Legislative Program Review and Investigations Committee

Chapter IV

Airport Governance

Studies of Bradley

As discussed in Chapter I, there have been a number of task forces, advisory groups, and working groups (examples include the industry clusters advisory group; Governor's Council on Economic Competitiveness and Innovation; Transportation Infrastructure Advisory Team, and the Bradley Advisory Group) that have concluded that Bradley International Airport is an important tool in the future economic development of the Hartford region as well as the entire state. The chronology of those groups and their focus on Bradley was outlined in Chapter I. The results of the various groups work are discussed below.

The groups mentioned above believed expertise was needed in analyzing Bradley as a competitive airport and as an economic development tool. Since 1998, three separate consultants have been commissioned to study Bradley from different perspectives. Each of those consultants - Frasca, Schiphol, and Gallis - issued separate reports, which are summarized in this section. While each approached its task in a different way, a common theme runs through the outcomes.

There is a strong belief that a profound institutional and cultural change will be necessary if Bradley is to succeed. The change must produce an organization that has a clear vision, a highly customer- and community-focused orientation, a capability to properly assess and take risks to realize the airport's potential, an agility and commercial sophistication to capitalize on market and financial opportunities, and a management approach that fully taps the energy and innovative resources of a motivated staff.⁹

Frasca report. Frasca and Associates, L.L.C., is a financial and management consulting firm located in New York City. In 1998, the firm was hired by the by the Transportation Infrastructure Advisory Team, a sub-group of the Governor's Council on Innovation and Technology, to assess recent experience at airports in the U.S. and worldwide where private management arrangements have been initiated. A subsequent focus of the study was to examine specific challenges facing Bradley and assess those in the context of approaches to airport management. A summary of the key findings of both segments of the consultant's report (both segments were issued in September 1998) is provided below:

Key findings of the first segment of the Frasca report.

• Virtually all commercial airports (with commercial air carriers) are publicly owned.
• Most U.S. commercial airports contract certain functions to private sector companies; thus, the majority of employees are private sector, and not government employees.
• Very few U.S. commercial airports have private management. In contrast, many European and Latin American countries airports have moved to private management or outright private ownership.
• Factors motivating the private ownership/management trend include enhancing marketing and management, accessing additional financing, and receiving financial benefit from the proceeds of sale or lease of an airport.
• The track record of privatized commercial airports is limited - only recent.
• Each airport is unique and models of management must be assessed on strengths, weaknesses, and constraints to match with strategic objectives.
• There are many ways private sector participation can enhance airport management and competitiveness, depending on objectives.
• The importance of planning - financial, marketing, operational, and facility -cannot be overstated. In considering a shift from one type of governance to another, there must be a clear understanding of the objectives, opportunities, and risks.
• Retail concessions offer valuable opportunities to enhance revenue and promote public image.
• Airports must find ways to be competitive to maintain position and grow. Community attitudes and political environment can help or hinder that growth potential.
• key findings of the second segment of the report, which focused on Bradley, are included in Table IV-1, on the following page.

Schiphol Report. In May 1999 the Departments of Transportation and Economic and Community Development hired Schiphol Project Consult B.V., a subsidiary of Amsterdam Airport Schiphol - a European airport management company - to review operations at Bradley International Airport and develop proposals to ensure the airport reaches its full potential as an economic asset of the state and region. Schiphol's report was released in November 1999.

The report includes a table summarizing what Schiphol viewed as Bradley's strengths, weaknesses, opportunities, and threats. An examination of the table -- which is reproduced as Table IV-2 -- indicates the consultants see Bradley as beset with management problems at a time when the airport is simultaneously confronted with threats from competitors and opportunities to grow.

At its core, the Schiphol report conveys the view Bradley is being operated like a transportation facility when it should be run as a business. Implied throughout the report is the notion if Bradley does not change it will never be more than a second tier airport. The report includes numerous recommendations for change. Grouped thematically, the proposals may be characterized as follows:

• Broaden the mission statement for Bradley to include a vision of the airport as seeking to be best in class, customer friendly and driven, an economic engine for the region, and managed in a professional and business-like manner.
• Develop a marketing strategy that strengthens Bradley's relationships with its present and future customers, increases understanding of their needs, and advances the airport as an alternative that can meet those needs.
• Introduce business-like decision-making regarding the utilization of scarce financing capacity and relate long-term financial planning to a strategic business plan and airport master plan.
• Establish a Board of Directors to set policy for Bradley and contract for a professional management team reporting directly to the board and the DOT commissioner.

Overall, the report contained findings and recommendations in 10 specific areas. Key aspects of each of the areas are highlighted in Appendix F. It should be noted DOT strongly disputes the accuracy of many of the report's findings. It also questions the need and value of several of Schiphol's recommendations. Given this view and the fact the findings and recommendations in many instances are based on the opinions and beliefs of the consultants, a summary of DOT's response to the report is included in Appendix F.

Gallis Report. The Gallis Report on Bradley International Airport, Establishing the Context: Global to Regional, was one part of a larger study on regional and global transportation and how Connecticut fits into the larger transportation picture.

Key findings of the Gallis Report on Bradley.

• Connecticut is in danger of becoming isolated, as surface modes of transport move west of the Hudson River and Bradley becomes crucial as Connecticut's most important link to the global marketplace.
• Airports, including Bradley, are commonly viewed as public facilities, but they increasingly operate in a competitive environment, competing for passengers and air service. Often airports provide a critical element to a region's competition for economic activity, requiring it to reach beyond its borders to form new sets of social, economic, transportation, logistic and communication relationships.
• These new demands are generating significant change in the culture of airports: only those airports that develop a highly competitive and entrepreneurial culture will be able to maximize their future and that of their regions.
• It is imperative that Bradley develop a competitive stance because:
  • there is an opportunity now for Bradley to capitalize on the capacity problems at New York and Boston airports;
  • without a strongly directed and competitive stance, Bradley runs the risk of losing market share as other airports expand to consume Bradley's market area; and
  • decisions regarding Bradley's future must be made with an understanding of the airport's impact on the future of Connecticut, its economy, and institutions.

Conclusions drawn from the reports. Based on the findings of these reports, the Governor's Council Leadership Committee and the Bradley Advisory Group communicated to the governor and legislative leaders that Bradley's current management structure within DOT's Bureau of Aviation and Ports will not allow the airport to reach its full potential. The crux of the conclusions reached by these groups is that Bradley does not have a clear vision and mission to achieve economic development and that it is not a "world class" or "best in class" airport. The Bradley Advisory Group (which issued its findings in April 2000) indicated that to rank in these categories an airport must have a sustained record of:

• providing a wide range of flights to key locations where passengers and businesses want to fly;
• offering competitive, if not lower, fares on flights than nearby airports;
• generating or attracting capital to continue investing and maintaining terminals and physical activities that are "first class";
• providing highest quality in customer service -- e.g., signs and other communication; customer responsiveness; and easy access to gates, baggage and parking;
• using modern strategic, business and marketing planning as essential management tools;
• creating a safe and secure airport that provides reliable service;
• interacting with major business interests to respond to and help shape the region's economic future;
• developing a good working relationship with neighboring communities to jointly tackle issues that arise;
• offering a wide variety of goods and services at concessions;
• creating a vibrant commercial center on and around the airport that generates jobs, opportunities, and wealth;
• planning for long-term intermodal transportation that effectively links the airport with rail, roads, and ports; and
• creating a terminal that is a symbol of the community and region.

Proposals resulting from the reports. To achieve the functioning of a "best in class" airport, the Bradley Advisory Group and the Leadership Committee advocated a change in the fundamental governance structure of Bradley airport. Options for change were presented to the governor and legislative leaders in May 2000, after the legislative session had ended. The principal recommendation was for a Bradley Board of Directors to be formally established by the governor and legislative leadership. The composition of the board would include key business leaders, the DOT and DECD commissioners, and senior representatives from communities surrounding Bradley, and the region, including Massachusetts.

The board would have clear authority to direct the future of the airport and to select a management team that would be held accountable for the airport's operating results. The board's recommended functions would include:

• establishing mission, vision, and goals for Bradley;
• approving capital and operating budgets, and facilities, business and long-range plans;
• establishing and tracking performance measures for the airport;
• approving consultant contracts in excess of specified limits;
• appointing an airport executive director and approving hiring of senior staff;
• approving compensation and benefit policies for senior management; approving policies governing airport usage by tenants and approving property and space leases; and
• approving all construction contracts and service agreements; and approving terms of debt financing before legislative review.

While the proposal for a Board of Directors was considered crucial, the Leadership Committee and Bradley Advisory Group suggested one of two organizational options under the Board of Directors:

• create a unique public/private partnership; or
• establish a new authority for Bradley.

In the first instance, the board would appoint the management team, which would be accountable to the board (rather than the DOT). The management team would oversee the day-to-day operations of the airport, including overseeing existing DOT employees. With the second option, all airport staff would be authority employees, who would ultimately be responsible to the board. All existing DOT staff would be given the option to become authority employees. In either case, the proposals recommended that no existing DOT employees lose their jobs because of structural changes.

DOT did not agree with either of these options. Instead, DOT proposed that it retain control of the airport, but that an executive council be created to work with the DOT to develop: a mission statement; long-term goals; a strategic plan; an airport master plan; a marketing plan; customer service standards; airport commercial activity; economic development considerations; and activities to maximize revenues.

As discussed in Chapter I, the governor created an executive council via Executive Order No. 18 in May 2000. The charge given the executive council appears similar to the DOT proposal. However, the executive order appears to limit the scope of what the council may consider for airport structure because it states it should recommend changes to "enhance the operation of Bradley International Airport by the Department of Transportation". Under the executive order, the council terminates on December 31, 2001. A key difference between the DOT proposal and the executive order is that under the latter the executive council will advise the governor and not just the DOT on issues relating to the future of Bradley International Airport.

The executive council has met about twice a month since its formation in July 2000 and is scheduled to deliver its legislative recommendations to the governor in January 2001. The question remains whether the council will propose the structural and cultural change that has been repeatedly called for at Bradley International Airport.

Committee Findings and Recommendations on Governance

The major theme running through the findings outlined in the program review committee's report is the need for Bradley International Airport to operate as a business enterprise rather than a transportation facility. In addressing the findings, the committee made a number of specific recommendations designed to help Bradley's management team operate the airport as a business. These included proposals to:

• add resources to business development, marketing, and planning;
• modify several state statutes and DOT policies and procedures aimed at increasing the airport's flexibility and streamlining its ability to respond to problems and opportunities; and
• require Bradley to perform functions common to a business enterprise, such as developing strategic and business plans.

An additional means of assuring a business perspective at Bradley is to change the governance structure. As noted in this chapter, there are several airport governance models in use throughout the world that could be employed to accomplish this objective.

These models could be set on a continuum ranging from completely public to entirely private. However, the committee discarded the extremes as not being practical at this time. Being consistent with the purpose of the study, the committee identified simple governance structures that met an objective for introducing a business viewpoint into Bradley's decision-making process.

Figure IV-1 shows the governance models the committee considered for Bradley placed on a continuum, which -- moving from left to right -- reflect greater autonomy from DOT. Three of the models were derived from governance structures identified in one or more of the studies of Bradley referenced above. The committee added the fourth, an independent state agency.

The models range from an advisory board to an independent authority. Two key functions differentiating the options are the party given the ultimate authority to direct the operation of Bradley and the entity employing the airport staff. Under the advisory board structure, the power to direct resides with DOT. Under the other three models the board exercises this authority. In terms of the employing entity: DOT employs the staff under the options that create an advisory board and most of the employees under an executive board; a newly created state agency is the employer under a third option; and staff is employed directly by a quasi-public authority under the last option.

The program review committee analyzed how specific responsibilities would be handled under the four governance options shown in Figure IV-1. The responsibilities were primarily obtained from the list contained in the report of the Bradley Advisory Group published in April 2000. As modified by the committee, the principal responsibilities include:

• establish a vision and mission for Bradley International Airport;
• approve operating and capital budgets;
• appoint senior level management staff;
• approve airport policies and procedures;
• approve contracts;
• approve airport master, layout, strategic, and business plans;
• create an economic development focus; and
• establish performance measures and track the results;

Three key assumptions were built into each of the four models. First, all existing staff would be retained at the same or higher salary and benefit level. Second, the commissioners of the Departments of Transportation and Economic and Community Development would be ex officio voting members of any board. Finally, and most important, there would be no more than nine voting members on any board. All appointed members would be chosen by the governor and confirmed by the General Assembly.

The four governance models reviewed by the committee are outlined below. Also included are a brief description of the role of the board under each option, identification of the entity employing staff, and a listing of the major pros and cons seen by the committee.

Advisory Board

Purpose: To assure those with the power to direct the development and operation of Bradley International Airport have access to advice from individuals with significant business experience

Employing entity: DOT

Board of Directors

Purpose: To assure those possessing the power to direct the development and operation of Bradley International Airport have significant business experience and bring a business perspective to the formulation of airport policies.

Employing entity: DOT for existing employees. In the future, selected top management positions would serve at the pleasure of the board.

State Agency

Purpose: To assure the agency operating Bradley has a single focus, does not need to compete with other units within the same department for resources, and the power to direct the development and operation of the airport is in the hands of individuals who have significant business experience and bring a business perspective to airport policies.

Employing entity: New state agency

Quasi-Public Authority

Purpose: To assure Bradley International Airport has single focus, is free of the state bureaucracy, and the power to direct the development and operation of the airport is in the hands of individuals who have significant business experience and bring a business perspective to airport policies.

Employing entity: Authority

Governance Structure Recommendations

As the pros and cons show, none of the models offer a perfect solution to the concerns raised in this study. While all the options presented meet the objective of providing a business focus and direction to Bradley, none does so without introducing new issues or failing to solve all existing problems.

In choosing a model to recommend, many factors were taken into consideration but the final decision was generally based on the committee's view of the effect of one or two key matters on Bradley's development. For example, the advisory board was eliminated as a possible recommendation based on the committee's belief that such a board would be too weak to overcome any resistance presented by DOT, and over a period of time this reality would lead to the frustration and eventual resignation of the more assertive and committed board members.

The program review committee dismissed the single purpose state agency model from further consideration primarily on the belief such an agency would face the same bureaucratic hurdles from the Department of Administrative Services and the Office of Policy and Management as currently confront DOT. Given this, the committee concluded the gain -- primarily an agency with a single focus -- was not worth the disruption that would result from forming a new agency.

Setting up an authority and staffing it with personnel transferred from DOT, and mandating they maintain their existing employment rights and privileges posed numerous problems, which the committee did not believe could be overcome in the short run. Committee staff discussed the matter with Connecticut Lottery Corporation officials, who went through such a conversion -- from state agency to quasi-public corporation -- in 1996. Lottery management indicated they are still working to solve similar personnel issues associated with the conversion. Based on this information the committee concluded the disruption related to making Bradley an authority would, in the short-run, divert attention away from key policy and operational matters at a crucial time.

Through this process the board of directors option emerged as the preferred choice of the program review committee. The full recommendation follows.

• A Board of Directors shall be established to oversee the operations of Bradley International Airport.
• Composition. The board shall be composed of seven prominent and experienced leaders of business and industry crucial to Connecticut and Bradley's regional service area. All members shall be appointed by the Governor, and shall be approved by the General Assembly. The governor shall appoint the chairperson of the board from among the business and industry members. Members shall be appointed for four-year staggered terms. The commissioners of the Department of Transportation and the Department of Economic and Community Development shall be ex officio, voting members. A member of the board shall be eligible for reappointment. No member may have a financial interest in the airport or its concessions. Each member of the board before entering upon his or her duties shall take and subscribe the oath or affirmation required by article XI, section 1, of the State Constitution. A member who misses three consecutive meetings shall be deemed to have resigned from the Board, and the Governor shall immediately make a new appointment to fill the vacancy.
• Purpose. The purpose of the board shall be to set a direction for Bradley International Airport that will establish it as a competitive, thriving enterprise, driving the economic development of the region.
• Transition period. The commissioner of the Department of Transportation shall be the chief administrative officer of Bradley International Airport, reporting directly to the Board of Directors, until not later than January 1, 2003. By January 1, 2003, the board shall develop a job description for a Bradley International Airport chief executive officer. The qualifications may include, but not be limited to, experience in airport administration, finance and budgeting, planning, and business development.
• Powers and duties. The Board of Directors shall have the following powers and duties:
  • Adopt a mission and vision for Bradley International Airport;
  • Approve the operating and capital budget for Bradley International Airport and monitor the airport's indebtedness;
  • Approve all airport policies and procedures;
  • Employ staff and consultants as necessary to oversee and manage Bradley International Airport;
  • Establish goals and objectives for the airport and for key management staff, and track performance;
  • Establish and implement by June 1, 2002, an organizational structure for Bradley International Airport that at a minimum includes divisions for operations, finance, business development, and planning and project development, each of which shall be headed by a director.
  • Direct the development and implementation of Bradley International Airport's master, layout, strategic, business, marketing, and customer service plans;
  • Approve all airport contracts and use agreements whose value exceeds $100,000;
  • Direct commercial development for the airport;
  • Direct the economic development focus, including seeking out and promoting grant and loan incentives for businesses to locate or expand within the Bradley International Airport service area;
  • Direct efforts to maximize revenue production; and
  • Periodically review all policies and procedures that impact Bradley operations and where constraints are identified that hamper Bradley's ability to act quickly, or prevent growth opportunities, the board shall seek an exemption to compliance.
• Employees. All current employees assigned to Bradley International Airport shall remain employed under the same working conditions, privileges, and rights as currently exist. Any newly authorized position filled after October 1, 2001, that is funded under the Bradley Enterprise Fund and reports directly to the Board of Directors or to a position that reports directly to the board, shall be under the sole purview of the board, and the board shall decide the duties, skills, qualifications, and salary level of the position and shall select the candidate to fill the position. Such newly authorized positions or filled vacancies shall not be considered classified service positions and the holders shall serve at the will of the board.
• Administrative functions. Administrative functions such as payroll and benefits, shall continue to be performed at the Department of Transportation, which may submit for reimbursement from the Enterprise Fund the costs for performing such services.
• Bradley Airport Community Commission. There shall be established the Bradley Airport Community Commission to address issues of concern to local communities surrounding the airport. The membership and appointment of the commission shall be as currently constituted in Section 15-101r(b) of the Connecticut General Statutes, except that one member shall also be a member of the Bradley International Airport Board of Directors. Sections 15-101r and 15-101s of the C.G.S. shall be revised to include the following powers and duties:
• provide advice to the Board of Directors and Bradley management staff on project development, including the airport master plan;
• provide advice to ensure the airport development meets the social, environmental, and community needs and concerns -- including noise and traffic -- of the surrounding towns, the region, and the state; and
• provide a forum for addressing the issues, needs and concerns of the users of the airport and the general public.

Rationale

The committee believes the recommended governance structure provides Bradley International Airport with the outside business development focus the airport needs to become a vital economic enterprise driving the growth of the Hartford-Springfield region. Leaders who have successfully directed or operated significant industrial, commercial, or financial enterprises can best provide the business direction Bradley needs.

While achieving the objective of providing Bradley a business perspective, the recommendation also presents the most workable solution to several problems associated with ensuring the present workforce that its jobs will be protected and benefits preserved, as a transition from one management structure to another takes place. The recommended governance structure also provides the best opportunity for a private-public partnership to work, ensuring the state and region benefit from a dynamic and growing Bradley International Airport. However, in the opinion of the committee, a change in governance structure alone won't ensure success at Bradley. The change in governance must be coupled with the recommended removal of constraints, an elevation of business development within Bradley's organizational structure, and allocation of the appropriate resources to that development.

The committee identified, and recommended removal of, many constraints on Bradley's operations, although there may be many others. As part of the board's recommended responsibilities, it should examine whether these continue to be restrictions -- like the airport's legal affairs and representation, its contract for law enforcement activities, and property review requirements -- and, where possible, seek their removal.

⁹ Contained in an attachment to a May 9, 2000, letter to the governor and legislative leadership from the governor's Council's Leadership Committee

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