Official Statement Airport Commission City and County of San ...

In addition to revenues received from the airlines, the Airport derives a substantial portion of its revenues
from concessionaires including parking operators, merchandisers, car rental companies, food outlets and others. See
“AIRPORT FINANCIAL AND RELATED INFORMATION–Concessions.” Declines in Airport passenger traffic have, and
may in the future, adversely affect the commercial operations of many of such concessionaires. Severe financial
difficulties affecting a concessionaire could lead to a failure to pay rent due under its lease agreement with the
Airport or could lead to the cessation of operations of such concessionaire.
The ability of the Airport to derive revenues from its operations depends in part upon the financial health of
the airline industry and international relations. The financial results of the airline industry are subject to substantial
volatility and many carriers have had extended periods of unprofitability. Additional bankruptcy filings, mergers,
consolidations and other major restructuring by airlines are possible. See also “SAN FRANCISCO INTERNATIONAL
AIRPORT–Airline Bankruptcies.”
Bankruptcy
In the event a bankruptcy case is filed with respect to an airline operating at the Airport, a bankruptcy court
could determine that the Lease Agreement to which such airline is a party is an executory contract or unexpired
lease pursuant to Section 365 of the United States Bankruptcy Code. See “SAN FRANCISCO INTERNATIONAL
AIRPORT–Existing Airline Agreements–Potential Effects of an Airline Bankruptcy.” In that event, a trustee in
bankruptcy or the airline as debtor-in-possession might reject the Lease Agreement, in which case the Commission
would regain control of any leased facilities (including gates and boarding areas) and could lease them to other
airlines. The rejection of a Lease Agreement in connection with the bankruptcy of an airline operating at the Airport
may result in the loss of Revenues to the Commission and a resulting increase in the costs per enplaned passenger
for the airlines remaining at the Airport. In addition, the Commission may be required to repay landing fees,
terminal rentals and other amounts paid by the airline up to 90 days prior to the date of the bankruptcy filing. The
Commission’s ability to lease such facilities to other airlines may depend on the state of the airline industry in
general, on the nature and extent of the increased capacity at the Airport resulting from the departure of the bankrupt
airline, and on the need for such facilities.
Also, under the United States Bankruptcy Code, any rejection of a Lease Agreement could result in a claim
for damages for lease rejection by the Commission which claim would rank as that of a general unsecured creditor
of the airline, in addition to pre-bankruptcy amounts owed. For additional information regarding bankruptcy filings
by airlines operating at the Airport see “SAN FRANCISCO INTERNATIONAL AIRPORT–Airline Bankruptcies.”
On January 5, 2010, Mesa Airlines (a U.S. Airlines affiliate) and on January 19, 2010, Japan Airlines, each
filed for protection under Chapters 11 and 15 of the U.S. Bankruptcy Code, respectively. For Fiscal Years 2007-08
and 2008-9 each of these airlines represented less than 1% of total enplanements at the Airport. Each of Mesa
Airlines and Japan Airlines has deposited with the Commission a letter of credit to secure their performance under
the applicable Lease Agreement. For additional information, see “SAN FRANCISCO INTERNATIONAL AIRPORT–
Existing Airline Agreements–Potential Effects of an Airline Bankruptcy–Japan Airlines” and “–Mesa Air Lines.”
Since the bankruptcy filings, both Japan Airlines and Mesa have continued to operate at the Airport.
For a discussion of the effects of an airline bankruptcy on the collection of the passenger facility charge,
see “AIRPORT’S FINANCIAL AND RELATED INFORMATION–Passenger Facility Charge–Collection of PFCs in the
Event of Bankruptcy.”
Airport Security
The September 11, 2001 terrorist attacks resulted in increased safety and security measures at the Airport
mandated by the Aviation and Transportation Security Act passed by the U.S. Congress in November 2001 and by
directives of the Federal Aviation Administration. In addition, certain safety and security operations at the Airport
have been assumed by the Transportation Security Administration. In spite of the increased security measures, there
is no assurance that there will not be additional acts of terrorism, such as the attempted December 25, 2009 terror
plot, resulting in further disruption to the North American air traffic system, increased passenger and flight delays,
and reductions in Airport passenger traffic and/or Airport revenues. See “SAN FRANCISCO INTERNATIONAL
AIRPORT–Airport Security.”
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