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San Diego County Regional

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Title: San Diego County Regional


1
San Diego County Regional Airport Authority

CONNECTING SAN DIEGO TO THE WORLD SDIA AIR
SERVICE DEVELOPMENT PROGRAM CHALLENGES AND
OPPORTUNITIES
SDCRAA Advisory Committee Meeting January 11, 2007
2
  • Robert Wigington
  • Director of Marketing and Route Service
    Development
  • SDCRAA
  • Hampton Brown
  • Manager of Route Service Development
  • SDCRAA
  • Dean Hill
  • Principal
  • TranSystems Campbell-Hill Aviation Group

3
Presentation Outline
  • Mission and Goals
  • San Diegos Demographic Strengths
  • Recent Enhancements
  • Air Service Development Methodology
  • San Diego Challenges
  • San Diego Opportunities
  • Competitive Nature of Air Service Development

4
Mission and Goals
5
Mission and Goals Connecting the San Diego
Region with the World
  • Plan and provide air transportation service that
    promotes regions prosperity
  • Develop domestic and international air service to
    meet the regions growing air transportation needs

6
San Diegos Demographic Strengths
7
SDIA Serves a Region of More Than 5 Million People
  • The eighth (8th) largest city in the USA
  • The second (2nd) largest city in California
  • A catchment area of over 5 million inhabitants in
    the US and Mexico

8
San Diego International Handled a Record 17.4
Million Passengers in 2005
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
Passengers
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source SDCRAA Operations
9
Airline Diversity and CompetitionPassenger
Market Shares at SDIA
Aeromexico
1
Air Canada
lt1
Alaska
United
Aloha Airlines
6
14
lt1
USAirways / America West
SunCountry
8
lt1
American / American Eagle
15
Southwest
35
Continental
5
Delta
8
Frontier
2
Hawaiian
Northwest
JetBlue
1
Source Year to Date SDCRAA Oct 06 Operations
Report
Midwest
3
2
lt1
10
San Diego International Airport Benefits from a
Healthy Mix of Business and Leisure Travelers
Business
Leisure
46
54
Sizable business proportion indicative of the
robust San Diego economy
Source Authority Survey YTD 3Q 2006
11
San Diego is Highly Ranked on Key Economic
Factors for a Major Metropolitan Area
San Diego Consistently in Top Quartile
Percent of Households with Income gt100K
Percent of Pop. With Masters, Dr. or Prof Degree
August 2006 Unemployment
  • San Francisco 31.5
  • Washington, DC 30.9
  • Boston 26.0
  • New York 26.0
  • San Diego 23.7
  • Minneapolis 22.3
  • Los Angeles 21.6
  • Chicago 21.5
  • Philadelphia 21.5
  • Seattle 21.0
  • Denver 20.8
  • Atlanta 19.8
  • Detroit 18.7
  • Houston 18.4
  • Dallas 18.2
  • Charlotte 17.5
  • Portland OR 16.8
  • Phoenix 16.7
  • St. Louis 16.1

Washington, DC 18.8 Boston 17.8 San
Francisco 16.6 New York 14.2 San
Diego 12.8 Denver 12.8 Philadelphia 12.4 Sea
ttle 12.3 Chicago 12.2 Minneapolis 11.8 Atla
nta 11.6 Portland OR 11.2 Detroit 10.4 St.
Louis 10.2 Los Angeles 10.2 Cleveland 10.0
Miami 9.9 Dallas Ft Worth 9.5 Houston 9.3 Pho
enix 9.3 Charlotte 8.9
Phoenix 3.1 Washington, DC 3.2 Minneapolis 3.3
Miami 3.8 San Diego 4.1 Seattle 4.2 San
Francisco 4.3 Boston 4.5 Chicago 4.5 Atlanta
4.5 Los Angeles 4.7 New York 4.8 Denver 4.8
Charlotte 4.8 Philadelphia 4.9 Dallas Ft.
Worth 4.9 Houston 5.1 Portland OR 5.2 St.
Louis 5.3 Cleveland 5.5 Detroit 7.0
Source US Census
12
San Diego International Airport Serves a Diverse
Economy
13
SDCRAA Teams with Business, Trade and Travel /
Tourism Partners
  • Outreach to business and travel / tourism
    industry
  • Identify air service and business travel
    requirements, and
  • Promote and support new air service

14
San Diego Recreation and Attractions
Museum of Photographic Arts
15
San Diego is Becoming a Pre-eminent Cruise
Gateway
  • Cruise lines and airlines use San Diego as
    Gateway for trips to Baja, Acapulco, Puerto
    Vallarta, and Mazatlán
  • Five cruise lines presently serve San Diego
  • 1.4 million cruise passengers expected by 2017
  • Additional cruise passengers require additional
    air service

Air Routes
SAN
Cruise Routes
Ensenada
Hawaii
Loreto
Los Cabos
Puerto Vallarta
Manzanillo
Zihuatenejo
Mexico City
Acapulco
Source San Diego Convention and Visitors Bureau
16
Why is International Air Service Important?
  • International Air Service important for the
    visitor and convention industry
  • International visitors stay longer and spend
    more
  • International Air Service is an important element
    to attracting / retaining high-value businesses
    and promoting trade
  • High-tech industries rely on easy access to
    global markets

17
Nonstop Service Stimulates Air Travel
  • New nonstop international service means more
    passengers

Total Passengers
Increase
12 months Before
12 months After
Portland
-
Asia
102,930
164,980
60
Portland
-
Europe
182,140
264,800
45
Source DB1B Relevant Years Portland Asia
stimulated as a result of PDX-NRT service on
Northwest. Portland Europe stimulated as a
result of PDX-FRA service on Lufthansa.
18
Contribution of a Typical Domestic and Typical
International Flight to Airport Revenues
1,600,000
1,491,916
1,400,000
ASSUMPTIONS Daily Flight 75 Load
Factor Concession 6.55 / EPAX Parking 2.75
/ EPAX MLW of Aircraft
INTERNATIONAL
1,200,000
Annual Airport Contribution
1,000,000
800,000
DOMESTIC
646,765
600,000
400,000
200,000
0
B737-700
B777-200
19
What is a Single Daily Nonstop International
Flight Worth? (Economic Impact)
  • San Diego London on British Airways
  • 156 million annual economic impact
  • Portland, OR Frankfurt on Lufthansa
  • 90 million annual economic impact
  • 1,500 local jobs
  • Portland, OR Tokyo on Northwest Airlines
  • 108 million annual economic impact
  • 1,100 local jobs
  • Denver Frankfurt on Lufthansa
  • 90 million annual economic impact
  • Phoenix London on British Airways
  • British Airways to London238 million annual
    economic impact
  • Nashville Europe on American
  • 255 million annual economic impact
  • 3,500 new jobs

20
Economic Engine for the Region
2.3 billion a year is spent by visitors who
arrive by air to San Diego Airport 9.9
billion economic benefit to region
  • By 2009, San Diego County will add more than
    5,200 new hotel rooms
  • These new hotel visitors will require additional
    air service
  • Las Vegas estimates that each new hotel room
    means 300 new passengers at Las Vegas Airport

Direct, Non-stop Air Service is the Key
to Attracting Visitors and Conventions

21
Recent Enhancements
22
Review of Recent Enhancements
NEW AIRLINES
NEW MARKETS CANCÚN MEXICO CITY PITTSBURGH PUERTO
VALLARTA RENO / TAHOE SAN ANTONIO TORONTO VANCOUVE
R BC
VANCOUVER
SEATTLE
MINNEAPOLIS
PORTLAND
TORONTO
DETROIT
BOSTON
CHICAGO (MDW-ORD)
SALT LAKE
NEW YORK (EWR)
PITTSBURGH
DENVER
NEW YORK (JFK)
ST. LOUIS
CINCINNATI
SACRAMENTO
PHILADELPHIA
RENO/TAHOE
SAN FRANCISCO
KANSAS CITY
BALTIMORE
WASHINGTON (IAD)
OAKLAND
LAS VEGAS
SAN JOSE
PHOENIX
CHARLOTTE
NASHVILLE
LOS ANGELES
ALBUQUERQUE
ATLANTA
DALLAS FT WORTH
SAN
TUCSON
EL PASO
AUSTIN
HOUSTON
SAN ANTONIO
LORETO
HONOLULU
LOS CABOS
MAUI
CANCUN
NONSTOP
PUERTO VALLARTA
MEXICO CITY
NEW SERVICE (2004-2006)
ADDITIONAL AIRLINE ON ROUTE (2004-2006)
23
Air Service DevelopmentMethodology
24
Phases of Air Service Development
  • Research Potential Air Service
  • Recruit Air Service
  • Retain Air Service
  • Expand Air Service

25
Methodology for Identifying Air Service
Opportunities
  • Assess passenger levels and data from San Diego
  • Origin destination passenger data
  • Load Factors
  • Average airfares
  • Identify unserved markets demand sufficient for
    nonstop service
  • Determine underserved markets where current
    demand is larger than nonstop supply
  • Identify current markets with high load factors
  • Review fare levels on all routes (vis-a-vis
    competitor airports)

26
Strategic Activities in Support of Route
Development
  • Review fleet plans of airlines and current
    schedule patterns to determine future
    opportunities
  • Estimate viability of airline/aircraft routes at
    SDIA
  • Discuss future strategic focus with airline route
    planners and decision makers
  • Monitor US-foreign government air service
    negotiations and advocate changes to
    international agreements that benefit San Diego
  • Monitor airline financial conditions to determine
    potential risks and opportunities
  • Update carriers on performance of the regional
    economy and future trends

27
San Diego Challenges
28
San Diego Air Service Challenges
Runway length and nearby terrain restrict nonstop
international service options
Range of A340-300 from SDIA
FRANKFURT
LONDON
AMSTERDAM
PARIS
BEIJING
SEOUL
SHANGHAI
TOKYO
SAN
HONG KONG
MANILA
Pax 40,000 lbs. Cargo
LIMA
SAO PAULO
BUENOS AIRES
210 lbs. per pax 295 passengers 2 fuel
markup FAR International reserves Average daily
maximum hottest month takeoff 85 annual winds
Pax Only
Source Airbus
29
San Diego Air Service ChallengesLeakage to Los
Angeles
  • In one analysis, LAX garnered 45 of bookings to
    Europe, Middle East and Africa from residents
    north of the line.

45
By driving to Los Angeles, San Diegans reinforce
the airlines perception that they can serve San
Diego via Los Angeles International
Source Eclat Analysis of MIDT Bookings (Shepherd
Systems)
30
San Diego Air Service ChallengesGeographic
Position
  • San Diego in a cul-de-sac limited ability to
    flow traffic to other points in US

EUROPE
31
San Diego Air Service ChallengesGeographic
Position
  • San Diego in a cul-de-sac limited ability to
    flow traffic to other points in US

EUROPE
32
Why was British Airways Service Discontinued?
  • Perfect storm of events
  • 9/11
  • Second Gulf War and associated downturn in
    passenger traffic
  • Downturn of fares / yields premium traffic
  • BA was in Financial Crisis
  • Future Size and Shape Initiative to reduce costs
  • Lack of immunized alliance relationship affected
    market reach
  • Business travelers could not earn AA miles
  • Fly America traffic could not use BA
  • Inconsistent Heathrow slot times affected daily
    connectivity
  • Competition for scarce Heathrow slots

33
San Diego Opportunities
34
New Aircraft New Opportunities
  • Boeing 787 250 seats with 8,500 mile range,
    fuel efficient, composite construction will open
    city pairs like San Diego Tokyo and San Diego
    Amsterdam
  • Embraer 175/190 73 100 seat aircraft with
    2,000 mile range will enable new markets San
    Diego Calgary, San Diego Mexico Markets, and
    San Diego Omaha.

35
San Diego is the Largest US Market without
Nonstop Intercontinental Service
International Passengers (except North America)
1,200
965
1,000
800
Passengers per Day Each Way (PDEW)
600
481
478
418
397
400
200
SAN
SLC
STL
PIT
AUS
0
SAN DIEGO
Salt Lake City
St. Louis
Pittsburgh
Austin
Source DB1B YE 2Q 2006 Seabury APG
36
San Diego is the Largest US Market without
Nonstop Service to Europe
600
522
500
400
Passengers per Day Each Way
300
265
263
247
190
200
100
PIT
SAN
SLC
STL
MCI
0
SAN DIEGO
Pittsburgh
St. Louis
Salt Lake City
Kansas City
Source DB1B YE 2Q 2006 Seabury APG
37
San Diegos Europe Market is Larger than Nine (9)
Existing US-Europe Gateways
600
HUBS
NON-HUBS
522
500
440
439
433
404
400
347
Europe PDEW
300
268
267
200
131
100
55
0
SAN DIEGO (18)
Cincinnati (25)
Portland (24)
Ft. Myers (64)
Memphis (45)
City (MSA Rank)
Charlotte (35)
Baltimore (4)
Raleigh (42)
Cleveland (17)
Hartford (43)
Source DB1B YE 2Q 2006 Seabury APGo
38
San Diego is among the Largest US Markets without
Nonstop Service to Asia
600
478
500
400
Passengers per Day Each Way
300
260
253
209
200
152
100
DEN
SAN
BOS
MCO
MIA
0
Boston
Orlando
SAN DIEGO
Denver
Miami
Source DB1B YE 2Q 2006 Seabury APG
39
International Air Service Objectives
  • 1) Re-establish Nonstop Service to San Diegos
    largest unserved International Market London

LONDON
SAN
40
International Air Service Objectives
  • 2) Link San Diego to one European hub to flow San
    Diego passengers throughout Europe / Middle East
    / Africa

SAN
  • London
  • Frankfurt / Munich
  • Amsterdam
  • Paris

41
International Air Service Objectives
  • 3) Link San Diego to one Asian hub to flow San
    Diego passengers throughout Asia

SAN
  • Tokyo
  • Seoul

42
International Air Service Objectives
  • 4) Establish direct / single plane service to
    important
  • San Diego Asia markets

SAN
MANILA
43
International Air Service Objectives
  • 5) Enhance Air Service to Mexico and link
  • San Diego to Latin American Hub

MONTEREY GUADALAJARA BEACH MARKETS
SAN
44
Competitive Nature of International Air Service
Development
45
Attracting Air Service is Competitive Business
  • Recruiting air service has parallels to corporate
    recruiting
  • Air service is a critical part of a communitys
    economic development
  • Airport revenues depend on passengers and
    airlines
  • SAN must assume that other airport groups are
  • Also meeting with the target airline
  • Offering a lucrative incentive package
  • Putting their best foot forward

46
Air Service Development Programs Are More
Important Than Ever
  • The marketplace is changing
  • New carriers emerging
  • Once stable carriers fading
  • Impact of security
  • Major pricing and distribution changes
  • Airlines have limited growth aircraft
  • Airlines also have limited staff and cannot
    evaluate all airports in depth
  • Screening techniques will miss key attributes of
    your airport
  • Air service development programs are used to fill
    the gap
  • Many untapped opportunities for new service
  • Many threats to current service

47
Air Service Fundamentals Have Not Changed
  • A credible business case is still indispensable
  • Strong analytical basis
  • Tell the airline something they dont know
  • Give airline reason to study your proposal
  • Substance more important than form
  • Marketing 101 still applies
  • Whats in it for the airline?
  • Why my airport?
  • Must fit corporate strategy and culture
  • Have plan B ready to go

48
Why Do Airports Need Community Support?
  • A credible business case is necessary but not
    always sufficient
  • Virtually all air service business cases require
    a change in buyer behavior
  • Many airlines no longer maintain local sales
    staffs with marketing budgets
  • Airport incentives and promotional funds are
    frequently limited
  • Airport staff resources limited
  • Airport cannot do it all

49
Typical Elements of Air Service Incentive/Support
Plan
  • Marketing support ()
  • Business introductions
  • Corporate commitments
  • Travel banks
  • Revenue guarantees
  • Fee waivers
  • KEY POINT Virtually all airports comparable in
    size to SAN have incentive programs

50
Two International Air Service Development Success
Stories
  • Portland
  • Hartford

51
The PDX Situation in 2001
  • High international orientation with Tokyo service
    dating back to the 80s
  • 4 Daily MD-11 flights to Asia lost when DL closed
    PDX gateway
  • Hundreds of Asian/High Tech Businesses in Oregon
  • Last year of operation averaged 770 passengers
    per day

52
The PDX Approach
  • Formed International Air Service Committee
  • Port of Portland
  • Mayor of Portland
  • Mayor of Vancouver
  • Major companies (e.g. Nike)
  • Governors Chief of Staff
  • POVA
  • Chamber of Commerce
  • State ECD
  • Research/Business Case
  • Marketing Case
  • Replacing Tokyo service was top priority but
    other efforts continued
  • Initial Asian airline meetings were not
    encouraging but when the Lufthansa opening came
    up, PDX had the machinery in place

53
Lufthansa in 2002
  • Lufthansa was considering new service to the U.S.
    but not PDX
  • Lufthansa was focused on the West Coast,
    primarily Seattle
  • Lufthansa was willing to meet with Portland, but
    was skeptical
  • Lufthansa said it had to have hard numbers to
    consider PDX
  • Marketing and incentive discussions would happen
    only if PDX had a solid business case

54
The PDX Strategy
  • Air service efforts for Tokyo now refocused on
    Frankfurt
  • In depth business case covering all planning
    aspects tailored to Lufthansa
  • Risk Mitigation Program
  • Corporate support 10 million commitment
  • Port support 2 million in fee waivers and
    marketing support
  • State/city support 1.1 million
  • TOTAL 13.2 million
  • Organizational bonding
  • PDX now in retention mode
  • Annual visits to Frankfurt and New York with
    events outside meetings
  • Constant contact with local sales and operations
    managers
  • Continued organizational bonding
  • Overall effort was coordinated by airport staff

55
The Portland Payoff
Tokyo June 2004
Frankfurt March 2003
PDX
Mexico May 2003
56
Bradley International Airport
BOS
  • State owned airport
  • Large wealthy market and home to many large
    corporations
  • High degree of leakage in long haul markets to
    JFK and BOS
  • Need to change travel habits
  • Primary objectives were West Coast and
    Transatlantic service

BDL
NYC
57
The Hartford Approach
  • Never had any transatlantic service and most
    airlines disregarded overtures
  • More traditional approach than PDX and less
    comprehensive
  • Highly technical analysis of DOT data, CRS
    systems and demographics focused on quantifying
    market
  • Marketing program focused on how to change travel
    habits away from JFK
  • Components of Hartford marketing support and air
    service incentives
  • Airport cost and fee waivers landing fees,
    arrival fees gate charges
  • Substantial marketing assistance
  • Corporate seat/spend commitment
  • Corporate access assistance

58
The Hartford Payoff
Amsterdam
BDL
Salt Lake City
Denver
Los Angeles
59
Important Messages from Portland and Hartford
Examples
  • It takes time, hard work and perseverance
  • There must be a strong well-supported business
    case before an airline will serve SAN
  • Some form of incentives, marketing support and
    risk sharing will be expected
  • Organized and supportive business community is
    essential
  • Every airport and every situation is different
  • The changing air service development world
    creates opportunities for some and threats for
    others
  • Airports can influence whether opportunities are
    realized and whether threats are deflected
  • Every airport and every opportunity is different
    so play to your strengths and your target
    airlines needs

60
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