New Authority; New Airport?: New structure allows San Diego International to plan for future growth

July 8, 2004

Cover Story

New Authority; New Airport?

New structure allows San Diego International to plan for future growth

By Jodi Richards

July 2004

SANDIEGO — It’s been an exciting couple of years for SanDiego International Airport and president/CEO Thella Bowens as anewly created airport authority takes the reigns and leads the regionthrough the process of searching for a possible new airport site. With 614 acres and one runway, the airport as it exists today is expected to reach capacity by 2020. In the meantime, careful investment is being made and considerations taken as officials continue to maintain the facility at Lindbergh field, located three miles northwest of downtown San Diego.

At the end of Phase 1 of the siting process, seven prospective sites were identified for a future airport. Since then, two more are being analyzed for suitability.

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Bowens came to San Diego in 1996 when she was hired by the San Diego Unified Port District as senior director of aviation after holding positions with Kansas City International and Dallas/Ft. Worth International airports. She says, “Coming here has been probably the most exciting and controversial job I’ve ever had because every year it’s been something different.”

During her first year with the Port, the airport was involved in a construction project, but rising costs quickly caused controversy in the local community. “When I interviewed in October/November, the cost was $165 million. When I got here in January it went to $185 million,” she explains, and didn’t stop there.

In an effort to gain control of the project and “stop the bleeding,” Bowens says the airport began sending all aspects of the project out for peer review. The renovation project capped out at $232 million, a more than 40 percent increase.

Establishing Independence
In 1999, legislation was introduced to create an airport authority, separate from the Port, which as Bowens says, “created its own set of tensions, because the Port owned the airport and wasn’t really in favor of that legislation.”

The way the legislation was set up, the senior director of aviation, the position Bowens held, was named to lead the transition of the airport to an independent authority as interim executive director.

San Diego International Airport

The new authority was created in January 2002, but did not officially take over operations of the airport until January 2003. A board of directors was also created. Comprised of nine members, the board is appointed by various regions throughout the community, says Bowens, including three executive committee members, one selected by the mayor, one by the governor, and one by the county sheriff and ratified by the board county supervisor.

The board is charged with operating San Diego International Airport, but it also serves as the airport land use commission for all airports in San Diego County. “I think that’s probably one of their most challenging jobs,” says Bowens. “I don’t think anyone realized how complex and contentious the issue of protecting the land and uses around airports could be.” The board has a deadline of June 2005 for establishing a comprehensive land use plan.

Bowens believes there are many benefits in having an airport authority. “Some are easier to identify than others,” she says. “One, it provides for a policy-making board whose only function is to focus on the airport. As good as the Port was at running the airport, they had three businesses. Their board and executive staff was designed to divide its attention between those three businesses. The airport doesn’t get the amount of attention that it should.”

Thella Bowens, president/CEO

A study performed in 1999 shows SAN generates $4.5 billion a year in economic impact in the region, making it one of the largest single economic generators, says Bowens. “I think that a business that is that important to a region should have a policy-making group that’s singularly focused on helping it to be as successful and productive as it possibly can be.”

From a financial perspective, explains Bowens, an authority structure allows the airport board and staff to control all of the finances of the airport. “In the past, the Port, under state law, was running what they call a single cash register; all the money was funneled into one account.

“They [the Port] did have a process where they had a side accounting for how much revenue was generated,” says Bowens. But, because of the size of the airport and the way the Port’s overhead was calculated, the airport, with some 52 percent of total revenues, was responsible for a “huge proportion of the overhead cost. Those were costs that were going to support other uses, not just the airport. Now all our resources can be funneled in to promote and support just the airport and the airport users.”

Bowens also believes operating the airport has become more efficient since becoming an independent authority. “Every decision we make, we can make it based entirely on the best interest of the airport and the airport’s relationship to the community.”

San Diego International Airport

Centerpiece Task
While not expected to be at “absolute capacity” until roughly 2015 or 2020 (in 2003 the airport handled 15.3 million passengers), the creation of an airport authority has allowed SAN to look ahead with more focus at how it will meet future capacity needs, according to Bowens. “It takes a long time to build, design, and open an airport. So we’re envisioning it’s going to be 15-20 years before we’ll be able to have aircraft fly in and out of a new airport.”

She calls the search for a possible new airport site the “centerpiece” of the new authority’s work. By November 2006 the decision on whether or not to build a new airport and where will be presented to voters on a ballot.

According to Bowens, the site selection process is ongoing, with Phase I recently completed. “In Phase I we had 32 sites. We whittled that down at the end to seven.” Chicago-based consulting firm Ricondo & Associates will now analyze each of those sites for suitability. “In addition to that,” explains Bowens, “Ricondo has just completed a GIS (geographic information system) study of the entire county of San Diego, looking to see if there were any sites that we missed that we should consider. We actually have two areas that we think have a lot of potential and we’ve sent those to a public working group.” The working group is comprised of 32 “stakeholders” throughout the county.

If San Diego County votes to establish a new airport, the FAA will make the decision, in conjunction with the airport authority, as to what happens to Lindbergh Field. “The work that we’re doing,” explains Bowens, “indicates that this region cannot support two full-service airports. We just don’t have the number of users in the catchment area that would make it viable for the airlines to operate two separate full-service airports.”

In November 2006, a referendum proposing the San Diego Regional Airport Authority’s recommendation for meeting increased capacity will be before voters.

However, that does not mean Lindbergh Field would be closed if it’s not the chosen site, adds Bowens. “One of the sites on the list is to keep the airport here and just live with it as it is. And then there’s a second scenario where this airport is coupled with North Island to create a larger facility, which would require some kind of underground tunnel.” North Island lies about a mile across the bay from SAN. Additionally, Lindbergh Field could be kept open as a GA or cargo airport.

If the airport does close, the land reverts back to the Port Authority.

A Careful Balance
The possibility of a new airport is one of the primary considerations the airport authority must take into account when master planning for SAN. “We don’t want to over invest here so that when we’re ready to move to a new airport we don’t have a huge facility here with unamortized investment. At the same time, we don’t want this airport to deteriorate because people are going to be using [Lindbergh Field] for the next 15-20 years; and the growth in San Diego County is anticipated as such that it’s going to be very heavily used during that period of time.”

Bowens says every decision for investment is now weighed against how much is known about a possible new airport location. She adds that those decisions will become easier after the November 2006 ballot. “But until we know more about the new airport, we will carefully invest in this facility.” She adds that the airport will “modulate” its investment and do what is necessary in terms of maintenance for safety and security. “We’re looking at some aesthetic improvements over the next couple of years, but they will be minimal just to make sure that everyone who uses this airport has a pleasant, safe, and secure experience.”

Bowens: Time to Rethink Industry Models

San Diego County Regional Airport Authority president/CEOThella Bowens believes the industry is showing signs of recovery.Because of that, she says it’s the perfect time for airportsand airlines to get their respective business models in order.

“I think the airlines are in a great monumental process of redefining and redesigning themselves,” says Bowens. “And while the airlines are doing that, we have to do the same thing at airports. We really have to step back and take a look at the tradition of running and managing the business of an airport, and rethink how we do it. What is our relationship with all the business partners that we have here? With the airlines and other tenants?”

She says that because the operating environment has changed, airports must adjust the way they do business. “I think just calling it a business is one of the first major steps,” says Bowens. “We can no longer look at this as a public entity providing infrastructure for airplanes to come and go. It is a business. We have to run it as a business to be successful.”

Much talk surrounds the rates and charges airlines pay for operating at airports. Airlines are calling for airports to reevaluate them as they struggle with their own profitability.

“The airlines are never going to be happy until they get it free,” says Bowens. “I think there are opportunities for us to look at how we structure what the airlines pay us and how they pay us to make sure it’s an equitable situation for them and us. It’s a business. And if you want us to run it like a business, we can’t give it to you free. We can’t subsidize you because we have costs that go beyond just the bare necessities that the airlines might need.

“The airlines sometimes lose sight that even without their airplanes coming here, we don’t have a business, the airport still belongs to the community.

“I don’t think we should get into the business of subsidizing airlines. Airlines are a private business that should not depend on subsidies from public sector organizations to be successful. Just like I can’t go to the taxpayer and ask for tax dollars to support this organization, they [the airlines] shouldn’t come to me to ask for money or facilities, without paying for them. That doesn’t mean that I have the right to gouge them or overcharge them or spend frivolously in such a way that their charges are excessive here, but they certainly must pay their fair share. I think a lot of airports today are willing to step back and look at that issue to find ways to help make the airlines more successful without giving away the facilities free.”