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Opinion: SFO needs to focus on air cargo

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  • 8/3 SF Chronicle
    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
    Message 1 of 1 , Aug 3 11:32 AM
      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
      airport records.

      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
      air cargo.

      Jock O'Connell is an authority on world trade who has also served as a
      consultant for Airis Holdings.
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