Who Will Benefit the Most from Raising OEI Limits?

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

The proposed heights increase with the change of OEI in downtown San Jose under the Airport's Scenario 4.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.

Figure 2, the model seems to assume 100% build out.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.

Figure 3 - Realistic and aesthetically pleasing build out of various heights and designs.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 informed the City on 4/12/06, soon after it received staff’s downtown building data, that the existence of the Adobe Phase I Tower does not provide sufficient emergency clearance for southerly departures of the B-777 flight to Narita. American must immediately institute weight restrictions on such departures (i.e., not operate with a full load of cargo, passengers, or fuel) unless and until it can redesign its emergency “one-engine out” procedures to avoid the building. This process is underway. American has informally indicated that if modified emergency procedures cannot be implemented, the potential economic loss from weight restrictions on !hat one flight is estimated to be approximately $1 million annually.”

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.

FFigure 4One 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

Financial Models with Different Buildouts

[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.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s