"Direct more subsidies to SFO"

Friday, December 17, 2004

Opinion
SFO lands new business but expansion plans remain aloft
By R. Sean Randolph
The San Francisco (CA) Business Times


After four years of declining traffic, San Francisco International Airport
is on the rebound.

This is good news for Bay Area residents, who rely on SFO for much of their
domestic travel and nearly all of their international flights.

It is also good news for the retailers and other businesses located at the
airport, Silicon Valley and other Bay Area technology companies who ship
most of their international cargo through SFO, and hotels and restaurants in
San Francisco, San Mateo County and throughout the region that depend on
tourist dollars.

After peaking in 1999-2000, air traffic fell with the dot-com economy,
nosedived after 9/11, and has been slow to recover since.  With domestic and
international passengers disappearing, flights and routes were cut.

One victim of the decline (and of virulent politics in San Francisco's City
Hall) was the airport's runway reconfiguration project, which was designed
to increase capacity in bad weather and accommodate future growth.  Work on
its environmental impact reports was halted just short of their completion,
depriving the region of important information and leaving the project's
future in doubt.

Gaining altitude

Now the airport has seen a welcome turnaround, and not a moment too soon.

While still well below its peak in 1999-2000, in the past year the number of
flights has increased by almost 7 percent and the number of passengers by 16
percent.  Airline service is also expanding.  United Airlines recently
launched service to Beijing and Ho Chi Minh City (Vietnam), Air New Zealand
is now flying direct to Auckland, and Air Iceland will begin service to SFO
in 2005.  Other routes are planned by United to Nagoya (Japan), and by Ted
(operated by United) to several destinations in Mexico.

Equally positive is the success of SFO's efforts to attract low-fare
carriers.  Virgin America recently selected San Francisco as its operational
headquarters.  Ted, Air Tran and Westjet (a Canadian low-fare carrier) have
launched service to SFO in the last year.

Why does this matter?  SFO is a major economic engine for the region.

At its peak five years ago, the airport directly or indirectly supported
approximately 470,000 jobs, over $13 billion in wages and salaries, $37
billion in business revenue, and more than $8 billion in taxes.  A new
domestic airline serving the region with 10 flights per day, using medium
sized aircraft, will generate nearly 4,000 jobs, $150 million in wages and
salaries, $240 million in business revenues, and $24 million in state and
local taxes.  Double the flights and you double the impact.

Growth requires investment

Adding service by low fare carriers brings other benefits.

Nationally, in markets where there is a hub carrier but no low-fare
competitor, tickets cost an average of 40 percent more.  In short-haul
markets without low-fare competition, passengers pay 54 percent more.

A price comparison of Bay Area routes bears this out.

Experience shows that adding low fare carriers also increases passenger
volume.  These competitive benefits are not limited to the airport where the
low fare service is provided, but can extend throughout the region.

New service and growing passenger volume are positive signs for the recovery
of the Bay Area economy.  It is important that, as demand for travel grows,
planning and investment in airport technology and infrastructure also
continue, to ensure that adequate capacity is available to meet the region's
future passenger and cargo needs.

R. Sean Randolph is president and CEO of the Bay Area Economic Forum.


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