At the 02/11/19 Airport Commission meeting, this author raised the question of whether the economic gains touted by the Norman Y. Mineta San Jose International Airport/City of San Jose (Airport) One Engine Inoperative (OEI) study will be as great as expected, as heard in the above video?¹
As a brief background, the Airport is recommending a 5′ to 35′ increase in downtown building heights (less than a 15% increase of today’s limits) and 70′ to 150′ in the Diridon Station Area, while the Airport Commission voted for an alternative Scenario (10B), which would allow taller buildings in the Diridon Station Area (30′-55′), while keeping the same OEI safety limits in the straight out (downtown) path.
The Airport’s model assumes all the buildings are built to maximum height and would result in a Total Economic Impact of between $747M for Scenario 4 and $438M for Scenario 10B. The economic impact does not seem to include the economic losses to the airport, which depending upon load factor, is estimated to be between $26 to $203M. These loss estimates do not include dropped routes or routes that are no longer viable for airlines.
A 100% buildout is not realistic from an economic or aesthetic viewpoint. The economic value drops by a greater amount with Scenario 4, as compared to Scenario 10B, as the economic losses to the airport begin once the first building penetrates the existing OEI limits (see Appendix A, below). In Southflow situations, airlines will have to shed passengers or cargo.
This won’t be so critical for an air carrier with many flights from SJC that has multiple options, but for those carriers flying long-haul flights that have fewer alternatives (e.g. being able to put passengers on alternative flights), their solution might be to drop the flight. In 2006, American Airlines raised this concern with their once-profitable flight to Tokyo-Narita, when they discovered that the Adobe building was in its OEI path. https://drive.google.com/file/d/1KwfvIQRutK3g3Yp-8JYxWi-j6GNDsjLv/view
American Airlines dropped that flight in 2006. ANA picked up that flight using the more fuel-efficient 787 series jet. This is consistent with the trend identified in an article last week in the Wall Street Journal about the trend of airlines flying smaller, lower operating cost airplanes on international routes to non-hub airports.
One thing that is clear is that property owners/developers who have the ability to build above current OEI will capture additional value from the air rights above their property.
The next question, for another article, is who owns those air rights?
¹ $940,000 was spent on this study, which is still a series of presentations and memos and not integrated into a single report.
Appendix A – Different Economic Impacts Based on % Buildout
[1] This is provided on page 23 of the December 2018 presentation and is cumulative over the period ending in 2038.
[2] Page 30 of the November 2018 presentation. Impact to the airport is directly related to Load Factor. The baseline Load Factor results in a $26M negative impact, while it increases to $203M as the Load Factor goes to 95%
[3] ibid
[4] Page 23 of December 2018 presentation.
[5] ibid
[6] Page 23 of December 2018 presentation.
[7] Page 23 of December 2018 presentation.
The Winchester Urban Village 