Incoming Viewpoint

TORONTO — Steve Grossman, named the 2005-06 chairman of the Airports Council International-North America at the group’s annual meeting here in September, has his master’s degree in urban planning from Michigan State University. After starting his career as an airport consultant, he worked his way up the administrative/financial ladder at San Jose International, prior to becoming director of aviation for the Port of Oakland in 1992. After being named ACI-NA chair, he sat with AIRPORT BUSINESS to discuss issues facing airports and the system. Following are edited excerpts ...

Oakland International is expected to move some 14.5 million passengers through its two terminals this year, according to Grossman. When he arrived at OAK, it was 6 million. Since that time, Grossman has helped direct what has become a major cargo gateway to the Pacific and a low-fare alternative airport to San Francisco International across the bay. It is the eleventh busiest cargo airport, with a FedEx hub and a major presence by UPS and Airborne.

AIRPORT BUSINESS: As you head into the position of ACI-NA chair, what is your overall perspective? What do you see?

Grossman: I see the planets coming into alignment for us to achieve a number of goals that ACI has set. We have a reauthorization coming up and we know that the industry is in trouble in funding the federal programs. There are a number of issues that seem to be coming together where FAA and Congress in particular ought to be receptive to solutions that this organization can put forward to make the situation better for everybody.

We want to put forward recommendations that will save the federal government money and allow the FAA to put its resources into its top priorities, which need to be the air traffic control system, FAA operations, and the support of small airports that absolutely have to have federal assistance in getting their projects done. Most larger airports with significant air carrier service have a variety of mechanisms in which we can support our programs if we have the economic flexibility to do it. We’re looking at how to reduce some of the burdensome regulations that we face, free up some money to be re-allocated to other users of the system, and give our airports the flexibility to run their businesses, within some parameters.

We very much value the role the federal government plays from the standpoint of protecting airport assets. So the revenue diversion regulations, the non-discrimination regulations — those are all very good. But there’s a whole raft of other cumbersome regulations that not only cost us money and tie our hands in what we can do, but also require resources from the federal government to oversee that don’t need to be there.

AB: And what do you see as the more onerous financial regs?

Grossman: The PFC [passenger facility charge] process is rather onerous. Why should the FAA go through the process of reviewing these applications, deciding which projects are appropriate, when utter definition of project eligibility could be developed — put the FAA more into a role of auditing us versus regulating us. The PFC revenue stream could almost be a permanent revenue stream and, for example, we could each year send an audit to FAA telling them what we spent our money on. They could then review it.

With environmental, where states have regulations that are as rigorous or more rigorous than the federal regulations, why not have the certification from the airport that shows we’ve complied with our state regulations and have that accepted as compliance with federal regulations?

Streamline the business, because in the end cost to us translates into cost to the airlines. Airport costs, while not a determining factor in the airline business model, are still an important cost. To the extent we can reduce our costs, that translates into dollars.

AB: Airports seem to be in agreement with FAA that as we go through a new reauthorization process, the system that is in place needs rethinking. Do you agree?

Grossman: I think it is broken. It worked fine for many years. We need to remember that it’s important to have all users paying their fair share. The air traffic system, I think, needs to be revamped. Scheduled passenger, air cargo, GA all need to pay their fair share; we need to get away from the argument that the system was designed for the air carriers so nobody else should have to pay.

Why should airline fares drive the financing of the system? New approaches have to be looked at. Some type of a private sector approach to air traffic, maybe. I see as a huge issue the ability to modernize the ATC system.

You have to take the parochialism out of the decisionmaking process. This is about the future of the entire system, and if that means using technology to derive more capacity and perhaps not fewer jobs but different jobs, then I think we’ve got to be open to it.

AB: General aviation groups say their users pay their fair share through fuel excise taxes.

Grossman: It’s been an issue with the GA community for many years. I know the argument for airports with regard to GA is that a lot of the services we have are for the air carriers and would not be necessary for GA. For years I’ve used the analogy with my friends in GA: if you live in an apartment complex that has a health club, swimming pool, and clubhouse, you pay for that whether you use it or not. If you don’t want to use it, move to another complex. In our system it ought to be treated the same way. If people use the services, they should pay for them.

They may have been paying their fair share as the system has worked, but the system can’t fund itself anymore and a new system needs to be developed.

AB: There seems to be agreement in most quarters that air traffic modernization is at the head of the to-do list. Your thoughts?

Grossman: I think there is a consensus that the model in Canada seems to be a better model. I think that anytime we can take a private sector approach to solving issues like this, we should. The same thing could well apply with security.

AB: Do you mean for the U.S. to go with private screening firms?

Grossman: Not so much having private companies doing the screening, but have one entity that handles the screening part and another that regulates it. In the U.S., with the creation of the TSA, we have an organization that both issues regulations and runs the security. That model doesn’t seem to be working as well as we all would like. A change in relationships there is due.

AB: What is the screening situation at Oakland International?

Grossman: We have two terminal buildings; one essentially devoted to Southwest Airlines, the other is our multi-tenant building. With regards to Southwest, we are in the final throes of implementing an in-line EDS [explosives detection] system. We got one of the last AIP grants to do it. The system’s going to cost about $16 million and will handle about 65 percent of our traffic. It’s a very cost-effective approach that will come online this fall.

In Terminal 1, our multi-tenant building, we came up with an intricate design to put in an in-line system for about $60-70 million. Then I took a step back, met with the airlines, and asked them if what we had in place was working for them. The answer came back that it was; it was not causing delays.

So, why should I be spending time pounding the pavement to pay for this system? Why should I put the cost into the airline rate base to pay for it? It’s a manual, trace system that’s labor-intensive. What we’ve done is tell TSA that whenever they get an EDS machine we want it. Eventually, each airline will have one. In essence, it becomes a mini-inline system. As technology changes, we don’t have a lot of investment and can easily jump into a new technology that can solve the problem. The real point is, we take a very practical look at operations. The whole idea is not to pass costs to the airlines.

AB: Do you have any thoughts on how the funding of the EDS systems in the U.S. will shake out?

Grossman: What we haven’t really come to grips with is this: Putting in-line EDS systems in place is so beneficial from so many angles. They pay themselves off in labor savings so quickly. The real problem seems to be we have a system where long-term capital spending is very difficult to program; Congress likes to deal with things a year at a time. If we could take $4 billion and put it into these in-line EDS systems in place next year, we’d have them all built and would start accruing billions in benefits. This whole issue of a cap on TSA screeners, the more in-line systems we get the less relevant that cap gets. You can use those existing 45,000 where we need them.

The problem with the AIP system has been, when you have to reauthorize something every three years how do I plan for four years out? I don’t know. Airports tend to be the only entity in the system that can do long-range planning. For the airlines, long-range is three days. Airports are the key member of the system that can look five or ten years down the road and decide what capital needs are needed. Lord knows, it takes anybody that long to bring things online.

It also brings into the discussion this idea of opt-out. I think you can tackle the technical issues of liability and some other things. What scares me is the funding. If an airport opts out and takes on the responsibility of screening, either directly or through contract, and they are at the discretion of Congress each year to appropriate funds for that, it would scare me to death.

AB: In recent years cargo has grown significantly at Oakland. Can you talk about its impact on your operations?

Grossman: The nice thing about cargo is, while it only provides about 10 percent of my revenue, it provides about 30 percent of the jobs on the airport. And, they also pay about 30 percent of the landing fees. And they don’t compete for the runway at the same time as the passenger carriers. So it’s a nice, shall we say, subsidy of the passenger operations without taking away any of the resources.

I can keep my landing fees low to everybody and we get a very high utilization of the runway, day and night. Now, I will admit that it probably causes most of my problems with the community. When you’ve got 40 to 50 FedEx jets taking off between midnight and 3 a.m. you get noise, even if they are taking off over the bay.

AB: Which brings us to the issue of noise. Any thoughts on the recent Naples [FL] decision related to noise and Part 161?

Grossman: I think the process that has been set up by FAA with Part 161 is a process that you’re set up to fail. Naples went through it, and look what they had to go through. I think it is very difficult to imagine an aviation system in which every airport can set its own noise regulations and standards. I don’t think that works. What we felt particularly aggrieved over is the fact that after Naples won in court, going through the 161 process, the FAA came back and tried to nail them on their grant assurances. We don’t think that’s what the grant assurances were intended to do.

AB: With so much cargo and passenger activity at Oakland, where does general aviation fit it?

Grossman: That’s the third leg of the stool. Oakland is an extremely busy general aviation airport. For a number of years we’ve focused on the business end of general aviation. If you need all the facilities that we provide, the services provided by two first-class FBOs, then you belong at Oakland.

What is not a priority is the recreational flyer. They don’t need the services and they don’t support the FBOs, anyway. That’s what it’s all about: business. I am there to facilitate the business of my tenants.

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