Compact Development Guidance
As of May 2012
Chapter 14: Guidelines for Countries Proposing Airports
MCC will use the feasibility study of the airport project as the basis to examine the following and make a determination on what supplemental studies, if any, are required to develop the project sufficiently so that appraisal could commence:
- Preliminary description of rationale, including nature and measure of benefits, and beneficiaries by income, gender and age.
- Demonstration supported by appropriate data and documentation, that the proposed project is likely to deliver the stated benefits.
- Identification of the need and principal driver(s) for a new airport or airport expansion and/or improvement, such as capacity restrictions, failure to meet ICAO and/or FAA safety/security standards, forecast growth of air traffic, changes in the aircraft mix, establishment of an economic/transportation hub at the airport, change in status from domestic to international airport, provision of necessary access to remote areas, etc.
- Identification of the range of alternatives – expansion/upgrading of existing facilities, construction of a new airport, site and size options, including any socio-economic and environmental considerations related to each alternative.
- Demonstration supported by appropriate data, that government, commercial or private financing is not available for the project (and the reasons for its unavailability) or would require the proposed project as a necessary precondition for complementary investments.
- Identification of areas which require obtaining more detailed, current or reliable information. If a new airport (or expansion/upgrading of an existing airport) is proposed, obtaining approvals from all relevant parties for land acquisition and/or imposition of zoning restrictions may be a significant and time consuming issue; identify potential resettlement and person and/or livelihoods, impacted by resettlement, as well as the parties responsible for providing approvals, and a timeline at commencement of the due diligence phase.
- Collection and integration of satellite imagery and topographical maps at the appropriate scale (typically 1:25,000 for urban planning) identifying key elements of existing and proposed infrastructure and utilities, rights-of-way, zoning restrictions and service areas. In addition, it may be appropriate for the due diligence process to identify other geo-spatial data – including but not limited to census data, water resources and geological data – and combine them into a single GIS database.
- Meaningful public consultations (including gender, age and income-based focus groups where relevant) among project affected persons and key stakeholders including women’s civil society organizations.
- Identification of potential social risks of airport construction and operation, including HIV/AIDS, human trafficking, or child and forced labor, and impacts on local communities including resettlement or impacts on physical cultural resources.
Once MCC has made the determination to commence appraisal on a project, the infrastructure group will conduct the following assessments and identify key constraints.
- Determine airport’s potential and growth prospects through thorough market assessment and traffic forecasts for major market segments (e.g., domestic, international and transit passengers, aircraft movements, cargo, mail, etc.). The analysis should be based on comprehensive compilation of a statistical database on aviation, tourism, trade and economic data from airline schedule data, immigration or T-100 data or equivalent, ICAO, ACI and IATA traffic data, regional tourism association annual reports and aviation forecasts from Boeing, Airbus, Bomabardier, Embraer and other aviation organizations.
- Compare the growth prospects and traffic forecasts against the country’s demographic and economic trends, a minimum 10-year airline service history in the country and the country’s relative competitive position to determine conformance.
- Check whether a route development plan has been developed, and assess whether the plan provides a competitive advantage relative to nearby airports. Determine the realistic potential (supported by numbers) for route diversification to address under-supplied or no-service markets.
- Review the country’s international agreements regarding access to its air transportation markets (bilateral air service agreements, regional treaties, etc.) and the extent to which they are being applied. Review the country’s official policies regarding the freedom of air carriers to offer both domestic and international services.
Logistics and Cargo Distribution
- Assess the potential of the airport to exploit cargo markets in order to develop its logistics and distribution activities in the region. Evaluate the likelihood of all-freighter carriers locating or expanding at the airport.
- Determine the prospects for logistics and distribution activities by examining the indigenous environment for consolidators, freight forwarders, consignees, shippers and cargo agents.
- Assess multi-modal transportation and distribution potential, especially with sea ports, if applicable.
- Project the potential for transshipment volume, clearly assessing market dynamics by sources of origin and destination.
- Determine capacity requirements for airfreight terminals, cargo agent buildings, freight aircraft parking bays, freight forwarders’ facilities and free trade zone facilities.
Airport Commercial Property Development
- Assess the potential of the airport and surrounding land for use by aviation-related industries, such as engine overhaul centers, aircraft component manufacturing/servicing and various suppliers to airport users, as well as non-aviation industries that benefit from close proximity to the airport, such as hospitals/clinics for medical evacuation services, commercial/office facilities, etc.
- Assess the airport’s commercial plan for generating aeronautical and non-aeronautical revenues, as well as aviation-related and commercial businesses.
- Evaluate additional job creation potential based on vetted business and commercial plan, including plans for expansion of opportunities for small businesses and/or microenterprises.
- Prepare a financial analysis of the airport operation, including a projection of airport revenues and costs, based on the previously-mentioned forecasts of air traffic, data on recent financial statements of the airport operator and the potential for optimization.
- Aeronautical revenues: Determine the sustainable values for aeronautical charges for landing and parking, passenger service charges and security charges. Ensure that the fee structure can be optimized to recover the costs, and yet remain sufficiently competitive to promote traffic growth and support the marketing strategies of the airport. Benchmark these charges against other airports in the region to assess viability and impact on demand.
- Non-Aeronautical revenues: Non-aeronautical revenues of successful airports in developed countries can represent on the order of 60% of revenues. Assess existing retail contracts. If applicable, determine potential for increase in patronage and passenger-spend at new or modernized terminal facilities. Calculate the returns on airport space ($ per m2). Construct realistic projections for other commercial opportunities within the passenger terminal (including food and beverage retailers, office rentals, car rentals, business lounges, taxi permits, fueling, car parking, counter rentals and banks) and on the airport lands.
- Assess commercial opportunities for small retailers, food vendors, and service providers within passenger terminal and around airport lands by income, age, gender and ethnicity to the best extent possible.
- Calculate FIRR for the airport with a distribution profile with demand as the key driver.
Technical Assessment: Engineering
- Review all aspects of preliminary technical designs and proposed standards and confirm appropriateness of design criteria, demand requirements and environmental and social impacts
- Compare the proposed design criteria to the standards (ICAO, FAA, IATA) to which the airport terminal is designed.
- Landside Facility Capacities: Identify the capacity of the existing landside facilities including, but not limited to aviation facilities such as passenger terminals, hangars, aircraft parking aprons, ATC, rescue and firefighting, ground handling, airport maintenance and fuel facilities; compatible non-aviation facilities such as commercial/industrial parks; and common facilities such as automobile parking, access roads and public utilities.
- Landside Facility Requirements: Evaluate existing landside facilities and compliance with applicable safety and design requirements. Based on the safety and capacity computations as well as the forecasts of aviation demand for the airport, identify the needed improvements for the landside facilities (see above).
- Airside Facility Capacities: Identify the capacity of the existing airside facilities including, but not limited to such aviation facilities as runways, taxiways, aprons and holding bays, including operational capacity (number of aircraft movements/parking positions, etc.) and strength (ACN/PCN comparison).
- Airside Facility Requirements: Evaluate existing airside facilities and compliance with applicable safety and design requirements. Based on the safety and capacity computations as well as the forecasts of aviation demand for the airport, identify the needed improvements for airside facilities including, but not limited to runways, taxiways, aprons, clearways, stopways, holding bays, obstacle free and height limitation zones and rescue and firefighting access and including pavement section alternatives.
- Confirm acceptability of surface gradient standards and line of sight standards.
- Assess existing condition and capability, as well as future requirements for Navaid and ATC facilities, including but not limited to instrument landing systems, nondirectional beacons, approach lighting systems, lead-in lighting systems, traffic control towers, surveillance radars, surface detection equipment, and Automatic Weather Observation Stations, among others.
- For new airports, ensure all appropriate tests have been carried out, including a thorough wind and weather analysis, including an analysis of crosswinds, coverage and orientation of runways.
- Evaluate local conditions, including local material suppliers, sources and capabilities; and evaluate drainage alternatives.
- Review airfield electrical lighting layouts and determine system relocation possibilities, if applicable.
- Review and evaluate project layout, including verifying master plan dimensions and data.
- Ensure that soils investigations are complete, including field exploration with test pit explorations and laboratory testing (e.g., compacted CBR test, sieve analysis, Atterberg limit determinations).
- Ensure completeness and quality of the pre-feasibility report, including geotechnical investigation, topographical surveys and designs of applicable airport landside and airside facilities (e.g. passenger terminal and other landside installations, pavement section design and analysis, drainage design analysis, runway lighting, signing and basic system circuitry layout).
- Strategize bidding procedures to provide a basis for competitive bidding.
- Complete estimates of probable construction costs for the recommended alternatives and conduct an initial cost analysis and life-cycle cost analysis.
- Identify major project risks and quantify, as much as possible, the impact of these risks on project cost, timeline and quality. Develop mitigation measures and estimate the cost of mitigation.
- Develop project cost estimates of +/-35%, including all associated costs, such as costs relating to environmental mitigation, resettlement compensation, social safeguard measures, construction supervision, project management and technical audits.
- Develop provisions to be included in project cost estimate, such as physical contingency, allowances for specific risks that were identified in Appraisal, price contingencies, and allowance for the effects of foreign exchange rate fluctuations, and determine meaningful rates of inflation – local and foreign – to apply to base costs.
Technical Assessment: Economic and Financial
The MCC economist responsible for the assessment of the project will work to ensure that the proposed airport project complies with MCC Guidelines for Economic and Beneficiary Analysis. The economic rate of return for each project should be sufficiently high to warrant investment and eligible countries should have reviewed relevant governance practices, including laws and regulations, and undertaken reforms, as possible, to enhance the anticipated economic benefits generated by the airport project. Infrastructure input to this analysis may include the following:
- Identify benefits expected to flow from the project, focusing on increases in incomes for workers, firms, and households. Identify the beneficiaries by income, age, gender, and ethnicity to the best extent possible. Compare projected incomes with and without the proposed project.
- Make an assessment of how benefits (i.e., increased incomes) resulting from increased efficiencies (e.g., reduction in wait and queue time) would impact poverty reduction. Determine impacts by income and gender.
- Summarize the design standards, design life and cost estimates (capital and maintenance) and confirm that these are consistent with the assumed benefits and duration of the benefit stream. Note that the duration of the benefit stream is typically assumed to be twenty years. Assumptions that the duration is longer or shorter than this should be clearly justified.
- Confirm that the costs and project life are consistent with the engineering design.
- Complete a financial analysis.
- Confirm that the technologies that are proposed in the project and the engineering design will allow fulfillment of operational performance, financial, and economic objectives.
Technical Assessment: Environment, Social and Gender
MCC environment and social assessment and gender experts will review proposed projects for their compliance with MCC Environmental Guidelines, Gender Policy, and Resettlement Guidance (www.mcc.gov), which include an expectation of compliance with host-country laws, regulations and standards, as well as requirements by which the host country is bound under international agreements. Particular attention must be paid to issues which generally arise including, but not limited to, siting related to adjacent land use (particularly concerning noise), the management and storage of fuel and aircraft fueling.
- Identify country-, region- or sector-level assessments, strategies and commitments with respect to climate change and their relevance to compact activities.
- Identify climate change impacts (from the project) and risks (to the project) and corresponding mitigation and/or adaptation opportunities, as relevant.
Legal and Regulatory Assessment
In consultation with MCC legal staff, the infrastructure group will assess projects to ensure that proposed projects do not violate any existing laws of the country or that MCC’s assistance of such projects would violate any law or U.S. policy applicable to MCC. The infrastructure group will also review relevant governance practices in the sector, including laws and regulations, and any reforms the country has or proposes to undertake. Finally, the infrastructure group will, in consultation with MCC legal staff, review and comment on any contracts related to the implementation of the proposed infrastructure projects. This assessment may include the following:
- Identify government policies and regulations specifically related to airport construction, operation and maintenance. Identify any international agreements specifically related to airport construction, operation and maintenance. Identify any issues arising from such agreements, policies and regulations.
- Identify any governmental agencies or other entities whose cooperation and assistance are necessary to the success of the airport.
- Identify the proposed chain of ownership of the airport, and whether any changes in ownership will be needed upon the end of the proposed compact.
- Identify any special arrangements that need to be made with any contractors performing work on the airport.
- Identify any military presence that would benefit from the airport.
- Confirm that the technologies that are proposed in the project do not require any exemptions from local import regulations.
- Review detailed description of current arrangements for ownership, management and maintenance of airport, including details of the legislative framework, administrative framework, funding arrangements and maintenance responsibilities.
- Review compliance with applicable security standards (e.g., FAA) that are necessary to sustain and grow demand.
- Review existing performance with respect to clarity and acceptance of contractual arrangements and responsibilities, and acceptance of financial reserves for maintenance and future capital investment requirements. Identify causes of inadequate performance including legislative or administrative arrangements, resources, technical capability and capacity and funding sources and airport charges structure.
- Review of maintenance programs to ensure that such plans are suitable for the new or improved airport, including responsibilities, resources, funding, taking into consideration gender roles and access. Identify shortfalls with current arrangements and provide recommendations for a program to strengthen airport management and maintenance arrangements.
- Review of details of alternative maintenance and capex funding options. Include details of income derived from users, disaggregated by gender and potential for increased cost recovery, if applicable.
- Prepare a summary of actions needed to maintain the airport to an acceptable level, including institutional strengthening, sources and structure of funding (responsibilities and funding levels) and additional resources needed.
Risk Management Assessment
- Identify significant risks to the project, in particular construction cost increases, administrative and other delays related to availability of materials and/or expertise, reliability of traffic forecasts, financial and environmental sustainability of the airport, trade union issues, local acceptance and take-up of benefits, and other factors affecting economic performance and distribution of benefits by income, gender, age and ethnicity (this could include risks such as HIV/AIDS, health and safety, resettlement, human trafficking, and child or forced labor.
- Identify and assess significant risks relating to durability and confirm that design criteria adopted shall mitigate these risks within acceptable tolerance levels.
- Prepare a risk management plan to minimize the negative impact of the risks.
- Provide a summary of the technical and construction resources available in country and previous experience with projects of similar size, nature and type.
- Identify local factors that may affect the timely completion of the works, including transport to/from the location for the contractor’s equipment, fuel and other materials, seasonal weather patterns such as avoiding the wet season, potential resettlement or social risk factors such as HIV/AIDs.
- Prepare an implementation program including contract awards, any approvals and permits needed, construction times, cash flow, government commitments and other hold points as appropriate.
- Recommend an appropriate procurement procedure, sequencing, and packaging.
- Recommend suitable supervision and management arrangements.