Despite recession, Alaska's airport business picking up

Three new Chinese cargo operators will stop in state to refuel

Posted: Friday, December 11, 2009

State airport officials are cautiously optimistic that international air cargo traffic through the Anchorage and Fairbanks international airports is on an uptick after being slammed by economic recession.

There's some good news to report, too. Three new Chinese cargo operators will stop in Anchorage to refuel, Christine Klein, deputy commissioner for aviation in the state Department of Transportation and Public Facilities, told the Anchorage Chamber of Commerce last month.

Reconstruction of terminals A and B at Anchorage's airport are now completed, and all domestic airlines are back operating out of the airport's South Terminal. The North Terminal is again exclusively used for international flights.

As a part of the recent construction, north and south terminals are now connected so that passengers don't have to go outside to move between the two buildings, Klein said.

Airport officials also issued a mid-year adjustment to landing fees that are slightly lower, which is good news for financially hard-hit airlines.

Alaska's airport landing fees are lower than those at competing U.S. West Coast airports like Seattle-Tacoma International, and the fact that fees have been stable, and even lowered, during the economic downturn has helped Alaska keep its competitive position, Klein said.

However, last year was tough for the airports, mainly in Anchorage. Cargo landings dropped 23 percent in state fiscal year 2009, the state budget year that ended last June 30, Klein said. Since then the decline has slowed and there are recent signs of recovery.

"Activity is actually increasing over last year as we get into the heavy holiday season, and that's encouraging. Most other airports have yet to see any recovery," she said. "October and November so far show us above the same periods of 2008, although we are still well below our peak year of 2006."

Klein said airport officials are forecasting a small increase in cargo landings - 2 percent - for fiscal year 2010 over fiscal 2009. The consensus is still that the road to recovery will be long and that it will take several years to get back to the brisk levels of activity of a few years ago, Klein said.

Total landings, including passenger and cargo flights, at the Anchorage and Fairbanks airports, which are operated in a single system for administrative purposes, were down 13 percent in fiscal 2009 and down 10 percent for fiscal 2010 so far, Klein said.

Landing fees paid by the airlines are a major source of revenue for the airports, and cargo carriers traditionally pay more than passenger airlines because the fees are based on the weight of the aircraft.

Even though most international cargo flight stops are "gas and go," the business of refueling and aircraft servicing adds private sector jobs at the airport as well as revenue to the airport from fuel sales and landing fees.

Three cargo airlines Federal Express, United Parcel Service and Northwest Airlines operate hubs in Anchorage for package sorting and trans-loading, which creates a substantial number of jobs.

Northwest is closing its hub at the end of the month, however. Most cargo airlines also do flight crew changeovers, and this creates welcome year-round business for local hotels and restaurants.

Although Fairbanks passengers and cargo levels are much smaller than Anchorage, Klein said the activity in Fairbanks has been more stable and has even increased in the last year. This is in contrast to Anchorage's airport, which has taken the brunt of the falloff in international cargo flights.

Some people criticize the state for operating the two airports in a single administrative unit, arguing that the arrangement has Anchorage basically subsidizing Fairbanks. Klein said it isn't that simple, and the experience over the last year was that Fairbanks, though smaller, helped soften airport losses in Anchorage.

Meanwhile three Chinese cargo airlines Yangtze River Express, Great Wall and Shanghai recently signed agreements to stop and refuel in Anchorage, and an airport international passenger marketing incentive program supported by all carriers flying through Alaska has been launched, Klein said.

China Airlines is the first international carrier to take advantage of the incentives, and has agreed to increase its frequency of passenger flights from Anchorage to Taipei from three to four weekly, she said.

"We expect to see some new developments in this program in the near future," Klein said.

Despite the economic downturn, Japan Airlines has also increased its passenger charter flights and operated 17 flights this past tourist season, up three flights from the previous year.

A new development indicating significant confidence in Alaska's airports by the airlines is that a new airport operating agreement has been signed with 27 airlines agreeing to support operating and capital projects over five years, Klein said. This is an increase of three over the previous operating agreement.

Anchorage's airport has also been cited in the retail trade press as having some of the highest retail sales per passenger for airport concessionaires among U.S. airports.

"We were surprised at how well we stack up against large airports like those in Denver and Phoenix," Klein said, adding it will attract new retailers.

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