Legislature(2017 - 2018)SENATE FINANCE 532

02/20/2018 12:00 PM TRANSPORTATION

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Audio Topic
12:07:59 PM Start
12:09:03 PM Overview: Ted Stevens Anchorage International Airport
12:46:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time & Location Change --
Joint with Senate TRA
+ Mr. Jim Szczesniak, Manager of Ted Stevens TELECONFERENCED
Anchorage International Airport
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                       February 20, 2018                                                                                        
                           12:07 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
SENATE TRANSPORTATION                                                                                                           
 Senator Bert Stedman, Chair                                                                                                    
 Senator Anna MacKinnon                                                                                                         
 Senator Click Bishop                                                                                                           
 Senator David Wilson                                                                                                           
 Senator Dennis Egan                                                                                                            
HOUSE TRANSPORTATION                                                                                                            
 Representative Louise Stutes, Co-Chair                                                                                         
 Representative Adam Wool, Co-Chair                                                                                             
 Representative Matt Claman                                                                                                     
 Representative Harriet Drummond                                                                                                
 Representative Chuck Kopp                                                                                                      
 Representative Mark Neuman                                                                                                     
 Representative Colleen Sullivan-Leonard                                                                                        
 Representative David Eastman                                                                                                   
COMMITTEE CALENDAR                                                                                                            
OVERVIEW: TED STEVENS ANCHORAGE INTERNATIONAL AIRPORT                                                                           
     - HEARD                                                                                                                    
WITNESS REGISTER                                                                                                              
JIM SZCZESNIAK, Airport Manager                                                                                                 
Ted Stevens Anchorage International Airport                                                                                     
Alaska Department of Transportation and Public Facilities                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided an overview of the Ted Stevens                                                                   
Anchorage International Airport.                                                                                                
ACTION NARRATIVE                                                                                                              
12:07:59 PM                                                                                                                   
CHAIR BERT  STEDMAN called  the joint meeting  of the  Senate and                                                             
House Transportation  Standing Committees to order  at 12:07 p.m.                                                               
Present  at  the  call  to  order  were  Senators  Egan,  Wilson,                                                               
MacKinnon, and Chair  Stedman. Present at the call  to order were                                                               
Representatives Sullivan-Leonard, Claman,  Kopp, Neuman, Eastman,                                                               
Co-Chair Stutes, and Co-Chair Wool.                                                                                             
^OVERVIEW: TED STEVENS ANCHORAGE INTERNATIONAL AIRPORT                                                                          
     OVERVIEW: TED STEVENS ANCHORAGE INTERNATIONAL AIRPORT                                                                  
12:09:03 PM                                                                                                                   
CHAIR STEDMAN announced that the  new manager for the Ted Stevens                                                               
Anchorage  International Airport,  Jim  Szczesniak, will  address                                                               
the joint committee regarding an airport operations overview.                                                                   
12:09:26 PM                                                                                                                   
JIM   SZCZESNIAK,   Airport   Manager,  Ted   Stevens   Anchorage                                                               
International Airport (ANC),  Alaska Department of Transportation                                                               
and Public  Facilities (DOTPF), Anchorage, Alaska,  commenced his                                                               
presentation  and  addressed  slide   2:  Ted  Stevens  Anchorage                                                               
International Airport, and referenced as follows:                                                                               
   • Fast Facts & Figures:                                                                                                      
        o 2.5 million tons of cargo annually:                                                                                   
             square4 Ranked second in North America.                                                                            
               - FedEx Memphis hub ranked first.                                                                                
             square4 Ranked sixth in the world.                                                                                 
        o 5 million enplaned passengers per year.                                                                               
        o 1 in 10 jobs in Anchorage are airport related:                                                                        
             square4 Over 9000 direct jobs.                                                                                     
             square4 Over 6000 indirect jobs.                                                                                   
             square4 Employment earnings $1 billion.                                                                            
   • Self-sustaining Enterprise:                                                                                                
        o No general funds used.                                                                                                
        o Revenue generated at the airport must be used at the                                                                  
              square4 Over $2 million in property taxes to the                                                                  
                Municipality of Anchorage.                                                                                      
12:11:11 PM                                                                                                                   
MR. SZCZESNAIK addressed slide 3: Interstate Destinations, and                                                                  
referenced as follows:                                                                                                          
   • 18 non-stop interstate destinations.                                                                                       
   • 5-million passengers.                                                                                                      
   • Top passenger markets:                                                                                                     
        o Seattle,                                                                                                              
        o Los Angeles,                                                                                                          
        o Portland,                                                                                                             
        o Phoenix,                                                                                                              
        o Minneapolis.                                                                                                          
   • International non-stop:                                                                                                    
        o Air Canada:                                                                                                           
              square4 Vancouver, Canada.                                                                                        
        o Icelandair:                                                                                                           
              square4 Reykjavik, Iceland.                                                                                       
        o Condor:                                                                                                               
              square4 Frankfort, Germany.                                                                                       
        o Yakutia Airlines:                                                                                                     
              square4 Petropavlovsk, Russia.                                                                                    
MR. SZCZESNAIK addressed slide 4: Meeting the Need, and                                                                         
referenced as follows:                                                                                                          
   • 1-stop service to all top-50 large U.S. cities:                                                                            
        o Alaska Airlines,                                                                                                      
        o United Airlines,                                                                                                      
        o Delta Airlines.                                                                                                       
12:13:13 PM                                                                                                                   
At ease.                                                                                                                        
12:13:59 PM                                                                                                                   
CHAIR STEDMAN called the joint committee back to order.                                                                         
MR. SZCZESNAIK continued with slide 4 and noted that ANC has                                                                    
direct service to:                                                                                                              
   • Seattle,                                                                                                                   
   • Atlanta,                                                                                                                   
   • Los Angeles,                                                                                                               
   • Chicago,                                                                                                                   
   • Dallas,                                                                                                                    
   • Denver,                                                                                                                    
   • San Francisco.                                                                                                             
He  addressed  slide 5:  Intrastate  Flights,  and referenced  as                                                               
   • Alaska Airlines,                                                                                                           
   • Ravn Air,                                                                                                                  
   • Pen Air.                                                                                                                   
12:15:25 PM                                                                                                                   
MR. SZCZESNAIK  addressed slide 6: Concession,  and referenced as                                                               
   • Third in the U.S. in revenue per passenger:                                                                                
        o $13.93.                                                                                                               
   • Alaskan businesses:                                                                                                        
        o $13.1 million in gross sales.                                                                                         
   • Concessions are 10 percent of total revenue.                                                                               
REPRESENTATIVE  NEUMAN  explained  that  Legislative  Budget  and                                                               
Audit Committee did an  ANC review in 2014 or 2015  to see if the                                                               
airport's retail space was used  adequately and appropriately. He                                                               
noted  that  suggestions were  made  to  make the  facility  more                                                               
profitable. He asked  Mr. Szczesnaik if the  suggestions from the                                                               
audit were addressed.                                                                                                           
MR. SZCZESNAIK  replied that he  is not aware if  the suggestions                                                               
were  addressed.   He  explained  that  his   background  entails                                                               
terminal  planning  and  the  airport's intent  is  to  add  more                                                               
concession spaces.                                                                                                              
REPRESENTATIVE NEUMAN  asked Mr.  Szczesnaik to address  the Bill                                                               
Sheffield  Alaska  Railroad  Depot at  ANC  regarding  concession                                                               
fees. He inquired if ANC receives  the concession fees and if the                                                               
fees are equitable with other leased spaces.                                                                                    
MR.  SZCZESNAIK  replied  that  he   is  not  familiar  with  the                                                               
specifics on  the railroad depot lease  and will get back  to the                                                               
12:17:44 PM                                                                                                                   
He addressed slide 7: Diversified  Air Cargo Base, and referenced                                                               
as follows:                                                                                                                     
   • FY2017 Carrier Market Share by Certified Maximum Gross                                                                     
     Takeoff Weight (CMGTW) percentage:                                                                                         
        o Cathay Pacific Airway: 15.5,                                                                                          
        o United Parcel Service: 13.8,                                                                                          
        o China Airlines: 9.0,                                                                                                  
        o Korean Air Lines: 8.8,                                                                                                
        o Federal Express: 8.0,                                                                                                 
        o Polar Air Cargo Worldwide: 8.0,                                                                                       
        o Eva Airway: 6.1,                                                                                                      
        o Nippon Cargo Airlines: 5.0,                                                                                           
        o Asian Airlines: 3.9,                                                                                                  
        o Atlas Air: 3.1,                                                                                                       
        o Cargolux Airlines International: 3.1,                                                                                 
        o China Cargo Airlines: 2.7,                                                                                            
        o China Southern Airlines: 2.7,                                                                                         
        o Air China Cargo: 1.4,                                                                                                 
        o Yangtze River Express Airlines: 1.3,                                                                                  
        o Singapore Airlines Cargo: 1.3,                                                                                        
        o Kalitta Air: 1.2,                                                                                                     
        o Northern Air Cargo: 1.1,                                                                                              
        o Tatonduk Outfitters: 1.0,                                                                                             
        o Others: 4.5.                                                                                                          
   • International cargo hub:                                                                                                   
        o Federal Express,                                                                                                      
        o United Parcel Service,                                                                                                
        o Korean Air Lines,                                                                                                     
        o Nippon Cargo Airlines,                                                                                                
        o China Airlines,                                                                                                       
        o Polar Air Cargo Worldwide,                                                                                            
        o Atlas Air.                                                                                                            
   • Five consecutive years winning air cargo airport excellence                                                                
     award for North America.                                                                                                   
MR. SZCZESNAIK  disclosed that ANC's  air cargo landings  were up                                                               
4.6 percent in FY2017.                                                                                                          
12:19:08 PM                                                                                                                   
SENATOR  MACKINNON  asked  if ANC  is  evaluating  the  potential                                                               
revenue impact  from fleet  upgrades by  air cargo  carriers that                                                               
result in increases in ANC overflies.                                                                                           
MR. SZCZESNAIK replied that airlines  can overfly ANC if desired;                                                               
however, the  cargo carriers are deciding  to land at ANC  due to                                                               
the airport's  lower fees and efficient  infrastructure. He noted                                                               
that there  was a thought that  the new Boeing 747-800  or Boeing                                                               
777-Freighter would result  in making overflying ANC  easy to do,                                                               
but the cargo carriers continue to land at ANC.                                                                                 
REPRESENTATIVE DRUMMOND joined the joint committee meeting.                                                                     
MR.  SZCZESNAIK  addressed  slide   8:  International  Air  Cargo                                                               
Markets and explained  ANC's "global reach" where  the airport is                                                               
the "gateway"  to North America  and Asia. He disclosed  that ANC                                                               
cargo flights include  the major airports in  China, South Korea,                                                               
and  Japan. He  disclosed that  ANC is  within a  9.5-hour flight                                                               
time to 95 percent of  the industrialized world. He detailed that                                                               
the  Ted  Stevens  Act  allowed  ANC  the  ability  to  do  cargo                                                               
transfers to  reconfigure destination shipments to  the Lower 48,                                                               
an ANC advantage that most other airports do not have.                                                                          
12:21:11 PM                                                                                                                   
SENATOR BISHOP joined the joint committee meeting.                                                                              
MR. SZCZESNAIK  addressed slide  9: Lake  Hood, adjacent  to ANC,                                                               
and referenced as follows:                                                                                                      
   • World's busiest seaplane base;                                                                                             
   • $42 million economic impact:                                                                                               
        o $25 million direct,                                                                                                   
        o $17 million indirect;                                                                                                 
   • Labor income: $14 million;                                                                                                 
   • Direct and indirect jobs: 230;                                                                                             
   • Non-Alaskan tourist-purchased flightseeing tours: 23000.                                                                   
CO-CHAIR STUTES asked to verify that Lake Hood is part of ANC.                                                                  
MR. SZCZESNAIK answered  yes. He explained that  ANC manages Lake                                                               
He addressed slides 10 and  11: Future Vision-Future Development,                                                               
and referenced as follows:                                                                                                      
   • Near Term:                                                                                                                 
        o New hangar:                                                                                                           
              square4 Alaska Airlines,                                                                                          
              square4 $40 million,                                                                                              
              square4 Room to hold 2 Boeing 737 aircraft.                                                                       
        o $100 million in new construction.                                                                                     
             square4 Primarily for runway resurfacing project with                                                              
               taxiway and gate-area construction projects                                                                      
        o On-airport hotel:                                                                                                     
             square4 Request for Proposal (RFP): Spring 2018.                                                                   
             square4 150+ rooms.                                                                                                
             square4 On-airport convenience for rural Alaskans that                                                             
               arrive at ANC when flight do not connect and to                                                                  
               support air cargo crew members.                                                                                  
             square4 Increases concessions traffic.                                                                             
        o New concessions:                                                                                                      
             square4 Alaska focused.                                                                                            
        o Pharmaceutical certification:                                                                                         
             square4 Increase pharmaceutical flow through ANC.                                                                  
   • Planning for the future:                                                                                                   
        o Maintenance-Repair-Overhaul (MRO) facility:                                                                           
             square4 Working with UAA training and retired military                                                             
   • New cargo development:                                                                                                     
        o Parking positions,                                                                                                    
        o Warehouses.                                                                                                           
   • Supportive Development.                                                                                                    
12:24:00 PM                                                                                                                   
REPRESENTATIVE  NEUMAN asked  who owns  the on-airport  hotel and                                                               
the new hangar.                                                                                                                 
MR. SZCZESNAIK  explained that Alaska  Airlines will  build their                                                               
hangar.  He said  the hotel  will be  developed by  a third-party                                                               
developer  who  will  lease  the   land.  He  detailed  that  the                                                               
developer  will  choose  a  franchisee  associated  with  Hilton,                                                               
Marriott,  Sheraton, etc.  He disclosed  that ANC  will act  as a                                                               
landlord and will not own the hotel.                                                                                            
REPRESENTATIVE  DRUMMOND asked  if  Alaska  Airlines has  started                                                               
construction on their hangar.                                                                                                   
MR. SZCZESNAIK answered yes.                                                                                                    
REPRESENTATIVE  DRUMMOND  asked to  confirm  that  the hanger  is                                                               
located on the airport's south side.                                                                                            
MR. SZCZESNAIK answered yes. He  disclosed that the hangar should                                                               
be completed by the third quarter of 2018.                                                                                      
REPRESENTATIVE DRUMMOND  asked if  the new  hotel will  be paying                                                               
Anchorage's bed tax.                                                                                                            
MR.  SZCZESNAIK answered  yes. He  specified that  the new  hotel                                                               
will pay Anchorage for both Anchorage bed and property taxes.                                                                   
12:26:01 PM                                                                                                                   
CO-CHAIR  WOOL  asked if  the  new  hangar will  increase  Alaska                                                               
Airline's maintenance abilities at ANC.                                                                                         
MR. SZCZESNAIK answered yes.                                                                                                    
REPRESENTATIVE CLAMAN  asked to  verify that the  Alaska Airlines                                                               
hangar is  on the southside of  ANC and not located  at the South                                                               
Airport Park.                                                                                                                   
MR. SZCZESNAIK  answered yes. He  specified that the  hangar will                                                               
be located on International Boulevard.                                                                                          
12:27:05 PM                                                                                                                   
REPRESENTATIVE KOPP  asked what the employment  estimates are for                                                               
the construction  projects. He estimated  that the  projects will                                                               
employ 500 to 700 fulltime jobs in Anchorage.                                                                                   
MR. SZCZESNAIK concurred with Representative Kopp.                                                                              
REPRESENTATIVE  KOPP asked  Mr. Szczesnaik  to address  long-term                                                               
jobs associated with  ANC's new projects. He inquired  if ANC has                                                               
addressed services  to support cargo-backhaul  opportunities with                                                               
Asian carriers.                                                                                                                 
MR. SZCZESNAIK specified that cargo  flights to the U.S. are full                                                               
and cargo  flights back to  Asia are "mostly" full.  He explained                                                               
that ANC is  working with Alaska's seafood  association people to                                                               
try  and fill  the Asian  bound flights  with Alaska  seafood. He                                                               
noted  that  ANC  is  looking   at  supportive  development  that                                                               
includes warehouses to bolster more goods for cargo carriers.                                                                   
12:31:55 PM                                                                                                                   
SENATOR  BISHOP  asked  that Mr.  Szczesnaik  address  in  future                                                               
presentations  the   University  of   Alaska-Fairbanks'  aviation                                                               
maintenance program at ANC.                                                                                                     
MR. SZCZESNAIK answered yes.                                                                                                    
He  addressed slide  12: Air  Cargo Forecast,  and referenced  as                                                               
   • E-commerce:                                                                                                                
        o China growth:                                                                                                         
             square4 Larger than U.S. market.                                                                                   
             square4 Increasing 20 percent per year.                                                                            
        o U.S. growth:                                                                                                          
             square4 17 percent of all retail sales by 2022.                                                                    
             square4 13 percent growth in 2017.                                                                                 
   • World air cargo traffic will more than double over the next                                                                
     20 years.                                                                                                                  
   • Freighter fleet will increase by more than half.                                                                           
        o Standard-body freighters will gain share.                                                                             
12:33:43 PM                                                                                                                   
REPRESENTATIVE SULLIVAN-LEONARD  asked if ANC is  considering the                                                               
Mat-Su Valley for support in ANC's expansion.                                                                                   
MR. SZCZESNAIK replied  that many ANC employees live  in the Mat-                                                               
Su Valley.                                                                                                                      
He addressed  slide 13: Air  Service Development,  and referenced                                                               
as follows:                                                                                                                     
   • Top Ten U.S. tourist destinations for Chinese tourists:                                                                    
        o 5 eco-tourism,                                                                                                        
        o 5 cities.                                                                                                             
   • Top Five Eco-tourism:                                                                                                      
        o Grand Canyon,                                                                                                         
        o Yellowstone,                                                                                                          
        o Yosemite,                                                                                                             
        o Niagara Falls,                                                                                                        
        o Hawaii.                                                                                                               
   • Alaska:                                                                                                                    
        o 8 National Parks:                                                                                                     
             square4 Second in the U.S.                                                                                         
        o 3 National Parks are UNESCO sites:                                                                                    
             square4 Glacier Bay National Park has over 1000 glaciers.                                                          
   • Top Five Cities:                                                                                                           
        o New York,                                                                                                             
        o Washington D.C.,                                                                                                      
        o Las Vegas,                                                                                                            
        o San Francisco,                                                                                                        
        o Orlando.                                                                                                              
   • Icelandair results:                                                                                                        
        o Passenger traffic has tripled through their airport.                                                                  
He summarized  that ANC will  work on more  non-stop destinations                                                               
to the  Lower 48, primarily  to top-tourism cities.  He explained                                                               
that ANC  is focusing  Chinese tourists for  Alaska and  Lower 48                                                               
destinations.  He noted  that Governor  Walker recently  hosted a                                                               
trade  delegation  from China  to  promote  Alaska as  a  tourism                                                               
destination.  He pointed  out that  Boeing  is producing  smaller                                                               
aircraft  with long-haul  capabilities that  will result  in more                                                               
aircraft being able to fly to Alaska.                                                                                           
12:38:43 PM                                                                                                                   
MR. SZCZESNAIK addressed  the "Icelandair model" in  slide 13 and                                                               
explained  that ANC  will focus  on  the Asian  market to  extend                                                               
visits in  Alaska. He  explained that Icelandair  is acting  as a                                                               
bridge  between  North America  and  Europe  where travelers  can                                                               
extend their stop in Reykjavik to tour Iceland.                                                                                 
REPRESENTATIVE KOPP suggested that  another marketing strategy is                                                               
to emphasize the  ease for foreign visitors to use  ANC as a U.S.                                                               
port-of-entry  rather than  higher-volume airports  in the  Lower                                                               
MR. SZCZESNAIK concurred with Representative  Kopp. He noted that                                                               
emphasizing ANC  as a  port-of-entry is part  of the  strategy to                                                               
call attention  to congested international gateways  in the Lower                                                               
SENATOR  WILSON  asked what  the  future  is  for the  ANC  North                                                               
MR. SZCZESNAIK replied that the  terminal is used for charter and                                                               
medical aircraft  operations. He  said the intent  is to  use the                                                               
added  capacity  from  the terminal  for  higher  volume  periods                                                               
during the summer and to support growth from the Asian market.                                                                  
12:42:20 PM                                                                                                                   
CO-CHAIR WOOL  referenced past travel  experiences to  Asia where                                                               
he encountered a  layover in Anchorage. He pointed  out that many                                                               
flights  to Asia  no longer  use  Anchorage and  inquired if  the                                                               
decision is made by the airport or airlines.                                                                                    
MR.  SZCZESNAIK  answered  that  the  decision  is  made  by  the                                                               
airlines.  He  noted that  the  primary  reasons airlines  bypass                                                               
Alaska  are due  to more  efficient aircraft  and direct  routing                                                               
when Russia opened their airspace.                                                                                              
He explained  that "The Goal"  addressed on  slide 14 is  to work                                                               
with the travel and tourism  industry to increase flights through                                                               
ANC. He  referenced a map  that showed inbound flights  from Asia                                                               
to Hawaii and explained that  the intent is to replicate Hawaii's                                                               
air traffic from Asia.                                                                                                          
REPRESENTATIVE NEUMAN  referenced a question he  posed earlier in                                                               
the presentation  to Mr. Szczesnaik  about the  railroad facility                                                               
at  ANC and  noted that  little information  was provided  to the                                                               
committee  regarding what  the lease  is worth  or what  the Bill                                                               
Sheffield Alaska Depot is doing.  He explained that every year he                                                               
asks DOT&PF  and ANC personnel on  what is going to  be done with                                                               
the  railroad  depot at  ANC  and  no  answers are  provided.  He                                                               
repeated that he was disappointed  with Mr. Szczesnaik's response                                                               
and his  hope is that  the committee  will look further  into the                                                               
railroad facility at ANC.                                                                                                       
12:45:20 PM                                                                                                                   
CHAIR  STEDMAN  asked  that  Mr.   Szczesnaik  get  back  to  the                                                               
committee's chairman regarding Representative Neuman's request.                                                                 
MR. SZCZESNAIK added  that part of the RFP for  the airport hotel                                                               
is that part of the railroad depot  will be used as the lobby for                                                               
the hotel.  He added that  the railroad depot is  "highly prized"                                                               
by the cruise ship passengers during the summer time.                                                                           
REPRESENTATIVE  CLAMAN   asked  Mr.   Szczesnaik  to   address  a                                                               
"communications plan"  that disappeared  "a couple of  years ago"                                                               
and what the status is  in getting the "communications component"                                                               
back into the ANC masterplan.                                                                                                   
MR. SZCZESNAIK disclosed the following:                                                                                         
     That  was  actually  released   on  Friday  for  public                                                                    
     comment and  then we distributed it  essentially to the                                                                    
     community council  people in and around  the airport so                                                                    
     that is currently open right now for public comments.                                                                      
12:46:51 PM                                                                                                                   
There being no further business  to come before the joint meeting                                                               
of the Senate and House  Transportation committees, Chair Stedman                                                               
adjourned the meeting at 12:46 p.m.                                                                                             

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