In response to a track record of substandard performance and criticisms of airport users as reported by the local media, Senate Bill 658 offers the potential to jump-start the transition from the Airports Division to an effective and responsive airport operator. Considering the importance of commercial airports to Hawaii, the Legislature should pass and the governor should sign SB 658, HD2.

Background and perspective

There are only two other states that operate major commercial airports: Maryland (Baltimore-Washington International) and Alaska (Anchorage International). The remainder of the nation’s major commercial air service airports (approximately 100 facilities with 2 million or more annual passengers) are owned and operated by units of local government (city or county) or independent or quasi-independent single or multi-purpose entities (authority, special district or commission). There is no dominant form of governance; however, the trend for airports that have recently changed form of governance has been to adopt a single-purpose entity operating on commercial principles. Wisely, this is the form of governance proposed by SB 658.

Since major airports are financially self-sustaining through internal revenue sources and require no local tax proceeds, they are ideal candidates for governance models that operate as independent public agencies.

Conversely, local entities cannot siphon funds from airports that have accepted FAA grants, as earned surpluses must be dedicated for airport operating and development purposes. The more effectively an airport is operated, the better the financial results to support O&M functions, asset preservation and demand driven capital programs.

Why consider new form of governance

In most instances, a change in form of governance is driven by the need to correct major operating and administrative shortcomings. Typically remedial objectives (to mention a few) are intended to enhance effectiveness of management and staff, to improve business processes, to deliver capital projects on time, to regain the public trust, to improve response time to regulatory mandates and tenant needs, to improve customer service, and to revitalize corporate culture. SB 658 spells out some of these typical objectives plus others specific to local conditions.

SB 658 provides the framework for and transition to a new form of governance for the state’s commercial airports by creating a single-purpose airport entity with an operating organization, which functions in keeping with best airport and accepted business practices, and with a policy governing board.

Provided necessary government powers are transferred to the board, this model, as opposed to other forms of governance, would best allow the objectives to be realized and provide long term strategic direction to meet Hawaii’s airport infrastructure needs. It should be noted that SB 658 as drafted fails to transfer certain governing powers that will hinder, if not prohibit, the new entity’s chance at success.

Post SB 658

While the passage of enabling legislation (SB 658) would be a major step, it is important to recognize it is just a first step. However, enactment of the bill provides no guarantee the new entity will achieve the objectives of SB 658 and meet the needs of airport tenants and the traveling public. The best chance for the new entity to perform as envisioned depends on defining and successful execution of the transition phase leading to its launch.

Bottom line

Our political leaders have the rare opportunity to recast the way the state’s airports conduct business — from a bureaucracy whose performance is reported to be unsatisfactory, to a single-purpose agency founded on commercial principles. SB 658, fine-tuned to ensure necessary governing powers are transferred to this entity, affords the framework to make this a much-needed reality.

Paul B. Gaines most recently served as a strategic adviser to governments and airports globally on such aspects as business practices, financing and organization; he also has served as CEO for two major U.S. airports and chaired the world airport trade association.