Attachment A Highlights From 2000 RASP Forecasts Preface. The information below highlights results from the aviation forecast prepared in 2000 for the Regional Airport Planning Committee and included in the2000 RASP. The information should be read in the context of the 2000 report, and does not necessarily reflect assumptions and trends that would be incorporated into a new set of forecasts that would be prepared today based on current conditions. Regional Demand Forecasts (1998 to 2020) The base year for the forecasts was 1998 and the horizon year was 2020. (See Figure 3) Total Bay Area air passengers would grow from 56.6 million annual passengers in 1998 to 111.1 million annual passengers in 2020, a 96% increase (3.1% per year). SFO air passengers would grow from 37.1 Million Annual Passengers (MAP) in 1998 to 61.1 MAP in 2020, a 65% increase OAK air passengers would grow from 9.2 MAP in 1998 to 24.7 MAP in 2020, a 168% increase. SJC air passengers would grow from 10.3 MAP in 1998 to 25.3 MAP in 2020, a 146% increase. Overall SFO’s share of regional air passengers was projected to decrease from 66% in 1998 to 55% in 2020, compared to 22% for OAK and 23% for SJC. Total air cargo would grow from 1.75 million annual tons in 1998 to 5.46 million annual tons in 2020, a 211% increase (5.2 % per year). Total air passenger flights would increase from 639,000 in 1998 to 954,000 in 2020, a 49% increase (1.8% per year). Total air cargo flights would increase from 70,000 in 1998 to 158,000 in 2020, a 125% increase (3.7% per year). Bay Area Air Travel Markets. Historically the growth in air travel in recent years is directly attributable to the steady decline in air fares measured in constant dollars. Initially lower fares were produced by advances in aircraft technologically, while in more recent years by improved airline management techniques which manifest themselves in better utilization of assets, employees, and consumables. The Bay Area has experienced more rapid air travel growth than the nation as a whole due to relatively lower air fares (such as introduced in the California corridor) In 1998 about 40% of Bay Area air passengers had domestic destinations, 12 % were international, and 18% were passengers connecting between flights at Bay Area airports (primarily SFO). Just seven metropolitan areas, led by the LA Basin, accounted for 51% of all domestic travel. 2 Since airline deregulation in 1978, domestic travel increased at a 4.4% annual growth rate, and international travel at a 5.1% annual rate. 3 The California corridor is the largest air corridor in the world, and constituted about 26% of all Bay Area air passengers in 1998. This market is characterized by frequent, low cost service with smaller sized jet aircraft that can be turned around quickly at the terminal. California air travel is beginning to exhibit characteristics of a “mature” market with moderating growth. Other major cities in the Western US also receive similar frequent, low cost service, and constitute the next largest markets (e.g., Seattle, Las Vegas, Phoenix, and Portland). International air travel will be the fastest growing market (travel to Mexico, Canada, Europe and Asia); the gradual deregulation of international air transportation and advent of new longer range aircraft will continue to stimulate international travel at international gateway airports. Service to smaller cities in California and adjacent states is provided by commuter airlines, which generally fly into SFO and feed United’s hub operations. About 4.7% of air passengers in 2020 will be in these commuter markets. About 18% of Bay Area air passengers do not leave the airport, but use the airport to connect between flights. Connecting passengers are concentrated at SFO (27% of the passengers in 1998), largely due to United’s hub at this airport. In the future, the amount of connecting traffic is highly dependent on airline decisions about where they want to route their traffic, rather than local demographic drivers of air travel. Ranked in order of projected growth in air passengers from 1998 to 2020, growth in international travel ranked the highest International: 12.8 MAP (millions of annual air passengers added) Connecting: 10 MAP Eastern US: 8.8 MAP Western US: 8.6 MAP California: 7.6MAP Airport Passenger Shares. The approach to developing specific airport forecasts for the 2000 RASP was threefold: 1) each airport has a natural geographic “catchment” area which determines the potential pool of future passengers, 2) the share of a particular market captured at an airport is largely determined by the quality/quantity/price of air service relative to the other two Bay Area airports, and 3) the specific air services offered at each airport are a direct function of the route strategies of the individual airlines that serve the airports In 1998, SFO had the broadest schedule of flights with non stop service to 57 domestic airports, followed by San Jose (26) and Oakland (21). OAK and SJC together served about 45% of Bay Area domestic passengers. Since deregulation in 1978, SFO’s share of Bay Area domestic passengers has declined from about 75% to just over half, while OAK’s and SJC’s combined share has increased to 45%. Almost all international gateway air passengers as well as almost all commuter airline passengers are served by SFO. 4 The future share of air passengers at each airport will be most strongly influenced by the availability of non-stop service. When frequent non-stop service is provided at all three airports (such as in the California corridor), each airport’s market share is around 30% of Bay Area air passengers. 5 Each airport’s demand is also affected by the number of local passengers generated within its primary geographic catchment area. Estimating future air passenger levels in a multi-airport system is not easily done given the dependence of the forecasts on decisions made in the private airline sector and given the ease with which airlines can enter and leave markets in a deregulated environment. To the extent that new routes fit within an airline’s overall strategy, some of the likely new markets at each airport can be predicted. Most of SFO’s growth would be in the International market where it would serve 76% of Bay Area international travelers in 2020 (with 13 new non-stop routes). OAK was projected to add service in 22 new markets by 2020, with 16.8% of the passengers in 2020 associated with new services. OAK’s growth will continue to be tied largely to Southwest’s expansion plans with some new service to mega-hub airports. SJC was projected to add service in 11 new markets by 2020, with 9.2 % of its passengers in 2020 associated with these new markets. The forecasts are based on more service from Southwest and American Airlines as well as development of a few regional jet markets. Air Cargo Air cargo includes freight and air mail; freight tonnages are much greater than mail. The attractiveness of using air cargo is related less to the value of the commodity itself and more to the value of having it exactly when needed. Air freight is used heavily for rapid delivery of small packages, just in time delivery practices for manufacturing, delivery of products that are seasonal or perishable in nature, and the burgeoning e-shopping market. In 1998, Bay Area air cargo was divided as follows: 61% domestic air freight, 24% international air freight, and 15% mail. Fed Ex launched the overnight express market for delivery of letters, documents and packages in 1973, which grew rapidly and constituted about 60% of domestic freight in 1998. FedEx and UPS are expanding into the medium and heavyweight market as well as second and third day time-definite deliveries (often by ground truck). From the early 1980’s up to 1998 the world air cargo industry experienced rapid growth, averaging 7.6% per year. At the time of the forecasts, different industry estimates were reviewed with an average projected growth rate of 6.2% for worldwide cargo growth into the foreseeable future. Most experts expect Asia to exhibit the largest growth in air cargo, fueled to a large extent by China’s growing economy. Domestically cargo growth was projected to moderate somewhat due to maturing of the market, lower domestic economic growth, and competition from ground service providers. The US Postal service predicted slower growth rates in the future for air mail as well. Cargo at SFO. Due to the large availability of widebody jet service, SFO air cargo is predominately carried in the belly holds of passenger aircraft, and SFO is the primary airport 6 for international air cargo. At the same time, many foreign flag carriers also operate freighter aircraft to support their overall cargo operations. International air freight constituted 46% of SFO’s air cargo in 1998 and domestic cargo was another 32%. SFO’s forecasted growth in air cargo is largely due to significant increases in cargo to Asia. OAK Air Cargo. OAK is an air cargo hub for FedEx and UPS, which are the world’s two largest “integrator” carriers (an airline that picks up and delivers cargo from its customers). In 1998, OAK ranked 14th in the nation in cargo volumes, just behind SFO. Air cargo hubs were established at OAK due to the good freeway access to various parts of the region. OAK’s air cargo forecasts were based primarily on growth in the more mature domestic air cargo market, with some new air cargo service to Asia. SJC Air Cargo. SJC has a small percentage of Bay Area air cargo due to its site constraints and limited number of widebody aircraft flights. As a result, a significant volume of South Bay- generated air cargo is transported to OAK or SFO for shipment. There will be some growth in international cargo at SJC which would result from the addition of a few new non-stop international flights. Forecasts of the Number of Airline Flights Forecasts of airline flights are based on the types of aircraft that will be in service in 20 years as well as trends in load factors. Historically, load factors have been increasing and are a key to airline profitability; airlines have learned to market unsold seats in new and creative ways to keep load factors high. The assumption in the forecasts was that long-term load factors would be around 73% (although current airline load factors are considerably higher). After deregulation there were several trends going on simultaneously in the airline fleets. Some airlines sought to use smaller aircraft in a more competitive environment, others downsized their aircraft to provide roomier and more comfortable seating in reaction to passenger feedback, some purchased new aircraft that added range but not seats (to fly transcontinental and to Hawaii), and some airlines deferred new purchases and retained existing models longer. The forecasts projected average aircraft seating would again increase in the future. In general newer, larger versions of existing aircraft types were assumed for a carrier’s densest routes. A significant increase in aircraft seating capacity was forecast for airlines serving the California corridor market; commuter aircraft would become larger moving more to regional jets, and a few new large aircraft (like the Airbus 380) would enter service on international routes to highly capacity constrained airports, such as London and Tokyo. All three airports would see increased airline operations, but at lower rates than growth in air passengers For air cargo, an increase in freighter operations was projected for SFO to serve growth in transpacific routes (freighter operations add to total runway activity, whereas cargo carried in 7 the belly holds of passenger aircraft do not). Freighters would carry 48% of air cargo at SFO in 2020, up from 42% in 1998. OAK’s air cargo is handled mostly by freighters, and some in the belly of passenger aircraft (about 10%). The forecasts assume some growth in freighter flights due to pursuit of more international markets (again, primarily Asia). Small air cargo aircraft are also used to feed cargo to FedEX and UPS; these aircraft use the North Field and their numbers of operations was projected to remain relatively stable. SJC will see some limited growth in freighter air cargo lift capacity, as older, narrow body cargo aircraft are replaced with larger aircraft.