Airis lawsuit alleges airport officials obstructed development of cargo facility

A major aviation developer is suing San Francisco International Airport to protect its right to develop a cargo facility at SFO, claiming the Airport is purposely derailing its air cargo facility project, so the Airport can build one if its own.

Airis SFO, a wholly owned subsidiary of Airis Holdings, LLC, announced that it is filing a lawsuit against the San Francisco International Airport and its director John Martin. The lawsuit concerns Airis' rights to build a new $200 million cargo facility at the Airport that is expected to reinvigorate the Airport's dwindling cargo business.

After almost two years of work and millions of dollars in investment by Airis Holdings and its local development partners, plans for a new 633,000 square foot cargo and office complex have been mired by SFO Airport staff for several months.

It is estimated that the Airis project will generate more than $200 million in direct rental revenues and another $100 million in indirect revenues from landing fees and parking for SFO and the City and County of San Francisco. It will also create 3,000 construction jobs, 1,700 permanent airport union jobs, and over 9,000 indirect jobs as a result of its operation. Additionally, the Airis project protects both the Airport and bondholders from liability through a corporate guaranty from the constructor, a payment and performance bond for the construction completion as well as bond insurance. The Airis project would also guarantee payment of ground rent to SFO during and after the construction phase creating a win-win for SFO.

The lawsuit seeks Declaratory Relief for Airis against SFO, and seeks to underscore that Airis has the exclusive right to negotiate a deal with the Airport and with the City and County of San Francisco -- as unanimously approved by the San Francisco Airport Commission in October 2003.

"We have tried at every opportunity to work with SFO executive staff to come to a mutually beneficial solution," said Ronald Factor, President of Airis Holdings. "Our attempts have been shunned by the Airport staff, and we feel that they have left us no choice but to protect our rights through legal recourse. We are, nevertheless, committed to this project and to bringing a world-class air cargo facility to SFO."

"After Airis won the exclusive right to negotiate a Development and Disposition Agreement with the City and County of San Francisco, Airport executive staff has, in direct violation of the terms and conditions of the parties' agreements, deliberately derailed the project slated to be built at the current West Field Cargo Area," said Oliver Holmes, Airis's counsel. "This area consists of 40-year old cargo facilities that sit atop environmental contaminants that otherwise would have been cleaned-up as part of the Airis project."

Airis felt it necessary to file the lawsuit after it learned that SFO had begun the process to develop the West Field Cargo Facility on its own, or with an airline consortium. The initial plans were then vetted with officials at City Hall and just recently approved by the Airport Commission. These actions by the Airport are in direct violation of Airis' exclusive rights.

Airis alleges that air cargo operations at SFO have been in decline for the past several years, presumably as a direct result of the lack of attention that has been paid to this sector of the business by the leadership at SFO. In 1988, SFO passed on FedEx's plans for a new hub and redirected company officials to Oakland International Airport. Today, the FedEx operation at Oakland moves more cargo than all of the cargo operations combined at SFO, according to Airis.

Today, over one half of all local air-eligible production is shipped in and out of the Bay Area by truck to be loaded on planes at Los Angeles or Ontario. "Much of this lost market share could be recaptured if there was a modern air cargo facility at SFO," said Brian Cochran, CEO of Airis Holdings. "Foreign carriers, especially from Asia, require certain standards that are simply not available in the Bay Area, but are available in Los Angeles. If that trend continues, air cargo and the revenue it generates will be lost forever, just as San Francisco lost its cargo seaports two decades ago to Oakland," said Cochran.

Shippers have complained for many years about the lack of suitable cargo facilities at SFO, and have opted to ship their high value goods through airports as far away as Portland or Seattle rather than deal with SFO's inefficiencies. "Cargo will travel the path of least resistance," said Jock O'Connell, an expert consultant in global trade. "Failure to develop the kind of air cargo facility at SFO that Asian carriers expect will prove costly to the Bay Area's ability to retain advanced technology companies, and will undermine economic development and job growth efforts in the region."

"If SFO staff had spent the same amount of energy working with Airis on the development of this facility as they have in circumventing their own process, construction of this state-of-the-art facility would be well under way," said Factor. "In fact, the Airport would already be receiving guaranteed rent revenue from our project instead of relying on temporary 30-day use permits from a handful of domestic carriers who move most of their cargo via other west coast gateways."

FMI: www.airis.com, www.flysfo.com