The Commercial and Operating Process of Hartsfield-Jackson Atlanta International Airport in Atlanta - Case Study Example

irроrt Рlаnning and Маnаgеmеnt By student’s name Course code +name Professor’s name University name City, state Аirроrt Рlаnning and Маnаgеmеnt Introduction Airports forms a crucial part of the transport industry. They facilitate the process of passengers moving from one part of the world to another through the transfer of surface modes achieved through landing and taking off. Runways are the basic and the most crucial features of air ports. Other features include; apron space taxiways, freight terminals, as well as, passengers. In order to make sure that the role of airports in the air transport industry is fulfilled, there is a range of services and facilities involved (Rosenberg, 2011). These services provided by Airports include; fire rescue, air traffic control. These services are essential in that they help in safe transfer of passengers baggage’s from one aircraft to another. The airports offer an extensive variety of commercial facilities that ranges from restaurants, hotels, conference services, as well as, business parks (Atlanta Airport Improvement Working Group. 1981). Despite of the analyzed services offered by Airports, they also have a strategic need to the areas or regions that they serve. In several countries especially the developed ones, Airports are being integrated with the entire transport sector through establishment of links to high speed rail and other major road networks (Padova, 2007). One thing to note with airports is that they can bring in substantial employment opportunities and play part in the economic development. However, they have a significant effect to the environment and quality of life to the surrounding communities. There is a growing anxiety of environmental issues and concerns about Airports. The aim of this paper is to give a clear and detailed report on commercial and operating process of Hartsfield-Jackson Atlanta International Airport in Atlanta. Hartsfield-Jackson Atlanta International Airport also referred to as Atlanta Airport is the world busiest airport in terms of passenger traffic , number of plane landings and take offs. It is located 11 kilometers south of Atlanta Georgia central business district. It held its rank as the world busiest airport in the year 2012. The airport managed to accommodate 95 million passengers and a total of 950,119 flights. There is a big number of domestic flights from inside United States (Pritchett. June 2002). Atlanta serves as the main hub for voyage all over the Southeastern United States. The airport has 207 domestic and international gates (Atlanta Airport Engineers. 1969) Ownership and Organization The owner of Atlanta International Airport is the Atlanta city, which indicates that it is a public property. The department of Aviation in the city is responsible for all operations within the Airport. There is a management company that manages and operates the terminal processes. The CPTC (central passenger terminal complex), (Pritchett. June 2002) lease clearly stipulates that airline signatories hold the responsibility for maintaining and working the terminal buildings for passengers (Burgain, 2010). There are a number of agencies that helps in the operation procedures of Hartsfield-Jackson Airport. The air traffic controllers are under the FAA and are responsible for the aircraft when they are within the runways, taxiways, and in the air. The ramp controllers are also available in the control towers where they control aircrafts that are on the ramp (Pritchett. June 2002). Finally, the Department of Aviation of the City of Atlanta operates the airport itself. Maintenance and operations service are contracted by the signatory airlines to third party service providers. That is a company that is primarily owned by the signatory airline where the Atlanta City holds a 7 % share of the contracted company (Rosenberg, 2011). However, the department of Aviation and the Atlanta city has the responsibility of long-term strategic plans, which includes capital investment decisions. In the autonomy terms, the Airport owners are bound to a certain level by the countries law on the kind of information they are supposed to share with the public. The airport being a public entity it has no autonomy of operating the airport on its own. This means the decision on the selecting and appointing the management team has to be influenced by the state laws and in this case the City of Atlanta (Atlanta Regional Commission. 1975). In the US where Atlantic international airport is located, ownership of airports is still under the cities and county governments as clearly seen in the above analysis. However, there are some cities owned airports that are under the management of quasi-governmental authorities such as SEATC, MASSPORT among other (Padova, 5 September 2007). In the US, airports under city management do not have any share capital; neither do they pay corporate taxes. The external funds for these companies is got from commercial bonds that are tax exempted, facility charges levied direct from passengers, and grants that are received from “Federal Airport Airways Trust Fund” (Department of Aviation City of Atlanta, June 30, 2011 p 5). On the other hand, the airports with federal charges are the ones that are subject to federal economic regulations (Braden, & Hagan, 1989). This indicates that constitutional requirements on airport revenues do not allow the owners from allocating revenue to non-airport purposes (Rosenberg, 2011).  Thus, stipulating the stand of Atlantic international airport as far as formal economic regulation is concerned. In the year 1999, the leadership of Hartsfield–Jackson's came up with its development Program, whose aim was focused to the future of the airport. These projects involved a multiple of construction projects aimed at enabling the airport to accommodate an increased number of passengers by 2015. Some of these new projects included; Maynard Jackson international terminal which was opened in 2012, rental car center which opened in 2009, and renovation and expansion of Concourse D in the airport (Atlanta Airport Improvement Working Group. 1981). Traffic characteristics Air traffic in the airport is a key factor to address in this report. The airport in 2012 managed to accommodate a total of 95 million passengers and 950,119 flights in total. This enormous number of passenger cannot result from only a couple of routes. There are major routes and airlines that operate within the airport. Some of the most busy routes include; Kotoka International Airport, Akron Canton Regional Airport, Albany International Airport among others. The major airlines in this case are by Delta holding almost 70 percent of the available routes, pinnacle airlines, and Air Tran airways (Rosenberg, 2011). These routes and airlines operate both to and from travel services from Atlantic airport. The operational conditions of the airport have increasingly changed. The airport has been experiencing an expansion and an increased number of passenger’s traffic and flights. The other clear evidence that the airport routes and airline has been increasing is with the airport expansions that have taken place in the recent years. In addition, the airport has also been pronounced the world busiest in terms of passenger traffic and flights (Peoples, 2012). Atlanta International Airport remains on the top of the world's air passenger traffic rankings. They have also been able to maintain a stable growth that is close to its closest competitor. Beijing airport is the chief competitor of Atlanta airport. The airport managed to handle a total of 95,513,828 passengers in the year 2012; this was close to a 3.4 % increase from the year 2011. Atlanta does not even have a location that is feasible for another airport (Hartsfield-Jackson, 2011). This passenger traffic was a little lower than that from Beijing capital airport, which was recorded a 4.1% growth rate. This rate put the airport at 81,929,359 passengers (world airport traffic 2011). In a number of years ago the Beijing hub was looked like it had been balanced dethrone Hartsfield-Jackson. However, its ascent looks like if it has hit a wall, this means that there it has not shown any extra growth from what has already been recorded. Although in 2012 Beijing growth slowed by 1/3 the city have plans of building the largest airport in the world (Rosenberg, 2011). In addition, the airport managed to jump from the 8th position to the second position, which is a clear indication that it has a capacity of surpassing Atlanta International Airport as the world's busiest airport in a couple of years (Rosenberg, 2011). The following figure clearly shows the passenger and cargo traffic from 2001 to 2008 Source: http://www.atrsworld.org/docs/2010ATL.pdf Financial Representation Financial overview of this large airport is important and for these reporting purposes the department falls under the classification of an enterprise fund. As indicated earlier in the previous section, the airport does not receive any funding from the general fund of the Atlanta city. It gets its income from advalorem taxes that are assed to the city of Atlanta residents. The revenues of the airport are from landing fees, lease of properties, fees from parking, and additional Airport-specific revenue sources. The budget of the airport annually is prepared through the utilization of lease and agreement use, the terminal complex lease, as well as, other lease agreements that are significant. The airport budget preparation is based on non GAAP basis. This approach is taken because the capital expenditures are taken as expenses while depreciation is excluded in the budget. The establishment of the budgetary control is at the office level belonging to each department. The strength of the budgetary control is maintained by the subsystems’ and purchasing of the accounts payable. These aspects encumber budget monies automatically subsequent to the issuance of the purchase orders, as well as, funds disbursement, maintenance and strengthening the budgetary control (Atlanta (GA.). 1996). Financial statements overview The Department of Aviation is in charge and control of the major enterprise that are wholly owned by the Atlanta city. The financial statements of the department are all set on an accounting accrual basis in line with the accounting principles that are accepted generally in the US as promulgated by the (GASB). Therefore, recognition of the revenues is done when they are earned and incurred. Capital asset apart from those of land and the ones held for future use are depreciated and capitalized within their predictable functional lives Information on all department assets and liabilities is belonging to the department and Aviation is shown in the Balance. However, the difference between the two is reported as net assets (Atlanta, 2000). The increase or decrease of the net assets over time is a useful indicator of the financial position of the department. The expenses, revenues and changes in net assets statements presents evidence that changes experience over the year on the department net assets. Once the underlying event that gives change to the rise to the change takes place all changes that have been experienced in the net assets are reported. This is done regardless of timing frame of the correlated cash flow (GA., 2000). Therefore, reporting on expenses and revenues is done in this statement for a particular item that is likely to result into prospect monetary period cash flows. The cash flow statement is responsible for reporting the cash, as well as, cash equivalents. The transactions that are recorded in these statements are only those that affect the department cash accounts (Alan Voorhees & Associates, & Atlanta (GA.). 1968). These statements are followed by a reconciliation to help and assist in bringing out a clear understanding of the difference between cash flows, operating activates, and the operating profits. Revenues Most of the airlines and the Atlanta that serves the airport have signed agreements that articulate the use of the airfield. The airline pays the landing fees that are able to offset an operating and maintenance fee portion. There are debt service and other additional coverage of 20% on the GARB that is given to the finance airline (Department of Aviation City of Atlanta, June 30, 2011). Over a period of 3 years the total revenues of the airport increased with a 17.7%in the year 2011 compared to 2010. There was an increase of 2.6% increase in the operating expenses while those that are none operating recorded an increase of 53.9 %.The table below shows the comparative statistics that represents the last three economic periods. Table: 1. Total Revenue Revenues 2011 2010 2009 Operating revenues $411213 $400799 $ $389535 Percent change 2.6% 2.9% 0.9% Non-operating 257497 167347 284710 Percent change 53.9% -41.2% -3.5% Total revenues $668710 $568146 $674245 Total percent change 17.7% -15.7% -0.1% Source: City of Atlanta, Department of Aviation Airport Financial Position The financial position of this airport is represented by the balance sheet at the end of a monetary period. All the assets and liabilities of the airport are included in the statement where the net assets are the difference that is there between the total liabilities and assets. This can be used as an indicator of the airport financial health. During the year 2011 fiscal period there was an increase of the net asset by $229.1 which is a 5.5% over the past fiscal year. In 2010 the net asset experienced a rise by 3.0 % compared to 2009 fiscal year. The following table is a clear representation of the financial position of a period of 3 years (Department of Aviation City of Atlanta, June 30, 2011). It is important to note that currently the airport is world busiest airport. In respect to the financial statement and evidence provided above in this paper it is clear that the airport has not been increasing only the number of passengers and flights, but also their profits and financial position in general has increased significantly. Table: 2 Total Assets 2011 2010 2009 Current assets $714512 $595370 $606,736 Restricted investment 1329343 766258 1037356 Capital assets 5605714 5236127 4928894 Deferred assets 109972 107509 115852 Total assets $7759,541 $6705264 $6688838 Source: City of Atlanta, Department of Aviation An increase of 15.7% in the total assets was recorded in 2011 fiscal year (Department of Aviation City of Atlanta, June 30, 2011). All these increments are as shown in above table. All these net increase can be attributed to the result of issuing revenue, as well as, refunding Bonds that totals up to $1.1 billion and paying off the debts. Increase in the current asset could have resulted from City’s choice of retaining cash related to CFC and PFC receipts. Capital assets, frequently driven by those activates that are related to the building of the new-fangled international terminal, increased significantly. Other important features It is important to address the issue of traffic control in the airport. Having in mind that the number of landings and take offs are so many control of these flights seems to be a critical activity to undertake. In each pair of runway there are set of two traffic controllers who are both workers for Federal Aviation Administration (FAA) (Pritchett. June 2002). Steering of aircraft is the responsibility of the ground controller and guides the aircrafts in between the runways and ramps. The tower controller takes charge of aircrafts before they land and when they are within the runway until the time they will just take off. There are other controllers who help in the task of delivering pre-departure clearances of aircrafts (Pritchett. June 2002). Conclusion The above analysis has clearly shown that the Airport is an own entity of the Atlanta City which is operated by the City’s department of aviation. The airport in this case is not funded by external sources like other Airports in the region. The analysis has also shown that the number of pass angers and flights has been increasing significantly from 2001.The airport traffic is enormous compared to other airports in the region and world. The services offered are unique and customer friendly, this is what has enabled the airport to have a competitive advantage over its close competitor the Beijing airport (Bell, 1980.). The airport has also taken a step forward in expanding the Airport terminals in order to be able to accommodate the growing number of flights and traffic. In the financial overview it is clear from the figures provided that the revenue of the airport has been increasing especially in the last 3 years. This is an indication that the airport has been performing well financially. Therefore, with the current managerial practices applied in the airport it is likely to grow even further in the near future in terms of cargo, passengers and flights. Reference List Atlanta, 2000. Master plan, working papers: Hartsfield Atlanta International Airport.. 1 ed. Atlanta: City of Atlanta Dept. of Aviation.. Alan M. Voorhees & Associates, & Atlanta (GA.). 1968. Atlanta airport transportation studies. McLean, Alan M. Voorhees & Associates. Atlanta (GA.). 1978. Airport layout plan report, William B. Hartsfield, Atlanta International Airport. College Park, Ga, Robert & Co. Atlanta (GA.). 1996. 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On the control of airport departure operations. Atlanta, Ga, Georgia Institute of Technology. http://hdl.handle.net/1853/37261. Department Of Aviation City Of Atlanta, G., June 30, 2011. Comprehensive Annual Financial Report For the Fiscal Year , ATLANTA: City of Atlanta Dept. of Aviation. Georgia. 1900. Review report, state of Georgia, Georgia Aviation Hall of Fame year ended. Atlanta, GA, Dept. of Audits and Accounts. National Research Council (U.S.). 2004. Safety, economy, and efficiency in airport and airspace management and operations. Washington, D.C., Transportation Research Board. Padova, A., 5 September 2007. Airport Governance Reform. Economics Division, Volume 1, p. 1. Peoples, J. 2012. Pricing behavior and non-price characteristics in the airline industry. Bingley, U.K., Emerald. http://www.emeraldinsight.com/2212-1609/3. Rempfer, P., Stevenson, L., & Huntley, M. S., JR. 1980. Atlanta Tower Cab and TRACON Equipment Integration Analysis. Ft. Belvoir, Defense Technical Information Center. Rosenberg, M., 2011. Busiest Airports in the World. The 20 Busiest Airports in the World , Volume 1, p. 1. United States. 1981. Special investigation report: aircraft separation incidents at Hartsfield Atlanta International Airport, Atlanta, Georgia, October 7, 1980. Washington, D.C., the Board. Wilbur Smith and Associates, Rosser Fabrap International, Airport Technology and Planning Group, Duckett And Associates, Inc, & Georgia. 1994. Georgia statewide aviation system plan: phase I--air carrier/air cargo : executive summary. [Atlanta, Ga.], Georgia Dept. of Transportation, Office of Intermodal Programs. Read More