FAA Rules in Airport’s Favor in Chattanooga Case

 - November 4, 2013, 1:10 AM

More than two years after Tac Air filed a Part 16 complaint with the FAA over the operation of an FBO built and owned by the airport operator at Chattanooga Metropolitan Airport/Lovell Field, the agency has finally issued its ruling, finding the airport authority did not violate its federal grant obligations. The situation became the centerpiece of the private ownership vs. airport-owned FBO debate in 2011 when the new FBO (managed by Wilson Air) opened to challenge the Tac Air facility.

The airport authority said it established the $5 million facility–paid for with aeronautical grants–after many unsuccessful attempts to address customer complaints of uncompetitive fuel pricing at the airport. While denying those accusations, Tac Air also disputed whether traffic at the airport could viably support two FBOs, and alleged that the publicly funded Chattanooga Metropolitan Airport Authority (CMAA) was subsidizing the new FBO’s operations and fuel pricing. The authority clearly delineated its relationship with Wilson Air, stating it owned the facilities and retained the revenue, while the FBO chain was paid a management fee with incentives.

In its findings, the FAA’s director of the office of airport compliance and management analysis stated that the authority “did not violate Grant Assurance 22(g) (i.e. its FBO services were provided under the same conditions as a commercial aeronautical service provider) when it entered into a management agreement with Wilson Air to manage a ‘sponsor-owned’ fixed-base operation (FBO) and retained the right to set fuel and other prices,” and “has not unjustly discriminated against [Tac Air] in favor of its owned FBO.”

“While we always believed we were in full compliance with the agency’s regulations, we are pleased the FAA’s report affirms that,” said a Chattanooga Airport Authority spokesman. “Our goal was simply to create a competitive environment for all the users of the airport, which in turn creates a tremendous economic impact for the city and the region.”

Tac Air takes issue with the verdict and released a statement: “While we strongly disagree with the FAA’s decision on the Part 16 complaint, it has not changed the fundamentals of the situation. Using taxpayer funds, the Chattanooga Metropolitan Airport Authority (CMAA) has developed an FBO that competes unfairly with private business. The FAA’s decision sets a dangerous precedent that will drive private investment away from airports.”

It continued, “To date, the CMAA has lost more than $1.2 million dollars operating its FBO, which brought unnecessary capacity to the airport, with no end in sight.”

In its ruling, the FAA did chide the airport on two matters, directing it to “immediately cease its practice of providing airport employees to provide assistance to FBOs during busy time periods or events, as the continuation of this practice may constitute a violation of the FAA’s Revenue Use Policy, and therefore a violation of [the airport’s] federal obligations,” and recommending that the airport authority make changes to Tac Air’s lease, removing certain “right of first refusal” language regarding additional airport property, “as, if exercised, this clause may constitute the grant of an exclusive right in violation of Grant Assurance 23 (which states that the airport [having received federal improvement grants] is not allowed to grant any exclusive use for its property use by company providing aeronautical services to the public).”

The case served as a lightning rod, attracting attention from Congress members, with Tac Air drawing support from organizations such as the Airports Council International/North America (ACI-NA) and the National Air Transportation Association. “NATA is currently reviewing the FAA’s recent ruling on the Part 16 filing and we continue to support a level playing field for businesses at the nation’s airports,” stated James Coon, the organization’s executive vice president.