Airports: In Missouri, Investors Seek a Profit in Branson Airport

Airports: In Missouri, Investors Seek a Profit in Branson Airport


Branson, Mo., is remote and has a tiny year-round population. But it also has the kinds of outdoor activities and family-friendly theater productions that attracted eight and a half million visitors last year, earning the city the unofficial nickname “Vegas without the gambling.”

The Branson Airport will have ticket booths for downtown performances.

And it is because of all those visitors that investors have placed a bet on Branson, spending $155 million to build the only privately financed commercial airport in America. Steve Peet, the chief executive of the airport, is a Connecticut businessman who concedes that he could not find Branson on a map nine years ago. By 2004, he was persuaded that there was money to be made flying tourists there.

“If you were ever going to think about building a private commercial airport, this would be the place to do it,” he said recently, as planes began test flights on the recently completed Branson Airport airfield. “It seemed like an incredible opportunity.”

Every one of the 552 airports providing commercial air service in the United States receives some kind of federal money, according to the Federal Aviation Administration, and these airports are owned by public entities, municipalities, transportation districts or airport authorities. The closest airport to Branson was 44 miles away in Springfield, Mo. Mr. Peet’s idea was to build a new commercial airport eight miles south of Branson’s theater district, with private financing.

Randall Fiertz, director of airport compliance and field operations at the F.A.A., said the agency had no problem with a privately financed airport. “We encourage airport development by whoever is financing it,” he said. “If the private sector wants to do that, it leaves more money available for other airports.”

In 1996, Congress passed legislation allowing a limited number of public airports to solicit private investors. Only two airports have tried going private, and both have encountered problems.

Stewart International Airport in Newburgh, N.Y., was purchased by the National Express Group of Great Britain in 2000. The British company, unable to make a profit, sold the airport to the Port Authority of New York and New Jersey in 2007. In Chicago, a consortium of investors agreed to purchase Midway Airport for $2.5 billion, but the credit crisis threatens the completion of the deal. The city of Chicago earlier this month granted the purchasers an extension on the due date for their next payment.

For Branson Airport, however, all has gone smoothly. The owners bought 925 acres in the Ozarks and constructed a runway, control tower and 58,000-square-foot terminal building in less than two years. Commercial passenger flights are scheduled to begin May 11.

“I think it’s some kind of record,” Jeff Bourk, executive director of the airport, said of the speed of the construction. “On other projects I’ve been involved in, there’s a lot more red tape.”

Because Branson eschewed federal assistance, it was free of the restrictions that accompany government aid. That allowed the owners to offer exclusive contracts to AirTran and Sun Country airlines on certain routes to Branson.

“We don’t want suicide fares, two or three airlines bashing each other over the head until someone says ‘uncle’ and leaves,” said Mr. Peet, explaining why the airport agreed to protect the airlines from competition. “We want to build real service, sustainable service.”

Restricting competition could result in higher prices, said Richard L. de Neufville, an engineering systems professor at the Massachusetts Institute of Technology, who specializes in airports. He has seen it happen before. “At first, local people are glad there is something where there was nothing,” Mr. de Neufville said. “As people get used to it there will be a concern about a monopoly jacking up the prices.”

Mr. Peet insists the airport has nothing to gain by that. “If we don’t provide a good product at a reasonable price, we’ll cut our nose.”

As a money-making venture for Mr. Peet and his fellow investors, the airport has a limited life span. In a deal to finance the airport with tax-free bonds, his Branson Airport L.L.C. gave the airport and the 420 acres on which it sits to Taney County, retaining the right to operate the airport for 45 years.

“Saving us money on the cost of debt service was more valuable than owning the airport,” Mr. Peet said.

With the clock set to start ticking next month, every possible way is being considered for maximizing the profit-making potential of the airport. Airlines are being wooed with a range of services so complete that the carriers need not hire a single employee. Security at checkpoints, of course, is provided by the Transportation Security Administration.

“We’re trying to make it as easy as possible for the airlines, with no station set-up costs, no installation of computers,” Mr. Bourk said. “You come up to the counter and it’s a Branson airport employee who will process your ticket and get you onto the flight.”

The airport also negotiated an $8.40-a-head fee from the city of Branson for every tourist arriving by air, a revenue stream that could bring in as much as $2 million a year. Ticket booths for downtown performances will be found in passenger arrival areas, and even the right to name the airport is up for sale.

Mr. de Neufville, who studies the issues involved in privatization of public properties, said airports as private for-profit enterprises that continue to receive federal money face unique challenges. “Governments do not permit their privatized major commercial airports to engage in practices that are routine in most other industries,” he noted in a study he conducted several years after the privatization trial program began in the United States. For example, they cannot set their own prices or restrict access to their products.

That is why Branson Airport is so intriguing. It is in the singularly liberating position of being able to ignore some of the business restrictions that every other commercial airport must follow.

“The airport industry doesn’t know what to make of Branson Airport,” said Steve Steckler, a transportation development consultant in Maryland. In this time of transition, it is the airport itself that put Branson, Mo., on the maps of aviation insiders. As Mr. Steckler put it, “It’s show time.”

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