Legislature(2009 - 2010)CAPITOL 106
03/17/2009 05:15 PM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Department of Transportation & Public Facilities Presentation by Linda Close, Ted Stevens International Airport Marketing Manager: Anchorage International Airport as an Economic Engine for Anchorage & Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
March 17, 2009
5:25 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative Nancy Dahlstrom
Representative Reggie Joule
Representative Mike Doogan
Representative Lindsey Holmes
Representative Chris Tuck
MEMBERS ABSENT
Representative Mike Chenault
Representative Kyle Johansen
Representative Mark Neuman
COMMITTEE CALENDAR
Department of Transportation & Public Facilities Presentation by
Linda Close, Ted Stevens International Airport Marketing
Manager: Anchorage International Airport as an economic engine
for Anchorage & Alaska
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to report
WITNESS REGISTER
CHRISTINE KLEIN, Deputy Commissioner of Aviation
Office of the Commissioner
Department of Transportation & Public Facilities
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the presentation
on the Ted Stevens Anchorage International Airport.
LINDA CLOSE, Marketing Director
Ted Stevens Anchorage International Airport
Department of Transportation & Public Facilities
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation on economic
development at the Ted Stevens Anchorage International Airport.
KARINA PETERSEN Reporter
KTVA CBS Channel 11
Anchorage, Alaska
POSITION STATEMENT: Asked a question during the presentation.
ACTION NARRATIVE
5:25:37 PM
CHAIR JAY RAMRAS called the House Special Committee on Economic
Development, International Trade and Tourism meeting to order at
5:25 p.m. Present at the call to order were Representatives
Holmes, Tuck, Doogan, and Ramras. Representatives Dahlstrom and
Joule arrived as the meeting was in progress.
^DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES PRESENTATION
BY LINDA CLOSE, TED STEVENS INTERNATIONAL AIRPORT MARKETING
MANAGER: ANCHORAGE INTERNATIONAL AIRPORT AS AN ECONOMIC ENGINE
FOR ANCHORAGE & ALASKA
CHAIR RAMRAS announced that the only order of business would be
a presentation by the Marketing Director of the Ted Stevens
Anchorage International Airport.
5:26:28 PM
CHRISTINE KLEIN, Deputy Commissioner of Aviation, Office of the
Commissioner, Department of Transportation & Public Facilities,
informed the committee the Alaska International Airport System
(AIAS) includes the Fairbanks International Airport; in fact,
the Anchorage airport would not be as "strong" without the
Fairbanks airport as a diversion airport.
5:27:18 PM
LINDA CLOSE, Marketing Director, Ted Stevens Anchorage
International Airport, Department of Transportation & Public
Facilities, informed the committee the following presentation
would give an in-depth overview of what is happening at the
airport regarding economic development and trade. She began the
PowerPoint presentation with a picture taken during October that
showed 40 wide-body aircraft on the airport deck during a 30-
minute period. Ms. Close said the airport is a huge economic
engine for Anchorage accounting for one job in eight and $850
million in annual payroll. The airport's total economic impact
to Anchorage is $2,363 billion per year, of which $1.4 billion
is garnered from fuel sales. Another $80 billion per year
supports construction activities and $30 billion goes to hotels
for crew stays.
5:30:48 PM
REPRESENTATIVE HOLMES asked whether the $1.4 billion for fuel is
money that would go to the refinery and the railroad.
MS. CLOSE explained the $1.4 million is for fuel sales to the
fuel companies.
5:31:18 PM
CHAIR RAMRAS added that the export of Jet A aviation fuel is
Alaska's largest value-added industry. This is a tremendously
large industry that is under a lot of pressure at this time
because the price of fuel is subject to the global market. He
opined Alaska refineries have to sell the fuel below cost in
order to service $600 million in bonds paid exclusively by
landing fees. Representative Ramras theorized that those losses
are passed along to Alaska consumers of home heating fuel and
retail gasoline.
5:32:13 PM
MS. CLOSE displayed a slide titled "Cargo Carrier Overview" that
listed the cargo carriers active at Anchorage airport. She
advised there were ten carriers that initiated service in the
last five years and four carriers that have been absorbed into
other carriers in the last five years. All in all, there are
fourteen new cargo carriers that entered the market in the last
five years. She then displayed a list of the number of cargo
carriers by home country and noted that of the fourteen U.S.
carriers, ten are operating as contract carriers for foreign
companies. The next slide titled "2007 ACI Cargo Traffic Stats"
identified ANC as the third largest cargo airport in the world
based on total cargo tonnage (Metric Tons).
5:34:45 PM
CHAIR RAMRAS recalled that 68 FedEx Corp. pilots were laid off
and Flint Hills shut down one of its units due to a 30 percent
decline in freight. He asked whether other airports are
experiencing the same reduction in freight.
5:35:37 PM
MS. CLOSE agreed that there has been a decline "across the
board, some higher, some lower ... we're not quite at 30
percent, we hit 28 percent for one month. But year over year
we're not that low."
5:35:54 PM
MS. KLEIN clarified the FedEx pilots were not laid off, but
relocated to other locations.
5:36:20 PM
MS. CLOSE confirmed that the 68 positions were transferred out
of Anchorage; however, out of those only 17 lived in Anchorage.
Moreover, FedEx still bases 425 pilots in Anchorage.
5:36:47 PM
REPRESENTATIVE TUCK recalled transportation has gone down
worldwide for air freight and also for water cargo; in fact,
shipping companies are having difficulty finding a place to
berth their ships.
5:38:10 PM
MS. CLOSE offered that ANC charges very competitive rates and
fees. A graph indicated landing fees for a 747-400 range from
$12,799.08 in Toronto to $1,174.53 in the AIAS.
5:38:14 PM
REPRESENTATIVE DOOGAN asked whether airports that have a lot of
traffic, like Memphis, charge landing fees more like Anchorage's
fees.
MS. CLOSE disagreed.
5:39:01 PM
REPRESENTATIVE DOOGAN concluded Anchorage looks good against its
major competitors.
MS. CLOSE said yes. She reviewed the history of passenger
traffic during the last ten years. Passenger and cargo
continues to grow at ANC and FAI. The downturns in the economy
such as the Japanese economic crisis and [the terrorist attacks
of September 11, 2001] were followed by rebounds; however, the
present downturn is unprecedented and will take a recovery
period longer than nine to twelve months, she opined.
5:40:39 PM
CHAIR RAMRAS asked how much more growth can be accommodated by
the airport.
5:40:56 PM
MS. KLEIN said both Anchorage and Fairbanks airports have
capacity for growth; in fact, there is a great deal more land
mass available than at most airports. However, the timing of
aircraft schedules can be an issue.
5:41:39 PM
CHAIR RAMRAS observed [the Alaska International Airport System]
has unique geography, low landing fees, a globally competitive
price for jet aviation fuel, and the capacity to grow.
5:42:18 PM
MS. KLEIN said the master plan projection allows for 3 to 5
percent growth for the next 10 years.
5:42:42 PM
REPRESENTATIVE DOOGAN surmised the possible bottleneck is
"getting planes on and off the ground rather than having a place
to build a new cargo facility."
MS. KLEIN indicated yes.
5:42:50 PM
REPRESENTATIVE TUCK recalled discussion some years ago about
moving the airport to Fire Island, and moving the air freight
portion to Port MacKenzie.
5:43:30 PM
MS. KLEIN explained airport planning looks at a window of thirty
years; therefore, master plans are highly speculative because
the models are based on growth rates, assumptions, and what is
going on in the global and the U.S. economies. She related the
projected numbers of the last master plan were very accurate;
however, the most recent master plan was too optimistic and is
being reevaluated.
5:44:28 PM
REPRESENTATIVE HOLMES advised the district she represents
includes a lot of the airport support services and nearby
residential areas. Last year there was an issue regarding
expanding the runway; in fact that project has been tabled for
awhile. She asked whether there are anticipated plans for the
expansion or movement of the runways.
5:46:03 PM
MS. KLEIN confirmed expansion of the fourth runway has been put
off indefinitely. She explained the airlines pay for the
infrastructure and they indicated the AIAS has not done a
through assessment in its growth projection and of the system
capacity. The reevaluation of the master plan will include a
system plan that looks at the capacity of both the Anchorage and
Fairbanks airports. She opined, "This is not the time, and we
still have enough capacity to be addressing our needs for
several years at a minimum ... this capacity [is] by managing
the incoming and outgoing traffic differently, there's new
technology and there are things we can do on our existing
airfield to actually increase throughput."
5:47:35 PM
MS. CLOSE continued with her presentation and pointed out
Anchorage's strategic location is clearly what drives the cargo
activity in Alaska. The economic basis for this activity is
determined by "payload versus range." The next slide compared
the flight of a 747 going from Hong Kong to Chicago nonstop
versus a flight going from Hong Kong to Chicago with a fuel stop
in Anchorage. The stop in Anchorage for fuel allowed the second
flight to carry more cargo and increase the revenue generated by
the flight by almost $200,000. Ms. Close concluded that all of
the cargo carriers traveling through the Anchorage airport are
seeing huge increases in revenue.
5:49:34 PM
REPRESENTATIVE DOOGAN asked whether the aforementioned "numbers"
are the same for flights continuing after a stop in Fairbanks.
MS. CLOSE indicated yes.
5:50:13 PM
CHAIR RAMRAS suggested this presentation should be heard by
members of the House and Senate Committees on Labor and
Commerce.
5:50:40 PM
MS. KLEIN agreed.
5:51:06 PM
CHAIR RAMRAS asked whether the stop in Anchorage allows carriers
to displace fuel for freight.
5:51:40 PM
MS. CLOSE said, "Yes, it's either one or the other." In further
response to Representative Ramras, she explained the weight of
the cargo is equal to the weight of the displaced fuel.
5:51:46 PM
CHAIR RAMRAS asked for information on the price of Jet A fuel.
5:52:06 PM
MS. CLOSE offered to find spot prices and compare the price of
fuel at airports that compete with Anchorage for cargo business.
She then stated that the management of the Anchorage airport has
been very successful at coordinating with federal agencies to
obtain regulatory advantages that help carriers enter the market
and that reduce barriers to trade. For example, the airport
worked with the governor's office and the U.S. Customs and
Border Protection to approve Fairbanks airport landing rights
for Japan Airlines. Also, because it is classified as a first
point of entry, the Anchorage airport has a program called
"progressive clearance" to streamline the federal customs
process. Progressive clearance is used by China Airlines on
passenger flights from Taipei and it allows passengers to
deplane and go through document inspection; however, their
baggage is cleared later in New York. This saves time as the
carrier does not have to download baggage in Anchorage and is a
quicker process for the traveler as well. In addition, there is
a waiver called International-to-International (ITI) that allows
passengers who are coming in from an international flight and
who are going onto another international flight to transit
without a U.S. visa.
5:55:02 PM
MS. CLOSE explained the importance of the Anchorage airport's
Cargo Transfer Authority. In 1996, the U.S. Department of
Transportation awarded the airport a Cargo Transfer Flexibility
that allowed the carriers to reconfigure their loads while on
the ground. However, the authority limited carriers from
"foreign-foreign" transfers. The airport management pursued a
regulation change through Congress that resulted in an expansion
of the Cargo Transfer Authority in 2003. Foreign carriers are
now allowed transferring of cargo with each other to complete a
journey to the U. S. She displayed a slide that showed the
example of how this change allowed Northwest Airlines to serve a
new market without any further investment in assets. In
addition, China Airlines can now fly in from New York and
transfer its cargo for transport to Shanghai. While the Cargo
Transfer Authority may not attract new business into Alaska, it
does anchor the current carriers and creates long-term stability
for the airport. Ms. Close turned to the subject of market
opportunities and pointed out the cargo carriers coming through
the Anchorage airport have access, traffic rights, and space to
ship to every country in Asia; furthermore, this access is
available at rates that are "very, very cheap." As the
westbound aircraft to Asia are almost empty, she stressed this
is a potential market opportunity for Alaska.
6:00:03 PM
MS. CLOSE, responding to further interest from Representatives
Tuck and Ramras, further explained that the airplanes are
returning westbound, to Asia, and are 30-40 percent full.
6:00:42 PM
CHAIR RAMRAS suggested the Alaska Seafood Marketing Institute
(ASMI) and the World Trade Center - Alaska, should be in contact
with the carriers.
6:00:58 PM
MS. CLOSE advised the airport works closely with ASMI and
related her past experience shipping seafood. The issue is
opening up markets overseas to sell the fish because Alaska
seafood must pull sales from an existing market. She continued
to explain that driving the growth of the cargo through the
Anchorage airport is the market in China. Every country has a
bilateral agreement with the U.S. allowing the exchange of
cargo; however, the agreement with China is unique in that the
number of carriers is limited to five and the frequencies are
limited. In addition, the ANC has high levels of service to
Viet Nam, Singapore, and India, and each carrier has the
authority to pick up cargo and take it to its home country, or
transfer cargo as well.
REPRESENTATIVE RAMRAS recalled Viet Nam, Singapore, and India
were the three [destinations] identified by the World Trade
Center - Alaska as potential markets for Alaska. He asked for
information about the "cargo relationship" with the three.
MS. CLOSE explained that all of the Japanese, Korean, Taiwanese,
and Chinese carriers have traffic rights and the authority to
transfer cargo to Viet Nam, Singapore, and India, as do
Singapore Airlines, FedEx, and United Parcel Service (UPS). On
the other hand, if India develops into a market, the routes will
fly over Europe instead traveling an additional 2,000 miles to
Anchorage.
6:04:10 PM
REPRESENTATIVE HOLMES asked whether the unique agreement with
China pertains to the entire U.S.
6:04:24 PM
MS. CLOSE explained the agreements are with the U.S.; in fact,
the agreements with Viet Nam and Singapore are called "open
skies" agreements which are unlimited, but the agreement with
India is somewhat limited. The U.S. air service agreement with
China was signed in 2004 and has had a positive impact on ANC
business. In 2000, there were 15 landings per week operating
into China; in 2006, there were 198 landings per week, and in
2007 there were 260 landings per week. In fact, the Chinese air
cargo market accounted for 35 percent of the air cargo traffic
through ANC in 2007. Regarding the economic impact of
international cargo at ANC, she said cargo accounts for two-
thirds of all airport revenue; furthermore, the top nine
international carriers account for 54.76 of the cargo revenue.
Ms. Close reiterated the strengths of the Anchorage airport such
as; its location, its competitive rates, a good relationships
with carriers, having the Fairbanks airport as an alternative
airport, and strong support from maintenance providers through
parts exchanges and local suppliers. Opportunities for the
airport include; the existing all-cargo carrier operation, the
Cargo Transfer Authority, an increased use of freighters, and a
growing base of Chinese carriers. Furthermore, she predicted
the Chinese agreement will be expanded into an "open skies"
agreement by 2011 that will bring in additional Chinese
carriers.
6:09:03 PM
MS. CLOSE addressed threats to ANC and pointed out there is not
a good manufacturing base in Alaska to provide export
opportunities for the carriers. Also, the weather and the
expense of deicing aircraft is a concern. The third threat is
the constant competition from other airports.
6:10:24 PM
CHAIR RAMRAS asked for the cost of deicing.
6:10:43 PM
MS. CLOSE estimated $800 to $1,000. In further response to
Representative Ramras, she reminded the committee of the
increased cargo capability of each flight to balance any
additional landing costs at ANC.
She addressed weaknesses at the airport and noted a decrease in
flights due to the global recession. In addition, there has
been an increase in overflights due to the development of longer
range aircraft and also due to lighter loads that allow aircraft
to avoid the fuel stop.
6:12:44 PM
CHAIR RAMRAS asked for suggestions for the ideal cargo.
6:13:06 PM
MS. CLOSE suggested perishables.
6:13:19 PM
REPRESENTATIVE JOULE asked whether there is warehouse capacity
at the Anchorage airport for the storage of perishable items
such as fresh fish.
6:13:39 PM
MS. CLOSE said yes, several of the carriers have freezers and
chillers. She continued to relate another weakness at ANC is
the shortage of a domestic air cargo network as the shortage
limits warehouse and distribution opportunities. A slide of the
domestic air cargo network showed thirteen carriers bringing
cargo from Asia and only four carriers taking cargo to the Lower
48. This situation creates a warehouse and storage problem; in
fact, in order to transport cargo to the Lower 48, shippers must
pay for the flight from its origin in Asia.
6:15:59 PM
MS. CLOSE recapped fiscal year 2008. The year was "off a little
bit," until after October when there were major decreases in
cargo operations. Passenger traffic was holding steady,
although cargo landings decreased 5.4 percent. The airport's
largest ground handler for international landings reported a
small increase in landings during March. Several items of good
news for the airport are that Nippon Cargo Airlines is moving
from New York to Anchorage; Cathay Pacific has added new
freighters, two new stations, and six additional flights per
week through Anchorage; either Evergreen International Airlines
or Kalitta Air will be a new carrier for China beginning in
April, 2009; and UPS has opened a new hub in Shanghai and will
be increasing its flights by eight per week. Ms. Close
concluded that, although carriers are being cautious, there is
some expansion of services.
6:19:24 PM
MS. KLEIN expressed her appreciation to Ms. Close for her long-
term contribution to the cargo and international marketing
function of the airport. She pointed out that her department
takes the AIAS position very seriously and monitors daily
changes in the cargo economy. It is important balance the
additional costs of operation in a northern climate and to keep
the rates and fees competitive.
6:21:00 PM
CHAIR RAMRAS asked what Fairbanks can do to attract additional
landings.
6:21:19 PM
MS. KLEIN stated there was concern by carriers about the FAI and
its support facilities; however, there are increasing options
for support staff, the terminal has been remodeled, and cargo
ramp facilities at the airport have been expanded. In fact, in
February there were several FedEx diversions that went well. In
response to Representative Ramras, Ms. Klein said the landing
fees in Fairbanks are the same as in Anchorage, although there
is an incentive for Fairbanks landings.
6:23:21 PM
CHAIR RAMRAS reiterated his recommendation that this
presentation should be available to other members of the
legislature.
6:24:24 PM
KARINA PETERSEN Reporter, KTVA CBS Channel 11, called attention
to the Prince George Airport Runway Extension Project and asked
whether the Department of Transportation & Public Facilities has
concerns about possible competition from the Prince George
airport for ANC cargo business.
6:25:07 PM
MS. KLEIN responded that the department takes all competition
seriously; however, Prince George is a small community, and the
airport has one runway with no taxiway. She opined the cargo
business at ANC requires a more developed ground support system
and service providers than they can provide at this time. She
acknowledged the Prince George Airport could become a competitor
in the future for Vancouver International Airport.
6:26:11 PM
MS PETERSEN agreed "It would be hard for Prince George airport
to catch up ..."
6:26:35 PM
REPRESENTATIVE TUCK asked about the air traffic from Asia to
Canada.
6:27:05 PM
MS. CLOSE noted that Cathay Pacific Airways and Air Canada stop
in Anchorage before going on to Canada, with the exception of
flights going to Vancouver.
6:27:33 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 6:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Aviation presentation to EDT 3 17 09.pdf |
HEDT 3/17/2009 5:15:00 PM |