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.