News Release Details

BOSTON--(BUSINESS WIRE)--April 24, 2001--Charles River Associates Incorporated (Nasdaq: CRAI), an internationally known leader in providing economic, financial, and management consulting services, today released its final report on a study that examined ways to alleviate travel congestion at San Francisco International Airport as an alternative to runway expansion.

Chronic travel delays, particularly arrival delays, have contributed to the consistent ranking of San Francisco International Airport (SFO) as one of the most unreliable commercial air transportation facilities in the country, according to the Federal Aviation Administration (FAA). On a bad day at SFO, the ripple effects of delays spread quickly throughout the national air travel system, destroying flight schedules and inconveniencing passengers by the thousands. Because the number of flights to and from SFO is predicted to increase significantly in the future, exacerbating an already serious problem, the Airport retained CRA to conduct an independent analysis of a set of measures for reducing delay that would not require the reconfiguration or expansion of SFO's runway system. Generally described as "demand management measures," such alternatives reduce flights at an airport to better match its capacity under particular operating conditions.

CRA analyzed the following specific demand management options:

• Coordinated operation of Bay Area commercial airports. Some or all of the Bay Area commercial airports - SFO, Oakland, San Jose - would be restricted to handling a subset of the operations they currently handle (e.g., freighter flights, general aviation flights, international flights, short-haul domestic flights, long-haul domestic flights). Passengers would be required to use the airport authorized to provide the particular service they were seeking.

• Slot controls. The number of flights permitted to use SFO would be limited, and permission to use the Airport would be allocated among users through a variety of possible methods, including auctions.

• Differential pricing of runway access. The price charged to an operator for runway use at various travel times would be raised until demand (number of flights for which operators were willing to pay) was reduced enough to equal supply (airport capacity).

• Controls on aircraft size. The minimum sizes of aircraft permitted to operate into SFO would be controlled. In principle, this would increase the number of passengers per flight and reduce the frequency of flights, thereby reducing delays.

CRA's study makes no recommendations. The ultimate decision whether or not to implement the various proposed demand management measures rests with public officials, who must weigh and compare the costs and benefits of each option. The CRA study is intended to inform these public officials about the probable impacts of whatever choices they might make.

CRA's principal findings are summarized below:

The unpredictability of weather conditions at SFO precludes implementing any delay reduction measures that would be in effect only when the weather is bad at SFO. Such measures would have to be in place -- generating their associated costs -- 100 percent of the time, even though they would produce benefits only about 20 percent of the time.

• Because of their own runway capacity limitations, neither the Oakland nor San Jose airport would be able to absorb a sufficient number of diverted flights to reduce delays at SFO significantly.

• Demand management measures such as slot controls, differential pricing of runway access, and gauge controls could, in principle, reduce delays at SFO, but only at the price of increased air fares and reductions in competition and the quality of air service.

• If slot controls were imposed, the price of slots at SFO would probably have to be set quite high in order to reduce operations sufficiently to provide significant delay relief; likewise, if differential runway pricing were used, landing fees would have to be increased to several times their current level -- reflecting slot prices.

• Each of the demand management measures considered would most negatively affect intra-California air service, particularly commuter carriers flying to and from SFO. A number of cities linked to SFO by commuter carriers likely would lose their air service to SFO while others would see their service frequency curtailed by between 60 and 80 percent. Feed traffic at United Airlines' SFO hub could be considerably reduced, threatening the viability of the hub.

• Unless international operations were exempted from demand management measures, which would increase the number of flight reductions required by domestic operations, the growth in international air travel to and from San Francisco would be substantially curbed.

The principal investigators for this report were Dr. George C. Eads, CRA Vice President; Mr. Mark Kiefer, CRA Senior Associate; and Dr. Shomik Raj Mehndiratta, CRA Senior Associate. The law firm of Morrison & Foerster provided an appendix to the report that identifies legal issues involved in implementing the various demand management measures studied by CRA.

Founded in 1965, CRA is a leading provider of sophisticated economic and financial consulting services, expert testimony and litigation support, and business consulting. The firm's areas of expertise include auctions, antitrust, mergers and acquisitions, policy impact assessments, corporate finance, strategy and business operations, and regulatory economics. CRA has advised corporate clients, government agencies, and other organizations in thousands of engagements. In addition to its corporate headquarters in Boston and international offices in London, Melbourne, Mexico City, Toronto, and Wellington, CRA also has U.S. offices in Berkeley/Oakland, College Station, Los Angeles, Palo Alto, Salt Lake City, and Washington, D.C. More information about the Company can be found on its Web site at www.crai.com.

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