SF Gate: On the wings of thrift/By catering to low-cost airlines, Oakland is stealing business from SFO

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Tuesday, June 3, 2003 (SF Chronicle)
On the wings of thrift/By catering to low-cost airlines, Oakland is stealin=
g business from SFO
David Armstrong, Chronicle Staff Writer


   It is late Sunday night, and Oakland International Airport is teeming. In
Terminal 1, where a new ticket counter area was recently created in what
used to be office space, a long line of travelers snakes and doubles back
in front of the SunTrips counter. Many of the travelers, clad in
flip-flops and tank tops, are young, giving the terminal the casual,
expectant air of a rock concert.
   Crowd scenes are common these days at Oakland International, the only one
of the Bay Area's three major airports that increased its number of
passengers last year in the midst of the deepest-ever downturn in
commercial aviation.
   Oakland has expanded the already-prominent presence of low-fare carriers
and low-fare charter airlines, the only carriers that have made money in
the aftermath of the Sept. 11 terrorist attacks, sudden acute respiratory
syndrome,
   the war in Iraq and the continuing slump in the economy.
   "We operate in an environment that is very sensitive to costs," said Ste=
ve
Grossman, director of aviation at Oakland International. Given that, he
said, Oakland focuses on luring low-cost carriers to its bayside facility.
"We very specifically went after certain airlines. We very specifically
went after JetBlue," he said of the stylish, low-cost New York airline
that flies coast- to-coast from Oakland.
   Oakland embraced low-cost carriers in 1989, when Southwest Airlines --
then and now the low-fare industry leader -- began flying there.
Throughout the 1990s, Oakland campaigned to attract more LCCs, as they are
called in the aviation industry.
   In early 2002, Southwest pulled out of San Francisco International Airpo=
rt
and moved most of its Northern California operations across the bay -- a
coup for Oakland, which was then the Bay Area's third-busiest passenger
airport, behind San Jose and SFO.
   Also in 2002, JetBlue began flying from Oakland, and SunTrips, a low-fare
charter airline that focuses chiefly on leisure travel to Hawaii and
Mexico, pulled out of SFO and concentrated all its Bay Area flights in
Oakland.
   All this made 2002 a very good year for Oakland International, even as
airports and airlines generally were reeling. Oakland was the
second-fastest- growing airport in the nation last year (after
Cincinnati-Northern Kentucky International Airport), increasing its
passenger traffic to 12.7 million from 11.4 million in 2001, a jump of
11.5 percent.
   That vaulted Oakland to second place among Bay Area airports, past Mineta
San Jose International Airport, whose traffic fell 15 percent last year.
SFO's traffic dropped 9.2 percent last year, while the nation's 40 largest
airports saw passenger traffic fall by an average of 3 percent.
   Oakland has ridden Southwest's rising star, building Terminal 2 just for
Southwest, which has filled up the space. According to Grossman, it was a
logical decision. "We build stuff to serve demand, and we don't go out of
our way to build monuments."
   Southwest, which boards 60 percent of Oakland airport's passengers, coun=
ts
Oakland as its fourth-largest center. Southwest likes Oakland's good
ground transit links, its access to San Francisco and the East Bay,
abundant parking and low operational costs, said Southwest spokeswoman
Carrie Breinholt.
   Indeed, Oakland appeals to a wide range of airlines because it is an
inexpensive place to operate, said Jessica Stolz Rudd, an airline analyst
at Fitch Ratings, a credit rating agency. "Costs are very low at Oakland,
and they use their space well, although they could use additional space,"
Rudd said.
   Oakland was the third-cheapest airport in terms of airline expenses such
as rent and landing fees in a survey of 28 major U.S. airports conducted
last year by Citigroup Global Markets. As figured by projected
enplanements -- cost per departing passenger -- Oakland is expected to
cost the airlines $3.39 per enplanement in 2003, Citigroup calculated.
SFO, by contrast, is expected to cost $17.53 per enplanement, making SFO
the second-most expensive airport surveyed, after Newark International
Airport in New Jersey.
   Oakland's advantages have attracted small but growing carriers such as
SunTrips, a charter airline based in San Jose. Founded in 1977, SunTrips
began flying out of Oakland in 1982 and concentrated all of its Bay Area
flights there in 2002.
   "We have clients all over Northern California and Nevada, and Oakland is
really convenient," SunTrips spokeswoman Helen Zimmermann said. "Also,
Oakland consistently has the best on-time record of the three Bay Area
airports, and it has good parking and good weather."
   Created to serve Portuguese Americans traveling from Oakland to the Azor=
es
Islands, SunTrips now flies 10 weekly trips to Hawaii and eight weekly
trips to Mexico in the peak summer season. It still flies once a week to
the Azores, Zimmermann said, and plans to begin a weekly flight from
Oakland to Costa Rica on June 15.
   SunTrips, which carried 250,000 passengers last year, counts Oakland as
its busiest airport, followed by Denver. Brisk bookings in Oakland have
spurred growth at SunTrips, which is owned by the British firm MyTravel
Group PLC. Surging Oakland revenue also has enabled the carrier to upgrade
its service, providing hot meals on most flights and installing leather
seats on all flights to Hawaii, Zimmerman said.
   San Francisco airport -- hit by a drop in usually lucrative transpacific
traffic and high-paying business travelers -- is trying to make up for the
loss of Southwest. Low-fare carrier ATA increased its weekly number of SFO
flights to 62 from 35 this month, for example.
   The San Jose airport derives 44 percent of its flights from low-fare
carriers, according to airport spokesman Steve Luckenbach. But that figure
pales next to Oakland, with 74 percent of its flights coming from discount
airlines.
   Discount carriers are driving airport expansion in Oakland, according to
Grossman, who added that the airport will continue to go after any LCC
that expresses interest in serving the West Coast.
   But one byproduct of Oakland's growth has been congestion, so the airport
is building a new parking garage and finishing a new main roadway entrance
to make room for all the extra travelers.
   In addition, the Port of Oakland's real estate division is seeking to
acquire land to build a retail and office mall near the main airport
entrance and hopes to begin designing that project some time next year,
according to Oakland airport spokeswoman Rosemary Barnes.
   Expansion presents challenges, said Rudd, the Fitch Ratings analyst,
because it will require Oakland to carry a bigger debt load. But she
praised Oakland's expansion plans, saying they are demand-driven and
prudent.

   E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx=20
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Copyright 2003 SF Chronicle

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