In San Diego: A Money Agenda

April 3, 2006
Managing editor Jodi Richards takes an industry sampler on what issues are atop airport managers’ hit list as they get set for their annual meeting in San Diego.

The 78th Annual American Association of Airport Executives Conference and Exposition will be held April 23-26 in San Diego. Topping the list of issues facing the industry, and what one can expect to hear about at the meeting, are future funding of the aviation system, capacity, the health of the airlines and security concerns. AIRPORT BUSINESS recently spoke with several airport directors to hear their concerns.

Thella Bowens, president and CEO of the San Diego County Regional Airport Authority, says at the top of the list of issues facing airports today is that of capacity and the ability to handle increases in passengers and aircraft. After 9/11, says Bowens, airports cut back on capital improvement projects. Now, as passengers return to the skies, capacity is again a concern and “everybody is in a build mode.”

Complicating capacity concerns are security changes at airports that have caused ticketing lobbies to be crowded with vehicle-sized baggage scanning machines and security checkpoint lines that stretch on for hours at some airports. “We’ve all got the issues of security and the infrastructure to support that security,” says Bowens. “And that brings with it significant capital costs.”

Which leads Bowens to the reauthorization bill currently before Congress, which is a concern for all airports. The proposed budget cuts nearly $800 million from the Airport Improvement Program (AIP), reducing funding to $2.75 billion. The $2.75 billion is $765 million below the FY2006 funding level and nearly $1 billion below the $3.7 billion authorized level for AIP in FY2007. With increased capacity only putting more demands on the system, airport managers agree that now is not the time to be reducing funding levels.

San Diego has its own interesting situation, explains Bowens. Not only is the airport involved in a master plan program, but it’s searching for a solution to the long-term air transportation needs of the San Diego region — which may require a new airport. The master plan implementation will be close to $1 billion and doesn’t even take into consideration the possibility of building an entirely new airport. Bowens says the airport doesn’t have estimates on what it might cost, but expects it will be in the $5 billion to $8 billion range.

Security and new technology for securing passengers, bags, and the airport are always on the radar screen of San Diego, says Bowens, but “without some additional funds from Congress, we’re being very calculated with what we’re doing.” The airport is nearing completion of an in-line baggage screening system in Terminal 2 East and has an in-line system in Terminal 1 which supports primarily Southwest Airlines. “The rest of our in-line installations we will be very careful implementing as we get more funds through the TSA,” says Bowens.

San Diego has spent its own resources to enhance security at the airport but “I think we’ve made about the maximum investment we can make without help from the TSA,” Bowens says. “Some airports are in a better position than others to fund security and some have a more pressing demand in terms of the impact to their facilities. We’ve made improvements that have allowed us to speed up and assist TSA. We’ve done as much as we can.”

Viability of Airlines

Fred Testa, executive director of aviation for Harrisburg International Airport (HIA), says the viability of the airlines is the number one issue facing airports today. “The airlines are the only industry I know that can go 85-90 years and not make a profit, and still be a viable entity,” he says.

Testa also says there isn’t a capacity problem nationwide. “The thing is, the capacity is not where the airlines want it,” he explains. “The airlines continue to force more and more flights into congested airports rather than created more point to point markets. The one thing the legacy airlines have yet to learn from the low cost carriers is that more efficiencies can be created by flying point to point.”

Harrisburg International is the first terminal to be constructed after 9/11 and was therefore able to build in an in-line system for baggage screening. According to Testa, the system here is the fastest in the U.S., at some 400 bags per hour per EDS machine. And while the airport did receive some funds from TSA for the installation, Testa says the agency still owes the airport money. He says his airport isn’t interested in investing in biometrics or radio frequency identification technologies because what is currently in place “works fine. RFID is just another expense,” he says. For a larger airport, RFID might make sense, but Harrisburg currently uses barcode technology for its baggage tracking.

The proposed funding bill for 2007 is a “big, big mistake” says Testa, one that will severely impact the aviation system. “I could think of 100 different places I’d rather see cuts than aviation — even if I took my hat off as aviation director,” he says. Testa adds that perhaps cuts could be made at the Washington level because government doesn’t create wealth. “Wealth is created through productivity gains. AIP money creates jobs and technological advances and that’s creation of wealth. There is a down the line benefit to be gained by everybody — not just the flying public.”

At El Paso International Airport, director Pat Abeln agrees that the biggest issue facing airports in 2006 is the economic health of the air carriers. “We don’t know what’s going to happen with fuel prices. We have legacy carriers losing amounts of money that are beyond comprehension,” he says. “That’s what I’m concerned about: fuel costs, airline costs, airline losses, and fares at a level where we’ll keep our traffic where it is.” Abeln expects that the industry will see fewer seats and higher fares in the near future, and maybe even a slight downturn in air travel.

Abeln agrees with Bowens and Testa that future funding is of tremendous concern to the entire industry. “Absent of strong federal funding, we’ll have trouble keeping our infrastructure up,” he says. “At El Paso, we’ve been very fortunate so far. We’re on top of our maintenance at this point in time.”

VLJ Skepticism

The pending entry of very light jets (VLJs) isn’t expected to have a big impact on El Paso, according to Abeln. “Even though they’re a little smaller and a little more economical,” says Abeln, “a jet aircraft is still very expensive to operate.”

He says there is a niche that the new aircraft will be filling, but says it’s probably not as big as some have made it out to be.

Harrisburg’s Testa agrees. “VLJs will make a small impact, maybe, but they’ve been saying that for years about business aircraft.”