I’m still hanging out, getting to know my son, so here’s another guest post for you. This time it’s an interesting look at airports and their names.

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The name of an airport: we see it when we book reservations, on billboards as we cruise down the highway, on signs directing us towards the terminals, and we hear it constantly over the airport’s PA and on the airplane itself. As frequent fliers, we try to tune it out and focus on the three-letter airport code—it’s a daunting task given how often we’re exposed to the actual name.

But there are reasons why air travelers are constantly inundated with the full name of the airport. First, an airport’s name is the largest free advertisement in its attraction toolbox. It’s plastered everywhere, and mostly not at the airport’s expense. Flight search engines use the airport’s full name in search boxes, airlines use the airport’s full name in itineraries, and cities use the airport’s full name on signs on highways and roads. With this much expensive real estate freely displaying the airport’s name, it’s no wonder that this component is integral for attracting passengers. Second, the name happens to tie in nicely with the region’s economic development strategy. Not only is it important for funneling more passengers through an airport’s gates and services, but it also is important for the region the airport serves.

Take the example of what happened recently in Bozeman, Montana, where the name of its airport was recently changed from Gallatin Field Airport to Bozeman Yellowstone International Airport at Gallatin Field. Not only does the new name include “Bozeman,” the largest city the airport serves, and “international,” even though the airport does not yet have a customs facility, but also “Yellowstone” was added. The airport, which is approximately 90 miles from Yellowstone National Park, changed its name to better compete with other airports that serve the park (Yellowstone Airport in West Yellowstone, Montana which is just a couple miles from the park; Jackson Hole Airport in Jackson Hole, Wyoming which is approximately 47 miles from the park; and Yellowstone Regional Airport in Cody, Wyoming which is approximately 52 miles from the park).

Even though none of these airports are actually located in Yellowstone, their names all work to advertise their proximity to this popular destination. Numerous other airports utilize this strategy of including a nearby destination in part of their names: Fresno Yosemite International Airport, which is located in Fresno, CA, is approximately 60 miles from the park; and the airports that serve Washington, DC (Ronald Reagan Washington National Airport, Washington Dulles International Airport, and Baltimore Washington International Thurgood Marshall Airport) that all use Washington in their name yet none are actually located in the city.

However, not every airport that claims to utilize this strategy actually does so. Last year the airport that serves Budapest, Hungary changed its name from the Budapest Ferihegy International Airport to the Budapest Liszt Ferenc International Airport. With a new terminal opening at the airport and the country taking over the EU presidency, the national government claimed that a name change was necessary to be more descriptive and more attractive to European travelers—after all, who has ever heard of Ferihegy? To further support the government’s cause, they elicited the support of the population, naming the airport after the country’s musical hero, Franz Liszt, who is widely known and celebrated throughout Europe and the world. Throughout the negotiations, the government made the case that changing the airport’s name would better promote the region during such a crucial time and in the future. The problem is that it is hard to imagine that naming an airport after a prominent figure would actually increase passenger traffic—is Washington/National attractive to passengers because it’s now named after Ronald Reagan or is it because it’s mere minutes from the city center? While the name change in Budapest might promote Hungarian culture, it certainly does little to increase growth for the airport or the region.

An airport’s name is clearly an important asset, much like the names of sport stadiums in the U.S. Airports use their names as an advertisement to promote passenger growth as well as the region’s wider development. Sports stadiums lease or sell their names as an additional source of revenue. If airport finances get much worse, maybe we’ll start seeing corporate sponsorship there, as well—who knows, perhaps the GM Detroit International Airport or the Exxon Mobil Dallas International Airport will be on the next billboard you pass?

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Jacob Kuipers is an economic policy consultant who has lived in Vermont, Washington, DC, Montana, Boston, Budapest, and Cleveland over the past five years. His current clients include the U.S. government, the Harvard Business School, and economic development organizations. He is a student pilot and an airplane enthusiast. You can reach him at jacob /dot/ a /dot/ kuipers /at/ gmail /dot/ com.

I’m still on paternity leave, but today I have an interesting post on the world of leasing from someone on the inside.

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The aircraft leasing business is an integral part of the aviation world, yet the travelling public knows relatively little about it. Currently about 38% of the world’s commercial fleet is leased. This figure is expected to grow to over 40% in just the next few years.

Ireland, you may be surprised to find out, is a bit of a hub for aircraft leasing. Nine out of the top 10 leasing firms in the world operate here. This is due to a few factors. We have favourable corporation tax rates and tax treaties that allow leasing companies to be competitive. In addition to this, there is a big pool of aviation expertise in our country. One of the first major players in the aviation leasing industry was Guinness Peat Aviation. After its dramatic demise, several companies rose from the ashes and ever since, Ireland has been a major player in global leasing.

But first, why do airlines need to lease planes – can they not just buy them, you might ask? Well yes they can, but owning your own aircraft can present problems.

Price
Aircraft are not cheap. You only need to look at the list prices of Airbus and Boeing to see just how pricey they can be. Therefore some airlines might not be able to afford aircraft, or in a bid to keep their balance sheets looking healthy might not want to have such large outlays. Leasing allows airlines a relatively cheap way of getting aircraft, as there isn’t the same extent of expenditure, and it stops their balance sheets from looking too asset heavy, tying up capital. Also from an operational point of view, it allows airlines access to newer planes and more fuel efficient aircraft. Cranky Air might be able to buy a 737-200 on the market, but could afford to lease a newer 737-800.

Economic uncertainty
The last few years have been a good example of why leasing planes can be a better alternative than owning them outright. When demand is unstable, the more flexibility you have in your fleet levels, the better.

Take for example Cranky Air, based in Long Beach. They buy 5 aircraft from Comac, yet owing to a major corporation opening a plant nearby they now have enough demand to have 8 aircraft in service – this is where a leasing company can be the airline’s best friend. They can step in and relatively cheaply (relative to buying an aircraft) provide them with aircraft to cater for the spike in demand.

Conversely, let’s say the largest employer in Long Beach were to shut up shop and Cranky Air now only needs 3 aircraft for the next two seasons. If they own the 5 aircraft they would find themselves in a major problem, trying to fill the aircraft or lease them out. However if their fleet was composed of a few leased aircraft, they could arrange for the early return of the aircraft, and with some penalty payments, address their capacity issues.

Here’s the view from the lessor’s perspective.

Risk
When dealing with a potential new customer, there will always be risk analysis done on the airline. Do they have a good safety record or have there been any incidents in their past? What are the chances they might not pay us? If a customer is risky, there are mechanisms to protect yourself as a lessor. This would be done by getting guarantees or large deposits that you can access in the event of default by the airline. If they are too big a gamble as an operator – don’t put your aircraft in there in the first place.

Maintenance
Long leases are better for the lessor than shorter ones. The fewer changeovers an aircraft does during its life the better! When an aircraft comes off lease with Cranky Air, in an all business class configuration (owing to a misplaced opinion that an all business class Long Beach – Topeka route was a guaranteed success), and we want to place the aircraft with a new operator, Concierge Air, who want it in an all economy lay-out, reconfiguring the aircraft comes at a huge cost to us. Lessors try to avoid bespoke aircraft lay-outs like this, a colleague of mine refers to them as “Aircraft with a sushi-bar and split galley.”

Other considerations are maximum takeoff weights (MTOWs), repainting the aircraft, and inflight entertainment systems. So if we can place the aircraft in 2 ten year leases, rather than four 5 year leases – this is incredibly beneficial to the leasing entity. Like commercial airlines, our planes don’t make money when they are sitting on the ground, so we also try and keep lead-in times between leases to an absolute minimum. Ideally, we like to have a new customer lined up for an aircraft before it even comes off lease with the previous operator. In an ideal world you would look to find a customer who wants the aircraft in its current configuration, but that isn’t always possible.

Legal
From a legal perspective an aircraft needs to be placed with airlines that aren’t surrounded by red-tape. Certain jurisdictions are typically avoided, as the red-tape to get the aircraft on lease and out at the end of the lease is too onerous and costly. For example, sometimes you see airlines across the world operating aircraft that are on the Irish register (EI-XXX), as their own national registers might be a nightmare to deal with.

The airline industry is unpredictable by its nature and despite all these checks, sometimes leases do not work out. The lessee might not maintain your aircraft as agreed, or simply not pay. If this happens you could negotiate with the airline for an early return, or if the relationship becomes hostile, you can use national/international authorities to seize the aircraft in a friendly jurisdiction who will be receptive to your plight. This could be done by an airport authority or someone like Eurocontrol, who may also be owed fees for the use of the same aircraft. It is typically easier to negotiate a compromise as seizing aircraft can get litigious and can restrict the use of the plane until it is all settled. A country’s aviation authority might not take kindly to you barging in and taking planes back, hence they could make your life hell trying to get the aircraft off the local register or drag you through the local courts.

In the future, it will become more likely that the planes you fly on will be leased as this area of the aviation world grows. Next time you fly, consider for a moment that you could potentially be on board a hired aircraft.

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David Soffe is a self-professed aviation nerd- he blames this on both his parents who worked in the airline industry. He is a Business and Law graduate from UCD Dublin. Currently he is working as a legal intern in an international aircraft leasing firm in Dublin. You can find him on Twitter @davidwilliamp.