--- In BATN@xxxxxxxxxxxxxxx, "10/11 SMCo. Times" <batn@xxxx> wrote: Published Monday, October 11, 2004, in the San Mateo County Times Oakland's low prices are squeezing SFO By Tim Simmers When fast-growing low-fare airline WestJet landed at San Francisco International Airport early last week for its inaugural flight, it was another sign of discount carriers seizing the opportunity in turbulent times. The industry downturn that has shrunk bankrupt United Airlines at SFO and cost thousands of Bay Area airline workers their jobs is creating an opening for low-cost carriers such as Canada's WestJet. While their bigger rivals like United have been slammed by terrorism, war, a sluggish economy, high fuel prices and the SARS epidemic, upstart low-cost airlines have moved in quickly. They hired workers while big carriers furloughed them. United's head count at West Coast hub SFO and at Oakland International Airport has plunged from 19,218 just before the Sept. 11, 2001, terrorist attacks to 10,942. Now, smaller discounters are helping SFO start a recovery, and they have fueled growth at Oakland International. Cross-Bay rival Oakland has long courted the discounters, landing Southwest Airlines in 1989 and upstart JetBlue Airways in 2002. That continues to put pressure on SFO to get on the low-cost wave to compete. "The more discounters who want to come the better," said Mike McCarron, SFO spokesman. "We're aggressively going after them because it's the wave of the future." While neighboring Oakland and San Jose airports have been far better at attracting low-cost carriers, and offering cheaper fares, SFO officials are hoping to lure more discounters and are talking to tenants about expanding low-cost service. SFO is driving down operating costs to accommodate these carriers, which are beginning to dominate the airspace, McCarron said. Budget carriers America West, Frontier and ATA have increased service at SFO, and discount airline AirTran began serving the Peninsula airport in November. SFO has boosted its service to New York, feeling the pressure from JetBlue and Southwest in Oakland. United's new discounter, Ted, also has added SFO routes that United dropped early in the economic slump. This past spring and summer, SFO saw an uptick in the passenger loads for the first time since the Sept. 11 attacks. Big, struggling carriers such as United, American and Delta have consistently laid off workers and shed money-losing routes. Because of furloughs, attrition, retirement and layoffs, thousands of mechanics, pilots, flight attendants and other workers at United and other airlines are out of work. United closed its Oakland maintenance base last year, cutting 1,000 jobs. Alaska Airline shut down its Oakland maintenance base in August, cutting 400 jobs. Other airlines have cut their staffs, too, and farmed out a lot of maintenance work. Traffic at SFO, where United operates nearly half the flights, has plunged from 41 million in 1999-2000 to 31 million last year. SFO has slid from the nation's fifth biggest airport to rank 11th last year, according to the Airports Council International. The airport, so key to the Peninsula's economy, is just starting to recover. But with a tentative economy and the region's major carrier, United, in bankruptcy, it's going to be a challenge. Passengers don't mind crossing the bridge to save money on a flight. "JetBlue has a comfortable seat, the fare is 20 percent less and the service is good," said Gerald Bernstein, managing director of Stanford Transportation Group in San Francisco. "On a party of four, you can save $1,000 to Newark." Knowing passengers are looking to spend less on flying, SFO has boosted low-cost carrier traffic to nearly 15 percent. That's up from 9 percent a couple of years ago, airport officials said. At airports nationwide, the average is about 25 percent, according to McCarron. Indeed, the news of signs of life at SFO isn't so sweet to local airline union workers. They fear the influx of low-cost carriers, because they say the smaller carriers don't pay high wages or benefits compared to the so-called legacy carriers like United. "We have to watch that in the labor community in the Bay Area," said Terry Sousoures, president of the Association of Flight Attendants-Communications Workers of America Local Council 11 in Burlingame. "We have to maintain a certain type of wage to live in this area." While United flight attendants make about $20 per hour, those at discounters make more like $11 or $13 per hour, Sousoures said. Thousands of mechanics have been squeezed out of high-paying jobs, too. There are 1,300 United mechanics on furlough at SFO and from the closed Oakland maintenance base. Many made $25 per hour or more. Many airlines are farming out such maintenance work to other areas. Fledgling low-cost startup airline Virgin America, expected to begin flying out of SFO in mid-2005, already has said it would perform some maintenance in other parts of the country. Robert Mendez, United Airlines Employee Assistance Program coordinator for the local machinists union, paints a bleak picture of the local job losses. "Some find jobs at other airlines, but they're making less money and the benefits aren't as good," he said. He stressed that wages at new jobs with discounters will drag down United's higher wages, which have already shrunk during bankruptcy. "The industry's in deep trouble now," Mendez said. "A lot more people are flying, but the cost of fuel is rising." The low-cost carriers seem to be better able to cope with the changing industry. "They are becoming the dominant carriers for now," Stanford Transportation Group's Bernstein said. Oakland was the only one of three major Bay Area airports to expand its passenger traffic last year. Southwest pulled out of SFO in 2002 and put most of its Northern California operation across the Bay. That was a plumb for Oakland, which has surpassed San Jose as the second largest Bay Area airport. Also in 2002, JetBlue began flying in to Oakland and SunTrips, another low-cost carrier, jumped from SFO to Oakland. Those moves helped Oakland become the second fastest growing airport in the nation last year. Traffic rose 12 percent to 12.7 million from 11.4 million in 2001. "We worked with carriers on what service passengers like," said Cindy Johnson, spokeswoman for Oakland International. "We had remarkable growth and we've never turned back." SFO was pretty healthy before 2000 and the Internet bust. But Oakland was "Oakland made itself available for a new generation of carriers," Kuhlmann said. "They were willing to try something new, while SFO didn't encourage new carriers at first." But SFO has fought back. It has improved its costs per passenger for the airlines. After the new International Terminal was opened in 2000, costs soared at SFO, McCarron said. But the airport pruned staff through attrition and some layoffs, delayed revision plans on its domestic terminal and tightened its budget. Its cost per passenger emplanement, a key industry measure, has fallen from $24 to $15. SFO hopes to push it down to $13, but competitive Oakland stands at $4. SFO also cut landing fees by 50 percent and reduced rental fees to airlines, McCarron said. "We're driving operating costs down," he noted. It's making the airport more consumer friendly with lower fares. Last March, America West started some new low-fare San Francisco-to-Boston and New York flights. United and American responded by lowering their prices for flights to that region. United discounter Ted is on tap to fly to Mexico next year, creating more competition with ATA's Mexico flights. McCarron said JetBlue showed interest in flying out of SFO but backed off because of delay issues during the foggy season. This spring and summer, the average monthly traffic climbed 20 percent. Still, it will take a significant economic upturn to get traffic back to pre-Sept. 11, 2001, levels, McCarron said. And Oakland's not going away, either. "Oakland's low-cost strategy is squeezing SFO," Kuhlmann said. "SFO's carriers can't hold prices up, because consumers can just cross the bridge." Business writer Tim Simmers can be reached at (650) 348-4361 or tsimmers@xxxx --- End forwarded message ---