Treeces propose plan to operate Toledo Express AirportWritten by Sarah Ottney | Managing Editor | firstname.lastname@example.org
Dock David Treece’s brain is whirring with possibilities, but he knows he needs to keep his feet firmly planted on the ground if his dream is ever going to take flight.
The Toledo native, along with his father Dock and brother Ben, is interested in taking over operation of Toledo’s airports from the Toledo-Lucas County Port Authority.
Dock is president of Treece Investment Advisory Corp. and his sons are both partners in the family-owned and operated Toledo firm. The Treeces are also Toledo Free Press contributors. They have been researching the feasibility of their idea for the past three years, but started to get more serious this spring. This summer, they hired a consultant and have incurred “significant personal expenses.” They declined to name their consultant or his company, but described him as a world-renowned expert in aviation operations and airport privatization.
Toledo Express Airport and Toledo Executive Airport are owned by the City of Toledo and have been operated by the Port Authority since 1973. Under its current lease, the Port is set to operate the airports through February 2023.
The Treeces would operate the airports as two new entities: Toledo Airport Operations Company and Toledo Airport Facilities Company. They estimate they are a couple of weeks from submitting an official proposal.
“If we can do what we say we can do, it would be very profitable,” Dock said. “We’re not a charitable organization. If we can’t do what we say we can do, we’re going to lose $650,000 next year. But we think we can do some things differently and we think we can attract some business and we’re willing to risk our money to do it.”
Dock, a Tennessee native, has lived in Toledo since the mid-1970s. His sons were both born in Toledo. They graduated from Sylvania Northview High School before attending the University of Miami in Florida, where they graduated with bachelor’s degrees in business administration. Dock David focused on finance while Ben focused on international finance and marketing.
“Ben and I decided, both of us independently, that we were coming back to Toledo after college and since we got back we have been wholeheartedly on Team Toledo,” Dock David said. “We want to see Toledo succeed. We want to do anything we can to help this region grow and develop.”
Although none have airport management experience, the elder Treece has been a licensed pilot for 30 years and has owned an aircraft leasing company and air ambulance. He currently owns and flies one small private plane he uses for business.
“I’ve been in and around aviation for over 30 years,” Dock said. “I’ve been involved in a lot of different facets of the industry so I am not a neophyte in the aviation industry, although I have never owned or operated an airport.”
Addressing a criticism that he and his sons don’t have the technical expertise to operate an airport, Dock bristles slightly.
“The Port board doesn’t either, from that standpoint,” Dock said. “I’m a businessman. I’ve been in business all my life. If I don’t know something, if I don’t know how to do something, I know how to hire people who do.”
“It’s like arguing you can’t hire someone to be a hospital administrator because what do they know about open heart surgery?” Dock David added.
Some eyebrows have been raised at the age of the Treece brothers — Dock David is 26, Ben is 25 — but their father said he feels their youth is an asset.
“If you look at history, you’ll find that innovation comes from young people,” Dock said. “Innovation doesn’t come from old people. We fought the battles. We know where all the land mines are. To do anything exciting in life, you can’t know where the land mines are. If you do, you stay out of the field.”
Dock said he has been critical of Toledo’s airport operations since at least the 1980s.
“When Dock [David] came back from college and we started lamenting about the problems, he said, ‘Well, why don’t we do something about it?’ and I said, ‘You know what? I’ve fought that battle for years. I don’t think there’s anything that can be done, but if you want to chase it, chase it.’ So I’ve supported him all along the way, both financially and emotionally, and with ideas and wisdom, I think. But it’s his deal. He’s put it together.”
Mayor Mike Bell, who will be out of office in January after losing to challenger D. Michael Collins in the Nov. 5 election, said it would be “irresponsible” not to at least consider their proposal.
“We don’t have what their plan is going to be so we’re just going to have to wait and see what it is. It could be something great or it may not be something that works. We’ll just have to wait and see,” Bell said Nov. 4. “In trying to be proactive you should look at everything.”
Bell said either way he’s pleased local investors are interested because it shows they care.
“I have an appreciation that businesspeople in the area are at least trying to figure out how to get engaged in helping Toledo and Northwest Ohio,” Bell said. “If we have those types of people starting to buy in and putting their money into plans that means they have confidence we can turn this place around and that’s a good thing for Toledo and Northwest Ohio.”
On Oct. 30, during a live Toledo Free Press/Toledo News Now debate televised on FOX Toledo, Collins said he would be open to the possibility.
“An airport is crucial to be able to develop our area,” Collins said. “New energy may be necessary to kickstart [it].”
Dock David first reached out to Port President and CEO Paul Toth regarding the airport on Dec. 10, 2010. Toth said he was and is somewhat skeptical, but that the Port is open to discussion and will support whatever the city decides.
“We’ve seen some good successes at the airport, but frankly we’re in the shadows of Detroit Metro so it’s constantly a struggle,” Toth said. “We are still looking forward to having some more clarity on what the Treeces have in mind and look forward to continuing those discussions.”
On March 28, Dock David reached out to Dean Monske, president and CEO of the Regional Growth Partnership, requesting “urban renewal/redevelopment plans” passed by City Council. Monske referred him to Deputy Mayor for External Affairs and Economic Development Paul Syring.
The Treeces said a sentence in one of Dock David’s emails to Syring about circumventing City Council was taken out of context.
In an April 1 email to Syring, Dock David wrote: “We’re just trying to explore as many different options as are available for working out a deal on the airport with minimal involvement from city council. For that reason, I thought I may find items of interest in urban renewal/redevelopment plans already passed by council, which may allow us to circumvent or more easily navigate various parts of the process.”
“There was no intent of cutting City Council out of the agreement,” Dock said. “What we were doing was saying, ‘Listen, if we’re going to operate the airport, we have to have the ability to bring in people and sell them property to build a facility.’ If down the road we get somebody who wants to put in a facility, we don’t have time to drag everything through City Council to make a decision about whether or not we’re going to sell them a piece of property. We have to have the ability to execute that in a timely manner. We know of three or four deals that have died out there because that ability did not exist with the operator.”
“I want to cross my T’s and dot my I’s, but I know whatever we put together, when it comes before [City Council], I want it to come before them once. I don’t want to have to come back in front of them every time we want to do anything,” Dock David added.
‘Time kills all deals’
Dock said Toledo Express has a reputation within the aviation community of being slow and difficult to work with.
“The reputation within the industry about Toledo Express Airport is not one where someone wants to come and start a business,” Dock said. “As our aviation consultant told us, ‘Time kills all deals.’”
Toth conceded that private business can move faster than public entities, but said the Port Authority recognizes its “responsibility to be pro-business and to move quickly.”
“We still do our due diligence, but we’ve been able to move very quickly as it relates to business opportunities,” Toth said.
Although the Treeces weren’t yet planning to go public when the story broke Oct. 30, Dock David said he has received an overwhelmingly positive response to the news and the attention has helped generate more interest. Within hours, he said, aviation-specific websites were abuzz.
“There was clearly excitement about people understanding this was a possibility,” he said. “It got a lot of people talking about this issue and starting to think about it, which was a good thing.”
“It only pushed the timeline up about two weeks,” Dock added. “Unfortunately, it became a political issue, which we didn’t want it to be because it’s too important for the region to be a political issue.”
A lengthy transition period would likely be needed.
Toth estimated the transition process would take six to 10 months.
“We would need to work with the Port Authority to understand what processes and procedures they have in place and that’s to say nothing of sitting down with the FAA (Federal Aviation Administration) to make sure we don’t violate any of the conditions of those loans and grants that we have been given so that neither the city nor the Port Authority nor us are asked to repay several million dollars in loans and grants that were given potentially 20 years ago for a capital improvement project,” Dock David said.
“It would not be instantaneous, where City Council passes a resolution and the Port Authority hands us the keys on the way out the door and tells us the alarm code. It’s a little bit more complicated than that.”
Toledo’s regional amenities — its access to the Great Lakes and the crossing of Interstates 80, 90 and 75 and its location within 500 miles of 60 percent of the North American population — allowed Toledo Express to flourish during peak economic conditions. But when economic conditions soured, airport activity dried up.
From the skyrocketing price of jet fuel that has hurt the 50-seat regional jet market to the numerous airline mergers to federal deregulation, the aviation industry has seen many changes during the past 40 years, Toth said.
“It’s a matter of sheer economics,” Toth said. “It’s not a matter of how well you manage or anything else. It’s just a matter of pure economics of the industry.”
Toth said the Port is projecting a loss of about $300,000 at the airport for 2013, similar to last year.
“We’ve reduced some of our staffing and leased a couple of hangars out that hadn’t been leased, so we’re doing about $375,000 better than our budget,” Toth said.
The airport has been in the red since 2011.
However, since 2001, the airport has generated $14.6 million in net operating revenue, for an average of $1.2 million per year. The most profitable recent year was 2002, when Port records show a net operating revenue of nearly $2.5 million.
“Every hangar we have out there at the airport is full, which wasn’t true four or five years ago,” Toth said. “We feel pretty good about the fact that there’s really no space available out there at the airport.”
The makeup of the Port Authority board has also changed, from several members with pilot’s licenses or aviation backgrounds to mainly bankers, Dock said, but Toth said he doesn’t feel that’s an issue.
“Being a pilot doesn’t necessarily give you aviation experience other than flying an airplane, so I don’t think that is a detriment to our board or our organization,” Toth said. “We reach out, we hire experts and consultants to help us think through things and implement things. I think we’ve done a great job of managing through some difficult times in the aviation industry.”
Dock David said he would be interested in maintaining ties with the Port.
“We don’t want to kick them out of the airport and never welcome them back,” Dock David said. “They’ve done a lot of things exceedingly well and we want to help them do the things they’ve been very good at doing. We actually hope to form a long-term partnership to help bring the Port Authority into finance development of facilities for companies at the airport that we can attract to Northwest Ohio.”
Among the business interests the Treeces said they have heard from or would pursue include current businesses at the airport looking to expand, defense contractors, plane refurbishers, maintenance facilities, refueling stations, pilot training programs and a school that wants to start an aviation program.
The Treeces insist the plan they are developing will not involve any firings — and may even add jobs.
“Our plan is to use the operations to attract business, which will create jobs,” Dock David said.
The Treeces said they would also look for inefficiencies.
“Fuel farms are a great example. There are a lot out there and it was set up in a segmented, ad hoc way,” Dock David said. “Why have seven fuel farms when you can have a smaller number, more cooperation among the tenants out there, fewer EPA inspections, less insurance?”
One undertapped market is business travelers, Dock said.
“People who are very sensitive to cost, not time, will use Detroit because Detroit will be cheaper but time-consuming,” Dock said. “People who are sensitive to the value of time more than they are to dollars, there is a marketplace for those people in Toledo.”
180th Fighter Wing
The Ohio Air National Guard 180th Fighter Wing should not be affected by a change in operator, Dock said.
“What would happen to the 180th is not up to us, and it’s not up to the City or the Port Authority either. It’s up to the military,” Dock said. “We would do everything we could politically and practically to keep the 180th, but in 2015 when the next BRAC (Base Realignment and Closure) closings come, 180th could well be an issue.
“You have to look at what’s going on in the bigger picture. That’s what no one seems to do. The military is transitioning away from using fighters and toward using drones. We’ve done nothing out here to attract the drone industry and if the fighters go away, what have you got? There is literally nobody looking down the road and saying, ‘Where are things going and why are they going there?’ There are a lot of things we could be doing, I think, to bring new aviation industry to this area that I don’t see anybody doing.”
FAA Pilot Program
The majority of U.S. airports are operated by a public entity like a city, port authority or county, Toth said. A few are operated through a management agreement with a third-party private entity, generally accompanied by a hefty management fee.
“We’ve asked for none of that. We haven’t asked for a management fee and we’ve agreed to indemnify the city and the taxpayers against almost three-quarters of a million dollars in losses,” Dock said.
In 1996, the FAA established its Airport Privatization Pilot Program. The program permits up to 10 public airport sponsors to “sell or lease an airport with certain restrictions, and to exempt the sponsor from certain federal requirements,” according to FAA.gov.
“We’re aware of the FAA privatization program,” Dock David said. “We’ve tried to structure our proposal to give us the flexibility to try to get into that program, which is a time-consuming process, if we choose to go that route in the future. However, it’s not our plan at present.”
The only airport currently operating under the program is Luís Muñoz Marín International Airport. The airport is owned by the Puerto Rico Ports Authority and managed by a private company. Airglades Airport in Clewiston, Fla., has had its preliminary program application approved and is currently negotiating a deal with a private operator.
The first airport to operate under the program was Stewart International Airport near Newburgh, N.Y., which participated from March 2000 to October 2007, operated by a United Kingdom-based company. The airport is now operated by the Port Authority of New York & New Jersey.
However, Dock said privatization of airport operations is more common than one might think.
“Gary, Ind., is in the process right now, even as we speak,” Dock said. “They announced last week they are working out a management agreement with a company much like what we’re trying to do in Toledo.”
Russell Mills, an assistant professor of political science at Bowling Green State University, wrote his master’s degree thesis on airport privatization and previously worked in Washington, D.C., as a policy analyst for the FAA.
“There are quite a few things that have been omitted from the discussion, namely the fact that because the airport has received federal grant funds, they are prohibited from using airport revenue for non-airport purposes, such as the distribution of profit without FAA approval,” Mills said.
“All the money that is collected on an airport — landing fees, terminal rent — has to stay at the airport for airport use only. That is key. It’s up to the FAA to determine if they will allow you to use the money off-airport,” Mills said. “That’s why there has not been much full privatization of airports in the U.S.”
Mills’ thesis concluded that all the regulations and restrictions placed on airports as part of the FAA’s Airport Improvement Program make it difficult for private-sector operators to make a profit and for public-sector owners to have influence or control over the operations. Also, if the private sector firm fails or goes bankrupt, the public sector operator may have to reassume control of the airport, potentially incurring a loss.
“There’s a lot of financial risk on this from both ends,” Mills said.
The Treeces have said they are interested in discussing the options that exist for purchasing or selling nearby parcels of land.
“We wanted the option because, down the road, if we get viable tenants to come in who need to buy pieces of property that are referred to as not critical for aviation, we wanted to be able to buy from the city and turn around and resell that property to a private entity that would want to build a facility and operate it near the airport,” Dock said.
“The best way to get more revenue in an airport is to have more service running through it,” Mills said. “What can the Treeces do to bring more air service to Toledo Express? I’m curious what their plans are for air service development, more so than what they are going to do with the land.”
“[Their plan] might be perfectly sound, but these are the questions that need to be asked and answered.”
Tags: Airglades Airport in Clewiston, Airport Privatization Pilot Program, Ben Treece, City of Toledo, D. Michael Collins, Dean Monske, Deputy Mayor for External Affairs and Economic Development Paul Syring, Detroit Metro, Dock David, Dock David Treece, FAA, FAA Pilot Program, Federal Aviation Administration, Fla, Luís Muñoz Marín International Airport, Mayor Mike Bell, Ohio Air National Guard 180th Fighter Wing, Port Authority of New York & New Jersey, Port President and CEO Paul Toth, president and CEO of the Regional Growth Partnership, Puerto Rico Ports Authority, Russell Mills assistant professor of political science at Bowling Green State University, Stewart International Airport near Newburgh N.Y, Sylvaina Northview High School, Team Toledo, Toledo Airport Facilities Company, Toledo Airport Operations Company, Toledo Executive Airport, Toledo Express Airport, Treece Investment Advisory Corp.