News Article | 8/26/2007

Airport authority returns to airlines option

When a Texas developer presented a proposal to redevelop the former Norton Air Force Base, local officials thought they had found the key to replacing the jobs that vanished when the military shuttered the base 15 years ago.

But seven years later, the plan by Hillwood Development Corp. — which originally called for turning San Bernardino International Airport into a multiuse cargo hub complete with railroad and air components — has brought about 1,500 jobs to the former base, far fewer than the 10,000 that existed there when the Air Force had the property.

The airport was unable to attract any major cargo operations and the more ambitious parts of Hillwood’s plan were scrapped. Now airport officials have switched gears again and are focusing on turning the former base into a passenger airport in a bid to recoup the rest of the lost jobs.

Two of the airport’s most ambitious projects ever are under way — one a $38 million renovation of the terminal building. Just a few hundred feet away, the airport plans to erect a $7 million general-aviation complex to house a franchise of Million Air Interlink, a Houston-based private-aviation services company. The projects come just two years after the airport finished a $34 million runway refurbishment.


Some critics, however, question whether officials’ efforts will succeed.

For the past eight months, members of the San Bernardino International Airport Authority’s board and staff have said they are in serious negotiations with airlines and an announcement is imminent. But officials decline to disclose the names of potential carriers or to discuss details of the negotiations. They now say they could reach a deal as early at the beginning of 2008.

While the prospects of passenger traffic may seem far-fetched for an airport that spent nearly a decade used for not much more than intermittent general-aviationflights, Don Rogers, the airport’s interim director, said he is confident the airport can attract an airline eventually, despite critics who point to stagnant traffic growth at LA/Ontario International Airport — only about 20 miles away.

“The question now is whether it’ll be one year or five years, but carrier service will happen,” he said.

“I may be putting too much emphasis on the economics of it all, but I don’t think so.”

Passengers or Packages?

One early vision for the airport was as traffic relief for Los Angeles International. When plans dragged and Ontario moved ahead with its upgrades, those plotting Norton’s future saw their niche in packages rather than passengers.

In 2000, Hillwood, owned by the son of Texas billionaire H. Ross Perot, approached the airport with a plan to turn the airport into a major distribution and cargo hub with 10 million square feet of warehouses, a rail yard and the potential to eventually take over operation of the airport.

It was the strongest redevelopment proposal advanced since the base closed, and Hillwood had the experience to make it happen. The company had built a similar project called AllianceTexas north of Fort Worth. Officials at the time expected the San Bernardino project, called AllianceCalifornia, to generate as many as 8,000 jobs.

The plan went forward in 2002. Ontario, long the distribution and logistics center of the region, was running out of land, and airport officials hoped to take advantage of the push to build warehousing space east along the Interstate 10 corridor.

The Inland Valley Development Agency, the airport authority’s sister agency, sold former base land to Hillwood, which razed old military buildings and erected numerous large warehouses, which are now occupied by Mattel, Kohl’s, Pep Boys, Pactiv Corp. and Medline Industries Inc.

But there have been some hiccups. Originally, the plan called for a rail yard to be built on top of the former Palm Meadows Golf Course, but local political opposition derailed that plan.

“We’ve always said to make a good industrial park, you needed both the rail and air component,” said John Magness, senior vice president of Hillwood. “There were a lot of issues with building the rail yard. We’d probably still be scratching our heads today trying to figure out how to do it.”

Hillwood instead decided to build another few million square feet of warehousing space there and to promote use of the BNSF rail yard, which is about three miles from the airport.

In 2004, the airport was dealt another setback when it lost its chance of getting a major cargo carrier at the base. German-owned DHL had been eyeing Southern California for a hub, and airports throughout the region courted the company, hoping to get its business and the 250 jobs that would come with an operation. March Air Reserve Base near Moreno Valley won the contract.

Hillwood has built about 4.2 million square feet of warehouse space so far and is planning 2.7 million square feet more. The company expects about 2,000 more jobs to be added once the projects are finished in the next few years.

Another boon to the locale will come when Stater Bros. Markets finishes its headquarters and regional distribution center. The facility will bring 2,100 jobs to the former base from elsewhere in the region.

Change of Direction

Officials did not totally abandon the idea of using the airport for cargo, Rogers said, but they decided once again to focus on attracting passenger service because airlines have the ability to transport cargo in their planes’ bellies.

With DHL at March and UPS and FedEx at LA/Ontario International, Rogers said, it was unlikely that the San Bernardino airport could attract a major cargo carrier any time soon.

“That only leaves two areas for us to focus on: general aviation and commercial (passenger) aviation,” he said.

Last year, the airport hired Irvine-based architectural firm GKK Works to begin plans to renovate the terminal building, which was used for years as Norton’s terminal for troop deployment.

After restoring the runway in 2005, the airport spent much of the past two years focused on airport services, including the addition of a 150,000-gallon underground fuel-storage site and updates to the control tower.

When a scheduled carrier never materialized, the airport authority decided to go ahead with the terminal renovation anyway.

San Bernardino County Supervisor Dennis Hansberger, who sits on the authority’s board, said the board is taking a risk by building the terminal with its future uncertain.

“We believe that we have all the elements of a commitment of probably two airlines that will be willing to do business there,” he said. “But we have to demonstrate that we are not just talking about it.”

Hansberger said current negotiations may result in a deal with carriers as soon as the beginning of 2008.

“We could have sat and twiddled our thumbs and waited for a carrier to come and knock on our door, or we could go ahead build the terminal and control our own destiny,” added San Bernardino Mayor Pat Morris, who serves as the airport authority’s president.

Name Recognition

But as the airport moves forward, some experts question how successful it will be, while others say they have a good chance at accomplishing scheduled passenger service.

Ron Kuhlmann, an airline analyst with Unisys R2A in the Bay Area, said one of the main problems at LA/Ontario International — one that San Bernardino International will likely share — is poor name recognition. He said travelers from outside the region tend to think of Los Angeles International Airport first.

“Ontario has spent a lot of time trying to tell people they aren’t just an alternative to LAX but a much more convenient one,” he said. “The chance that someone 20 miles away is going to challenge their position is zero to nil.”

New York-based airline consultant Bob Mann said launching service at untested airports is risky for airlines because there is no data for them to use in planning.

“Airlines tend to go where they can look at passenger traffic statistics,” he said. “In a market where airlines are risk-averse, it just makes it that much more difficult for new cities to establish service.”

Airport officials contend that if San Bernardino International can offer less-expensive accommodations to airlines — some of which struggle to stay profitable — they may decide to move to San Bernardino.

Alan Bender, an airline industry expert and professor at Embry-Riddle Aeronautical University, agrees. He said throughout this country and in Europe, low-cost carriers and even some higher-cost carriers are starting service to outlying airports near major metropolitan areas.

“Most experts discounted Long Beach Airport,” he said. “For decades, it was never a very successful facility. But JetBlue has made it into a successful hub.”

Master Tenant

Similar to Hillwood’s role seven years ago, now much of the airport’s fate rests on the shoulders ofone company — SBD Aircraft Services LLC, which, because of its success elsewhere at the airport, was chosen to renovate the terminal.

Since becoming the master tenant for the airport’s hangar complex in 2005, SBD has brought more than 400 aircraft maintenance jobs to the hangars, representing the only substantial job growth the airport has seen in more than a decade. Last week, the company announced that one of its tenants, Baysys West, would be expanding its aircraft interior conversion business and adding 200 workers.

In May, SBD announced that it had bought a Million Air franchise and would hire the company to run a fixed-base operation at the airport, providing fuel and services to executive charter and general aviation customers. It will be the airport’s second general-aviation company. The other is Blue’s Aviation.

As part of that deal, SBD is subleasing approximately 5 acres in the northwest corner of the airport, including a 32,000-square-foot hangar next to the airport’s terminal on which it will build a 50,000-square-foot complex to host the aviation service.

In the past few months, work crews have gutted the inside of the terminal to prepare for renovations, and outside the building, concrete has been pulled up where a concourse will be built.

SBD manager Scot Spencer said the operation could be up and running by the early part of next year.

“Five years from now, we’ll all be absolutely stunned at the level of activity here,” Spencer said.