(gentle music) - Welcome to Business Forward, I'm your host Matt George.

Joining tonight, Gene Olson.

Gene is the Director of Airports for the General Downing Peoria International Airport, and Mount Hawley Airport.

So welcome Gene.

- Thanks for having me.

- I'm excited because I've always been interested in this business.

I just don't know a lot about it, other than just going to the airport and getting on a plane and flying to my destination.

But first of all, how does one get into a business like this?

How did you get into this business?

- If you really wanna know it goes back to when my dad used to bring us out to the airport to watch airplanes take off and land.

And you do that long enough, it gets under your skin and you wanna do it for a living.

So there are places where you can go to school to get a degree in aviation management, or you can do it the hard way like I did and just get a degree, and try to find a way to get into the industry.

- And that's what you did?

- That's what I did.

I worked for an engineering firm, and I worked for state government in Indiana in aeronautics and was able to work my way back here, and come home and run the airport where I first got enthusiastic about aviation.

(Matt laughs) - That's good.

So you have been a Director of Airports for how long?

- The director I've been here, this summer will be 12 years.

And I was the Assistant Airport Manager in Evansville, Indiana, before that.

- Where are you originally from?

- Right here.

- What is the exact role of your position?

What do you do every day?

- I report to a nine member board.

and they're appointed by either mayors in Peoria County, or state representatives or senators.

So they hire me and then I hire the rest of the staff.

There's probably two people that work at the Peoria International Airport and I hire 26 of them.

So we're kind of a small organization with a big responsibility.

And what we basically are as a landlord, we own and operate the facility but nobody really does business with us.

They do business with our tenants like the airlines, and rental car companies and things like that.

- Oh, so explain that.

So take the rental car company as an example 'cause that's a whole nother piece that most people don't even really think about when they think of airports.

I guess it would make sense too.

So Hertz as an example, they come in, do they rent space from you, or?

- It's a combination.

Since we aggregate the market and we bring all the passengers for them, we charge them space rent for the space they occupy in the building.

We charge them for their ready spaces that are in the parking lot when you go pick up your car, and then up on the hill behind the airport, to the north of the airport, there's a maintenance facility and we charge them for space in there and storage of cars in there.

- So you report to whatever this nine person board, but is that run by the city or state or?

- We're an independent entity.

So we are technically, the term is a municipal corporation.

So we're sort of a hybrid between a business and a governmental body.

But we have the power to condemn land, and to levy taxes, and things like that.

So we're a governmental body.

- Interesting.

So there is an airport authority with the state right?

Or is there- - There's an Aeronautics Department, and then there's also an Aeronautics Act.

So that was the enabling legislation, that allows communities to create local airport authorities.

- And so bear with me, 'cause I've got a lot of questions and I'm gonna go all over the board here but let's start with technology.

How is technology used in your business?

How important is it?

- It's hugely important.

Everything's becoming more automated.

just this week, just today, we got a letter from the FAA, and they do an annual inspection.

They used to send a person to Peoria and he would go through every piece of paper in our inspection process, and our work orders, and all that kind of stuff.

So now it's totally changed by technology and by COVID, we package up four months worth of records and we put them on a share site, where the FAA can get 'em and then they go through them electronically.

- And that's how they do their audit or?

- That's how they do part of their audit.

They still have to come for an onsite inspection, but that's one example of how we're using technology.

The industry is using technology to streamline things.

- What are some other things like with the control tower, and is that standard across the board in the United States or city to city or?

- Air traffic control is becoming more automated, and there are new systems like there's now a thing called ADS-B, which broadcast the information from the airplanes transponder and it shows up on the air traffic controllers radar scope.

And they know all kinds of information about the airplane.

Whereas before all they used to get was a four-digit number that popped up on the scope.

I'm a pilot I haven't flown in about 12 years, but I got into an airplane recently and I looked at all the displays that used to be mechanical instruments that you would look at, and I'm like, these are all digital displays now.

And I'm not even sure how to turn them on.

- I bet you that just changes and all of that relates to safety?

- Right.

- Efficiencies and so on.

So when you in your position, are you tasked with submitting a strategic plan or is it just basically you run the airport.

How you've done it for years.

How does that work?

- It's more of a goal setting.

So at least once a year, I sit down with my commission and come up with a set of goals that I'm gonna work on for the year.

And those are, some of them you'd call strategic.

Like one of our bigger projects is we need to replace the control tower.

And we've done the site selection study, we've done the design, and now we're looking for a funding source that can fund the construction.

The actual construction of the tower.

So that's a strategic goal that's gonna be on my goal list until we get it done.

- So you say finding a funding source.

Is every airport different or are they in charge of getting their own dollars in?

Or how does that work?

Because you see some airports that you just sit there and go that airport is just beautiful, and then you see smaller towns and then you'd go, (sighs) I don't know if I wanna fly into there next time.

(Gene laughs) - We have an expression in the industry that if you've seen one airport, you've seen one airport.

There are some common threads, but every airport arranges their finances a little bit differently.

So we do a kind of a mix of setting rates and charges for our users, our direct customers which would be the airlines, and then also setting activity fee.

So for example the airlines would pay a certain number.

I forget what the actual rating is but it's like a buck 55 per thousand pounds of landed weight.

So if you take a 70,000 pound regional jet and divide that 70 times a buck 55, that's what they pay for each landing.

And then they pay also for space that they have in the terminal building.

They pay for, we have to have law enforcement officers so we have some security fees that we charge.

And we are, what's called a rates and charges airport.

So we set those rates and charges by ordinance every year.

Other airports do it through lease mechanisms.

So you might have five-year leases with the airlines and they agree to pay you, and it's either on a compensation basis or a recovery basis.

So you're trying to at least break even.

For major capital projects, we receive funding under the Airport Improvement Program, based on the number of passengers that come through the airport.

So for us that's about 2/1/2 million dollars a year.

An airport like O'Hare for example, they have so many passengers that the amount per passenger is a lot lower.

And then they rely more heavily on the passenger facility charge, which is basically a head tax.

Every time you fly somewhere, the first two airports in your trip can charge you a $4 and 50 cent head tax basically.

So around trip is $18.

And the projects that you do with that have to be federally eligible, so in other words, they have to fit under the Airport Improvement Program rules.

But you have 100% control over what happens with those dollars.

- And that would be when you built the new terminal, or you need to redo runways, or whatever.

- So the new terminal, was some passenger facility charge money.

The total cost was about $60 million, and we had about $19 million in federal aid.

And some of it from accumulated cash because we'd been building up a treasury for that, and some of it through PAR property taxes.

And we did that through bonding.

And then over time those bonds get paid off.

- So that was very interesting.

I did not know that.

So every time an airplane lands or takes off, there's a chart- - Just a landing fee - Landing fee.

So every time something comes in, a plane comes in, a commercial plane.

- Commercial ones.

- There is a landing fee?

- Right.

- That is interesting - For general aviation, the private owner flown aircraft, we don't charge them a landing fee, but they pay a PAR, they've pay 5 cents per gallon fuel surcharge, that basically goes through Byerly, or Byerly Aviation is our fixed base operator.

And so they pay a fuel flowage fee that covers kind of their usage of the air field.

- And Byerly is separate from what you're doing?

- They're a tenant.

- It's something different.

A tenant.

And then so now let's pivot to Mount Hawley.

Mount Hawley, much smaller airport, but yeah, and I guess that would be for only personal crafts?

- Right.

We do see a light jet usage out there.

Not very often, but occasionally we'll see a jet there.

- Why would a jet go in there?

Oh, you mean a private jet?

Like maybe a porter jet?

- Assess the citation or something like that.

We see those occasionally up there.

And the reason they go to Mount Hawley instead of the big airport, is that Mount Mount Hawley is closer to where they're trying to go on the ground.

We had a jet come in there one time and I happened to be there and see the guy who got off.

And he was the CEO of the company that owns K2 Skis, and Berkley Fishing Equipment.

And they happen to also be the largest processor of zinc in the United States.

And I'm looking at the guy's website and there he is, wearing ski clothing and holding a pair of K2 skis.

And I'm like, that's not why they're here.

And then I found the thing on their website about zinc and I'm like, ah, they're going to Mossville.

- They're going to cat.

- And they save that half-hour drive around Peoria by doing that.

- I did not know that.

So do you have sub committees, do you have a safety committee?

'Cause I'm guessing safety's number one at an airport.

Probably on your head at all times.

- Our board is made up, we have two subcommittees.

We have a project finance committee, and we have an air service and marketing committee.

There is a safety committee, but it's not active.

And that's because the staff pretty much that's what we do.

We focus on that all the time.

Each of my key staff members makes a report at the board meeting, and so we talk about safety and safety related issues and projects at every meeting.

I'm gonna say this.

Amy McLaren is a dear friend of mine and I don't mean anything bad by this.

But you can drive down a road and feel all kinds of bumps.

You can't get away with that on a runway.

We're held to a much higher standard.

And you gotta to think this vehicle has three wheels and they're only this big and they can take a lot of vertical movement, but they can't take much side to side.

So any kind of a pothole, or crack, a crack that's generating pebbles can ding a propeller, and that can cause the blade to come off and then the airplane's not gonna to fly anymore.

So we have an extremely close tolerance that we follow on inspections, and things like that.

- So a runway inspection is done how often?

- At least twice a day.

We go out and do an inspection in the morning, and then if there's a rainfall event or something else like that, especially during snow, we're out there every hour.

Snow removal is a huge burden and task for us.

- Costly.

- Yeah, we have about an 1100 gallon deicer trailer, and it has these foldout booms that we can cover about 40 or 50 feet of pavement width, in one pass.

So we go up the main runway, back the main runway, and then we do the main taxi route.

That stuff costs like four bucks a gallon.

And it takes 1100 gallons will do the main part of the airfield once.

- (indistinct) so every time it goes out 5,000.

Just boom, gone.

I think one of the benefits of the international airport and I love it is, the free parking.

And people talk about that.

I know you can use that in marketing terms and so on but just keep the free parking.

And the other thing it was funny I was talking to somebody about that I was gonna talk to you and they said, well, ask him why the bar was closed.

So (laughs) I'm just joking.

- It was actually being remodeled.

- Oh, was it?

- Yeah.

- I'm gonna go back to the landing fee.

I did not know that at all.

So this may be wrong thinking, but a place like let's say New Orleans that has a Super Bowl, and they have an airplane land I think every 10 seconds or something.

They get that fee every time they land?

- That's correct.

- That is crazy.

- So if a really huge event like that it's gonna be a real boon.

Again, they probably don't charge that for private jets, which when you go to the Super Bowl- - There's a lot of private jets.

But there's also a lot of commercial flights that go in there.

That is amazing.

That's pretty cool.

- I remember seeing an aerial photograph of the South Bend Airport when Notre Dame was really hot one year and they were having a home game, and they had runways shut down and jets parked on it.

- Oh my goodness.

- But again, they're paying the fuel flowage fee and not necessarily the landing fee.

- So there are so many revenue streams that you just don't even think about, when you're talking about your business.

- And you want it that way.

You want your revenue streams to be diversified.

So that like in the case of COVID, when your passenger count drops, like in April it dropped by 95%, last year.

So you want it to be diversified So you have things that aren't gonna be affected by passenger numbers to still be there.

- Let's talk about the economic impact of COVID.

That is a hit of hits right there for an airport.

So how do you keep morale up?

- Morale wasn't really an issue for our staff.

I'm sure it was for the airline people.

And they saw some layoffs and things like that.

but there were federal grants that went to the airlines to try to minimize layoffs.

I laughed because at the start of this, I told our staff to prepare for a 15% decline in passengers, in revenues.

And it's laughable now because it was way off.

It was way bigger.

We were stabilized by two programs.

There's the CARES act and the CRRSAA grant.

So over the course of about three and a half to four years, we're receiving about $8.9 million in direct financial assistance that's paying our operational costs.

So what we did then was, we turned around and we felt it was the right thing to do, to abate all the rents and fees that the airlines were paying.

Any of the terminal tenants, we abated minimum annual guarantees, we abated space rent for the airlines, we abated the landing fees, and things like that, because a couple of reasons.

One, we're trying to pass on, we're getting funded by things that they normally pay for.

And so it was kind of the right thing to do.

And the other thing was, we have to go out and market the airlines, and we have to, I wish we could say where an airplane's gonna fly and how much the fees gonna be and things like that.

We don't have that ability.

So we have to market the airlines to try to get them to serve Peoria.

And we wanted to do something that was kind of attention grabbing in the industry, and get the airlines to remember us so that when it's time to build the system back, they'll know that Peoria is a good sponsor and a good business partner for them.

- Let's talk about Allegiant for a minute, because they're obviously a huge tenant of yours.

And so when Allegiant says, hey, we're going to have a new route to Sarasota or we're gonna have a new route to Nashville or whatever it is, do you think some of that is because of the way you've managed the business, or is that?

- I think so, yeah.

We have a pretty good reputation with Allegiant and we've been partners with them.

We were one of the first airports, back in like 2004 when they first got started.

And we've tried to keep that momentum going.

We talk pretty frequently with them, and we were shocked last year because Nashville was supposed to kick off, and it's about a month ahead.

And we're like, we're in the middle of this crisis.

You're not gonna to do this right?

And they said, no, no, we're gonna give it a shot.

So it started off really slow but it built, and they extended the season beyond what they had planned.

It was supposed to end I think in August or September.

It actually went through the first week of January.

And then now with our new Denver flights, we feel very confident about Nashville because the airplane is gonna go Denver, Peoria, Nashville, Peoria, Denver.

So when they link two cities together through us like that, that says that they're pretty confident in the Nashville service.

- So if you're Allegiant Airlines what due diligence do they do to decide, that they like Peoria as a hub or any other airport, really?

- It's experience that they have with us, and different issues come up from time to time and how we respond to those issues, and how kind of cooperative we are as a business partner with them.

That builds a track record.

It's just like any other business.

We're really excited because Allegiant is doing an experiment this year, where they're gonna give us service for two weeks in August, from Peoria to Rapid City, South Dakota.

And you're like, okay, what's in Rapid City?

It's the closest airport to Sturgis.

And those two weeks in August are these Sturgis Motorcycle Rally.

- That's cool.

- So we're just tickled that they're doing an experiment like that, and they picked Peoria as one of the places to it.

- That tells a story, doesn't it?

- Sure.

- So how do you track progress or do you just look at just heads through on planes, or how did bodies on planes?

How do you personally sit there and go yes, we need to have X amount of passengers or?

- The number of passengers that goes through the airport, primarily 'cause we don't charge for parking, is not a direct revenue stream for us.

But we see that in terms of the percentage that the restaurant pays us and the commissions that the rental cars pay us, that's important.

And for us, it's about having the departures, and having the network of cities that you can fly to.

And we've been talking about Allegiant.

That's the leisure side of things.

The real important part for future growth is the business use of the airport.

Right now the Business Traveler has left the market.

And Allegiant where they used to be 25 to 30% of our market amongst four carriers, now they're well over half.

So we know that the Business Traveler has kind of not traveling.

And if they are there, they're driving.

I talked to somebody the other day and they said their radius right now is five hours.

If they can get there by car in five hours they're driving.

That used to be three hours.

- Or less.

- Yeah, we're less.

And so we're really trying to stay as close to the business community as we can, so that we know when they go back to the office, when the office says it's time to travel, and that's gonna to be critical for the future growth of the airport.

- So I give you credit for two things.

There's probably a lot more, but number one, I saw you out in front of COVID and you were seeing a lot at the airport.

You were not shy to get on the TV and do interviews and do that.

So credit to you and your team for that.

But the other thing that gets lost a lot, and I'm just a kind of a clean freak, but your airport's very clean.

- And that was one of the pleasant surprises when COVID kicked in.

We contract out a lot of services that a lot of other airports will have in-house.

And one of those is our custodial service.

And so when COVID started hitting, we all sat down and we're like okay, what do we need to do to be safe?

How do we clean?

So we used to time the cleanings for when the terminal was empty, and we switched to more of a go hit it all the time.

They hit all the touch points.

And then the most pleasant surprise was that the cleaner that they use, has always been an antiviral cleaner.

And then they even switched recently to an antiviral cleaner that used to, they would apply it to a surface, and it needed 15 minutes to set and dry.

They've got one now that is dried and set in two minutes.

So we've done that.

We've also put out a lot of the stickers on the floor to those six feet apart.

Plexiglass up wherever somebody has to talk to a passenger.

And of course we have the mask mandate which is now federal mandate.

Anytime you're basically outside of your private car on the airport, you have to have a mask on.

It was, it was funny I was walking around in the parking lot yesterday and I see these two guys walking up to the terminal, and neither one of them had a mask.

But I look and they both have them in their hands.

So I'm like, okay, they're gonna put them on when they get to the door.

They notice me looking at 'em, probably not too many guys running around with a tie and an ID badge.

They put them on real quick when they saw me looking at 'em.

- You do a great job and your team does a great job.

And I flew last month and my daughter was a little nervous to fly, and everything was smooth.

And so lastly and quickly, I was gonna ask you, lack of pilots out there, is this a big issue?

- It's not right now because the airlines have parked a lot of airplanes in the desert, long-term storage.

But when we start to recover from COVID, then we're gonna be right back into the pilot shortage.

And that is a big deal.

- I wanted to tell you, you tell your staff this, that they do a great job and they're very friendliest, is a great airport, and so is Mount Hawley.

But the main airport is a great airport.

And clean, and great parking, and Gene Olson, and thank you for coming on, and we appreciate it.

This wraps another show.

I'm Matt George, and this is Business Forward.

(gentle music)