Flight Capital

How SFO officials used city employees and money -- in apparent violation of state and federal law -- in a very odd attempt to privatize the airports of Honduras

During the first three years of the life of SFO Enterprises, public records show, that kind of misappropriation seems to have been accomplished, over and over.

Aeropuerto Toncontín in Tegucigalpa, Honduras, is the only airport in the world where motorists must stop at a traffic signal to await passing planes. Out-of-towners sometimes run the light. Locals rarely do; such is the terror of seeing car windows darkened by the belly of an airliner.

The Tegucigalpa firm of Danzilo y Asociadas, which SFO officials used 
to route money to Honduras.
Luis Elvir
The Tegucigalpa firm of Danzilo y Asociadas, which SFO officials used to route money to Honduras.
The Tegucigalpa airport terminal displays the logo of InterAirports, the 
consortium that won the Honduran airport privatization contract.
Luis Elvir
The Tegucigalpa airport terminal displays the logo of InterAirports, the consortium that won the Honduran airport privatization contract.

Aeropuerto Toncontín is considered by pilots who have landed there to be the world's keenest skills test. At 5,046 feet, the runway is approximately half the length of runways at SFO; it is surrounded by six mountain peaks; in making landings, pilots are forced to execute a tight U-turn before skimming their wings along a gully of mountainside residential dwellings. Aeropuerto Toncontín may be the only airport in the world whose main terminal clock was six hours slow the morning of Aug. 11, 2001. It's surely the only airport where a private security guard held a gun to the head of a customs official in July, leading the government to shut down customs for two days. ("It was a question of them not recognizing the legitimate authority of the government," says a very irritated Jorge Yllescas Oliva, director of Honduras' version of the Internal Revenue Service. "The guard was very arrogant. He placed the gun right here," he adds, motioning to his forehead.)

Welcome to the capital of Honduras, bastion of surreal superlatives, a city rife with corruption, grinding poverty, and decrepit infrastructure, home to SFO Enterprises' sole publicly acknowledged line of business.

San Francisco became part of the consortium granted the right to privatize Honduras' four international airports -- located in the cities of Tegucigalpa, San Pedro Sula, La Ceiba, and Roatán -- only after failing elsewhere around the globe. SFO managers had traveled the world in hopes of winning airport privatization concessions, using city money, living on city paychecks, boasting of their authority as San Francisco city officials, while actually working on behalf of SFO Enterprises, which was very specifically set up not to be part of the city government. In essence, a two-sided deception was under way: In San Francisco, everyone was pretending that SFO Enterprises was entirely separate from the airport and the city. Overseas, airport bureaucrats were presenting themselves as city officials, and glossing over or minimizing the difference between the city of San Francisco, which has tens of billions of dollars in assets, and SFO Enterprises, which was worth $10,000.

"When they won the concession, we had the idea that experts from the airport in San Francisco were going to come and improve our airport, and that they were going to invest $125 million. I had understood that InterAirports SA [the consortium that won the privatization contract] was the same thing as the San Francisco International Airport. We know that's a prestigious institution, so we figured that was great. We figured it was a stroke of good fortune that the San Francisco airport would run our airports," says Juliette Handal, president of the Honduran Private Enterprise Council, a national Chamber of Commerce.

(Judging from documents pertaining to an earlier privatization effort, Costas and his subordinates may have done more, at least once, than simply leave an impression that the city was backing their efforts. In Panama, a notarized document lists the San Francisco International Airport -- which, legally speaking, is the same as the City and County of San Francisco -- as a 10 percent equity partner in Airport Management Group Inc., a corporation created to bid on the privatization of a Panamanian airport. The city's business partners: two Panamanian banks.)

As Costas' team squandered hundreds of thousands of city dollars on losing privatization proposals, it became clear that the new corporation needed to hire outside experts. In some respects, at least, this reality undermined the logic behind the creation of SFO Enterprises. The company was created, after all, to exploit S.F. government expertise in the area of international airport management. But Costas hired Alex Seid, who, according to Aviation Week, had been director of project development for the Massachusetts Port Authority, which had also set up a division to pursue private airport consulting work. However, like others who worked for SFO Enterprises, Seid was hired as a city of San Francisco employee, and he traveled on a city government expense account -- while pursuing a private corporation's business.

To pursue the Honduran privatization contract, Seid helped assemble a consortium of international airport-industry players. The consortium offered an astoundingly high bid to win a privatization contract for Honduras' international airports. The consortium, called InterAirports SA, told Honduran reporters it would invest $120 million to improve airport facilities over 20 years. The consortium also included Servicio Littoral Pacífico SA, a Peruvian warehousing and shipping company known as Serlipsa; Swissport SA, an international firm that provides airport ramp services; Pacific Architects and Engineers, an L.A.-based contractor that, among other things, managed CIA infrastructure during the Nicaraguan Contra war; Calmaquip Engineering Inc., a Miami-based contractor; and Honduran partners CIC and Interoceánica.

According to a contract I obtained between SFO Honduras SA -- the corporate shell created as a subsidiary to SFO Enterprises for purposes of the airport privatization project -- and its consortium partners, other members of the group agreed to pay SFO Honduras a $750,000-per-year fee to provide "operation and management services" for the consortium.

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