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San Diego International Airport: A unique economic powerhouse for the region

With its scenic bayside location conveniently close to downtown, San Diego International Airport (SDIA) is often taken for granted by many in the San Diego region. Sure, businesses rely on it for vital connections to foreign markets; military personnel use it to reach important missions abroad and arrive back home; SDIA allows local leisure travelers to explore what lies beyond San Diego; and the region’s tourism industry depends on the airport to bring visitors from around the world to our shores.

A unique economic powerhouse

But how many are aware that -- beyond its role as a gateway to the region — that SDIA is also a major economic powerhouse? Here’s how:

·According to the most recent economic impact study, activities at the airport generate more than $10 billion in economic benefit for the region each year. Few other regional resources can make such a claim.

·More than $2 billion a year is spent by visitors who arrive by air to San Diego.

·And it is estimated that airport operations directly or indirectly support one in 16 jobs in the region.

Many San Diegans are also unaware of what it takes to keeps SDIA serving the region as an economic powerhouse, generating those jobs and the billions of dollars in annual economic benefit. Like all commercial airports in the United States, SDIA is different than most transportation infrastructure, where the majority of investments are funded by taxpayer dollars.

Rather, America’s airports are largely self-sustaining and do not drain precious local tax dollars away from other important government services. In fact, commercial airports receive almost no taxpayer-funded support from state or local sources. SDIA is largely funded by those who use it. The vast majority of its revenues come from:

·Fees paid by passengers using SDIA, including Passenger Facility Charges paid when passengers buy airline tickets;

·Landing fees and space rental fees paid by the airlines serving SDIA;

·Parking charges;

·Sales of food, goods, and services (such as shoe shine) at the airport.

Like all commercial airports in the United States, SDIA also receives some revenues from the following sources:

·Federal funding -- In the form of grants that help pay for airport construction and others projects.

·Bond financing -- Major improvement projects at SDIA are funded with bonds repaid from user fees listed above. For example, the Green Build improvements currently under way at SDIA are financed through two bond offerings. Fortunately, due to prudent financial management by the Airport Authority and market conditions, these bond offerings garnered exceptionally low interest rates, saving tens of millions of dollars. In 2010, the largest bond sale in SDIA’s history -- $572.6 million -- secured an interest rate of 4.38 percent, projected to save more than $40 million dollars over the 30-year term. And in January, another $379.6 million in bonds secured a borrowing cost of 3.92 percent, projected to save an additional $71 million over 30 years.

Enhancing the airport

Given the tremendous economic role played by SDIA in the San Diego region, the stakes couldn’t be higher. Today, SDIA is in the midst of the largest improvement project in the airport’s 85-year history: the $1 billion Green Build. When it opens this summer, the airport will offer a number of new and improved benefits for airport users.

·A dual-level roadway will reduce curbfront traffic in front of Terminal 2 by separating arriving and departing passengers.

·Ten new gates with larger waiting areas will offer a more comfortable passenger experience.

·More security lanes, which will reduce security lines and wait times.

Airport-wide, a massive overhaul of all food and retail concessions will provide more and better dining and shopping options, many with a local flavor.

Beginning this summer, travelers will find better choices for shopping and dining at the airport, including wine and tapas from Italy-based Beaudevin (above), a day spa and salon, and an electronics store. Several local businesses -- such as Stone Brewing Co., Phil’s BBQ, Warwick’s Books and Ryan Bros. Coffee -- will have a presence at Terminal 2. Image courtesy of San Diego County Regional Airport Authority

On the north (Pacific Highway) side of the airport, a $362 million north side development project is already under way. This includes the recently completed Receiving and Distribution Center (which just earned LEED Gold certification), a rental car center, a new fixed-based operator (FBO) facility for general aviation and several roadway improvements that will improve traffic and access to the north side of SDIA.

And that is just the start of what is being planned to meet regional needs and provide a consistently superior level of customer service into the future.

Evolving models of funding

In these recent years of economic uncertainty, budgets have tightened at all levels of government and the airline industry has continued to struggle toward profitability. This means traditional funding sources for SDIA have become more unpredictable. Prudent financial management, therefore, requires the Airport Authority to be on the lookout for new and enhanced ways to generate revenue and reinforce the airport’s self-sufficiency.

That includes more revenue from expanded parking facilities and more concessions, as well as new air service like the recently added nonstop flights to London, Mexico and Japan. It also includes innovative development and management approaches, such as funding by third-party developers.

This allows construction of essential facilities without relying on SDIA’s bonding capacity or financial reserves. Such an approach was used recently to build the new Receiving and Distribution Center at SDIA, and it will also be the model for the new fixed-base-operator facility.

There will likely be other innovations identified to generate the revenues SDIA needs. But as airport funding models evolve, one thing will remain unchanged: the Airport Authority’s commitment to enhancing SDIA’s role as a largely self-sufficient economic powerhouse for the region.

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