RANDALL BENTON / rbenton@sacbee.com

Sacramento airport's people mover is seen as very reliable, but when it broke down one day in December workers shepherded travelers along an unsafe walkway.

Sacramento airport tries to lure Virgin America flights

Published: Wednesday, Apr. 11, 2012 - 12:00 am | Page 1A
Last Modified: Wednesday, Apr. 11, 2012 - 9:59 am

Faced with nearly a billion dollars of debt, the recently expanded Sacramento International Airport has launched an aggressive campaign to increase service and raise revenue.

Airport officials got the OK Tuesday from the county to offer Virgin America Airlines an incentive of up to $400,000 to launch Sacramento-to-Los Angeles flights, and will seek the go-ahead today to negotiate a deal for two airport hotels by 2014.

Neither deal is anywhere near signed or delivered, officials caution, but if consummated, the moves would strengthen Sacramento as a competitor with Bay Area airports.

"We're really focusing on Northern California: Napa and Tahoe and all parts in between," airport spokeswoman Linda Cutler said.

The deals also could give the airport more fiscal breathing room at a time when its balance sheet has been pushed near the edge.

The airport debt load jumped to $950 million after the gleaming new Terminal B and concourse building opened last October. Standard & Poor's analysts noted the airport's high debt burden in a credit report last fall, but nonetheless rated its overall outlook as stable.

Airport officials have been counting on increased passenger levels and revenue in the coming years to help with payments. The airport also raised parking rates after the October opening.

The task of bringing in new passengers and revenue to cover the debt was made harder by the recession, which caused airlines to cut flights and forced some into bankruptcy.

There are signs of recovery, however. Sacramento's passenger counts rose 4.5 percent in February over the same month last year. That was the biggest monthly increase in more than four years.

In tandem with opening the $1 billion expansion, airport officials launched a major effort to cut costs and increase business, in part by marketing the airport better to carriers.

"This is becoming a very competitive process," Cutler said. "With (fewer jets) and higher costs across the board, airlines are looking carefully at where they are putting their assets."

Airlines flying out of Sacramento have complained about its high lease rates. Airport officials say they have talked with airlines about a new lease structure.

The airport is also seeking to attract more carriers. On Tuesday, the county Board of Supervisors authorized a $250,000 cash offer to Virgin America to lure it to Sacramento. That money would come from an existing program funded by airport restaurants and shops.

In addition, the board agreed to boost from $50,000 to $150,000 the awards that can be granted under an incentive program for new airlines. That money can include cash payments and credits for marketing and operating costs.

Neither action would affect the county general fund, which is separate from the budget for the county-run airport.

Airport officials said Virgin would add three round-trip flights daily between Sacramento and Los Angeles. Virgin America spokeswoman Abby Lunardini confirmed her company is in talks with Sacramento, but said, "we have not made a formal decision with respect to launching service."

Today, airport officials will go back to the board to ask permission to negotiate an agreement with Los Angeles-based Sonnenblick Development to build two hotels, both privately financed, at the airport.

The airport tore down its original hotel several years ago to make room for the new terminal. Plans called for a hotel on top of the new terminal, but the economic downturn forced the airport to scrap that plan.

Airport officials say it now appears feasible to build a hotel or two, giving travelers from around Northern California a convenient place to stay before early morning flights, and providing convenient business meeting space.

Sonnenblick, the sole company to respond to the airport's request for proposals, specializes in government buildings, but has built a number of hotels and increased its hotel development in recent years.

The company proposes building 200-room and 132-room hotels at the airport by the end of 2014, both a few steps from terminals A and B.

Company principal Bob Sonnenblick told Hotelnewsnow.com his company moved more into hotels the last two years – "when everyone else was running away" – to position itself for an expected industry rebound.

Industry consultant Thomas Callahan of PKF Consulting in San Francisco, an adviser to Sonnenblick and former adviser to the Sacramento airport, said hotel construction in California is still in the doldrums, but could improve in the next year.

"Right now, you can't get a construction loan for a hotel," he said. But by the time the project planning is done, "hopefully the financing markets will be in a better state."

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