A Suggested Test for Determining Compliance with Two FAA Grant Assurances

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The job of an airport director is complicated by the numerous, sometimes inconsistent contractual obligations. The FAA has asked for comments on its proposed policy. There may be a relevant test which will reflect the complexity of an airport’s commercial situation and which meets the goal behind the non-aeronautical use standard.

The operator of an airport bears a number of responsibilities by virtue of accepting the FAA Grant Assurances (26 statutes, 6 Executive Orders, 25 regulations and 38 [actually more than the mere numbering] specific terms applicable to airports). In the below Notice of Proposed Policy, a draft of what is acceptable for non-aeronautical uses of hangers (49 U.S.C. 47107(a)(1)) is posited for comments. The standard proposed involves some detailed criteria as to what constitutes non-aeronautical use, interference, area, length, etc. The judgment of an airport director as to what may comply with this rule will require a lengthy inspection with lots of room for disagreement.

One of the other requirements imposed by the Assurances is to establish a fee structure which results in the economic status of being self-sustaining (Assurance #24). That requires that the airport director try to maximize her/his revenues and in order to comply with such a goal, it would be well advised to rent as much of the available hangar space. Unused area results in zero dollar collection.

In some airports there are long lists of tenants seeking to put their aircraft in such buildings. Under normal economics that high demand means that the charge for such space is likely to be higher. Unfortunately, there are also instances in which the available space exceeds the local requirements for aircraft rentals. There, values will be low and in such situations, it would be appropriate to rent out the unused space for non-aeronautical uses.

The airport director could obtain an annual assessment of the hangars’ FMV and follow that test in contracting for hangars. That document could provide guidance for rental. The same file could include the specific proposed use of the rented space.

Economics, it would appear, should provide an excellent test to measure an airport director for these two Assurances—non-aeronautical use and self-sustaining. If the rent charged for hangar space is below Fair Market Value, then the FAA inspector should examine whether the hangar space is being used for non-aeronautical uses. If the rents are at FMV, then it is likely that both tests are being met. However, there may be instances in which a tenant will pay the FMV for other than an airplane, and then the FAA inspector should investigate whether this use is to the detriment of an aeronautical use. The general FMV rule should work as an easy method for determining compliance without a laborious, detailed review.

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