Wyatt's Port prognosis: Part 1
Port of Portland's Bill Wyatt retires this June after 16 years as director. He's seen a lot of changes but not all of them are obvious from the outside.
The Port of Portland — like Seattle, Oakland and New York-New Jersey — combines air and seaport functions.
So it's no surprise that given the choice, Wyatt would take the Business Tribune on a tour of the airport rather than a marine terminal or plot of industrial land. Airplanes are the backbone of the Port of Portland,
When he started there in 2001, income from marine operations — what ships pay to dock, and rent from companies loading them — was more than half of the Port's bread and butter. By the time they moved from the Lloyd District to their own space in Old Town (near PGE) in 2000, income from the airport was just over half. In 2010, the Port moved to its shiny headquarters above the long-term parking at Portland International Airport. Then aviation amounted to 70 cents of every dollar the Port brought in. In 2017, that figure has increased to 75 cents on the dollar.
Plane half full
In 2001, PDX handled 12 million passengers a year. Now it's up to 18 million. Oddly, while there are fewer planes taking off from PDX than 16 years ago, the planes are larger and fuller. Only nine years ago, airlines were content with planes taking off only half full, says Wyatt.
Asked how he thinks airports will look in 50 years, he is bullish.
"I think aviation will grow as long as the price of fuel is reasonable," he says. "If it's close to what it is today, the economy will be able to support it. The demand for air travel is going to grow. In the U.S., half the population will get on a plane this year. In China it's 4 percent. Imagine when China gets to 16 percent, what that means for a number of places..."
One of those places being PDX, which would welcome on influx of new consumers from Asia.
Other improvements? He cites three.
First, satellite-based air traffic control.
"Now it's all terrestrial, the equipment is similar to when I was born." It will have a huge impact on cost and time. "People don't know how much time they spend in the air, navigating about..."
Second, more new planes like the carbon fiber Boeing Dreamliner, the Airbus A320 NEO and the Boeing B737 MAX will reduce fuel consumption and shorten flight times.
Third, security. Passengers like feeling secure but they hate being slowed down, questioned and frisked. The rise of PDX's reputation as a good shopping airport — street prices, and an accent on local goods — has been mainly driven by security. People like to get through security as soon as possible, so it makes sense to put the shops to that side of the cordon.
"For security there'll be more automation. It'll be more rigorous but more technologically sophisticated."
He foresees you walking down a corridor that scans you and your bag.
"This electronic stuff is just penetrating you, you're not being patted down. That part of the experience will improve."
Fracking for freedom
One of the real drivers of success of aviation has been simple: the price of fuel.
PDX was in trouble when crude oil spiked at $155 a barrel.
"2008, I remember that so well. In the summer of 2008, the financial world was coming to an end, it was just awful. I'd come into the airport and it was busy as hell. But it was people going on vacations they'd already paid for. I knew come Labor Day it would turn into a ghost town, and boy it did."
He said with oil at $130 the airlines just weren't equipped to make money.
"There was a genuine debate about how airlines would make it in the world." Today, with the U.S. preferring its own oil and gas to foreign crude, oil is at $50 a barrel.
"Then comes fracking and this revolution in the production of transportation fuels, and airlines since that time have been a phenomenal success, helped by a strong economy and tremendous technology."
Wyatt cites technology such as ticketing on smart phones and automated check-in as helping airlines' bottom lines.
The next nose dive
What if another recession hits?
"It would cause a constriction," he says judiciously. "There'd be a drop in standards, but we'd take it."
The port makes (75 percent of) its money on plane passenger volume. Passengers drive the things that line the port's pockets, such as fuel charges, concessions, parking fees and car rentals.
Airport economics are odd, and whomever directs the Port has to manage them. The airport is in need of a massive expansion, including expanding Alaska Airlines' space and moving Southwest to the Gate E side. Portland hasn't added a gate since 1989.
Going to six gates will cost around $200 million.
But the airlines will pay for it, and the port will continue to lease them space in the buildings.
"We issue debt and the debt service will go into the rates and charges to the airlines. It's a complex formula. The airlines review them and we vote on them. We always have to present our business case for any change costing over $1 million."
The Port will also renovate the entire central terminal building. It opened in 1958 and won't do well in a big earthquake. The total cost of the expansion sits at $1 billion.
The new Cathay Pacific hub sits quiet, rows of silver containers called positions, which bolt inside the freight aircraft, awaiting the twice-weekly flight. So far, flights leaving for the hub in Hong Kong have been oversubscribes, not just with Nike airsoles, the airbags that go in sneaker heels, but with frozen seafood. In cherry season this summer he expects Cathay Pacific will add a third flight.
He adds that there are more than 100 Chinese e-commerce facilities in the vicinity of the airport. These are e-tailers who, when a wholesaler in Shanghai wants a box of Leatherman tools, they make sure it's on the plane that day.
"They originally came for the lack of a sales tax, and they stayed for the lack of congestion, on road and air. I know, hard to believe."
Getting Cathay Pacific to put PDX on its freight itinerary was a coup. But the same things happen with international passenger travel. Portland used to have no direct flights overseas. But then local executives lobbied the airport management. Nike, Intel, Daimler and Columbia Sportswear all complained that if their people flying internationally twice a month had to always change planes before getting home, it stressed their lifestyle.
So Wyatt and his team talked to the airlines and asked them to commit to a certain number of seats per year. Wyatt presented Lufthansa with a giant fake check for $10 million, representing the income they'd be guaranteed in ticket sales direct to Frankfurt, and in return the Port said they would be exclusive. Northwest got a similar deal on direct flights to Tokyo.
"The model is organizing the community of local people who travel to book the local service and use it," he says. "And not recruit against them once you have found them. It's recognized as one of the greatest programs in the country."
Driving around the airfield, Wyatt points out workers laying down markers for where they will dig, just as a large backhoe arrives on the back of a semi truck. The tarmac will be cut into and new gates will be added.
The tour passes Atlantic Aviation, a new $25 million mini terminal for private jets. As a Gulfstream jet taxis past, Wyatt jokes that he has no idea who's in it, other than they are very rich. He sometimes reads the tail numbers with his field glasses and looks them up online, but they are usually discretely registered to a corporation rather than a person.
Wyatt reiterates his optimism. Passenger volume growth rate was nine percent last year and they are projecting between six and seven percent this financial year.
"If it's not, you can blame my successor," he says with a smile. "It's all about management." Then letting up, "It's really not, actually."
Your average West Coast port directors only last a couple of years. The next closest to Wyatt's 16 years is four years.
He's been staying officially neutral on the issue of his successor. Wyatt hand-picked his Deputy, Curtis Robinhold, who like Wyatt, was chief of staff to an Oregon Governor.
On retiring, he says, "I'm determined to find the right time to move on, and things are in great shape. The financial picture is strong, we have a strong internal candidate (Robinhold) and a couple of strong external candidates, and a strong commission. You get to pick your moment, or it picks you."
Executive Director of the Port of Portland, a public agency overseen by Port commissioners who are appointed by the governor.
Lives: Pearl District