Monday’s announcement that Southwest Airlines plans to add 23 nonstop flights a week to five new cities is a major coup for Sacramento International Airport – and a significant and welcome sign that its efforts to fix its finances and repair its relationship with airlines are on the right path.
Starting next spring, passengers will be able to fly direct to Austin, New Orleans, Orlando, St. Louis and Cabo San Lucas in Mexico, making Sacramento a more attractive alternative to busy Bay Area airports.
The biggest flight-increase announcement in decades will boost the airport’s passenger numbers, which have been steadily climbing the last few years. Through July, nearly 6.1 million had boarded or deplaned, up nearly 6 percent over the same period in 2016. For all of 2017, the airport expects to get within 100,000 of its total passengers peak of 10.7 million in 2007, and to surpass that number in 2018.
That would be a huge milestone.
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“We’re very encouraged,” Director of Airports John Wheat told a member of The Bee’s editorial board on Tuesday.
While the growing economy is boosting business and leisure travel, the region also is responding by filling seats on the new flights, Wheat said. Eventually, more flights and more competition should lead to lower fares.
The turnaround that Wheat has been pursuing since arriving in 2013 to run the airport is crucial to the airport’s financial future.
The $1 billion Terminal B, built during the depths of the Great Recession, opened in October 2011 and saddled the airport with a huge debt that isn’t scheduled to be fully paid off until 2040. The increases in flights and passengers are driving revenues higher and providing more of a cushion to pay down the debt. In the fiscal year that ended June 30, debt service is projected at $74 million – about $53 million from airport revenues and $21 million from a $4.50 fee on each passenger ticket.
The new flights come on top of 21 a week added this year by Southwest, the airport’s dominant airline, accounting for more than half of all daily flights. Like other major airlines, its relationship with the airport has been rocky. Airport officials unilaterally imposed higher landing fees and gate rentals to finance the new terminal. Airline executives, who complained the expansion was too ambitious, were not happy.
Since Wheat arrived, the airport has been trying to cut its expenses and generate cash. For instance, in December, it plans to open a solar power array that is expected to provide one-third of the airport’s electricity and save $850,000 a year.
The airport also is seeking to lower airlines’ cost of doing business in Sacramento. In May, the airport and airlines announced a new 5-year deal on fees: The airlines get lower rents, but if the airport hits financial turbulence, they will help with debt payments until the airport can repay them.
The airlines’ cost per passenger boarding at SMF has been reduced from $17.81 in 2013 to $14.27 in 2016 and is projected to dip to $13.50 in 2018, making the airport far more competitive in California, Wheat said.
Bottom line, Southwest’s announcement is not only a vote of confidence in the California market and the regional economy. It’s a signal of more trust in the airport and its leadership.