San Francisco International's Business Still Turbulent

Although ridership has been gradually bouncing back, passenger load remains down about 10 percent from 2000.

The Sept. 11, 2001, terrorist attacks took place 3,000 miles away, but the effect is still being felt at a decidedly changed San Francisco International Airport.

Like all airports in North America, SFO was closed to commercial aviation for several days after Sept. 11. When the planes started flying again, it reopened to a very different aviation environment.

Five years after the attacks, SFO -- Northern California's busiest airport and one of the nation's major gateways to Asia -- is home to fewer airlines, fewer passengers and fewer flights than before Sept. 11. Forced to operate with suddenly reduced revenue, SFO put several major construction projects on hold and cut its staff by a third.

And SFO, like other American airports, bristles with stricter security than it did before the attacks. All told, SFO spent $150 million to beef up security, with the federal government reimbursing about $50 million.

Over the past two years, SFO has gradually been recovering, according to spokesman Michael McCarron, although the initial shock was severe.

"Our business was down dramatically,'' McCarron recalled, saying the falloff began before Sept. 11. "Six months prior to that, the dot-com boom collapsed, and that summer of 2001, business was down. Then came Sept. 11.''

From handling 41 million passengers in 2000, when it was one of the world's 10 busiest airports, SFO plummeted to 29 million passengers in 2001.

Shortly afterward, the SARS outbreak in Asia and Toronto, the Iraq war and avian flu further hampered business. But, buoyed by a surprisingly strong global economy and pent-up demand for travel, civil aviation gradually began to recover.

This year, driven by surging demand for international travel, SFO officials expect nearly 37 million passengers. International traffic is growing by about 4 percent a year, according to McCarron, though domestic demand is still flat. Free-spending international fliers account for 25 percent of SFO passengers and generate 42 percent of its passenger revenue.

SFO, like most U.S. airports, has not fully recaptured the lucrative business traveler, who typically books flights at the last minute and pays a high fare. Such travelers now often drive to their destinations or use e-mail or videoconferencing instead of flying, said Kevin Mitchell, head of the Business Travel Coalition, a trade organization for corporate travel planners.

Nationwide, "the high-yield business traveler traffic is approximately 50 percent of what it was prior to 9/11,'' according to a coalition report released Sept. 1.

Still, travelers are learning to live with a certain amount of risk, and many people have to fly, especially if they are going overseas for business or leisure. Even the high oil prices of the past few years -- which drive up airlines' operating expenses and raise air fares -- have not stopped the recovery, though they may be slowing the pace.

The devastating confluence of Sept. 11 and the dot-com bust came just after SFO had taken on substantial bond debt to finance a just-completed $1 billion international terminal -- the biggest terminal in the United States at 2.5 million square feet -- and was ramping up to build a new airport hotel, renovate the former international terminal for domestic use and reconfigure runways to handle traffic that had mushroomed in the late 1990s.

The sky was the limit -- or so it seemed. The dot-com collapse and the terrorist attacks changed all that.

Like other U.S. airports, SFO's post-Sept. 11 credit rating suffered. Standard & Poor's, for example, dropped SFO's credit rating from A+ with a stable outlook to A with a negative outlook in September 2001, according to S&P analyst Kurt Forsgren.

The weak Bay Area economy, SFO's paucity of thriving low-cost carriers that provide consumer choice and its reliance on ailing United Airlines, which handles about half of all passengers and flights at the airport, drove the S&P downgrade, Forsgren said.

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