Wednesday, May 25, 2005

Ice Caves International Airport?

Valley's largest employer, business and city spokesman worry about sites for a new airport

Wally Huffman, Sun Valley Co. general manager and Dick Fenton, Wood River Valley Realtor

The Friedman Memorial Airport Authority is looking for a site upon which to build a new airport. Two sites under serious consideration by a 25-member Airport Site Selection Committee are Site 13 near Fairfield, and Site 9 south of Timmerman Hill on Highway 75 near the Shoshone Ice Caves, both nearly an hour away from Sun Valley.

Sun Valley Co. general manager Wally Huffman and Realtor Dick Fenton are on the committee, which is being guided by Mead and Hunt, a Minnesota airport consulting company. Both men have been critical of the process.

The Sun Valley Co. is the Wood River Valley's largest employer. Fenton represents both the city of Ketchum and the Sun Valley/Ketchum Chamber and Visitors Bureau. Both are long-standing members of the Blaine County Air Transportation Advisory Group, which works to maintain and promote commercial air service to Sun Valley.

The Idaho Mountain Express invited Huffman and Fenton to talk about potential effects of the leading sites on the valley's economy in a two-hour interview excerpted here. This is the first of a series of interviews on the airport.

Express publisher Pam Morris and reporter Pat Murphy, who has covered airport affairs for several years, conducted the interview. A full transcript of the interview is available by clicking here.

IME: What worries you most about potential airport sites for a new airport outside of Hailey or outside of Blaine County?

DF: They're not economically feasible from the air carriers' standpoint. And we stand to lose some portion of our existing air service beside [what's] now being considered.

IME: What convinces you of that?

DF: The input of the air carriers. I think to a degree our own judgment, but I think we raised the concern early on and asked the air carriers to get involved early on. Unfortunately it took quite awhile for that to transpire, and I think it's only in the last month that we've gotten any clarity from what the air carriers' concerns are . . .

IME: Have they been definitive about those concerns, or are they hedging their bets a bit?

DF: I don't think you can predict with any accuracy exactly what the outcome's going to be, but you've got two of the most senior, highly respected market-planning guys in the regional airline industry in the country, Steve Hart [SkyWest Airlines vice president for market development] and Pat Zachwieja [Horizon Air vice president for marketing and planning], who have raised similar concerns. Though, they've characterized them differently. I think one of them said I think it would seriously jeopardize their service. I think the other one said there's a high probability that they'd have to reduce service.

IME: In a March 28 letter from Steve Hart, he said, "Non-stop service could be provided from major markets with sufficient frequency; we believe that (although) a one-hour or one-hour-plus drive is not ideal, it may be acceptable to the traveling public."

WH: I think he's characterizing a service different from what we have now. He's characterizing origin-destination service from large metropolitan areas into that airport and I think he's probably close to right. . . .What he doesn't say, and what hasn't been said, is that he doesn't believe that kind of service can ever exist without a major subsidy. And that service would be the only kind of service that would substitute for the service we have now . . . .

IME: Let us get this right. You believe that if the airport is moved an hour away that we will lose the air service that we have now.

DF: I believe, as the air carriers have stated, that there's a high probability that we're going to see a reduction in service.

IME: So you're talking about a reduction, as opposed to a disappearance of service?

DF: I'm saying if you sort of have to make an educated guess, my guess right now is that we would probably lose the [Horizon Air] Seattle service. It would either become seasonal or go away in its entirety. We would certainly lose the 12-month service because they couldn't make enough in the summer and winter to offset what they'd lose in the spring and fall because it's marginally profitable today, so it would have to shift to seasonal service. And, SkyWest, I think it would decline to a more basic kind . . . it might be half of what we have today. Wally's challenged me a bit on that, because he thinks it could go away in its entirety.

IME: Let us challenge you on the Seattle thing. According to airport consultant Mike Boggs quoting Horizon Airlines, the Seattle-Sun Valley leg is the most profitable leg of their entire operation per seat mile. It's 21 cents per seat mile versus about 18 cents for the rest of the system. So, why would they go away?

DF: The reason it would go away, in Horizon's opinion, is because people are now willing to pay a premium to fly directly into Sun Valley. If you leave them an hour away, they won't be willing to pay that premium.

IME: But if they're coming to Sun Valley, what difference does it make?

DF: They'll go to Boise, because it costs half as much to fly to Boise. And if they come to Sun Valley to the Ice Caves airport, they won't be willing to pay the same premiums that they're now paying to come to Friedman Airport in Hailey.

IME: How do you account for people who go to other ski resorts and are willing to drive for 45 minutes, an hour for 70 miles, or 45 miles?

DF: These aren't the people we're competing with. You can fly directly into Aspen, Vail, Jackson, Park City. The big areas we compete with all have non-stop service.

IME: What is it in the local market that would keep larger carriers from coming in [to a distant site] and mitigating the loss of service you're talking about in flights from Seattle, L.A., San Francisco?

WH: For 15 years, I've made my trek to St. George (Utah, the headquarters of SkyWest) and to Seattle to beg for service. To St. George to beg SkyWest for jet service...

IME: You beg for jet service?

WH: Yes, you bet. . . . And when I go to Horizon in Seattle, which Jack Sibbach (Sun Valley Resort marketing director) and I do each year to talk about service for the next year, they always preface the meeting by telling me that in their system that with the available aircraft they have, there are only so many places they can fly. . . . And the reason for that is that Sun Valley has this terrible spring and fall season that they have to overcome. They don't want to commit a plane to any market that's not 12 months because they don't want to have to find a place for the plane four months of the year, and they don't want to park it. So, we basically go over there and beg them to fly here.

IME: What commitments are being made?

WH: Subsidies, subsidies in the form of advertising commitments, subsidies in the form of packaging commitments, subsidies in the form of trade-out commitments, and subsidies in the form of direct payments for service.

IME: What convinces you that other carriers besides SkyWest and Horizon Airlines, for example Southwest Airlines or Jet Blue, or even Delta, would not fly direct into a new, more distant airport?

WH: Well, we've tried Delta over, and over, and over again, so I can say with some certainty that Delta is not going to be the carrier that flies in there. You can bet that we would go look for Southwest, or Jet Blue, or any other carrier. But my sense says that we would have to prove the market to them through subsidy.

DF: It's just in the market. That's the underlying problem, and part of what the consultants I don't think fully recognized in their earlier market-demand evaluations. It's not an urban market. . . this market is so small and so thin, there's no way to economically fly a larger aircraft in here and do it profitably.

IME: Aren't you overlooking something? If this airport is at Site 9, for the sake of discussion, then you've got Twin Falls, Shoshone, Gooding and Jerome as markets. Now people who are going to drive an hour or 45 minutes from Site 9 to Sun Valley, certainly would drive the other way. Now, Twin Falls has no service to speak of. Friedman Memorial Airport is the second-busiest commercial airport in the entire state behind only Boise.

DF: But the order of magnitude difference--we have 75,000 emplanements. Boise has 2.8 million emplanements. It's a low-cost market. It's very, very competitive. They have non-stop service to 16 or 18 markets. They have a high frequency. People in Twin Falls drive to Boise to fly. In a best-case scenario, Ice Caves International is not going to be a low-cost airport. There's no way. Right now Twin Falls generates 25,000 emplanements. We generate 75,000, and Boise generates 2.8 million.

IME: But they [Twin Falls] have no direct service anywhere to speak of.

DF: No, they have five flights a day to Salt Lake. They all drive to Boise. And the fact that we have a higher cost option that's somewhat closer, isn't going to cause them to drive to the Ice Caves when they can drive to Boise and it's going to be half the cost, or a third less.

IME: But the airlines work on the premise that if we show up, the passengers will come. . . . Why would people drive to Boise, which is much farther?

DF: What's Twin Falls' trade area? About 75,000 people. The city of Twin Falls is 40,000. The total trade area is 75,000 and Boise's is 400,000. It's just that there isn't the number of people to support a Southwest out of Twin Falls or the Ice Caves when they're already in Boise.

IME: Why should the average person employed in the Wood River Valley, who's just living here working and raising a family, why should they share your worries?

WH: Well, let's close (the resort) down for a year and see what kind of a town we have left.

IME: So you think that there would be no air service and the economy would dry up?

WH: We have minimal air service as it is. It's not great. . . . Unfortunately, in this community there's no vehicle to create a fund to subsidize these services and the [Sun Valley] Co. only has limited funds that we can put into that kind of subsidy so we've been limited to the West Coast. . . . Southwest—or any other airline—in order to entice them into Ice Caves International, you're going to have to build that market and you're going to have to pay for it on the way. We don't have any funding mechanism to do that, and I'm not able to do it alone.

IME: What percentage of the valley's business is generated by air service?

DF: Seventy to 80 percent? I could be pulling a number out of the air. . . . But the second-home owner market I would assume is about a 90 percent fly market. The guest market is at least a 75 percent fly market. And, some portion of the locals are flying.

IME: What percentage of Sun Valley Resort's business is generated by air seats?

WH: In the winter, probably 75 percent. In the summer, somewhat less, and it's ironic that in the summer we have more demand for flights than we have for winter.

IME: Let's say it's [airport construction] is 10 years down the road, the year 2015. What do you think the market's going to be in 2015? And not just the valley—Buhl, Twin Falls, Burley, Jerome, Shoshone—the whole business.

DF: Order of magnitude 10 years down the road in Blaine County? Idaho Power has done some 20-year stuff that says 50 percent growth, so is 10 years 25 percent growth? So, 26,000 to 28,000, somewhere in that neighborhood, maybe 30,000.

WH: That's a great question, because that really is the question isn't it? What are we going to be in 10 years or wherever the airport ends up, whatever it is, it's built. . . . I work for a guy who seems to have an unlimited appetite to invest money in this community. And he has asked me over and over again, "Why would they want to move the airport?" The implication in that question is that to move the airport is probably negative in his point of view. So what happens if the owner of Sun Valley Co., if it's Mr. (Earl) Holding or whoever it may be, loses faith in our ability to continue to grow the market and decides, "I'm not going to put my money here. I'll put it somewhere else where there are better odds." This community doesn't particularly want to support the resort investment. Maybe we go somewhere else to try it. If that should happen, then the negative implications of this decision start to happen almost immediately. . . . We don't want Mr. Holding to lose his enthusiasm. And I can tell you that he believes that to move the airport far away, it doesn't help him.

DF: There would be adverse effects for the second-home market, too.

IME: Where do you think the airport should be?

WH: My view of the airport is that we should at least give consideration to the current site, that the decision to move this airport has basically, from my observations, been made and it's been made on the basis of politics. . . . We're going to go it alone at Ice Caves International.

IME: I think the site study being financed by the FAA requires that Friedman be compared with any other site, and in fact, at the last meeting, the question was raised as to whether Friedman was going to be compared, and they said, "Yes."

DF: It isn't being compared to the existing airport. It's being compared to an arbitrary, hypothetical—either leave it within the fence, which is one political decision, or only consider the fully compliant most Draconian two options—of now taking Woodside, which a year ago in the master plan they weren't doing and which has changed in the intervening time—but now they have a more Draconian move to the East, which I don't think you ever would have logically considered. If you were trying to fix the existing airport you would have studied moving it to the west in the last go-round.

IME: Let us get this straight. If there were no impediments, if there weren't a political impediment, and if you and Wally were the only two people on the committee, then the airport would stay where it is.

WH: I've never said that. All we have said is we need to include it in the area of study. It needs to be part of this discussion and the Triangle Site needs to be part of this discussion.

IME: Why?

WH: Because the economic and social aspects of analyzing whether or not it makes sense can be compared against the economic and social aspects of the Ice Caves International site or the current site. But if we're not looking at it at all ...

IME: And what would that comparison get us?

WH: Every site that we have, the existing site, the Bellevue Triangle potential site, or the far site, is going to be a compromise. The existing site's going to require some change in the physical aspects of the airport, but then they will solve, they can solve, the obstacle-free zone on either side of the runway. It can be done. Physically, it can be done.

IME: But it could physically be done with condemnation of some properties around the airport.

WH: Well, of course. The solutions ... but it can be done.

DF: Not necessarily. It could mean the acquisition of a portion of the Eccles Ranch (south of the airport).

WH: It's not optimal.

IME: Site 2 is the one west of state Highway 75 near Timmerman Hill.

WH: If you look at that site, it probably works economically, it's got some social issues, it's got some environmental issues, it's not optimal either. Then you go to the Ice Caves and you've got unlimited area around the airport. The only thing you're going to bother is some rabbits and some sage chickens and maybe some deer, but it's economically not an appropriate site. That's my view. If we don't compare the scenarios, what kind of a job have we done for the community?

DF: And that's been our frustration. All we've said is "let's just look at all the options and make the political decision after you've done your homework, not before you've done your homework."

IME: A very important thing is being totally overlooked here. The planners are talking about a plan for an airport that will last 50 years at least. They're talking about 1,200 acres, which is four times larger than the present facility. Now, do you think that the Friedman Airport in its present configuration and/or improved configuration will be as good in its limited space for 50 years as would a new airport with 1,200 acres, which would include all kinds of buffer to prevent encroachment.

DF: What's your criteria?

IME: No encroachment, no noise problems in terms of complaints, the footprint can be as large as you want to begin with for approaches and departures . . . You have a one-way departure and arrival corridor instead of two, and they're planning for 50 years.

DF: If Friedman has air service and Ice Caves doesn't, then, yes, Friedman I think would be better. I don't think you can isolate any one component of this. It's multifaceted: environmental, social and economic.

IME: The Airport Authority has now directed the consultants to take a look at the issue of minimum revenue guarantees. And the authority's attorney was asked to take a look at what might be allowed under state law as a countywide levy to generate money that could be spent on revenue guarantees. . . .If some mechanism could be found to provide minimum revenue guarantees that were not coming totally from Sun Valley Co., would that ameliorate your concern about an airport located at some distant site?

WH: In my view, it would certainly be a positive step. And, it would give us at least some hope to replace the service that I believe we will lose. And we'd work hard to make that work. I'm not aware of any funding mechanism. And, secondly, we need to have a pretty good understanding—if we're going to be 50 miles away in 10 years—of what Highway 75 is going to look like . . . we're probably not going to have a net gain in the amount of time it takes to get here. We're probably gonna have a net loss.

IME: What do you say to Hailey residents—with Broadford Road on the west side of the airport, and Woodside on the east—whether you shift the airport east or shift it west, something gets shifted? What do you say to residents in those areas?

DF: I don't think it has any impact if you shift it to the west.

IME: So you don't think it's a major displacement?

DF: Not to the west. You're just [moving] the hangars and the terminal. But that's it. You're not impacting any of the light industrial. No impact on the highway, no impact on Woodside.

IME: I mean physically, how long would it take to shut down the runway and move it?

WH: Based on this, we probably could build the entire new runway alongside the old one. But if I had the choice to live with an airport an hour away, that had no revenue guarantees, if we build a field of dreams out there that nobody flies to and our service is going to go downhill, I'd figure out a way to take a summer off and build this.

IME: So, you'd rather have the airport remain in Hailey even given the number of diversions and the kinds of problems in the winter?

WH: There are several myths that have become conventional wisdom. One of them is that we are always going to have diversions at this airport that are so significant that we just have to move it to another site. But that's not true. We have diversions now in the winter that are significant. We don't have any diversions in the summer at all. So, if you take the diversions as a percentage of total emplanements ...

DF: I got from SkyWest [for the 12 months ending May 12] that the percentage of winter diversions was 4 percent—that's the annual diversion.

WH: ... If you consider worst-case scenario on diversions, technology will lower those diversions to a percentage that isn't significant ... once we have a proper landing system that gets the diversions down to a reasonable percentage, that won't be a significant parameter to compare this to another site. You see what I mean? If the diversions stay at 20 percent in the winter and they were 2 percent down at the Ice Caves, that's significant. But if they're 5 percent in the winter, and they're 2 percent at the Ice Caves, that's not significant.

IME: Are there three options out there that would be acceptable to you? And if so, what are they?

DF: It's the three: Fix the existing airport, find a site north of Timmerman that would work without [revenue] guarantees, or have enough guarantees to make a distant site work.

IME: Speaking of revenue guarantees,. . . do you think county residents will be willing to accept a property tax levy to support minimum revenue guarantees for airline service?

DF: I think if you agree that we should be trying to deal with the people in Hailey's concerns—that this is an intrusion. It does create a noise impact for the people of Hailey, and there's certainly a perception of safety concerns for the people in Hailey—I think we should be willing to at least consider paying to alleviate this burden from Hailey, if we think there's a reasonable project that's going to work.

IME: How does a minimum revenue guarantee lift the noise burden from Hailey?

DF: It makes the distant site work. IME: Wally, do you feel the same way?

WH: I feel the same way. I am worried about the ground transportation in between. But, if we can buy the service and if there's a way to do it and if the local community feels comfortable to commit to doing that, then that's an option.

IME: Is there anything here we haven't covered that you're dying to get on the record?

DF: I think the cost to construct [a new airport] ... The consultants have given us the presentation that says sort of by category, we're eligible for up to 90 percent of these various categories of expenditure. The FAA in their Feb. 18 letter said do not count on us for half, something less than half. So, we do have a need to reconcile that...then we start figuring out what's the likely community share of that. But if the public-funded facilities are in the $80 million range, half is $40 million. . . . And I'm not sure, I don't know what the temperament of the community is. Will we ante up $40 million to move this out of Hailey?

WH: I've been very frustrated and I brought this up at the meetings, that for whatever reason the conventional wisdom on how this airport would be funded is that the feds pay 90 percent of it. I think that the community ultimately will bear whatever decisions we make. And if they knew the odds were likely that this county was going to have to belly up $40 million, or $30 million. . . then people would be more sober about how they address the issues . . . .

IME: Even if you go through this whole study, you'll still get to the point where there's got to be some kind of a bond issue that could be defeated at the ballot box?

WH: Absolutely.

DF: And logically, if we end up with the distant site, you'd not only have the cost to construct component, you've got [airline] revenue guarantees that could be in the $2 million to $3 million a year range, because as you look at the competing resorts that have revenue guarantees, they're typically not less than a million dollars. And the ones that are over $2 million are bigger resorts but they're just winter guarantees. And our need is as big in the summer as it is in the winter.

IME: For revenue guarantees at the outlying sites?

DF: Yeah. So, if the outlying site has a $20 million local cost to construct component, that has to be bonded for. And it has a $3 million a year initial revenue guarantee . . . . This is all conjecture at this stage of the game, but that all enters into the decision-making process, particularly for a more distant site.

IME: Anything else?

WH: Let's say we build an airport at the Ice Caves, which will become a major attraction, by the way. . . . Let's say it was wildly successful. And we started off with revenue guarantees. And we started getting 757s flying in from 12 different metropolitan areas. How long do you think the local community would put up with it?

IME: Put up with what?

WH: The increased traffic.

DF: It's the very issue I raised at the master plan hearing. It's the law of unintended consequence, you know. Some day, Holding won't be with us, God bless him, or he will not be active in the company. Will the company still be owned by Sinclair? Maybe it will, maybe it won't. But if it's owned by Intrawest or Vail Associates or Blue Creek Holdings, or Disney or Tommy Weisel or Sam Zell or Edgar Bronfman, or take your pick, right, or Steve Wynn, any of a dozen people, who pay $500 million for 2,000 units of developable density, then all of a sudden, it may look like Vail's model of 30,000 seats a week flying 757s, we don't have the infrastructure--we don't have the water, we don't have the housing, we don't have the roads to accommodate that. I hope it doesn't happen, but it's one of the consequences of building this fabulous airport. I mean, after telling you why it wouldn't work? You know, there's some possibility it would work too well. And we'd all be real unhappy.

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