--- In BATN@xxxxxxxxxxxxxxx, "6/24 SJ Business Journal" <batn@xxxx> wrote: Published Friday, June 24, 2005, in the San Jose Business Journal Deal reshapes airport expansion Airlines win cut in costs By Andrew F. Hamm The new $2.8 billion reincarnation of Mineta San Jose will still have its landmark "sails," but airport officials have agreed to cut back modernization plans in order meet airline demands to reduce costs. "Everything is on the table," says Aviation Director William Sherry. "The airlines are saying 'you are building the Taj Mahal and you are doing it on our nickel.'" Mr. Sherry and the 13 commercial airlines operating at San Jose's international airport have agreed to a six-point program to cut the airlines' cost by approximately 30 percent: * Reduce the annual fee airlines pay to $8.50 or less per passenger, twice the current rate, but sharply lower than the worst-case scenario; * Delete the controversial Terminal C and A baggage-scanning connection to the North Concourse; * Provide common use capability at lightly-used gates; * Commit to building a "cost-efficient and comparable" facility that meets airline and city needs; * Work toward a strategy that would create equivalent terminal facilities, and * Develop additional cost-saving measures to reduce airline and airport development costs. Some of the scenarios being contemplated include lengthening the 400,000-square-foot North Concourse scheduled to open in 2007, tearing down at least a part of Terminal C as soon as 2009 and upgrading the retrofit already planned for Terminal A. To save money, the airport will not develop an air cargo screening system, nor upgrade security checkpoint equipment in Terminals A and C. These projects are being eliminated because expected federal Transportation Security mandates for such changes never materialized, Mr. Sherry says. Other projects being delayed include the demolition of the belly freight warehouse on the airport's southeast side as well as the construction of a new belly freight facility. The airport also has scuttled plans to take over San Jose State University's aviation classroom facilities on the airport's southwest corner. No dollar figures have been attached to these projects, Mr. Sherry says, but the savings are expected to be significant. Airport officials are also contemplating stopping short of operating a full 40-gate airport when the North Concourse opens in 2007. The North Concourse will have at least eight new gates but the reworking of Terminals A and C may leave the gate number somewhere between the present 32 and 40, Mr. Sherry says. "We may not need all of them right now," Mr. Sherry says. "The challenge we face is to make sure we have enough gates available when we need them." The biggest change may be the early retirement of all or part of Terminal C by 2009. "(Terminal) C is getting very expensive to operate because of its age," Mr. Sherry says. In a letter dated June 15, San Jose airline association president Greg Gillis gave the airport his organization's support of Mr. Sherry's proposals. However, there are still issues to be resolved, says Mr. Gillis, who is also the property manager for Southwest Airlines. "The big issue is (which airlines) go into the North Concourse," he says. While it has been widely assumed that Southwest would take the majority of gates in the North Concourse, Southwest has been approached about staying in Terminal A as its dominant tenant. Southwest has agreed to study the proposal but nothing has been decided, Mr. Gillis says. Southwest has been critical of Terminal A's outdated facilities since before new security regulations enacted in the wake of the Sept. 11, 2001 terrorists attacks. The security conditions since then have just made a bad situation worse, Mr. Gillis says. "If you have a chance to move out of the slums to Beverly Hills, it's really a no-brainer," he says. But the airport has plans to widen Terminal A's security checkpoints and pedestrian bridge among other upgrades that may yet entice Southwest to stay in Terminal A. The No. 1 carrot may be allowing Southwest a freer hand to run its operations. The airport has already agreed not to attach Southwest to its $6 million IT computer system that essentially requires airlines to share gates when necessary. Mr. Gillis says what he is most excited about is the airport's new-found desire to communicate with the airlines. "It is 180 degrees of where we were before," Mr. Gillis says. "Before, we didn't know the costs involved and it scared the hell out of us. We are much more comfortable today." That said, Southwest still has not signed on to the airport's master plan, Mr. Gillis says. "But we are with everybody else to find a way to make this happen," he says. The airport's master plan would not require any major revisions because the ultimate build out will remain essentially unchanged, says San Jose airport planner Cary Greene. The only difference is the timing. That includes one scenario under discussion that would include tearing down the northern half of Terminal C, extending the North Concourse and then tearing down the southern end of Terminal C. The overall size of the single airport terminal would remain at 1.7 million square feet, airport officials say. "The master plan never got down to that kind of detail," Mr. Greene says. "Our projections of (15 million) passengers for 2010 isn't going to happen. This is just stretching out implementations." Mineta San Jose is handling about 11.1 million passengers annually, down about 15 percent from pre-Sept. 11, 2001 levels. Mr. Sherry admits he isn't sure how lengthening the North Concourse would effect the single terminal's central area or South Concourse. One thing losing Terminal C early would do is eliminate the need for an elaborate conveyor belt system designed to carry luggage from Terminal C and Terminal A into an automated baggage-scanning system that will be built in the bowels of the North Concourse. That plan had drawn loud objections from the airlines because of the costs and what they said was the system's inefficiency. Airport officials hope to reduce the size of the automated baggage system in the North Concourse to save approximately $6.5 million. Losing the conveyor belt system would save another $5 million. However, eliminating the conveyor systems would mean baggage at Terminal A and C will continue to be manually scanned in tents located on the tarmac outside each building. The ad hoc system has been an embarrassment of sorts to the airport since it was installed in 2003. The airport has looked into eventually installing a separate automated baggage-scanning system as part of its Terminal A retrofit. The San Jose city council June 21 approved a three-year, $300,000 contract with Miami-based Recondo & Associates to find additional cost-saving measures. An initial report is scheduled to be returned to the airport by the end of the year. Mr. Sherry has already promised the airlines its costs for the airport's $2.8 billion expansion project won't exceed $8.50 per passenger. That's down considerably from $12.73 "worse-case scenario" price given to the airlines earlier this year and much lower than the $17.63 per passenger fee cited if no federal money was obtained for the expansion project. Currently, the average per passenger fee charged airlines is $4.33. Federal grants are expected to cover the remaining costs. Andrew F. Hamm covers transportation for the Business Journal. He can be reached at 408-299-1841 --- End forwarded message ---