APPENDIX F

Summary of the Schiphol Report's Findings and Recommendations

Plus DOT's Response

Mission and Strategy

Findings

• The mission statement is focused on safety, efficiency, and convenience - implying a vision of the airport as little more than a public service facility.
• There is no overall strategic plan that encompasses marketing, physical and financial planning, environmental policies, and political issues such as community concerns.
• Bradley needs to choose between one of two strategic options. The airport can pursue (1) a "volume strategy", where the goal is to grow economic activity by increasing passenger and cargo traffic, or (2) a "yield strategy" where the goal is to grow in value by maximizing net revenues through increases in rentals, fees, and charges.

Recommendations

• Construct a mission statement for Bradley that notes the airport seeks to be best in class, customer friendly and driven, an economic engine for the region, and managed in a professional and business like manner.
• Bradley should adopt a "volume strategy."
• Bradley needs to put an emphasis on enhancing "returns on Investment" (ROI)

DOT response

DOT indicates it has a broader vision of its mission than the written statement describes and faults itself for not sharing this vision, noting the department sometimes chooses to promise less and deliver more. DOT indicates it is constantly striving to improve customer services and acknowledges Bradley has a role to play in the region's economy.

DOT maintains it has vigorously and successfully pursued the "volume strategy" noting among other things increases in the number of carriers (7), the number of nonstop destinations (18), and cargo volume (up 23 percent since 1995).

DOT disputes the method used to calculate "return on investment" in the report. It believes passenger facility charges (a per passenger remittance to the airport) should be included in computing returns and the consultants should not have ignored an estimated $100 million in existing private investment at Bradley.

Marketing - passengers

Findings

• The marketing plan prepared for 1998/99 provided a short-term action plan focused on promotion and advertising. It did not articulate a long-term vision of what the plan expected to achieve or identify the resources needed to carry out the plan.
• Bradley has not been successful in differentiating itself from other airports and needs an aggressive marketing strategy to put itself on the map as an alternative for airlines.
• The value of Bradley's marketing through contracted air service development firms is limited.

Recommendations

• Bradley must aggressively market itself to airlines and passengers as an alternative airport and strengthen its relationships with present and future customers.
• Bradley needs to refocus its resources away from print ads and consultants and toward establishing a professional in-house marketing staff.
• Bradley needs to create a Quality Board composed of airport stakeholders to provide a mechanism for discussing issues and establishing standards.

DOT's response

DOT states it has an aggressive marketing strategy. Evidence of this is the addition of several new, low cost carriers in recent years, which according to DOT is a direct result of personal meetings and presentations to airlines by both Bradley's marketing staff and its air service consultant. Bradley's print and radio advertising has been directed at building "Brand" and has been effective as evidenced by an increase in Fairfield County passengers from less than 2 percent in 1993 to approximately 10 percent in 1999. DOT acknowledges value of the Quality Board and other customer service recommendations, but believes several customer feedback mechanisms were overlooked.

Marketing - cargo

Findings

• Cargo has grown strongly at Bradley over the past decade, but the growth has fluctuated randomly and does not correlate to economic indicators.
• Land leases at Bradley have exceeding long terms and rental rates are very low
• Bradley is an attractive location for cargo development based on its strength of good interstate road network, airside infrastructure, capacity for growth, and dependable winter operations.

Recommendations

• Bradley should aggressively pursue cargo operators and seek to become the choice of cost sensitive cargo operators.
• Bradley should develop an overall cargo-related strategy with the four neighboring towns.
• Bradley's agreements with cargo operators should set a maximum 10-year concession period to keep control of land for future development and charge market rates.
• Marketing staff should develop a strong relationship with the cargo community in order to better understand and meet its needs.

DOT response

DOT indicated it maintains a close relationship with the cargo community and has worked closely with the Bradley Development League in jointly pursuing cargo leads and staffing trade shows.

Master Planning

Findings

• Bradley's current master plan was prepared in 1993 - covers the period up to 2015 - and has not been updated or comprehensively reviewed, as good master-planning practices would dictate.
• DOT should not have proceeded with terminal expansion plans without an up-to-date master plan.
• The introduction of Southwest Airlines changes Bradley's growth scenario and no overall plan to address the situation has been developed.

Recommendations

• Review the forecasting data, based upon strategy and marketing plan, with a planning horizon of 2015-2020.
• Review the Master Plan for the entire airport according to new projections and planned activities, incorporating the airport-zoning concept.
• Review the Federal Inspection Service (FIS) facility location and hotel re-use option.
• Preserve terminal expansion options for the future.
• Reserve space within the appropriate zone for new activities such as a second hotel, real estate, hangers, and train station.
• Use a one-terminal concept in planning airport development - it is more efficient, commercially attractive, economical, and passenger friendly than the current plans.

DOT Response

DOT stated master plans typically are updated every 10 years. It noted the 1997 Terminal Study did update the forecasting data. DOT pointed out the new FIS facility is consistent with the 1993 master plan. DOT noted it had examined the hotel and found it did not lend itself the changes suggested by the consultant. DOT indicated that for the most part the plans for the Bradley terminal were consistent with the consultant's report.

Financial Performance and Planning

Findings

• The 1982 bond indenture creates the framework for financial management of the airport.
• Financial maneuverability of the airport is tightly bound. Airlines consent is required on the operating and capita budgets and surpluses cannot be used without the authorization of the State Bond Commission.
• Under current airline agreements Bradley derives little financial benefit from increases in volume.
• DOT financial managers view compliance with the bond indenture as their sole responsibility.
• Management dwells on budget issues, lacks an overall and integrated long-term focus, and neither receives nor provides incentives for innovation, improvement, or efficiency.
• Financial performance has been marginal when measured by net profit and return on capital.
• The budget planning and control cycle is well organized and management has a tight rein on costs.

Recommendations

• Profitability and return on investment should be the highest priority.
• Cash flow should be viewed as no more than a tool to promote business objectives.
• Investments should be assessed in terms of their returns, capital costs, and depreciation.
• Assess revenue growth opportunities developing commercial office space, advertising inside terminals, aircraft services, and cargo facilities and development.
• Review the need for an external debt capacity limit.
• Study downsizing the fire rescue crew.
• Review the decision to use state troopers to provide airport safety and security.

DOT response

DOT states the airport must operate within a set of regulatory concerns, state laws, collective bargaining and contractual agreements, FAA regulations, and political realities. Regarding recommendations to increase revenues from carrier and commercial activities, DOT notes the intent of the Airport Enterprise Fund is to recover costs of providing airport facilities and public services primarily through user charges. This approach is consistent with FAA policy and federal airport improvement grant and passenger facility charge assurances that require establishing only reasonable rates and charges. According to DOT accumulating excessive surplus revenue would be an indicator of unreasonable rates and charges. DOT repeated its concern that the return on investment calculations used in the report exclude Passenger Facility Charges, resulting in an understatement of revenues. DOT indicates that when these revenues are included in the ROI calculations the results are more favorable to Bradley.

Airline Agreements

Findings

• The landing rate calculation used to allocate airfield costs at Bradley (landed weight and landings) results in a large part of the airfield costs being assigned to lighter aircraft (general aviation), which are exempt from paying landing fees. This prevents Bradley from fully recovering all the costs related to the airfield, and in the process grants commercial airlines a better landing rate than they get at other airports.
• Airlines pay costs for only the areas of the terminal they use exclusively (30 percent of the terminal) and not for common spaces used by everyone, resulting in Bradley losing money on its terminal operation.
• Commercial airlines do pay their fair share for apron space.
• Aviation activities at Bradley are subsidized by non-aviation activities.
• Airlines maintain existing agreements prevent Bradley from imposing fees on third parties providing services to airlines (The report disputes this claim).
• The influence of the signatory airlines with respect to capital improvements is unacceptable and may be an obstacle to airport development.

Recommendations

• DOT should amend airline agreements to make it clear the airport has a right to impose fees on third parties.
• DOT should use the opportunity provided by the construction of the new terminal to renegotiate airline use agreements.

DOT response

DOT states it is currently developing a new five-year airline agreement based on preferential use of facilities. It notes the current airline agreements' are a potential obstacle to airport development, but points out no major project has ever been stopped by an airline veto.

Retail and Terminal Concessions

Findings

• The food and beverage aspects of Bradley's retail services fall well short of industry standards
• The new terminal provides an excellent opportunity to improve the retail program.
• Opportunities to increase airport revenue can be found in agreements for advertising, rental cars, telecommunications, vending machines, baggage carts, and other areas.

Recommendations

• Bradley should develop a "portfolio concept" for providing retail and terminal concessions (researching and developing the type of concessions that meet the needs of the particular target groups using the airport).
• The contract with Host Marriott should be re-negotiated to improve the quality of food and beverage services.
• DOT should pursue better agreements for duty free stores, advertising, financial services, telecommunications, and vending machines.

DOT Response

DOT acknowledged the growing importance of retail activities at airports, the need to develop a strategy that meets travelers' needs, and the shortcomings in current food and beverage services. It noted the value of improving these services and indicated it is seeking opportunities accomplish this objective along with obtaining more favorable terms for the airport. DOT points out the report did not suggest a strategy for renegotiating the existing contracts without incurring costs that would undermine efforts to minimize costs and maximize revenue.

Airport parking

Findings

• Revenue from parking exceeds $8 million per year and is the largest single source of airport income.
• The decision to turn over development and operation of a new parking garage and all surface parking to a developer under a 25-year contract raises several strategic and financial questions.
• On airport parking has been placed at a disadvantage relative to private off-airport parking by the imposition of a sales tax on the former and a concession fee on the latter, which is among the lowest in the nation at 4 percent.

Recommendations

• Equalize the sales tax applied to on- and off-airport parking.
• DOT should develop an overall parking pricing policy while managing the parking flow.
• Short-term and long-term parking should be located close to the terminal, and long- term parking should at an efficient surface parking lot between five and 10 minutes away from the terminal.

DOT Response

DOT states the decision to turn over the construction an operation of the parking garage and surface lots to a vendor for a 25-year period was the result of careful analysis that found this approach was the best way to protect current and future parking revenues, pay for the bond issued to construct the garage, and provide the quickest and most cost-effective means for developing the parking structure. DOT agrees private parking lot operators have a competitive advantage through their sales tax exemption and 4 percent concession fee. However, DOT pointed out that both of these things were the result of legislative actions.

Safety and security

Findings

• Safety and security at Bradley meet all FAA requirements.
• The cost of providing safety and security through Connecticut State Police and the DOT Fire Brigade ($0.68 per passenger in 1998) is more than three times as expensive as the cost at Indianapolis International Airport, and almost three times the cost at Columbus International.

Recommendations

• Greater utilization of the firefighters by assigning additional responsibilities and optimizing the shift structure.
• Use private security to accomplish many of the tasks currently performed by Connecticut State Police.

DOT Response

DOT stated it finds it difficult to look at safety and security primarily as an issue of cost and budget. It pointed out that federal inspectors have recently evaluated Bradley and indicated it would be used as the standard to measure other airports.

Governance, Management Structure, and Culture

Findings

• DOT's operational capabilities have ensured that Bradley is a reliable and safe facility, but it is not yet a "World Class" or "Best in Class" airport.
• The lack of clear accountability and sophisticated business management and marketing skills will continue to relegate Bradley to a catch-up position.
• The management structure that has been in place for decades must bear primary responsibility for Bradley's present condition.

Recommendations

• Establish a Board of Directors composed of eight to 10 members including the commissioners of DOT and DECD, and five or six CEO's of state industries. The board should provide oversight of the airports management, ensure it engagers in strategic planning, has a customer service focus, and seeks economic development opportunities.
• Hire a new professional airport management team reporting to the DOT commissioner and the Bradley Board of Directors. The team should be located at the airport and to handle all aspects of the airport's operations.
• Retain and more constructively use the Bradley Commission.

DOT Response

DOT states that having raised concerns about the accuracy of many of the facts that form the basis for the report's findings, the recommendations contained in the report need to be revisited. Further, DOT questions the need to change a management approach the report acknowledges has provided a safe and reliable airport. DOT reiterates previous statements indicating it currently is pursuing many innovations called for in the report. DOT does agree it may be useful to review the makeup of the Bradley Commission and consider the inclusion of stakeholders who operate at the airport in order to add their perspective to the body's deliberations.

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