rental cars, restaurant sales and fuel commissions.
The Envoy Air lease is for five years. The agreement also has two five-year options.
Envoy Air will use the Little Rock facility to service American Airlines aircraft flying to hubs in Dallas and Chicago. The company employs about 14,000 people nationwide and operates seven maintenance facilities with contract workers at three additional locations.
Up to four airplanes at a time will be able to undergo maintenance in the hangar once modifications are made to accommodate the new 76-seat Embraer 175 aircraft. American Airlines has purchased 40 of those jets to fly regional routes with an option to purchase up to 90 more.
"What the airline is going to do is work inside the hangar," Mathieu said. "They are going to go back there and reconfigure some walls, create caged areas for their spare parts inventory, mechanics' equipment and so forth. They are going to have some desk space and finishes."
The $2.5 million investment announced last week includes the $500,000 from the the state, Mathieu said. "The state is going to give it to them and the airline is giving it back to us," he said.
Mathieu said the discussions about the potential of American Airlines locating the maintenance facility at Clinton National began in January.
Metro on 09/21/2016