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Letter to Tennessee Governor Bill Haslam in Opposition of Government Competition with Private Business

 

June 19, 2012

 

The Honorable Bill Haslam

State Capitol Building

Nashville, TN 37243-0001

 

Dear Governor Haslam:

I am writing to bring to your attention a national issue affecting our transportation infrastructure that has, in recent months, become centered in the state of Tennessee. This issue concerns airport owners, which are usually arms of state and local government, creating an unlevel playing field for the private companies that do business at their airport. This issue is highlighted by the actions of the Chattanooga Metropolitan Airport Authority (CMAA), which has utilized more than $10 million in government grants to establish its own on-airport general aviation service facility to compete with the existing privately owned service provider at Lovell Field Airport (CHA). The CMAA, which acts as regulator for and charges rents and fees to the private businesses operating on the airport, has now decided that it should also act as those businesses competitor.

History has shown the value of private investment in our nation’s airports. Across the state of Tennessee and around the nation, you will find thousands of aircraft service facilities funded and built by private investment. These service facilities act as catalysts, creating jobs and providing the services and support local businesses need to utilize aviation to expand their markets and grow their business. All of this is accomplished using private investment, not taxpayer funds.

Some in our industry have begun advocating for more local government-owned and operated (and taxpayer funded) general aviation service facilities, known as fixed base operators (FBO), to be constructed to compete with the existing private businesses. Many reasons are given for supporting this type of an operation, such as greater control over pricing and a supposed need for more competition. In all cases, however, the advocates ask for government grants to build these supposed “needed” facilities. The bottom line is government grants are needed so these airport-owned FBOs can enjoy a competitive advantage over private business since they face no need to amortize the cost of funding the construction of facilities and purchase of equipment the way a private company does. In effect, these airport-owned businesses enjoy access to “free money” that never needs to be paid back out of the businesses’ income. 

Aside from the flatly unfair practice of allowing government to compete with private enterprise by using “free money,” we are faced with the stark reality that government is not as proficient or efficient at providing services as is private industry. One need look no further than Chattanooga to see the real effect of a government-run business competing with a private company. Despite receiving $10 million in government grants that it need not worry about ever paying back, the CMAA’s FBO has operated at a loss of over a half a million dollars in its first nine months. The CMAA predicted a full first year loss of only $250,000. The excess losses, much like the $10 million used to construct this facility, come directly from funds that could be used for other safety and security improvements in our aviation system.

Allowing this type of unlevel playing field to be constructed by airport sponsors will have only one long-term effect; the chilling of private investment at airports. As the stream of private investment begins to slow, more and more government funding will be needed to take its place, putting a further strain on already strained state and federal budgets. Funds that used to be used to expand capacity and create a safer and more secure aviation system will need to be diverted to support government-run businesses such as the one in Chattanooga.

NATA firmly believes that private business is the best route to provide quality services at our nation’s airports. History and the billions of private dollars that have been invested at airports across the nation prove the value that these private companies bring to our air transportation system. Now, with the CMAA having already used $10 million in government grants and poised to ask the state of Tennessee for $5 million more to expand its failing government-run FBO, I ask you to consider the role the state of Tennessee should have in this issue. Should the state allow its transportation grant funding to be used to allow airports to compete unfairly with existing private businesses or should it reaffirm that the role of government is to support and regulate private business, not compete with it?

I hope you will look further into the use of state funding to disadvantage on-airport private business and conclude, as I have, that government funds should not be used to compete with existing private business. If I can be of any assistance, please do not hesitate to contact me. Working together, I believe we can ensure the future of the businesses that have made our airports and aviation system successful.

 

Sincerely, 

James K. Coyne

President and CEO

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