Monthly Archives: January 2011

State of Small Airports A Better Speech?

By Paul Eubanks, Senior Manager Policy and Regulatory Affairs
I recently had the pleasure to speak at the Transportation Research Board’s 90th Annual Conference in Washington, D.C.  Although the official panel topic was entitled “Airline Industry Update” my presentation entailed challenges and issues facing North America’s small and non-hub airports.

For better or for worse, the TRB assigned our panel discussion to the 7:30-9:30 post meridiem timeframe.  Which begs the question: Who wouldn’t want to be me? There is nothing quite like competing with President Obama’s State-of-the-Union address AND being scheduled to speak at the end of a panel discussion that’s scheduled to end at 9:30 p.m.  Given my coherent state-of-mind in the evening these days (my sleeping schedule has recently shifted from 9 p.m. to 5  a.m. — the joys of having a four-month-old baby in the house!), I couldn’t think of a more excellent time to present a 15-slide PowerPoint presentation to less than 10 individuals.  I’m happy to report that 40 individuals actually decided to attend the session (my guess is the majority of attendees were registered Republicans!)

Putting all jokes aside, it was especially nice to see several ACI-NA members in the audience. Special thanks to Patty Clark/Port Authority New York and New Jersey; Susan Warner Dooley/HNTB; and Belinda Hargrove/TransSolutions for attending. I want to also thank Paul Aussendorf/U.S. Government Accountability Office for moderating the panel discussion and inviting me to speak on behalf of ACI-NA.

My presentation focused on four key issues/challenging points facing small and non-hub airports. They included, increasing regulatory requirements, airline industry consolidation, the increasing reduction of the 50-seat regional jet, as well as a changing relationship between regionals and airlines.

As everyone in our industry knows, the costs associated with incorporating on-going regulations have steadily added to airport operating costs over the years. This is especially true for small and non-hub airports that have historically had limited staff and financial resources with which to fulfill their regulatory responsibilities. For many of our smaller airport members, lower passenger enplanements limit their ability to raise revenue or cut costs significantly to make up for the financial challenges posed by increased regulation. While government agencies provide some funding for new regulatory initiatives, costs attributed to on-going compliance remain unfunded.   Proposed regulatory rules pertaining to safety management systems, effluent limitation guidelines, as well past congressional discussions aimed at changing aircraft rescue and firefighting standards were just a few examples I noted of the growing regulatory creep facing our industry.

During my presentation, I also thanked the Airport Cooperative Research Program for sponsoring Project 03-25 (originally submitted by ACI-NA), which is conducting a study to examine the cumulative regulatory compliance requirements and their associated costs at small and non-hub airports (a big thank you to Mike Landguth/Chattanooga Metropolitan Airport for chairing this important study).

In terms of industry consolidation, concerns were noted pertaining to decreased competition, increased fares, flight reductions and potential elimination of air service in some markets. I also reminded attendees about the pending Southwest/AirTran merger and its possible effect on many small non-hub airports that are currently served by AirTran (Asheville; Lexington; Charleston, W.Va., Gulfport/Biloxi; Allentown; Newport News/Williamsburg; and Moline/Quad Cities come to mind).  Also noted were challenges related to the United/Continental merger, especially as it relates to the differences in pilot scope clauses at each respective airline (United contract allows UA Express regional affiliates to fly regional jets up to 70 seats; Continental contract limits all regional flying to 50 seats or less) and its possible impact on airports served primarily by 50-seat regional jets.

Speaking of 50-seat regional jets, love them or hate them, the 50-seat regional jet is facing a slow death.  Introduced in the early 1990s when crude oil was just $20 a barrel, my presentation noted the number of 50-seat RJs peaked in 2007 around 1,400 aircraft.  Given the climbing rise of oil prices (now around $90 per barrel range); these aircraft are becoming increasingly expensive to operate and maintain.   As a result, industry analysts are now forecasting only 200 will remain by 2015.  As capacity continues to shift to 70 seats or larger aircraft, what will be the impact on smaller airports that rely heavily on the 50-seat RJ and or aging turboprop aircraft?

I closed my remarks by briefly commenting on the changing relationship between regionals and airlines.  Specifically, the growing number of regional routes that are shifting from the current “fee-per-departure” model to “pro-rate” flying contracts that were typically found in the 1980s and early 1990s. As some regionals are turning to more pro-rate flying on certain routes, there is a growing expectation to work with local communities more closely.  In other words, they’re looking for financial incentives and operational support in return for air service.

Thanks to David Lee/Air Transport Association; Joakim Karlsson/MCR Federal and Zia Wadud/Bangladesh University of Engineering and Technology for joining me on this great panel.

Report from the Insurance and Risk Management Conference

By Liying Gu
The ACI-NA Insurance and Risk Management Committee kicked off the New Year with its 12th annual Insurance and Risk Management held in Atlanta with 106 pre-registered attendees, up almost 12 percent over last year’s attendance.

The first session today highlights the business of risk management and important issues that the aviation risk management is facing today. Stephen Caldwell, Director of Financial Analysis, Budgeting, and Risk Management of the Atlanta airport presented an airport’s perspective; while Rick Price, Director of Risk Management and Insurance of Delta Air Lines addressed the session from an airline perspective.

Price discussed Delta’s global network and route growth. He is confident of Delta’s traffic growth in 2011 as he sees lots of gross domestic product growth. According to him, Delta is trying to match capacity in line with GDP growth. In 2011, Delta is looking to add 2 percent capacity, just a little below the US GDP growth as Wall Street likes to see capacity discipline. The wild card is fuel even though the airline hedges 50 percent with 90 days out.

From fleet perspective, Delta is implementing an “up gage” strategy – moving away from smaller regional jets in the domestic U.S. market, which takes the frequency down and increases the seats. Other airlines may employ an opposite strategy depending on their existing route network. By implementing an “up gage” strategy, they are focusing on increasing the margin even though unit revenue may go down. Other airlines may implement a “down gage” strategy, i.e. moving to smaller regional jets, the focus of which is on improving unit revenue.

Staying informed on a carrier fleet plan is important in airport-airline relationship as a key example of information sharing, Caldwell said, as it takes long time to build airport infrastructure.

The risk of a terrorist attack exists as U.S. is a target. The U.S. security system is built on the idea that everybody is a suspect. Price does not quite agree with the “trusted traveler program” as he thinks this may become a weak point. He acknowledges that the airline benefits from FAA’s war risk program and keeps monitoring any change in the program.

Caldwell reported that Atlanta Airport has an Owner Controlled Insurance Program in place aiming to generate more financial benefits under one program. It generated savings of 3 percent of the total $6.5 billion capital improvement program. What’s more, it allows small business and minority companies to get involved in the airport’s Capital Program.

ACI-NA’s Clemmons Promoted to Vice President, Meetings, Convention & Education

Airports Council International-North America (ACI-NA) president Greg Principato this week announced that Deirdre L. Clemmons, CMP, has been promoted to vice president of meetings, convention & education.  Clemmons is responsible for activities related to ACI-NA’s extensive meetings portfolio, leading a four-member conference team.  In her new role, she will also oversee professional development and the expansion of educational opportunities for North America.

“Dee’s unique combination of leadership abilities, attention to detail, and willingness to consider new concepts has helped raise our meetings and educational conferences to new heights”, said Principato. “Under her leadership, I am confident ACI-NA will build on that record of success.”

Clemmons has been with ACI-NA since 2008.  Prior to joining ACI-NA, Clemmons directed conferences for the National Defense Industrial Association and managed conferences and events for Hanley Wood, a business-to-business media and information company. She has more than 11 years of experience in both the association and corporate meeting planning environments.

In 2007, Clemmons earned her Certified Meeting Professional (CMP) designation. She is a member of the Professional Convention Management Association (PCMA), Meeting Professionals International (MPI) and the American Society of Training and Development (ASTD) and a graduate of James Madison University.