The role of airport costs in the post-9/11 recovery of San Francisco International Airport

Abstract

This paper examines whether or to what extent San Francisco International Airport’s (SFO’s) purportedly high costs relative to other airports suppressed SFO’s traffic demand and prolonged the recovery of passenger traffic in the period after the 11th September, 2001 terrorist attacks. A comparative analysis of the historical data shows that SFO’s direct airport costs per enplanement (CPE) were higher than most other major airports in the post-9/11 period by a considerable margin, but that airport costs likely were not a significant factor in SFO’s prolonged recovery. Airport costs likely did not affect airline profitability sufficiently to influence route and scheduling decisions, and it is unlikely that passenger demand was dampened by the pass-through of higher costs to airfares. This research suggests at best a tenuous relationship between airport rates and passenger activity, and at SFO the evidence does not suggest that an extremely high CPE relative to peer airports affected the pace of its slow return to pre-9/11 traffic levels. Rather, the slow return of traffic to SFO and its neighbour, Norman Y. Mineta San Jose International Airport (SJC), compared to the robust growth at Oakland International Airport (OAK) can be explained by traditional economic means. It also suggests that in a multi-airport region where each airport is somewhat specialised, an individual airport’s over- or underperformance relative to its neighbours is more likely to be a function of economic geography than of any airport’s rate-setting practices. If this conclusion holds true for other US airports, it emphasises the ability of airports to create capital plans and set rates and charges to make long-term investments in organic air traffic growth, ensuring that new entrant airlines have sufficient facilities to begin service and that existing airlines have sufficient capacity to grow.