=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/08= /06/BU161966.DTL ---------------------------------------------------------------------- Wednesday, August 6, 2003 (SF Chronicle) SFO cuts landing fees to spur traffic/Incentive for airlines to add flights David Armstrong, Chronicle Staff Writer San Francisco International Airport, seeking to generate new business, will propose cutting landing fees for airlines that add service to new cities or additional flights to cities they already serve. SFO director John Martin said the move could shave 2 or 3 percent from t= he operating costs of the affected airlines and help increase passenger traffic to the airport. Martin said in an interview that he will propose a 50 percent discount in landing fees to the Airport Commission at its Aug. 18 meeting. The discount would apply retroactively, to July 1, for airlines that agree to maintain new flights for up to a year. The discount "will be be a grand experiment" if it happens, he said, adding, "No major airport has done this before." The proposal is born of competitive pressures. Martin acknowledged that SFO, Northern California's busiest airport, has seen a decline in traffic to = 31 million passengers last year from 40 million in 2000. The airport has been hard hit by a lethal combination of the dot-com implosion, the Sept. 11 terrorist attacks, SARS, the Iraq war and the bankruptcy of United Airlines, SFO's dominant carrier. In addition, the heavy debt load SFO took on in building its $1 billion international terminal has weakened its credit rating. As a result, Fitch Ratings recently lowered SFO's bond rating twice to A, according to Dan Champeau, Fitch's manager of airport ratings. Passenger traffic at SFO, the Bay Area's prime international gateway, began perking up in June and July, Martin said, but the public's continuing embrace of low-cost carriers, which handle only 9 percent of passengers at SFO, has forced SFO to change its flight plan. Nationally, 25 percent of fliers travel on LCCs such as Southwest Airlines, JetBlue Airways and ATA Airways. At Oakland International Airport, about 75 percent of travelers fly on LCCs. ATA, which will begin daily nonstop service between SFO and Newark International Airport in October, is among the airlines that would benefit from reduced landing fees, Martin said. "We've never had a low-fare carrier serve New York. This will encourage other airlines to lower their fares, which will be great for the traveler," Martin said. ATA, which caps its one-way fares at $299 regardless of when a ticket is sold, is a very attractive alternative to major carriers that charge up to $1,800 one way for a walk-up ticket, he said. "I hear some business travelers say they have to drive to Oakland to get= a decent fare. That's not acceptable to me," he said. SFO is one of the most expensive airports in the country, averaging about $18 in costs for each passenger, as compared with less than $4 for Oakland airport. Through cost-cutting efforts, restricted, at least at first, to reduced landing fees, Martin thinks SFO can become a more attractive destination for airlines. "Part of my job now is to visit airline CEOs and hear their concerns, so= I can be more responsive," Martin said. "I'm learning to see it as a partnership. " Martin said SFO's transpacific traffic, which plummeted 40 percent below the figures of a year earlier at the height of the SARS scare this spring, is down just 6 percent from the year-ago numbers this month. Martin said the new BART line to the airport, which opened in late June, is averaging 3,600 riders daily, about the number BART projected. "Considering BART's traffic is down 37 percent from three years ago, that's good," he said. "This (new) line has really made a difference," said Warren Leslie of Pleasanton, who said it makes SFO much more accessible for him. Leslie, flying to Hong Kong for business, said the ride took him just over an hour and is vastly preferable to driving and paying for parking. "Now, they need to put in something for your luggage," he said of the BART trains. Given the drop of nearly 25 percent in SFO's own traffic, its once- notorious flight delays are no longer common. Martin said new radar will allow an increase in flights this winter, to 38 from 30 per hour. However, SFO does not expect to match the 2000 figures for five to 10 years. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle