Page 24 - BAA CAFR 2017

BIRMINGHAM AIRPORT AUTHORITY
Management's Discussion and Analysis (Unaudited) (continued)
Fiscal Years Ended June 30, 2017,2016, and 2015

and equipment), less the amount of related debt outstanding. The Authority uses these capital
assets to provide services to its passengers and visitors to the Airport; consequently, these assets
are not available for future spending. Although the Authority's investment in its capital assets is
reported net of related debt, it is noted that the resources required to repay this debt must be
provided annually from operations.

An additional portion of the Authority's net position (10% at June 30, 2017) represents bond
reserve funds, passenger facility charges, and federal grant contributions that are subject to
restrictions and federal regulations. The remaining unrestricted net position (9% at June 30, 2017)
may be used to meet any of the Authority's ongoing obligations. The Authority is required by
certain agreements to maintain two months of operating expenses on hand which is included in the
total of unrestricted net position.

AIRLINE RATES AND CHARGES

From January 1, 2006 until March 1, 2009, the airlines operated without an agreement in place,
but were charged rental rates and landing fees based on the methodology contained in the expired
agreement. On March 1, 2009, the Authority changed its rate setting methodology to an approach
of crediting the Airport’s terminal cost center with 25% of all terminal building non-airline
revenues, and calculating landing fees based on a full compensatory methodology.

From July 1, 2011 until August 14, 2016, the Authority entered into a new agreement with each
of the six major airlines serving Birmingham. Under the terms of the agreement, the airlines will
be charged full compensatory landing fee rates for the airfield, and will be charged commercial
compensatory rates for the terminal building reduced by a 35% non-airline terminal building
revenue credit.

Effective August 15, 2016, the Authority entered into a new five-year agreement with each of the
four major airlines serving Birmingham. Under the terms of the agreement, the airlines will be
charged full compensatory landing fee rates for the airfield, and will be charged commercial
compensatory rates for the terminal building reduced by a 35%-50% non-airline terminal building
revenue credit depending on the Capital Improvement Fund balance. The new agreement contains
an end of term option that allows for a renewal of an additional five years.

2017 2016 2015

Terminal Building Charges $6,355,239 $6,381,759 $6,863,627
Aircraft Parking Charges 692,343 699,327 744,868
Landing Fees 9,266,125 9,095,656 9,045,201

Total Signatory Airline Charges $16,313,707 $16,176,742 $16,653,696

Airline Cost per Enplaned Passenger $12.21 $11.99 $12.52

6