As at every other airport in the US, business bottomed out at San Francisco International immediately following 9/11. While many airports struggled back to their feet as passengers returned, it's been an uphill climb for SFO. Rather than wait for nature to take its course, managers launched an aggressive, innovative marketing campaign to increase business and draw new carriers to the beleaguered facility.
SFO rolled out its most recent innovation last month: A $20 million precision runway monitoring system featuring a new radar that allows planes to descend simultaneously to two runways despite weather conditions. Airport officials expect the new system to cut delays by 25% on bad-weather days. More importantly, it will serve as a cheaper alternative to a proposed $3.5 billion runway expansion that has been abandoned.
In December 2000, airport officials were jubilant unveiling a shiny new international terminal. But nine months later came 9/11 and business dropped off dramatically. The terminal, a gateway to the Far East, suffered a triple whammy from the aftermath of the terrorist attacks, the meltdown among the dot.com companies that proliferate on the West Coast and the SARS outbreak in Asia, according to Kandace Bender, deputy director-communication and marketing. She describes that period as "all dressed up to have a grand ball and we had no guests."
The airport in 2000 handled some 41 million passengers, with international traffic accounting for about 30% of the total. But costs were high, passenger loads began falling and low-cost carriers JetBlue and Southwest Airlines started eating into SFO's market with service out of nearby Oakland and San Jose, says Bender. While previous passenger levels have not returned yet, the airport is projecting 32 million passengers this year.
One of the steps it took to stop the slide was to adjust fees for tenants and suspend annual fees, Bender says. "We changed rents to a percentage of revenues rather than a fixed annual fee," she explains. Business has improved since then and the minimal annual guarantee has been restored-"We wanted them to survive and they did." Landing fees have been reduced by 18% and will be lowered again next year. The PFC remains unchanged at $4.50.
Through market research and various focus groups, the airport determined that low fares were No. 1 in choice of airline or airport. "We needed to let people know we were bringing in low-cost carriers," says Bender. As an enticement to draw new airlines, SFO instituted a stimulus marketing program that offered a 50% reduction in landing fees for the first year of new service by a carrier. The plan seems to be working, as AirTran, WestJet and Icelandair, along with Air New Zealand, have opened new routes out of the airport. Next year, Vietnam Airlines will begin flying there. United Airlines, which has a maintenance center at SFO, and its LCC subsidiary Ted continue to boost flights, says Bender. The airport also is prepared to handle the A380 when it enters service in 2006.
Other changes are coming in the terminal area. The lease of master concessionaire Host Marriott, which had managed concessions for 50 years, was scheduled to expire in 2004. The airport decided to negotiate with individual locally owned restaurants for food and beverage programs, dubbing the concept San Francisco Marketplace. These concessions will account for 80% of the business, though a number of fast food chains still are represented in response to customer demand, Bender says. "It's great for the passenger. The food is prepared onsite," she adds of the program that will be completed by early summer. "The outlets will also offer food to go."
SFO also has initiated a number of cooperative marketing ventures. "We didn't have dollars to spend but we did have advertising real estate," she explains. "We would run an airportwide promotion in exchange for advertising somewhere else." For example, the airport swapped advertising space with the local convention and visitors bureau. "There was no cost to either party. It gave us a way to market downtown."
Airport officials are realistic in their assessment of prospects for growth. Because of its location on the edge of San Francisco Bay, there is limited opportunity for expanding SFO's boundaries. It's not that they haven't tried, having spent some $80 million on an environmental study. "Ultimately, it came down to the Bay," Bender says. "It's not a body of water but a religion."
So the airport has pursued other avenues for improving operations, such as the new runway system. Other projects include extension of the BART rail system linking SFO with downtown, installation of a wireless system within the airport, a new airport parking program and a partnership with the Transportation Security Administration to privatize security screening to reduce wait times.
And SFO will continue to encourage long-haul and international flights, according to Bender. "We have to be very careful to plan for the future. We are working on transcontinental and international [service] with bigger planes, more passengers and fewer flights. We are focused on smart growth."