[Federal Register Volume 64, Number 201 (Tuesday, October 19, 1999)]
[Notices]
[Pages 56377-56379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27288]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
Policy Regarding Risk Analysis for Airport Proposals Involving
Federal Aid
AGENCY: Federal Aviation Administration (FAA); DOT.
ACTION: Notice of interim policy; request for comments.
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SUMMARY: This notice announces the issuance of an interim policy
establishing procedures to help proponents identify and analyze the
principal risks related to the feasibility of certain airport
development proposals for which Federal aid may be requested. Risk
analysis is typically eligible for Federal aid when conducted in
conjunction with, or in anticipation of, airport master and system
planning studies. This interim policy describes the types of proposals
for which risk analysis is warranted and the analytical procedures that
are typically involved. The primary purpose of the policy is to ensure
that proponents are informed early in the planning process about
certain risks involving the financial feasibility of development, so
that they can make appropriate adjustments. An interim policy is being
issued in lieu of a proposed policy to help ensure that development
proposals currently being planned are handled in a consistent manner.
In formulating this interim policy, the FAA has considered and
recognized the analytical practices currently accepted and in use as
producing reasonable results. This policy does not intend to disturb
those practices, but rather to apply them uniformly. This interim
policy may be revised prior to issuance of a final policy pursuant to
comments received.
DATES: Comments must be submitted on or before December 20, 1999. Late
filed comments will be considered to the extent possible.
ADDRESSES: All comments concerning this proposed policy must be
delivered or mailed to Larry Kiernan, Manager, Airport Capacity Branch,
Federal Aviation Administration, Room 623, 800 Independence Avenue,
SW., Washington, DC 20591.
FOR FURTHER INFORMATION CONTACT: Larry Kiernan, Manager (APP-410),
(202) 267-8784, Airport Capacity Branch, National Planning Division,
Office of Airport Planning and Programming, Federal Aviation
Administration, Room 623, 800 Independence Avenue, SW., Washington, DC
20591.
SUPPLEMENTARY INFORMATION:
[[Page 56378]]
Background
Airport development is primarily a local or state responsibility,
but the Federal government often provides substantial financial aid for
planning and developing airports listed in the National Plan of
Integrated Airport Systems (NPIAS). Federal aid currently accounts for
about \1/4\ of the total public investment in airports. The Federal
government typically pays 90% of the cost of eligible planning studies,
in order to encourage the development of a safe and efficient airport
system and to help local officials make well-informed decisions.
The FAA maintains guidance for the content of typical planning
studies. However, some airport development proposals warrant
additional, more detailed risk analysis during the planning phase
because of the size of the investment and uncertainty whether future
activity will achieve forecast levels. The potential consequences of a
shortfall in activity includes a corresponding reduction in airport
revenues. If the ability to generate adequate revenues cannot be
demonstrated in a convincing manner, a project may be considered too
risky to permit financing with revenue bonds or other forms of debt
financing, which plan an essential role in most large projects.
Inadequate revenues could also result in a requirement for an operating
subsidy from the general fund of the local sponsoring agency.
A proposal should usually be subjected to detailed risk analysis if
it involves an eventual total investment (Federal, State and local) of
$25 million or more and has one or more of the following
characteristics:
1. The traffic forecast that warrants the proposal involves a
substantial change in or reallocation of the local traffic trend.
2. The proposal would compete with other airport facilities for a
substantial portion of its traffic. (Examples would include the
establishment of passenger and cargo transfer facilities and aircraft
maintenance centers that are intended to attract business that would
otherwise take place at another airport).
3. A substantial financial commitment is required long in advance
of full utilization of the airport. (An example would be land banking
for a major new airport).
4. The proposal is intended to serve a technology or innovation
that has not yet been widely accepted and implemented. (Examples would
include airports to serve future supersonic transports or tilt rotor
aircraft).
5. The anticipated cost of the proposal is considerably higher than
for proposals providing similar capacity at other locations. (An
example would be an off-shore airport built on an artificial island).
6. The proposal does not enjoy strong support from the segment of
air transportation that it is intended to serve. (Examples would be a
remote transfer airport or a new cargo airport without firm financial
commitments from the prospective users).
7. The implementation of the proposal is dependent on the
availability of substantial Federal aid. (An example would be a
supplemental air carrier airport with little near-term potential for
generating revenues through rents and fees).
8. The proposal requires close cooperation by a number of public
agencies in order to be implemented. (An example would be a new
regional airport intended to replace one or more existing airports or
that is expected to provide supplementary capacity to existing
airports).
Application
Proposals that are considered potential recipients of Federal aid
for planning and/or development, and which, if implemented, involve a
total cost (Federal, state, and local) of $25 million or more, will be
screened by FAA to determine whether detailed risk analysis is
warranted as a part of the planning process. It is anticipated that
about 200 projects will be screened annually and about 10 will require
detailed analysis.
Initial Screening
Proposals will be screened by FAA Regional Airports Office
personnel at the earliest possible time to determine whether special
attention should be given to elements of risk. The screening will
usually be conducted in conjunction with the initial discussions
between the FAA and the project proponent. In addition to the factors
mentioned above, an FAA Regional Airports Division Manager may require
a detailed risk analysis based on other considerations that, in the
Manager's judgment, warrant such action. The requirement that a
proposal be analyzed for risk does not constitute an approval or
disapproval action. It simply highlights specific aspects of a proposal
that should receive special attention during the planning process.
Risk Analysis
Once a proposal has been recommended for analysis, the FAA Regional
Airports Office will coordinate with the proponent to ensure that an
appropriate analytical process is used to assess the risk and the
results are disseminated to interested parties. An analysis should be
tailored to the specific characteristics of a proposal, identifying
potential risk factors and examining their significance. The selection
and implementation of an appropriate analytical process is the
responsibility of the proponent of the planning study, with the goal of
providing a frank and complete assessment of major risks. The product
should be a report that is both easily understood by the general public
and consistent with expert opinion within the aviation community. The
risk will usually be analyzed as part of a master or system planning
study, although the analysis can result in a stand-alone study and
report.
Application of Results
The main purpose of risk analysis is to support well-informed
development decisions. Risk analysis should begin as soon as possible
after conception of a major project and is ideally conducted in an
iterative manner that is incorporated into the overall planning
process. Information developed by the analysis may be used to modify
the scope of the project, and these changes should be identified and
implemented as quickly as possible. Changes may affect the underlying
purpose of development, activity forecasts, staging of development,
scale of development and proposed financing.
More information about the analytical process is included in
Appendix 1.
Appendix 1. Analysis Techniques
The possibility that activity may fall short of forecasts, and
the potential financial consequences of such a shortfall, are often
the primary issues to be addressed.
It is particularly important to determine whether a project is
intended to serve the current and probable future local demand for
air transportation at a single airport with an effective monopoly
position (the usual situation that tends to involve little risk) or
if it is intended to compete with other airports for traffic that
may be speculative (a situation that can involve substantial risk of
failure). The risk of a shortfall in activity can be estimated
through sensitivity analysis that examines the assumptions that
underlie a forecast, consultation with experts, comparison to
forecasts for similar proposals, if any are available, and
comparison to regional and national growth projections.
The risk involved in a passenger enplanement forecast can be
addressed from a number of perspectives;
1. Examination of the assumptions that underlie the forecast,
and comparison to assumptions for official FAA forecasts.
2. Comparison to local, regional, and national historical data
and trends.
3. Comparison to forecasts of local, regional, and national
aeronautical activity
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and information available from the FAA, state aviation agencies,
regional planning organizations, and airframe manufacturers.
4. Comparison to population and employment projections for the
airport service area.
5. Computation of per capita consumption of air travel and
comparison to the historical trend for the airport service area and
the nation.
6. Discussion of the forecast with representatives of the air
carriers and other segments of aviation serving the area. The
opinion of all carriers should be given due consideration,
particularly if the proposal is intended to promote competition. The
opinion of incumbent carriers should be weighed against the
probability of other carriers to serve the market.
7. Discussion of whether the proposal involves traffic currently
served at another airport and, if so, the level of certainty that
traffic will be transferred.
8. Examination of base data, principal assumptions, and
forecasting methodology by a panel of experts convened for that
purpose. (This could include peer review by operators of comparable
airports). Cargo forecasts can be addressed by:
1. Examination of the assumptions that underlie the forecast.
2. Comparison to local, regional, and national historical data
and trends.
3. Comparison to forecasts by metropolitan planning and state
aviation agencies. (The FAA does not make detailed forecasts of air
cargo.)
4. Comparison to forecasts by experts and industry leaders.
5. Examination and group discussion by an expert panel or peer
review group.
6. Discussion with potential airport users, including shippers,
air carriers, and tenants.
The financial aspects of a proposal can be examined in the
context of a market analysis by estimating capital and operating
costs and comparing them to probable sources of funds, including
grants, subsidies, and income from rents and fees. The financial
feasibility of many proposals can be estimated at an early stage by
using guidelines and rules of thumb developed by credit rating
agencies for evaluating the viability of revenue bonds. Increasingly
detailed estimates can be prepared as the planning process generates
more precise data.
Issued in Washington, D.C. on October 14, 1999.
Louise E. Maillett,
Acting Associate Administrator for Airports.
[FR Doc. 99-27288 Filed 10-18-99; 8:45 am]
BILLING CODE 4910-13-M
