"Vertical Integration: Knoxville Airport Authority forms LLC"

Thursday, July 5, 2007

Airport Authority forms LLC 
BY MICHAEL SILENCE
The Knoxville (TN) News Sentinel


As a carrot to attract airlines to McGhee Tyson Airport, the Metropolitan
Knoxville Airport Authority wants to begin taking over some airlines'
traditional duties, such as baggage handling.

The Airport Authority has taken a key step toward assuming that business by
forming a limited liability company that will employ workers to do those
jobs.

In turn, McGhee Tyson could offer customers a higher level of service, such
as returning lost luggage more quickly and efficiently, said Dave Conklin,
vice president of marketing for the Airport Authority.

The Airport Authority last week formed Consolidated Airport Services LLC to
perform aircraft handling and parking, baggage loading and unloading and
cabin cleaning. The new company, which now can begin marketing its services
to existing and potential airlines, could have about 80 employees if all
airlines serving McGhee Tyson opt to take the service.

A report done for the Airport Authority by Maryville-based The Masters Group
estimates the cost of Consolidated Airport Services to the authority would
be about $3.3 million a year if all air carriers serving McGhee Tyson join
in.

To recoup that cost, the authority would then charge the airlines for
handling those services for them. Conklin said the intent is to break even
on the new program.

A first phase of the new operation will be "under wing" services that
include loading and unloading luggage.

"We would like to be successful with the first phase before we start any
other" services, Conklin said.

The Airport Authority is joining other airports in taking over many duties
typically performed by the airlines, which are cutting costs by streamlining
operations and fiercely competing for every passenger dollar.

One of the authority's intents is to make McGhee Tyson attractive to other
airlines by shedding costs for them. Also, the authority hopes it can handle
the airlines' duties more cheaply by consolidating them under one company.

Other duties that could potentially be taken over by the authority include
ticket-handling services at McGhee Tyson.

Airport officials are moving toward a centralized lost luggage system to
deliver wayward bags to owners more efficiently and cut costs.

By taking over delivery duties from the airlines, the authority can
centralize baggage recovery. That would allow it to take, for example, five
bags to Sevier County in one trip as opposed to the different airlines
delivering them individually. McGhee Tyson handles about 200,000 pieces of
luggage a month.

Part of the new duties could include 24-hour service on lost luggage, which
the airport does not have.

Now that the limited liability company is formed, Conklin said work can
begin on marketing the program, which has been an emerging trend for midsize
airports.

But launching the new program will depend on signing the first airline
clients.

Conklin said some airlines already have expressed an interest in the
arrangement.

The Airport Authority will meet with various airlines beginning in late
August with the intent of having Consolidated Airport Services started in
six to eight months.

Conklin said it is too early to tell what the salaries will be for the new
employees, and how many there will be depends on how many airlines opt in.

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