ACE Airport Financial Management 3 — Questions and Answers
Question 1: Which cost center classification at an airport groups expenses directly associated with a specific, identifiable airport function or area?
- Indirect cost center
- Overhead allocation
- Direct cost center (Correct answer)
- Shared service pool
Correct answer: Direct cost center
Direct cost centers track expenses that can be attributed specifically to a function, such as a runway or terminal building.
Question 2: When an airport issues general airport revenue bonds (GARBs), the primary security pledged to bondholders is:
- Federal tax revenues
- Airport land value
- Net airport revenues (Correct answer)
- Airline ticket surcharges
Correct answer: Net airport revenues
GARBs are secured by the net revenues of the airport system, not by general government taxing power.
Question 3: Passenger facility charges (PFCs) collected by airlines on behalf of airports are primarily restricted to use on:
- Airline lounges and catering
- Eligible airport capital projects that preserve or enhance safety and capacity (Correct answer)
- Routine janitorial and maintenance costs
- Airport marketing and advertising
Correct answer: Eligible airport capital projects that preserve or enhance safety and capacity
FAA regulations restrict PFC use to FAA-approved capital projects that improve safety, security, capacity, or noise reduction.
Question 4: An airport's cost per enplaned passenger (CPE) is used primarily to:
- Set retail concession rents
- Benchmark airline cost competitiveness compared to other airports (Correct answer)
- Calculate ground handler fees
- Determine fuel flowage charges
Correct answer: Benchmark airline cost competitiveness compared to other airports
CPE is a standard benchmark airlines and analysts use to compare the cost of operating at one airport versus alternatives.
Question 5: Under a 'compensatory' airport use agreement, airline rates and charges are set to:
- Cover all airport costs including non-airline areas
- Recover only the actual costs of facilities used by each airline (Correct answer)
- Guarantee a fixed profit margin for the airport
- Eliminate all non-aeronautical revenue sharing
Correct answer: Recover only the actual costs of facilities used by each airline
Compensatory agreements charge airlines the actual cost of the specific facilities and services they use.
Question 6: Which financial report provides information on cash inflows and outflows from operating, investing, and financing activities?
- Statement of revenues and expenses
- Balance sheet
- Statement of cash flows (Correct answer)
- Budget-to-actual variance report
Correct answer: Statement of cash flows
The statement of cash flows categorizes all cash movements into operating, investing, and financing sections.
Question 7: An airport that uses a 'signatory airline' rate-setting framework gives signatory carriers which benefit in exchange for their financial commitments?
- Free gate access for all flights
- Input into rate negotiations and often lower rates than non-signatory carriers (Correct answer)
- Exclusive terminal use rights
- Exemption from security fees
Correct answer: Input into rate negotiations and often lower rates than non-signatory carriers
Signatory airlines commit to long-term use agreements and typically receive negotiated rates lower than non-signatory rates.
ACE Airport Financial Management 3
Which cost center classification at an airport groups expenses directly associated with a specific, identifiable airport function or area?