With contracts between Orlando International Airport (MCO) and 15 of its major airlines ending this year, airport officials are working hard to insure that contractual renegotiations are greeted with clear skies and without turbulence.
The Greater Orlando Aviation Authority (GOAA), the governing body of MCO, is comprised of a seven member board responsible for arranging the negotiations between the 15 signatory airlines, which include JetBlue, Delta, Southwest and American Airlines, just to name a few.
Negotiations began on July 24 and must be completed before the current contracts expire at the start of 2013. Focused mainly on rate making methodology, space requests and future growth and expansions, the terms of the new contracts will set the stage for the next four years of MCO’s operation.
“The agreement provides a fixed basis for calculation of rates and charges, identifies fixed space needs and locations for the airlines and known quantities for the Greater Orlando Aviation Authority,” says Jim Rose, deputy executive director for GOAA.
The airport requires payment from airlines in two major ways; fees collected for weight upon landing based on 1,000 pound increments, and leasing rates for all space needed for an airline’s day-to-day functions.
While all airlines are required to pay landing and leasing costs to operate within Orlando International, basic contracts, or non-signatory designations, give airlines the ability to pay on a month-to-month basis, whereas signatory contracts, like the ones being negotiated, work more like extended leases, insuring that the airline is there to stay – at least until the contract expires.
“The agreement establishes and sets forth the responsibilities and obligations for all parties and supports more favorable bond ratings,” says Rose.
In exchange for signing signatory agreements, airlines are entitled to a percentage of unused funds from MCO’s approximate yearly budget of $385 million, as well as lower overall leasing and landing rates throughout the time of their contract.
Though much has not been released regarding the specifics of the negotiation process or its expected completion date, GOAA representatives say that because such a large amount of airline contracts will be ending at once, “negotiations are conducted as a group with all of the participants approving the agreement.”
Because mutual agreement between all 15 airlines is necessary before contracts can be signed, differences in opinion, logistics and general scheduling issues make the negotiation process somewhat tedious and time consuming for both GOAA and its signatory partners.
The 15 airlines represent a substantial chunk of MCO’s business, accounting for more than 95 percent of the airport’s passenger traffic, which averages approximately 97,000 passengers daily and reached a total of 35.4 million in 2011.
With an economic impact of more than $26 billion on the Central Florida region, 44 total airlines flying both domestically and internationally, and a total of 18,000 employees working in everything from traffic control to hotel management, navigating through the cloudy negotiation process is one trip Orlando International Airport is happy to embark on.
Since the start of the negotiations only one airline, Allegiant Air, has made it clear that it will not be returning to MCO in 2013, but will be present throughout the drafting of the new contracts. Once the current contract expires, Allegiant will be moving its operations strictly to Sanford International Airport.
“We would hope that all of the signatory airlines would be at the gates next year,” says Carolyn Fennell, director of public affairs for MCO. “However, this is also contingent upon future airline activities of mergers and alliances.”
By Victor Ocasio