Published Tuesday, August 3, 2004, in the San Francisco Chronicle
Missed connection on air cargo
By Jock O'Connell
The Bay Area economy is acutely reliant on the region's airports, and
no airfield is more critical to the region's economic fortunes than
San Francisco International Airport, especially when it comes to
international business. More than 90 percent of the international
travelers arriving or departing the Bay Area use SFO, according to
But what is less generally known is that SFO -- and not the sprawling
maritime shipping complex at the Port of Oakland -- is Northern
California's principal conduit for international trade. In fact, as
federal Department of Transportation figures bear out, SFO handles
more than double the two-way trade (measured by dollar value) moving
across the docks in Oakland.
Whether SFO will be able to provide the global air-freight connections
that Bay Area businesses will require in the years ahead is an open
question, however. A report issued in April by the San
Francisco-based Public Policy Institute of California offers
compelling evidence that SFO's competitiveness as international air
cargo hub has been waning since at least the mid-1990s. A similar
conclusion was reached in a January 2003 study for the Pacific Council
on International Policy, which specifically noted that cargo-handling
inefficiencies at SFO were forcing more and more freight forwarders to
route overseas shipments through airports in Southern California.
The issue here goes well beyond whether the international air
transport needs of local companies are being adequately met.
Ultimately, what's at stake is the Bay Area's ability to remain
economically competitive and to retain its stature as a commercial
crossroads. In the global economy of the 21st century, world-class
seaport and airport facilities confer substantial economic advantages
by reducing transportation costs and more generally facilitating links
between local businesses and the global economy. Regions so endowed
have a sizable edge in pursuing economic development strategies that
target highly competitive companies and the well-paying jobs they
typically provide. As a 2001 report by the Bay Area Economic Forum
report observed: "While air transportation is vital to the movement of
trade nationally, this is emphatically the case in the San Francisco
Bay Area due to the region's technology economy and the high value of
its technology exports."
Regrettably, SFO has been unconscionably slow to upgrade its
facilities in anticipation of huge increases in the volume of
international and, more specifically, transpacific air cargo trade.
The consequences are becoming easier to identify. For example,
California's merchandise exports surged by 19.9 percent through the
first five months of this year, but the volume of international cargo
handled by SFO inched upward by only 1.3 percent, according to the
Federal Aviation Administration and carriers that serve SFO. In June,
the San Francisco Airport Commission spurned a proposal from Airis
Holdings, LLC, a Texas-based private developer, for a huge 633,000
square-foot, privately financed, state-of-the-art air cargo terminal.
Instead, the airport has chosen to bolster SFO's cargo-handling
capacity on its own.
How the only California airport assigned a negative credit outlook by
Standard & Poors intends to pay for a vast new construction project is
anyone's guess. SFO is still paying off about $4 billion in debt from
previous capital projects, and its principal tenant, United Airlines,
is in bankruptcy. The airport's plan involves a piecemeal approach,
building the cargo terminal over several years and thus assuring
maximum feasible disruption of the airport's air cargo operations.
Even worse, the plan caters largely to the handling requirements of a
handful of major domestic carriers who transport freight primarily in
the bellies of passenger jets. Meanwhile, the air cargo operations of
large foreign carriers like EVA, Air China and Korean Air, who make
far greater use of dedicated air-freighters, have been exiled to an
off-airport gulag of widely dispersed warehouses that are miles of
congested streets and highways away from SFO.
Even if heightened security concerns do not eventually lead to a
general ban on transporting freight aboard passenger planes, there is
little question that the real heavy lifting on transpacific routes
will be done by Asian carriers, especially those operating all-cargo
services. Yet, without the highly mechanized and technologically
sophisticated type of facility foreign carriers are demanding, SFO
will likely see more and more international air cargo diverted
elsewhere. That, in turn, is apt to further tarnish the Bay Area's
reputation as a place for globally engaged companies to do business.
SFO is truly a regional asset, but its operations reflect the often
distinctive interests of its sole proprietor, the City and County of
San Francisco. As a mecca for tourists and conventioneers, San
Francisco has an understandably keen interest in facilitating
passengers. That priority has long served to inform, if not dominate,
SFO's expansion plans. It is, unfortunately, a governance structure
that poorly serves the more industrialized counties such as Santa
Clara, Alameda and Contra Costa that generate most of the Bay Area's
Jock O'Connell is an authority on world trade who has also served as a
consultant for Airis Holdings.