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MacArthur Airport to have $2M surplus after 4 years of losses, officials say

Islip Town Supervisor Angie Carpenter, left, with airport

Islip Town Supervisor Angie Carpenter, left, with airport commissioner Shelley LaRose-Arken at Long Island MacArthur Airport on Nov. 14, 2017. Credit: Johnny Milano

Long Island MacArthur Airport is on track to end the year with a projected $2 million surplus, continuing a financial turnaround after four years of losses.

Major changes at the Ronkonkoma facility — including more stringent accounting practices, renegotiated leases for airport tenants and employee attrition — led to the new financial strength, officials said.

“We’re operating the airport like a business,” airport Commissioner Shelley LaRose-Arken said.

The improved financial standing helped attract Frontier Airlines to the Islip Town-owned airport in August, a move that is projected to bring in $2.8 million in revenue in 2018, officials said.

“Good stewardship of the airport leads to more airlines, which leads to more revenues, which will have a positive cyclical effect of attracting more users,” said Kevin Law, president and chief executive of the Long Island Association, the region’s largest business group.

Changes made in MacArthur operations in the past 18 months include:

  • Reducing the small-vehicle fleet by seven, saving $53,000
  • Increasing landing fee revenue by $346,000 in 2016, largely from new general aviation and commercial landings
  • Increasing airport baggage claim fee revenue for airlines by $182,000 in 2016
  • Reducing spending on outside professional services, such as advertising, which alone saved $76,000 in 2016
  • Changing to a lower cost security contract, saving $78,000 last year
  • Reducing the annual operating budget to $14.6 million this year, down from $15.1 million in 2016.
  • Hiring a professional airport manager rather than a political appointee

From 2011 to 2014, the Ronkonkoma airport operated at a loss, reaching its largest deficit of $2 million in 2012.

MacArthur is self-sustaining and has never used tax dollars to support its budget. In years of financial loss, it survived on surpluses from better years.

Daily operations are funded through fees for concessions, leases and other services. Capital projects are funded by federal, state and other grants, or with surplus funding in years it is available, LaRose-Arken said.

MacArthur’s narrow $284,000 surplus in 2015 was largely because of a decision to lease airport property to a compost facility for $600,000 in annual rent.

“We were able to finally at the end of the year bring it in with a slight variance over budget so that it wasn’t losing money,” town Supervisor Angie Carpenter said. “But there were no long-term strategies in place for the future.”

The airport has struggled to hold onto airlines. Spirit Airlines began limited service from MacArthur to Fort Lauderdale, Florida, in 2008, but discontinued it later that year. Delta Air Lines also discontinued service in 2008. Peninsula Airways started operations at the airport in 2013 and left in 2014, and Allegiant Air commenced service in 2014, then left before the year was out.

“If they want the airlines to be there, they’ve got to uphold their end of the bargain,” said Phil Derner, an industry consultant and founder of NYCaviation.com. “Make it appealing and cost effective for airlines to want to operate, and make it appealing for passengers to want to fly.”

By the time LaRose-Arken was hired in the spring of 2016, the airport had lost half its daily flights since 2007, and about $5.5 million in revenue since 2010.

Carpenter, who took office in March 2015, attributed the financial improvement largely to the leadership of LaRose-Arken, the former head of Republic Airport in East Farmingdale. Before that, she held management positions at Cincinnati/North Kentucky International Airport and Westchester County Airport. She is a licensed pilot and has a bachelor’s degree in aviation management from the Florida Institute of Technology.

“Experience counts, it really, really does,” Carpenter said. “In the past, appointments to the airport have been political, quite frankly. This person [LaRose-Arken] went through a very serious vetting process, has a proven track record.”

LaRose said her new role is similar to that of a chief operations officer, overseeing day-to-day airport operations.

“It requires you to continually reinvent yourself to find new revenue,” she said.

The airport was established in 1942 when the Town of Islip contracted with the federal government to build an airfield on town-owned property for military use. MacArthur added its first commercial flight in 1960.

Today, the 1300-acre, four-runway airport operates 24 commercial flights a day, including eight new daily flights by Frontier, which is based in Denver. Last year, 1.2 million passengers used MacArthur.

Carpenter and LaRose-Arken said they want travelers to consider MacArthur a natural and convenient alternative to Kennedy and LaGuardia airports, both in Queens.

“We’re getting a lot of reverse travelers coming from western Nassau and eastern Queens who see it is easier to drive here and park close, park cheaper, safer and not spend an hour or 45 minutes on the TSA line,” Carpenter said.

The airport creates 6,000 direct and indirect jobs, according to a 2010 economic study by the New York State Department of Transportation, the most recent available. The same study found MacArthur generates $577 million for the local economy.

LaRose-Arken said one of her first efforts was to revamp the airport’s budget and accounting practices, which she found vague and lacking detail about how money was being spent in each department.

“It didn’t drill down into the actual expenditures,” she said. “What we’ve done is drill down into the line items.”

Those efforts helped eliminate waste, she said.

In 2016, the airport saved $270,000 through not filling vacancies after employees left and by eliminating unnecessary overtime; $53,000 by postponing equipment purchases; and $18,000 in avoided maintenance costs for old, underused vehicles, LaRose-Arken said.

She also had the airport’s assets appraised and renegotiated a lease with the Army National Guard for 19.4 acres of airport property. The Army had been paying $66,000 a year on a 40-year lease signed in 1977. Under the new lease, it will pay $490,000 a year, with graduating increases every five years, with the final rate for the lease term in 2052-2057 totaling $953,700.

One of the airport’s most visible recent successes was in August, when officials secured Frontier, LaRose-Arken said.

“The addition of Frontier is a very good barometer of success,” said Robert Mann, a former airline executive and president of R.W. Mann & Co., an aviation consulting group based in Port Washington.

Frontier became the airport’s third major carrier, joining Southwest and American.

LaRose-Arken and others attribute Frontier’s interest to the airport’s improving finances. When MacArthur has a surplus it becomes easier to avoid fee increases for airlines, she said.

“Low costs matter more to us than any other airline,” said Daniel Shurz, Frontier’s vice president for commercial operations. “We did wait [to fly out of MacArthur] until costs were low enough for us to make a success of it . . . We couldn’t understand why the airport was so expensive previously.”

The new budget practices also gave airport officials the clarity needed to calculate the airlines’ average cost of $10 per passenger, LaRose-Arken said.

Per-passenger cost is a standard industry metric based on fees for security, baggage, counter rent, concourse rental, fuel and landing. Westchester County Airport in White Plains, which has six carriers, has a $19 per passenger cost to airlines.

Shurz said Frontier tries to stick with airports that cost their airline tenants $10 or less per passenger. He said Frontier noticed this year that MacArthur officials were able to offer more precise financial information and a lower cost than in previous discussions.

“There was actually certainty from the airport of the lower cost level they were able to achieve, and that they would be able to maintain it,” Shurz said.

In turn, MacArthur gets a percentage of every dollar that passengers spend at the airport — from concessions to parking — that amounts to an average of $9 per passenger, LaRose-Arken said.

Derner said rising fuel costs will be the biggest challenge ahead for MacArthur, and all airports. As higher prices squeeze airlines, affordability will drive decisions about which airports they partner with going forward.

“The moment an airline isn’t making money at an airport, they’re gone,” Derner said. “Especially at those out of the way airports.”

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