appendix a: methodology for the economic impact …

Economic Development Research Group, Inc.

APPENDIX A:

METHODOLOGY FOR THE ECONOMIC IMPACT

ANALYSIS

The economic impacts described in this report are measured in terms of jobs, payroll, and business

revenue. The study quantifies three categories of economic benefits resulting from SFO-related activities:

direct, indirect, and induced effects.

Direct impacts are: (1) business activities at SFO, including airline operations, aviation-related services, the

operation of the Airport, and passenger-related services; (2) spending by visitors in the Bay Area who

arrive via SFO; and (3) the sale of goods by Bay Area businesses to international or long-distance domestic

markets through SFO via air freight . For example, the direct impacts of on-Airport tenants include the

tenants’ business sales, the wages and benefits paid to workers from those business sales and number of

jobs supported by the sales. Similarly, the direct impacts of air visitors to the Bay Area include the money

they spend on services and supplies and the jobs and payroll supported by those expenditures. Most of

the direct impacts measured in this study occur on-Airport, although some impacts—such as visitor

spending and the benefits produced by air-reliant businesses—occur off-Airport.

Indirect and induced impacts, which are sometimes called “multiplier impacts,” result from: (1) a portion

of business sales used for “business-to-business” purchases of goods and services (indirect effects); and

(2) the recirculation of worker incomes and business expenditures in the broader Bay Area economy

(induced effects). For example, an Airport restaurant that buys supplies from a Bay Area produce vendor

creates income (i.e., new business sales) for the supplier, which then uses a portion of that income to pay

its workers and buy additional goods and services from other businesses in the region. In addition, Airport

workers spend their wages on other items, such as housing, retail purchases, and services. Those

expenditures in turn support jobs in those industries, whose workers then spend their salaries in the Bay

Area. These successive rounds of spending and job creation lead to indirect impacts (business-to-business)

and induced impacts (spending of wages). This study specifically measures the indirect and induced

impacts that occur in the economies of the nine-county Bay Area. Figure Figure-A-1 illustrates the

interrelationships among direct, indirect, and induced impacts.


Figure-A-1. Economic Impacts and Interrelationships

Source: EDR Group.

Suppliers of Goods and Services (Indirect Effects) Orders from Businesses at the Airport On-Airport activities generate orders for goods and services from suppliers, including:

• Printing and publishing for the Airport operator and the airlines

• Banking, insurance, legal, accounting, and technical services for Airport businesses

Spending by Visitors

to Bay Area via SFO

Direct Payroll

at SFO

Purchases of

Goods & Services

Visitor Purchases of

Goods & Services(Meals, Hotels,

Transportation, Retail)

Induced Effect (Off-Site)Spending of Direct + Indirect Worker Income

on Consumer Purchases:

Sales at Other Businesses Jobs & Income to Workers

Total Economic ImpactsSum of Direct + Indirect + Induced Jobs & Income

Fiscal Impacts:

Government Tax Revenues

Business and Government

Agencies Located at SFO

Direct EffectJobs at the Airport

Income to Workers

Direct EffectJobs in Retail & Services

Income to Workers

Indirect Effects (Off-Site)Sales at Supplier Businesses:

Jobs and Income

to their Workers

Flow of Causation

Calculation of Total Ef fect


• Off-site bus and parking services for SFO employees

• Food products for Airport restaurants

• Wholesale merchandise to be sold by Airport stores

• Furniture and equipment for offices, hotels, restaurants, and stores located at the Airport

Orders from Off-Airport Businesses Serving Air Travelers Off-Airport businesses that serve air travelers also generate orders for goods and services from suppliers,

including:

• Fuel and vehicle maintenance services for use by off-Airport taxis, rental cars, tour buses, and public transportation

• Food products for off-Airport restaurants

• Wholesale merchandise to be sold by off-Airport stores

• Furniture and equipment for off-Airport hotels, restaurants, and stores

Re-spending of Worker Income (Induced Effects) Workers at SFO, at off-Airport businesses serving air visitors, and at supplier businesses earn income, and

most of that income is re-spent on consumer purchases that support additional jobs in the Bay Area,

including:

• Retail purchases of food, clothing, home furnishings, cars, electronic devices, computers, and other products

• Purchases of services such as haircuts, cleaning, car repair, and insurance


Components of the Economic Analysis of SFO The following surveys and analyses were conducted for this economic impact study:

1. The Airport Tenant Survey. This survey included outreach to all Airport tenants as well as data provided by the San Francisco Airport Commission. These data provide profiles of on-Airport jobs and payroll by establishment, type of business activity, and place of residence by zip code for Airport and tenant employees.

2. The Airport Visitor Survey. This survey was conducted by Corey, Canapary & Galanis Research, and supplied information on trip purpose, origin (international or domestic), desinations in the Bay Area and the amount of money spent in the Bay Area by visitors using the Airport.

3. The air-freight analysis is based on data from SFO, WISERTrade (using data from the U.S. Census Bureau, Foreign Trade Division) for international exports, and the FAF for domestic shipments. These data were used to develop a detailed profile of air shipments from SFO by commodity and origin of movement. While WISERTrade is port-specific, detailed data from the FAF are not available specifically for the Bay Area. Therefore, the detailed domestic commodity flows found in the wider 12-county CSA region reported by FAF are proportioned based on the output per industry (converted from commodities) of the Bay Area.

4. Econometric models for the nine-county Bay Area were based on the IMPLAN Economic modeling package. IMPLAN was employed in two ways. The package was used to calculate indirect and induced effects, which are business orders to suppliers generated by on-Airport businesses, off-Airport businesses serving Airport visitors, and air-reliant businesses (indirect impacts), as well as to calculate business sales generated by the spending of workers income on consumer purchases (induced impacts).

As discussed in the report, the IMPLAN modeling package is based on federal economic data for each county in the Bay Area (derived primarily from the U.S. Bureau of Economic Analysis, the Bureau of Labor Statistics, other U.S. Department of Commerce agencies, the U.S. Bureau of the Census, and the U.S. Department of Agriculture). These data include jobs, labor income, and revenues (output) for each of 536 industry sectors (see Appendix B) of the Bay Area economy. Based on these data, IMPLAN was used to “fill in” (extrapolate) values for direct impacts. For example, in the case of an airport tenant for whom only employment is known, IMPLAN was used to estimate labor income and output, or for visitor spending and construction where only expenditures are known, IMPLAN was used to estimate direct employment and labor income. Error! Reference source not found. illustrates the ways in which the IMPLAN modeling package was used to extrapolate direct impacts. Bay Area averages by each of the 536 industry sectors accounted through IMPLAN (denoted by green circles) are used based on the availability of direct data (shown by black X’s).


Figure 1. Estimating Direct Impacts with the IMPLAN Modeling Package

Data in the IMPLAN modeling package are based on models calibrated for the 9-county Bay Area.

Domestic and International Values of Cargo Originating in the Bay Area and

Shipped Through SFO International and domestic exports through SFO provide a significant direct contribution to the Bay Area

economy To estimate the degree of economic impact, EDR Group layered three sets of data derived from:

the U.S. Census Bureau’s Foreign Trade Division (tabulated by WISERTrade) 1, the multi-modal Federal

Highway Administration’s Freight Analysis Framework (FAF), and the U.S. Department of Commerce’s

Bureau of Economic Analysis (included in IMPLAN) to:

1. Estimate the jobs and wages associated with domestic and international exports through SFO

2. Determine the additional activity that percolates throughout the economy as air-reliant businesses purchase additional goods and services from suppliers (indirect) and employees spend their income (induced)

EDR Group used Foreign Trade Division data, aggregated by WISERTrade, to estimate the weight and value

of goods produced in the Bay Area and exported from SFO to international markets. The Foreign Trade

Division provides data on total exports by commodity and state of origin, and the total value of California

exports shipped through SFO. WISERTrade aggregates total value and weight by commodity for all

shipments from SFO, but not at a commodity level by point of origin. To determine point-of-origin data at

the commodity level, EDR Group used U.S. Department of Commerce data (assembled by IMPLAN) to

calculate the ratios of output (revenue) by commodity for the nine-county Bay Area compared to the total

output for California. This calculation provides an estimate of the “share” of California-produced air

exports with an approximate point of origin in the Bay Area. The calculation was constrained by two

factors: the value and weight of exports by commodity from SFO (reported by WISERTrade) and the

weight of international shipments from SFO (obtained from the FLYSFO website).

EDR Group used FAF data to estimate domestic cargo shipments. The FAF provides data on domestic air

shipments of commodities that originate in the 12-county San Jose–San Francisco–Oakland Combined

Statistical Area (CSA). Using county-specific data assembled by IMPLAN, EDR Group compared output

1 The World Institute for Strategic Economic Research (WISERTrade)—formed in July 2004 to continue the international

trade data work of its predecessor, MISER—was chosen by the U.S. Census Bureau to be one of its first Business and Industry Data

Centers with a special focus on foreign trade statistics. See www.wisertrade.org.

Data collected through surveys and interviews

Data imputed using IMPLAN

http://www.wisertrade.org/


(business revenues) by commodity for the nine-county Bay Area to output for the 12-county CSA to

estimate the “share” of each commodity shipped from the Bay Area.


APPENDIX B: IMPLAN SECTORING

EDR Group used the IMPLAN modeling package to estimate the full range of direct effects and the

resulting indirect and induced “multiplier” effects of SFO on the Bay Area economy. The industry detail is

at the level of 536 industries and is based on categories of the U.S. Bureau of Economic Analysis, which

correspond to two- to five-digit groups in the North American Industry Classification System (NAICS).

For this study, the direct job, payroll, and business revenue effects for on-Airport and visitor spending

were documented through surveys completed for this project (see Appendix C) and then assigned to

specific industry sector groups based on EDR Group’s experience in aviation. The model results provided

an estimate of the indirect and induced (and overall) job, income, and business revenue impacts for each

industry sector of this analysis. The analysis of retail impacts for on-airport concessions and visitor

spending was adjusted to account for retail margins. The retail portion of multiplier effects also

incorporates these margins.

Regardless of whether economic impacts are measured in terms of employment, labor income, or

business revenue, these impacts can be classified into three categories:

Direct economic effects represent the net increase in business activity associated with SFO, including on-

airport sales and expenditures, spending by visitors at off-airport businesses in each county’s hospitality

sector, and the sale revenues earned by shippers who route air cargo through SFO.

Indirect economic effects are the broader effects on the economy from the purchase of off-site goods and

services by the directly affected businesses.

Induced economic effects result from workers spending income earned due to direct and indirect activities

on food, clothing, shelter, and other consumer goods and services.

EDR Group classified businesses activities at SFO, hospitality sectors affected by visitor spending and

industries related to commodities exported from SFO with the 536 sectors in the IMPLAN modeling

package. The classification schemes used for this study for on-Airport and visitor spending impacts are

shown in B-1 and B-2.


B-1. Classification of On-Airport Industries Airport Tenants Classification IMPLAN Sectors Used

Passenger Airlines Air Transportation

Freight Airlines / Couriers Air Transportation & Couriers

Fixed-Based Operator (FBO) Support Activities for Transportation Local Government Other Local Gov’t Enterprises

Employment & Payroll of State/Local Government (Non-Education) State Government

Federal Government (FAA, Immigration, TSA, DEA, FBI, U.S. CDC, Customs & Border Patrol (CBP), Coast Guard, National Weather Service)

Employment & Payroll of Federal Gov’t Non-Military)

Distribution Trucking & Warehousing

Wholesale Wholesale Trade Businesses

Security Security Aviation Firms Construction Highways and Streets

Commercial Structures

Nonresidential Structures Maintenance and Repair

Retail Electronics/Appliance Stores Food and Beverage Clothing Stores Sporting Goods Stores General Merchandise Misc. Retail

Food and Beverage (includes Catering Firms) Full-Service Restaurants Limited-Service Restaurants All Other Food and Drinking Places

Car Rental Car Rental Ground Transportation (includes taxis, limos, buses, vans, and transit)

Transit and Passenger Ground Transportation

On-Airport Services Architectural/Engineering Business Support Computer Systems Design Services Facilities Support Financial Services Management, Scientific, and Technical Office Administration Parking and Misc.

General Services Educational Institutions Electronic Repair Services Insurance Medical Services Other Support Services Repair & Maintenance Telecommunications Waste Management


B-2. Classification of Visitor-Serving Industries

Visitor Spending

Classification IMPLAN Sectors Used

Retail

Electronics/Appliance Stores

Food and Beverage

Health and Labor

Clothing Stores

Sporting Goods

General Merchandise

Misc. Retail

Entertainment

Performing Arts

Spectator Sports

Artists, Writers, and Performers

Museums, Zoos, and Parks

Amusement Parks and Arcades

Gambling Industries

Fitness and Recreational Sports Centers

Bowling Centers

Other Amusement / Recreation

Restaurant

Full-Service Restaurants

Limited-Service Restaurants

All Other Food and Drinking Places

Hotel Hotels and Motels

Other Accommodations

Transportation

Transit and Passenger Ground

Transportation

Scenic and Sightseeing

Support Activities

Gas Stations

Source: U.S. Department of Commerce data provided by IMPLAN. Calculations by EDR Group.


APPENDIX C:

AIRPORT TENANT AND VISITOR SURVEYS

This appendix presents the survey instruments used to collect data on SFO tenants and visiting

passengers. The tenant survey was administered online, although tenants were given the option of

completing a written survey. Note that the passenger-intercept survey was administered in multiple

languages.


APPENDIX D:

AIR SERVICE

Domestic Air Service SFO is a hub for United Airlines operations and maintenance. However, there are multiple carriers that

compete actively for the remaining passenger traffic share. In FY 2018, United carried approximately 24.7

million domestic passengers at SFO, maintaining a large market share of 48.6%. The second largest carrier

was Alaska Airlines (which aggregated Virgin America’s served passengers prior to April 2018 in FY 2018)

with 7.0 million. At San Jose and Oakland Airports, both being focus airports for Southwest’s network, they

carried 6.0 and 8.9 million domestic passengers, respectively, or 48.5% and 72.5% out of total air

passengers in FY 2018.

D-1. Share of Domestic Passengers for Top Five Airlines at Each Bay Area Airport, FY 2018

San Francisco International Airport San Jose International Airport

Oakland International Airport

Source: U.S. Department of Transportation’s T-100 Database via Airline Data, Inc.

Since the completion of the Alaska Airlines and Virgin America merger in December 2016, and the

consolidation of their schedule operations in April 2018, Alaska has been developing and executing its

growth strategy for the Bay Area region increasing its domestic departing seat and passenger shares over

United48.6%

Alaska16.6%

American

10.0%

Delta9.8%

Southwest

8.9%

Other6.0%

Southwest48.8%

Alaska17.3%

Delta11.1%

American9.9%

United5.0%

Other7.8%

Southwest72.5%

Alaska6.5%

Spirit Airlines6.3%

Delta3.8%

JetBlue3.3% Other

7.5%


the past two years. Based on domestic passenger share by airline from the pie charts above, Alaska

consistently ranks second behind United’s hub at SFO Southwest is the dominant carrier at both OAK and

SJC. With the Virgin America integration, Alaska has dedicated its commitment towards the Bay Area

community in respect to domestic air service and marketing communication strategies.

In spite of the fact that SFO is a United Airlines hub, SFO is also a strong origin and destination (O&D)

airport, meaning that the majority of its passengers originate from or travel to the San Francisco-Bay Area

service region. SFO’s geographic location in the Bay Area, central to the U.S. west coast makes it an

important domestic connecting hub for United Airlines. In total, almost eight out of ten (77.3%) domestic

passengers flying in and out of SFO are O&D passengers. This is the 13th highest O&D share among U.S.

large hub2 airports as categorized by the FAA. Compared to the average share of domestic percentage of

O&D passengers across the U.S. large airport, SFO has a greater O&D percentage, indicating it is becoming

more of an attractive domestic O&D market.

D - 2. Domestic Local and Connecting Passenger Share for the Bay Area Airports, FY 2018

Airport IATA Code % of Domestic Passengers

O&D Connecting

Bay Area

San Francisco [SFO] 77.3% 22.7%

San Jose [SJC] 90.7% 9.3%

Oakland [OAK] 93.7% 6.3% Average U.S. Large Hub Airports (FAA) 68.5% 31.5% Note: Average of FAA large hub airports only include those in the continental United States. Source: U.S. Department of Transportation O&D Survey via Airline Data, Inc.; ICF Analysis.

As of FY 2018, the top 25 domestic O&D markets can be seen in D - 3 below, where the large business

markets like Los Angeles, New York, Seattle, and Chicago make up approximately 25% of the total

domestic O&D traffic flying in and out of the Bay Area. SFO provides nonstop service to all of the Top 25

U.S. O&D markets, and has an advantage over SJC and OAK, which do not provide nonstop service to

Washington D.C. and Philadelphia. Thirteen of the top 25 domestic O&D markets are located on the

Pacific/West Coast, which highlights the service strength that Alaska and Southwest provide from the Bay

Area as well.

2 Large Hub Airports are defined by the FAA as airports that enplane at least 1.0% of total annual US. Passenger enplanements.


D - 3. Top 25 Domestic O&D Markets for the Bay Area and Nonstop Weekly Frequencies, FY 2018

O&D Domestic Avg Distance O&D

Passengers Avg Nonstop

Weekly Frequencies

Rank U.S. Market (miles) Annual

(thousands) SFO SJC OAK

1 Los Angeles 330 4,363.1 321 185 100

2 New York \U EWR 2,574 4,008.4 276 27 13

3 Las Vegas \S 405 3,051.4 153 98 97

4 San Diego \S 436 2,983.8 149 130 79

5 Seattle \A 683 2,950.2 205 126 73 6 Orange County 359 2,057.2 88 92 45

7 Chicago \U ORD \S MDW 1,844 2,003.0 154 44 33

8 Denver \U 961 1,839.3 129 69 33

9 Portland \A 554 1,794.1 118 75 63

10 Burbank \S 314 1,782.2 76 93 88

11 Phoenix \S 640 1,573.7 93 77 62

12 Boston 2,703 1,497.3 113 7 4 13 Dallas/Ft. Worth \S DAL 1,460 1,367.3 128 52 20

14 Washington D.C. \U IAD 2,423 1,190.3 77 - -

15 Long Beach 341 1,157.2 14 40 40

16 Honolulu 2,404 1,035.2 58 21 26

17 Salt Lake City 592 948.4 72 45 50

18 Atlanta 2,134 857.3 79 19 13

19 Austin 1,495 810.3 55 30 7 20 Ontario \S 355 790.0 65 27 46

21 Houston \U IAH \S HOU 1,632 776.9 67 21 26

22 Kahului 2,344 753.8 51 21 28

23 Minneapolis 1,586 709.1 81 19 5

24 Orlando 2,440 618.1 28 6 5

25 Philadelphia 2,521 614.5 55 - -

Top 25 Markets 41,531.9 2,706 1,325 954 Other 11,615.6 1,800 198 231

Total 53,147.5 4,506 1,523 1,186 Note: New York includes LGA, EWR, and JFK; Chicago includes MDW and ORD; Dallas/Ft. Worth includes DFW and DAL; Washington D.C. includes IAD and DCA; Houston includes IAH and HOU. \U indicates market has a United hub airport (with greater than 40% of the departing domestic seats) \S indicates market is a Southwest focus city (with greater than 40% of the departing domestic seats) \A indicates market has an Alaska Airlines hub airport (with greater than 40% of the departing domestic seats) Source: U.S. Department of Transportation O&D Survey via Airline Data, Inc.; Innovata Schedules, July 2019.

Changes in scheduled domestic airline services departing from the Bay Area airports by full-service carriers

(FSC) and low cost carriers (LCCs) over the past year are shown in D - 4.

At SFO, the majority of scheduled departures are flown on a full-service carrier (i.e. Alaska and United

Airlines) versus a low cost carrier, while at SJC and OAK, low cost carriers (i.e. Southwest) make up the

majority at 53 and 84% of weekly departures, respectively in July 2019.


D - 4. Scheduled Domestic Airline Service at Each Bay Area Airport, July 2019

Nonstop Weekly

Departures (July 2019) Change ’18-’19

Full-Service Carrier (FSC)

Alaska 608 300 69 4.7% 14.4% 0.0%

American 312 114 28 -6.6% -5.8% -31.3%

Contour Airlines - - 24 N/A N/A 241.9%

Delta 348 193 37 0.3% 11.8% -30.5%

Hawaiian Airlines 14 14 21 0.0% 0.0% 20.8%

United 1,913 57 - 0.1% 2.4% N/A

Subtotal – FSC 3,194 678 179 0.2% 8.4% -4.6%

Low Cost Carrier (LCC)

Allegiant Air - - 28 N/A N/A 5.9%

Frontier 35 8 - 108.1% -69.1% N/A

JetBlue 103 28 25 -16.3% -33.3% -40.3%

Southwest 307 721 818 -9.8% 23.0% 2.3%

Spirit Airlines - - 65 N/A N/A -15.8%

Sun Country 26 - - 57.5% N/A N/A

Subtotal – LCC 471 757 936 -5.2% 15.9% -1.0%

Grand Total 3,665 1,435 1,115 -0.5% 12.2% -1.6%

Pct. Share of Departures

Full-Service Carriers 87.1% 47.3% 16.1%

Low Cost Carriers 12.9% 52.7% 83.9%

Source: Innovata Schedules, July 2019.

As a result of the service mix, SFO carries most of the premium traffic generated within the Bay Area (D-5).

Since a significant portion of premium traffic is comprised of business travelers, SFO is the key airport

serving the business community in San Francisco and the greater Bay Area.


D-5. Share of Premium Fare Passenger Traffic at Each Bay Area Airport, CY 2018

Note: Premium includes first class and business class. Economy includes coach class (unrestricted and restricted). Source: Innovata Schedules, July 2019.

International Trade Historically, the growth of international services has been heavily concentrated at major airline connecting

hubs in the U.S. (e.g. Atlanta, Chicago O’Hare, Houston-Intercontinental) and at SFO Airport, as a hub

carrier’s connecting network was often needed to generate sufficient passenger traffic to fill the large

widebody aircraft used on international flights. The strength of United’s hub at SFO and its Star Alliance

connections, coupled with the local O&D strength of the Bay Area market make SFO an attractive gateway

for United, its Star Alliance partners, and other unaligned foreign flag airlines (like Norwegian Air and

Philippine Airlines). In recent years, trends in new aircraft technology such as the Boeing B787 and Airbus

A350 have allowed use of smaller and more fuel-efficient aircraft on international routes, compared to

B747 and A380 jumbo-jet (which Airbus has announced in early 2019 will discontinue producing/delivering

in 2021)3. The use of these new aircraft is increasingly opening up new destinations and increased

frequencies to long-haul markets such as Asia and Europe.

As shown in D - 6, next generation aircraft such as the B787 and A350 account for a combined 22.1% of

SFO’s scheduled long haul international seats for Fiscal Year 2019 (based on Innovata advance schedules),

up 4.8% from FY June 2018. The B777 still accounts for 45.6% of international departing seats given its

usage across many foreign Asian carriers (i.e. EVA Airways, Cathay Pacific, Korean Air, Philippine Airlines,

etc.) and United Airlines.

3 NY Times, “Airbus Retiring Its Jaw-Dropping Giant, the A380, in an Industry Gone Nimble”, February 2019

1.5%

2.9%

10.3%

2.8%

6.5%

17.2%

0.0%

5.0%

10.0%

15.0%

20.0%

OAK SJC SFO

Passenger Revenue

80.0%

92.3%

75.0%

80.0%

85.0%

90.0%

95.0%

SFO Share of Region


D - 6. International Weekly Departing Seat Share by Aircraft at San Francisco Airport, FY 2015 -2019

Fiscal Year

(Year Ending June) 2015 2016 2017 2018 2019

B777 32.5% 41.2% 40.8% 37.2% 45.6%

B787 1.8% 3.5% 7.5% 16.1% 16.2%

B747 49.8% 34.0% 27.2% 23.4% 11.6%

A380 3.1% 9.2% 11.7% 11.1% 9.8%

A350 0.0% 0.0% 0.0% 1.4% 5.9%

A330 2.9% 4.2% 4.2% 4.9% 5.7%

Other 9.9% 7.9% 8.7% 5.9% 5.2%

Note: Excludes Caribbean and Canada destinations. Source: Innovata schedules, FY 2019 is using advance schedules.

Compared to the other two Bay Area airports, a majority of foreign flag carriers serving SFO are Asian.

These carriers provide long-haul nonstop service to the Asia/Pacific regions using their widebody fleet,

while SJC and OAK proportionally have a higher share (in terms of departing seats) on foreign flag Latin

American carriers. Below is a list of foreign flag carriers that provided scheduled service at each airport

(regardless of international region) as of July 2019.

D - 7. Foreign Carriers Serving each Bay Area Airport, as of July 2019

SFO SJC OAK

Aer Lingus China Airlines Korean Air Air Canada Norwegian Air Shuttle

Aeromexico China Eastern Lufthansa ANA SATA Internacional

Air Canada China Southern Philippine Airlines British Airways Volaris

Air China Copa Airlines Qantas Hainan Airlines

Air France El Al SAS Volaris

Air India Emirates Singapore Airlines

Air Italy EVA Airways SWISS

Air New

Zealand Finnair TAP Portugal

Air Pacific Hong Kong

Airlines Turkish Airlines

ANA Iberia Vincent Aviation

Asiana Icelandair Virgin Atlantic

AVIANCA Interjet WestJet

British Airways Japan Airlines XL Airways France

Cathay Pacific KLM

Source: Innovata schedules.

As a top U.S. gateway for transpacific international traffic, SFO Airport catered to 15 Asian/Pacific foreign

flag carriers as of July 2019. As shown earlier in Error! Reference source not found., Asia/Pacific segment

passengers represent approximately 48% of all international passengers from SFO in FY 2018. As shown in


the table below, the Asia/Pacific market has grown significantly in terms of average daily nonstop seats

over the past four years.

D - 8. Top 10 International Asia/Pacific Destinations from SFO by Average Daily Nonstop Departing Seats, FY 2015-2019

Asia Pacific Market

Average Daily Nonstop Departing Seats Average Annual

2015 2017 2019 Growth Rate

Hong Kong 1,278 1,364 1,713 7.6%

Taipei 983 1,329 1,636 6.3%

Seoul 1,200 1,142 1,203 -0.2%

Tokyo 1,346 1,141 1,120 -1.4% Shanghai 607 814 809 7.1%

Singapore 0 426 735 31.4

Beijing 698 747 656 -0.7%

Sydney 347 581 591 21.4%

Manila 319 429 497 5.1%

Auckland 350 466 489 8.2%

Other 267 1,019 1,488 9.3% Total 7,454 9,458 10,937 40.6% Note: Average annual growth rates are estimated based on average daily seat calculations; “Other” Asia/Pacific markets include: Chengdu, Delhi, Guangzhou, Hangzhou, Hanoi, Melbourne, Nadi, Osaka, Papeete (Tahiti), Qingdao, Wuhan, and Xi An

Source: Innovata schedules; ICF Analysis

Since 2014, departing seats to Singapore, Sydney, Hong Kong, Shanghai, and Taipei have grown as existing

carriers and new entrants have increased service to these markets. Prior to the end of 2016, no air carriers

provided nonstop service to Singapore from San Francisco. Once United began direct service using a new

generation B787 aircraft, Singapore Airlines, a Star Alliance member, added frequencies on this route

using their new A350 aircraft.

In terms of international markets outside of the Asia/Pacific regions, SFO provides significant capacity to

key business markets across Europe and Canada, including London, Vancouver, Frankfurt, Toronto, and

Paris. Among the top ten Bay Area international business markets, based on average daily nonstop seats,

Paris and Toronto have been growing the fastest. Both markets have average more than 10% per year

over the past 4 years.


D - 9. Top 10 International Destinations from SFO by Average Daily Nonstop Departing Seats, FY 2015 -2019

Rank

International Market

Average Daily Nonstop Departing Seats

Average Annual

2015 2017 2019 Growth Rate

1 London 1,564 1,954 2,034 6.8%

2 Hong Kong 1,278 1,364 1,713 7.6%

3 Taipei 1,280 1,329 1,636 6.3%

4 Seoul 1,214 1,142 1,203 -0.2%

5 Vancouver 976 1,133 1,190 5.1%

6 Tokyo 1,185 1,141 1,120 -1.4% 7 Frankfurt 1,066 1,073 1,060 -0.1%

8 Toronto 720 866 1,060 10.2%

9 Paris 666 808 986 10.3%

10 Shanghai 614 814 809 7.1%

Other 6,696 9,957 11,667 14.9%

Total 17,258 21,580 24,478 9.1% Note: Average annual growth rates are estimated based on average daily seat calculations. Source: Innovata schedules; ICF Analysis

When comparing the three Bay Area airports by international departing seats and nonstop market served

in 2019, SFO’s top five make up approximately 32% of total daily departing seats in FY 2019, while those at

SJC and OAK make up more than 50%. It is worth noting that a majority of the seat capacity available at

the number one markets at SJC and OAK are due to contributions of foreign low-cost carriers competing

with full-service carriers. Guadalajara-SJC is currently served by three carriers (Alaska, Volaris, and

Aeromexico) while London-OAK is served by Norwegian and British Airways seasonally.


D - 10. Top 5 International Destinations Served in the Bay Area by Seat Capacity Share, FY 2019

San Francisco International Mineta San Jose International Oakland International

Markets Avg Daily

Seats

Share

(%) Markets

Avg

Daily

Seats

Share

(%) Markets

Avg Daily

Seats

Share

(%)

London 2,034 8.3% Guadalajara 397 23.8% London 188 11.8%

Hong

Kong 1,713 7.0% London 207 12.4% Guadalajara 178 11.2%

Taipei 1,636 6.7% Vancouver 207 12.4% Barcelona 178 11.2%

Seoul 1,203 4.9% Tokyo 203 12.1% Paris 164 10.3%

Vancouver 1,190 4.9% Los Cabo* 181 10.8% Los Cabo* 120 7.5%

Top 5 7,776 31.8% Top 5 1,195 71.5% Top 5 829 52.1%

Other (45) 16,703 68.2% Other (7) 475 28.5% Other (10) 762 47.9%

Total (50) 24,478 100.0% Total (12) 1,670 100.0% Total (15) 1,591 100.0%

Note: Numbers may not sum due to rounding, seasonality is not capture in the average daily seat calculations over the course of fiscal year 2019. * Los Cabos = San Jose Del Cabo, MX Source: Innovata schedules; ICF Analysis

Air Service Development The expansion of service by LCCs and foreign carriers has driven the majority of passenger and capacity

growth at SFO and the other Bay Area Airports. Southwest is the largest carrier at the secondary Bay Area

airports in terms of seats and seven foreign carriers in total serve SJC and OAK as of July 2019 advance

schedules.

In FY 2018, Hawaii as a destination saw nearly 1.2 million passengers connect through the Bay Area, which

is about one-third of the total enplanement traffic that flies between the Bay Area and the Aloha State.

Most recently, Southwest has announced service from the U.S. west coast to Hawaii, making the Bay Area

the center stage for departing seat capacity to the Aloha State. When comparing July 2018 to July 2019,

the total departing seats from each airport to Hawaii has increased by 19.4% due to Southwest’s entrance,

driving other airlines like United and Alaska Airlines to respond on their existing flights. Hawaiian Airlines

on the other hand will decrease their seat capacity in July 2019 versus the previous year by 18.9% at SJC

and OAK, but will add a third daily flight between SFO and Honolulu/Kahului on their newly acquired

A321neo and A330 aircraft that offer luxurious first class seats, lie-flat beds, and Extra Comfort seats4.

Ultra-low-cost carrier Sun Country has also announced seasonal nonstop B737-800 service to Honolulu

from SFO as well, beginning May 2019.

In terms of new international service from SFO, Air Italy (formerly known as Meridiana) recently began

seasonal service to Milan, Italy in April 2019. TAP Portugal will commence year-round service to Lisbon

starting June 2019, equipped on their newly acquired A330-900neo aircraft. United will operate nonstop

service to Melbourne starting late October 2019, adding frequencies to the existing Qantas service, and

nonstop service to Delhi in December 2019, which Air India already serves. Overall SFO is expanding its

4 Hawaiian Airlines Newsroom, “Hawaiian Airlines Increases San Francisco-Hawaii Service”, March 2019


international nonstop portfolio to unserved countries in Europe like Italy and Portugal and the Pacific Rim

nations using ultra long-range aircraft like the B777 and B787. Based on advance Innovata schedules,

there are no new international services from SJC or OAK beginning in mid/late 2019.

Low Cost Carrier Development Over the recent two years (based on July monthly schedules), LCC seat capacity at OAK and SJC has been

growing faster than SFO at 2.3 and 21.3% on average per year, respectively, given the Southwest’s strong

presence. Although, LCC overall seats at SFO have been declining by 3.8% per year, its full-service carrier

seat capacity total grew on average annually 2.6% within the same time period. Between July 2019 and

July 2018, JetBlue and Southwest held majority of reduced LCC departing seats at SFO, declining 16 and

9%, respectively. However, international departing seats on foreign LCCs have been growing at SFO, where

Interjet nearly doubled their July capacity, and WestJet increased their seats by 35.4% to Canadian

destinations. As of July 2019, the majority of seats at SFO are flown on full-service carriers, while LCCs

have the majority at OAK and SJC as seen in D-11.

D-11. Share of LCC Departing Seats, July 2015-July 2019

Source: Innovata Schedules.

When comparing July 2019 and July 2018 schedules, LCC seat capacity has grown over 4.5% based on

advance schedules (domestic and international seats). The majority of the growth is coming from SJC,

where LCC domestic seats grew 17%, and international seats jumped 77%. At SJC, Southwest is the key

driver of raising LCC shares in July 2019 compared to the previous month.

Another factor that led low cost airlines to increase their capacity at the secondary airports in the Bay

Area would be the average cost per enplanement (CPE). SFO of the three has the highest CPE given the

premiums to operate at a large international airport ($17.60 USD per enplanement) versus SJC and OAK,

82.9%

55.0%

11.8%

84.6%

49.3%

12.4%

87.3%

56.5%

11.0%

OAK2-Year CAGR (2.3%)

SJC2-Year CAGR (21.3%)

SFO2-Year CAGR (-3.8%)

2015 2017 2019


which are $10.01 and $12.05, respectively.5 Aside from network route strategies, the lower airline costs

make SJC and OAK fairly attractive airports for low cost carrier to operate.

Aircraft Operations There were approximately 460,000 commercial airline operations (excluding general aviation and military)

at SFO during FY 2018, up 5.8% from the previous year (Table D-12). Within the Bay Area, SFO operations

made up 63% of total commercial traffic (departures and arrivals) in FY 2018, while SJC and OAK shared

18% each.

Table D-12. Bay Area Airports Annual Commercial Aircraft Operations (in thousands), FY 2009 -2018

Fiscal Year

(Year Ending June) SFO OAK SJC

Bay Area

Total

2009 363.0 133.1 112.4 608.5

2010 368.6 118.4 97.5 584.5

2011 376.9 112.3 91.0 580.2

2012 402.1 116.0 88.3 606.4

2013 405.3 114.2 88.7 608.2

2014 414.5 110.9 92.2 617.6

2015 412.5 115.0 93.9 621.4

2016 423.8 122.4 97.9 644.1

2017 434.6 129.1 111.8 675.6

2018 459.9 135.6 130.5 726.0

Avg. Annual Growth Rate (2009-2018) 2.7% 0.2% 1.7% 2.0%

Note: Aircraft operations exclude general aviation (civil) and military. Sources: SFO air traffic statistics; U.S. Department of Transportation’s T-100 Database.

Over the past decade, the industry has experienced a significant increase in the average number of

passenger seats per aircraft departure, a trend that has been even more pronounced at SFO than the

other Bay Area airports. As illustrated in Error! Reference source not found., the average number of

seats per scheduled airline departure at SFO increased from 134 in FY 2009 to approximately 155 in 2019,

growing on average 1.5% annually. This was in part of newer technology and larger aircraft being

introduced to the San Francisco market. As airlines continue to effectively assign appropriate sized aircraft

to routes and fleet upgauging (like the B777, B787, and A350), these trends will continue to increase seats

available per departure at large international airports like SFO, where aircraft can fly longer ranges and

carry more passengers. Average international seats per departure over the past decade grew 6.1%

annually at Oakland given new European service flown on B777s and B787s by British Airways and

Norwegian. However, SFO continues to operate the largest aircraft by seats on its international segments,

with an average of 247 seats per departure.

5 FAA CATS (FY 2018 – based on airport reporting years)


D-13. Trend in Average Seats per Departure at the Bay Area Airports, FY 2009 -2019

Fiscal Year (Year Ending June)

SFO OAK SJC

Dom Intl All Dom Intl All Dom Intl All

2009 120.2 225.1 134.1 132.6 122.8 132.5 119.2 137.6 119.4

2010 120.1 218.9 132.8 133.7 134.7 133.8 121.4 130.9 121.5

2011 119.8 222.7 133.2 134.3 144.2 134.4 125.7 147.3 126.1

2012 119.3 227.2 132.7 132.1 144.7 132.3 127.5 146.4 127.8

2013 120.3 228.3 133.7 137.1 149.1 137.2 128.9 152.3 129.4 2014 122.5 227.9 136.0 140.1 164.4 140.4 130.1 172.0 131.3

2015 126.7 233.1 141.1 142.1 194.3 143.0 130.8 171.2 132.0

2016 132.4 243.3 148.1 141.7 189.8 142.7 133.8 179.5 135.5

2017 135.4 246.5 152.4 144.9 206.1 146.6 133.5 173.4 135.8

2018 136.4 244.5 153.1 147.2 220.2 150.4 132.8 165.3 134.6

2019 136.7 246.8 155.1 146.7 222.6 149.7 134.1 160.3 135.4

Avg. Annual Growth Rate (2009-2019)

1.3% 0.9% 1.5% 1.0% 6.1% 1.2% 1.2% 1.5% 1.3%

Source: Innovata Schedules.

Cargo Volumes San Francisco International Airport was the 16th largest U.S. airport in terms of cargo volume, including

mail, for the Fiscal Year ending June 2018 (see Error! Reference source not found.) with 618.6 thousand

tons of cargo volume. Of the top 25 airports based on cargo volume, 11 are primary or regional sorting

hubs for all-cargo carriers (which includes Oakland acting as a secondary hub for FedEx operations). If all-

cargo airline hubs are excluded, SFO ranks as the 6th largest airport in the nation in terms of cargo volume.

Oakland is ahead of by total cargo volume, with over 666,000 U.S. tons of cargo volume.

D-14. Top U.S. Airports Ranked by Total Cargo Volume (U.S. tons), FY 2018

Rank

Airport

Total Cargo

(000s)

5-Yr

CAGR

Rank

Airport

Total Cargo

(000s)

5-Yr

CAGR

FY

2018

FY

2017

FY

2018

FY

2017

1 1 Memphis - MEM* 4,873.7 1.6% 15 15 Oakland - OAK* 666.7 4.0%

2 2 Anchorage - ANC* 4,755.7 2.8% 16 16 San Francisco - SFO 618.6 8.7%

3 3 Louisville - SDF* 2,871.3 3.8% 17 17 Houston - IAH 566.2 2.7%

4 4 Los Angeles - LAX 2,629.9 5.4% 18 19 Philadelphia - PHL* 543.1 3.3%

5 5 Miami - MIA* 2,228.6 1.4% 19 18 Seattle - SEA 542.0 6.1%

6 6 Chicago - ORD 2,180.9 7.4% 20 20 Phoenix - PHX 381.5 5.7%

7 7 New York - JFK 1,519.0 0.9% 21 21 Boston - BOS 374.6 6.4%

8 8 Cincinnati - CVG* 1,502.0 18.6% 22 22 Washington - IAD 337.1 3.3%

9 10 Dallas - DFW* 1,077.6 7.4% 23 23 Denver - DEN 307.2 2.6%

10 9 Indianapolis - IND* 1,063.0 0.0% 24 24 Portland - PDX 288.4 5.9%

11 11 Atlanta - ATL 929.5 3.0% 25 30 Chicago - RFD* 287.4 16.7%

12 12 New York - EWR* 920.2 3.0% 66 64 San Jose - SJC 61.1 2.7%

13 13 Honolulu - HNL 759.4 4.0%

14 14 Ontario - ONT* 712.9 9.0%

Note: includes FedEx hubs (Memphis, Miami, Anchorage, Indianapolis, Newark, and Oakland); UPS hubs (Louisville, Dallas/Ft. Worth, Philadelphia, Rockford (IL), and Ontario (CA); and DHL superhub (Cincinnati).

* indicates airport is a freighter hub. Sources: SFO air traffic statistics; U.S. Department of Transportation’s T-100 Database via Airline Data, Inc.


When looking at the top three freighter carriers at each Bay Area airport in D - 13, passenger airline belly

cargo has the greatest share in terms of cargo volume, at SFO and SJC, making up approximately 62.5 and

39.2%, respectively. Atlas Air (which operates as DHL) carries the largest share of volume through SFO at

10.4%, followed by Korean Air Cargo with 6.8%. Across the entire Bay Area system, Oakland International

Airport operates one of FedEx’s secondary hubs, where approximately 533,400 U.S. tons of cargo freight

and mail (36.3% of total Bay Area cargo volume) pass through. On the other hand, given that SFO has the

greatest share of widebody aircraft activity (92.3% of total commercial Bay Area widebody operations in

FY 20196) while SJC and OAK have 4.4 and 3.3% share, respectively, SFO benefits from cargo belly capacity,

especially on longer-haul flights on both U.S. and foreign carriers.

D - 13. Share of Top 3 Cargo Freighter Carriers and Passenger Belly Cargo at Each Bay Area Airports by Cargo Volume, FY 2018

Notes: Atlas Air operates as DHL at SFO; “Other” aggregates the remaining pure freighters that carry freight and mail to each airport: SFO includes FedEx, China Airlines, Asiana, Kalitta (as DHL), EVA Airways, Amerijet, Lufthansa, Wiggins, Uniworld Air Cargo; SJC includes Gulf and Caribbean Cargo; OAK includes Empire Airlines, Gulf and Caribbean, Kalitta (as DHL), Nolinor, Tradwinds Airlines, Asia Pacific Cargo, Ameristar Air Cargo, and Northern Air Cargo. Sources: SFO air traffic statistics; U.S. Department of Transportation’s T-100 Database via Airline Data, Inc.

6 Based on advanced Innovata schedules.

Other (0.1%)

Other (15.2%)

Uniworld Air Cargo (0.0%)

Nippon Cargo Airlines (5.2%)

Passenger Airlines Belly Cargo (2.1%)

United Parcel Service (27.8%)

Korean Air (6.8%)

United Parcel Service (17.8%)

FedEx (33.0%)

Atlas Air (10.4%)

FedEx (80.0%)

Passenger Airlines Belly Cargo (39.2%)

Passenger Airlines Belly

Cargo (62.5%)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

OAK

SJC

SFO

Largest

Second

Third

Fourth

Other

appendix a: methodology for the economic impact …

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