The 12,000-square-foot terminal, which will have amenities not usually seen at similarly sized airports, is expected to be completed before the Alltech FEI World Equestrian Games in 2010.
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"What we're proposing is construction of a completely stand-alone terminal, which is a good bit different from what's there now," said TAC Air Vice President Danny Walsh.
The terminal will include a large passenger lobby, two conference rooms, a gift store and art gallery, upscale food service, a movie theater, exercise facility, pilot lounge, quiet room and flight planning area.
In addition to the terminal, TAC Air will be constructing three 15,000-square-foot hangars.
The new terminal will be in an area between the existing general aviation terminal and the Aviation Museum of Kentucky. General aviation is private planes, not the commercial flights that come into the main terminal.
The existing general aviation terminal will continue to be used. The new hangars will replace ones that have already been torn down, and there is room to build more if needed, said Michael Gobb, the airport's executive director.
The new construction is part of TAC Air's new 10-year agreement with the airport, which the airport's board approved Wednesday after looking at bids from three other companies.
"These new facilities will provide Blue Grass Airport's general aviation customers with a high-quality travel experience," Gobb said.
TAC Air has been providing ramp service, fuel, storage, tie-down spaces and maintenance for private aircraft at Blue Grass for the past 12 years. Air 51 is the airport's other fixed-base operator for private aircraft.
Under the new agreement, TAC Air will pay the airport $484,000 in annual land rent fees, $374,000 in annual building rent and $70,000 in annual fuel facility rent, said airport spokesman Brian Ellestad. The airport also will get 8 cents for each gallon of fuel sold by TAC Air and 10 percent of its food sales.
"The increased revenue over the current contract will be about $500,000 annually," Gobb said.
TAC Air will pay for the new buildings, which will eventually become the property of the airport.
In the new terminal, Walsh said, plans are for the theater to include a 6-foot screen and Surround Sound with space for several lounge chairs and maybe a couch. The gift shop, he said, is to be an upscale affair that sells Kentucky-themed items. And TAC Air plans to work with deSha's to cater the general aviation planes.
"Their terminal building will be world-class," Gobb said. "In today's competitive environment, we need to be better. We need to be out in front, and this shows that we are."