The ins-and-outs of hangars

 - March 19, 2008, 1:07 PM
“When we look at building a hangar for a client we see someone who has made a significant investment. It doesn’t matter if it’s a Cessna 150 or a Gulfstream V,” noted Seth Kohn, president of New Castle, Pa.-based Fleming Steel. “People usually buy the most airplane they can afford, so it is always a major investment for everyone. Our first consideration is what we need to do to protect that investment. That’s what a hangar is–protection for an investment. Leaving an aircraft on a ramp is a costly mistake that results in premature aging, damage from hail, storms, ice and wind and otherwise avoidable repairs and maintenance. And it isn’t simply the cost of the repair or maintenance, but there’s the downtime and the cost of renting a replacement.” As an aircraft owner you have two choices–lease someone else’s facility or build your own.

It is curious that few people interviewed for this article had the slightest idea what the going lease rate is for hangar space is outside their local area. Not surprisingly, the prices of real estate and population density have a profound effect on rates that range from one extreme to the other. What is clear is that rates are a function of the value of the customer to the FBO.

William McShane, president of Long Island Jet Center on Long Island MacArthur Airport (ISP), in Islip, N.Y., said, “In the New York area the price to hangar a based aircraft varies significantly. Depending on the aircraft, we start at $10 to $14 a square foot, but at Teterboro [N.J.] that can jump up to about $30.” McShane said the company also has New York-based FBOs at Republic Airport in Farmingdale and Gabresi Airport in West Hampton Beach.

“For example, a GIV at Teterboro might pay about $17,000 per month for hangar space, but at Farmingdale that same aircraft might only pay $7,000 to $8,000 a month,” he said. “So the price differs wildly, depending on location and aircraft type. More expensive airplanes are typically charged more for rent per square foot, even though that might not entirely make sense. It wouldn’t be uncommon for an FBO to charge $2,500 a month for a Learjet 35 and only $1,700 for a King Air 200.

“Now you might think that seemed fair until you realize that, all things being equal, the Learjet will uplift more fuel, is easier to store and even easier to tow than the King Air 200, making it a more profitable airplane for the FBO to hangar. Despite that, many FBOs will charge the Learjet more for hangar space simply because it’s a more expensive aircraft. There is, however, some justification in terms of liability. If you ding that Learjet, you’re going to pay a lot more money to fix it than the King Air.” McShane cautioned not to read too much into the square-foot rates.

“Even $14 a square foot is a bit misleading because it’s always negotiable,” he explained. “We look at the prospective tenant from the frame of reference of what they can do for us. Some aircraft naturally uplift more fuel, fly more often and buy more services from us. The more desirable they are as a based aircraft, the more flexible we are with their actual aircraft hangar lease rate.”

Hank Mook, general manager of Signature Flight Support at Chicago Midway Airport, put rates in perspective: “People will pay for convenience. You might find a less expensive facility 25 miles away from the city, but with big-city traffic you have to drive 90 minutes to get there. CEOs would typically rather pay a higher rate to hangar their aircraft if it will save them time. Then you add the higher level of service typically found in the larger FBO, and it can be more attractive despite a higher price. As an example, when we move an aircraft we have two wing walkers, a tail walker and a tug driver. We offer a lot of security for your aircraft and we truly take care of our customers’ needs.”

Mook said Signature Midway’s per-square- foot charge ranges from about $10 to $15 for transient aircraft, but because based customers use other billable services the actual lease rate is flexible.

Los Angeles Anomaly
In the Los Angeles area, Craig Foster, v-p of business development for Newport Jet Center at John Wayne Airport (SNA) in Santa Ana, said, “We lease space to permanent tenants at $1.25 per square foot.” Asked the question again, he verified the figure. “We’ve got between 65,000 and 70,000 square feet of space but we’re completely filled,” Foster said. “But there are a lot of airports relatively close to us so there’s a lot of competition. At the same time, we also have no problem filling our hangar so we can afford to keep our rates down.” He said Newport Jet Center competes with airports in Long Beach, Chino, Riverside and Carlsbad.

Christine Elwess, manager of Avitat-Petersen Aviation at Van Nuys Airport (VNY), said her company’s per-square-foot rate was also $1.25 per square foot and that it is not negotiable. “Customers are charged $1.25 per square foot,” she said. “But we’ll negotiate fuel discounts and other services,” she said. Both she and Foster were surprised to learn of the New York and Chicago rates. It is worth noting that not all FBOs in California have such low hangar lease rates.

Despite the apparent Los Angeles anomaly, it is safe to say that population density is a driver behind hangar lease rates, and turning to less populated areas proved the point. Wells Aircraft, an FBO at Hutchinson Municipal Airport (HUT), Kansas, doesn’t have a square-foot rate. Instead, it charges by aircraft category, such as piston single, multi-engine piston, small business jet and so on. To base a Citation II in Wells’ hangar, for example, would be a flat $750 a month.

Kirby Harvey, manager of Air Services of Mississippi at McComb-Pike County Airport (MCB), said that hangaring a Citation II would cost $185 a month, with a Hawker going as high as $250. “And that’s in a secure hangar,” Harvey said. When told how much those aircraft would garner in New York or Chicago, he responded, “I wish we could get that down here, but then that’s why this is such a great place to live. Ya’ll come down.”

Another interesting difference between urban and rural airports is lease arrangements. When you sign on the dotted line in the big city you’d better have your attorney look over the document and interpret it. Into the heartlands, by contrast, it is not unheard of for small, single-FBO airports to rent out hangar space on little more than a handshake, or at most a simple document.

As one small-town FBO owner said, “We’ve got some pretty nice aircraft in our hangar, including a couple of turboprops and a jet. Thing is, I’ve known every one of those owners pretty much all our lives. I went to school with a couple of them. We don’t need much in writing. They know I’ll take care of their airplane and stand behind any problem, and I know they’ll live up to their end of the bargain. A handshake down here means something.”

He preferred to remain anonymous, saying, “People would just think we’re a bunch of hicks, and maybe we are but we don’t go around suing everybody down here and looking to extract a pound of flesh if someone makes an honest mistake. Life’s different here, and we like it that way.”

Construction Considerations
Whether for economic, security or availability reasons, many corporate flight departments prefer to own their hangars. While there is always the possibility of buying a facility from another company, more often than not it means building a new hangar.

Brian Wing, v-p of Wing Aviation in Conroe, Texas, stressed that building an aviation property is a tremendous commitment since the aviation industry can be volatile. “As flight departments grow and contract, what looks like a great idea one day can become an unused and unsellable asset the next,” he said. “With that said, if you intend to use the hangar long term and you construct it properly, you will not be disappointed with your choice.” Wing said his FBO spent three years designing and redesigning its facility.

“We invested in a knowledgeable construction foreman to avoid little surprises,” he said. “We did not, however, spend a fortune hiring a high-priced architect to add presentation without substance. In the end, we got exactly what we needed, crossing only minor obstacles and achieving overall satisfaction.”

When asked for one piece of advice that would apply to everyone, Wing said, “Do not step over a dollar to pick up a nickel. While more expensive is not always better, you can bet that you will almost always get what you pay for. At some point you will likely need to fix every corner you cut.”

Once the decision is made to build your own hangar, the question becomes where. In some areas there are multiple airports and the operator can evaluate services available against the distance. There are no right or wrong answers, according to Kohn. “You have to choose an airport based on what suits you best,” he said. “As far as where to build on a given airport, you want easy access on and off taxiways, accessibility to utilities and access from the road,” he said. “Depending on the size of your aircraft or the number of aircraft in your fleet, you might want more setback to build a bigger ramp. A corporation might want a fairly quiet part of the airport and short taxiway to the end of runway. You should also be sure to check your long-range plans against the airport’s master plan.”

Kohn said to look for flat terrain, good drainage and appropriate soil conditions. “You need solid, stable soil on which to build,” he said. “Sand takes a lot of preparation before construction. At an airport like JFK–essentially a landfill–site preparation is very expensive. Ironically, most airports today have wetlands around them. You want to be as far from that as possible because that means birds–which like to live in your hangar.”

According to Kohn, you can’t buy land at most airports–you can only lease it. “Typical land lease terms vary from 20 to 50 years. Larger airports may have shorter lease periods, smaller airports may have longer ones,” he said. “At large airports when the land-lease expires the hangar you built probably becomes their property. Smaller airports often have leases that require renegotiation of the land-lease cost but they don’t automatically own the building.”

At some point you are ready to build your hangar. Jim Singeltary, project manager and architectural department head for URS Corp. of Columbus, Ohio, talked about five things an architect will want to know before putting pen to paper. “What’s the cost of the land? What are the site preparation issues? Do you have architectural guidelines regarding the type of material, wind protection and functional design? And what are your building cost limitations?” he asked. “And be sure to get enough land, even if you have only one aircraft now, you’re probably going to need to expand eventually.”

It’s important to have a good idea what type of aircraft will go in the hangar, because that often drives decisions that affect building codes. “The height of an aircraft’s tail is a primary building design driver and so too is what you will be doing in the hangar,” Singeltary said. “Will it simply be aircraft cold storage or will it be more? What will you do to support your aircraft, such as having back shops? Things of that nature affect building-code requirements. Also, will it serve as a corporate headquarters and require a fancy lobby?”

Most contractors agreed that a typical 10,000-sq-ft corporate aircraft hangar with heating and air conditioning in a moderate climate can be built for about $50 a square foot. It’s not impossible to put a roof over an aircraft for as little as $35 a square foot, but you can easily run that figure up to $100 a square foot and more with enough amenities. Everyone agreed that cheaper isn’t necessarily better.

Randy Kirk, v-p of sales for Erect-A-Tube of Harvard, Ill., said that in the pre-engineered metal building industry, “nothing innovative has happened in the past 25 years, except for the actual sheet-metal covering and paint processes, but that’s common throughout the industry. Normally, when you’re trying to take market share from the competition you build a better mousetrap. In this industry, we don’t have a better mousetrap, so if you’re trying to increase your market share you end up buying someone out.”

Kirk echoed the sentiment of others about buying cheap: “Since we can’t differentiate ourselves with innovation and product, what the customer is going to see is a differentiation on price and that’s a big mistake when building hangars. “We’re not pre-engineered for the benefit of the customer; we’re pre-engineered for the benefit of the company to make a profit. Pre-engineered means we design a structure and fabricate it in house, then ship it to the customer, who takes responsibility for erecting it. What that means in real terms is that our profit relates to the cost per pound of fabricated steel we ship out the door.

“So how can a company charge less money for essentially the same product? They constantly ask themselves how far they can shave the metal down and still meet the basic requirements of the building code,” Kirk explained. “They might remove subtle structural parts to reduce overhead so they get closer to the minimum code requirements, but the structure still has to support a door made by another company. It’s possible to buy a building that meets code requirements and then buy a door that the building can’t support.”

Kirk reviewed the basic types of hangar structure. “You gain more floor area with a post-and-beam-design because it’s a straight wall. Post-and-beam hangars are usually 80 feet wide or less. Rigid frame structures can go 200 feet wide or more,” he said. “The problem with a rigid frame is that, because of the way it is constructed, you can’t use a door as wide as the overall dimension of the hangar itself. So, if footprint space is an issue you’ll get the most amount of floor-space access through the door with a post-and-beam building–but that’s only good up to about an 80-foot-wide structure.” The big issue with hangars is the door. The more flexible the door, the greater the expense.

Doors and More
Unidirectional doors have multiple leaves that slide to one side. It is a fixed mode of travel; one way to open, the other way to close. A biparting door has an even number of leaves that are symmetrical about an imaginary centerline. Half the doors go to the right and half to the left. Either half can be opened without disturbing the other half.

In bigger facilities with an individually motor-operated door system the selection and opening of a single door allows for more flexibility. Each door panel is in its own track and operates individually. While it’s more expensive than most doors, there are some worthwhile benefits. The weight of the door is supported by the ground, allowing less expensive hangar construction to install a door versus an overhead door, whose weight must be supported by the hangar.

Kohn cautioned, “Remember, it isn’t even simply the weight of the door you have to worry about. Doors are subject to wind pressure, which transfers the force to the building. With a sliding door system, 50 percent of the load goes to the floor because it’s holding the door and 50 percent goes to the building because that’s where the guide system is attached. An overhead door is primarily supported by the building, so most of the load goes directly to the building.”

“This is very complicated stuff,” Kohn said. “We have what we call the wet-noodle rule, which says you should maintain a 1:1 ratio of width to height of the individual door leaves. As the door leaf becomes excessively narrow (1⁄2:1 or 1⁄3:1) the designer starts to fight a slenderness ratio problem; i.e. “the wet-noodle effect.” To overcome that problem, the depth of the framing member must be increased or the number of vertical members must be increased. The average local-area contractor has little or no experience with this sort of thing.”

Kirk also suggests one of the keys to any good hangar project is getting water drained away from the hangar. “If you’re putting floor drains in, and believe me if you do the EPA gets deeply involved, the floors must slope to the drain. Unfortunately, even the best concrete finishers can’t guarantee a perfect slope, and you’re going to find pool spots. You should take the first 10 to 15 feet of the hangar floor just inside the door and slope it toward the outside,” he said. “That way, if a door is open when it’s raining, the water will drain back out rather than flow in and pool somewhere. I like about a 1-percent slope from inside going outward. The contractor will scream because it means more work for him, but stick to your guns. Anything over 1-percent makes it difficult to move the aircraft against the slope.”

“Then there’s the issue of fire-suppression systems,” Kirk said. “Depending on local code, at some point the building becomes large enough to require a fire-suppression system. Even when code doesn’t require it, a lot of corporations will put one in anyway. You know what? I’ve yet to see an airplane spontaneously combust. I’ve seen probably five hangar fires in my entire career, and they tended to be related to fueling the aircraft in the hangar or oily rags stored in a corner. I think there are better ways to protect aircraft than fire-suppression systems that can top $100,000 in some cases. Your money is better spent by keeping your hangar free of things that can burn. Build a smaller building off to the side if you have to have those types of things, and put up firewalls separating the hangar from office space. But regardless, you should never refuel an aircraft in a hangar. That’s asking for trouble.”

Insurance Perspective
From an insurance perspective, Ronald Davis, president of the Tulsa, Okla.-based National Hangar Insurance Program division of Arthur J. Gallagher Co. of Oklahoma, said hangar premiums are based on value, use and location. “California, Arizona and similar states simply have few or no wind and hail damage claims, compared with Texas, where such claims are common,” he said. “In California a $500,000 hangar might carry a $2,000 annual premium, but the premium for that same hangar in North Central Texas would be $4,000, for weather reasons. You’d also have a higher deductible for wind damage in those areas because it’s a question not of if you’ll get hit but when. Also, if you have a sprinkler system we’ll usually take 10 percent off your premium; foam will probably get you 15 percent off.” It is worth noting that a sprinkler system is less than desirable because any kind of fuel or oil fire will float on water rather than be extinguished by it.

Then Davis essentially agreed with Kirk on the subject of fire suppression. “I agree– fire systems are very expensive and I think over-emphasized,” Davis said. “I’ve paid as much in payments for accidental foam discharges as I have for fire. It used to be you could recover the cost of the system over several years, but insurance rates are low enough these days and the systems have gotten so expensive that you can’t recoup the cost.”

Davis said another rate driver is how the facility is used. “It’s one thing if it’s simply a cold storage hangar, and something totally different if you’re doing maintenance,” he said. “That means there’s more exposure to flammables. We also look for the type of construction to assess fire exposure and the wind uplift rating.”

Hangars, which due to their functional design have a tendency to want to fly, have an uplift rating that indicates how much wind they can take before it starts to be a problem. Different parts of the country require different ratings. For instance, a 70-mph wind-rated hangar is no good in Florida because of hurricanes. In that state, hangars must have a wind rating of at least 120 mph. In Michigan, on the other hand, the required rating might only be 70 mph.

“There is a much larger issue involved in the decision to lease or build,” McShane said. “This is a pretty unpopular thing to say, but it’s the truth and corporate flight department managers and airport managers need to understand it. If a corporate flight department is going to lease airport land and build its own hangar facility, it should be charged a higher per-square-foot land-lease rate than the FBO so the FBO can compete on an even playing field. I know that sounds totally self-serving, but you really have to put it in perspective.”

McShane argued that corporate operators don’t want to pay the hangar lease rates required for an FBO to get a realistic return on its investment. “Most FBOs finance the construction of a new hangar against the contract income from committed tenants,” he explained. “In most cases, you simply need one or two customers to undertake construction. Of course, an FBO is in business to make a profit, so the customer isn’t getting wholesale space. Naturally, aircraft owners ask themselves what it would cost to build their own hangar, and it’s obviously going to be less expensive than leasing [in the long term]. The problem is many airport and flight-department managers have lost touch with the reality that they need to protect the FBO.”

“Let’s say at a given airport there are two FBOs, and everyone on that airport has built his own hangar,” McShane said. “With no income from hangar rental, and having to foot the bill for a significant array of services operators expect but refuse to actually pay for, that leaves fuel and maintenance as primary sources of income. But it doesn’t end there–the corporate operators will pit one FBO against the other for the lowest fuel price. That’s going to further cut into their already slim profit margin. It’s a good deal for the corporate operator but it’s penny wise and pound foolish.”

Hangar rent provides a steady flow of income for FBOs in an industry where the rest of their income depends on the economy, traffic flow and (for vacation destination airports) even the season. “If you cut out the middle man, the FBO,” McShane said, “you undermine the business and it dries up and goes away. At the same time, that corporation will fly into another airport and expect an FBO to provide all the services it needs.

“It’s clearly a systemic problem because if you lose your FBO, at most airports you lose all your airport services. Look at it this way,” he said, “building a hangar on your airport is a good deal for you but a bad deal for the other guy who flies there and finds there’s no FBO to take care of his needs. In reality, everyone is the other guy.”