AirportBusiness Blogs

… was the overriding message from Administrator Randy Babbitt at the FAA’s annual Forecast Conference this week. He’s right, of course. At a time when the news is generally negative on aviation activity – airlines and general aviation – this is no time to stop investing in future infrastructure.

In his prepared speech, Babbitt focused primarily on infrastructure investment for a new air traffic control system – NextGen. He comments, “I believe that this aviation forecast is a major point in a very strong business case for NextGen. If you’re thinking that because the numbers are down, there’s no need for NextGen or airport improvements, I would counter that it is unwise to make long-term decisions with short-term information. Aviation teaches us again and again the importance of getting ahead of the curve, and it will punish you if you don’t. It’s just flat-out wrong to contend that sluggish economic growth, high unemployment, or even higher oil prices in the near term are an occasion to ease up on our plans for modernization.”

ACI-NA’s Greg Principato likes to point out that NextGen begins and ends at the airport, and U.S. airports are a critical component in the movement of aircraft. Infrastructure for ATC is critical to the future air transportation system, yes, but so too is infrastructure investment at the facilities on the ground. While for many this is a given – even for some members of Congress – it would be helpful if the FAA Administrator gave it more prominence in such a national forum.

Five years ago when the economy and aviation were robust, FAA was projecting that the U.S. airline industry would transport one billion passengers annually by 2015. That plateau has been moved to 2023. The U.S. airline industry moved some 704 million passengers in 2009.

In sum, FAA’s 20-year forecast for FY2010-2030 predicts domestic passenger enplanements will increase by 0.5 percent in 2010, followed by average growth of 2.5 percent per year during the forecast period. Total operations at airports are forecast to decrease 2.7 percent to 51.5 million in 2010, and then grow at an average annual rate of 1.5 percent reaching 69.6 million in 2030. At the nation’s 35 busiest airports, operations are expected to increase 60 percent from 2010 to 2030, says FAA.

Comments Babbitt, “This forecast makes a very strong business case for NextGen. Without NextGen, we won’t be able to handle the increased demand for service that this forecast anticipates.”

FAA does a good job each year of providing a barometer of where the industry is today and where it’s headed. The fact that many in Congress have come to the realization that ongoing NextGen investment is critical is encouraging. Now if we can just get the legislators to recognize that long-term system reauthorization is just as critical. But then, the latest word is that the legislation is now being held up because of the dispute over unionizing FedEx workers. Another day, another excuse.

Thanks for reading. jfi

… he is “cautiously optimistic” regarding a U.S. and global economic recovery in 2010, and notes that those companies involved with infrastructure building are best poised for near-term success. William F. ‘Ted’ Truscott, a Chief Investment Officer with Ameriprise Financial, was addressing airports, consultants, and government officials attending last week’s Airport Planning, Design & Construction Symposium in Atlanta. The event is co-sponsored by the Airport Consultants Council and the American Association of Airport Executives.

Truscott says “the whole world is growing again” with some exceptions, notably Greece. In particular, China and India continue to report strong growth rates which are directly linked to massive infrastructure investments being made in those countries. Those countries, along with Brazil, offer a tremendous source of demand for infrastructure-related providers, relates Truscott.

Similarly, he estimates that the U.S. will need to invest some $2 trillion in infrastructure investment. He points out that two-thirds of the federal economic stimulus funding has yet to be spent, though that will likely be targeted at non-aviation transportation. The trickle-down effect, however, will have an impact. Of course, the $1.1 billion of stimulus funding targeted at airports was disseminated quite expeditiously by FAA over the past year.

Overall, Truscott sees a “sluggish” economic recovery for the U.S. through the end of the year, with unemployment holding at around 9 percent. Normally, he says, with a deep recession like the one the country is recovering from, forecasters would have expected growth rates of 6-7 percent; instead, the U.S. will see growth of some 3 percent this year.

Truscott foresees a resurgence in technology investment, following a drop over the past decade. He also sees opportunity returning to Wall Street, and expects the stock market to see 10 percent growth in 2010. He sees the Federal Reserve maintaining low interest rates, which he calls “good news” for credit creation. And, on the subject of a downturn in commercial real estate, Truscott says “we view it as an opportunity” and says that the major banks in the U.S. already survived their “stress test” in 2009. However, he adds, “There are going to be issues at some of these smaller banks.”

The “biggest issue” facing the U.S. economy, Truscott says, is debt. He relates that the U.S. is currently holding a debt level that is the equivalent of some 12 percent of the economy. “We can only sustain a 3 percent deficit,” he comments.

Getting specific about aviation, Truscott predicts an increase in business travel over the coming year. There is no substitute for “face to face” contacts and that Internet webinars and video conferencing can “only go so far” in promoting commerce.

Thanks for reading. jfi

Last February 1, this Blog explained that my son Brett—a side scan sonar operator/technician on a recovery vessel—was searching for the Ethiopian airliner that crashed into the Mediterranean Sea shortly after departing Beirut, Lebanon. I promised more details when they came in.

Details didn’t come very quickly. Brett has been constantly at sea since that time, and we heard nothing from him. He called from Lebanon yesterday and we finally learned that his ship did find the airliner within a few days after my Blog was posted.

After the airliner was found by the ship’s sonar, a robot was sent down to take pictures for positive identification. The area was then mapped by the ship, and Lebanese divers went down and recovered the “black” boxes. I had read in the media about the boxes being found, but no mention was made of Brett’s ship, so I wasn’t at all sure if his ship was involved.

Wish I could tell you more, but I don’t know anything else except what is readily available through normal news sources.

The only thing else I can say for sure is it that Brett arrived back in the states today—his birthday, BTW—and we look forward to visiting with him during the month he will be here.

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… like watching the construction of a new airport, which is what they’re up to in Paulding County, GA. They’re building a first class business aviation airport here some 40 miles northwest of downtown Atlanta. In the previous 10-15 years, much of Atlanta’s growth was to the northeast; now it’s headed west.

According to Paulding Northwest Atlanta Airport director Blake Swafford, the airport’s official opening will be April 30. The airfield is already open … during our interview, I watched through the window of the temporary construction offices a Cessna 172 doing touch-and-gos.  Cool.

The county-sponsored airport is in the process of negotiating with a private sector company to provide fixed base operation services. Swafford says the decision was made to go with the private sector for services primarily for two reasons: a better level of service; and, the private investment dollars that can bring with it new hangars and new sources of revenue.

Through the years I’ve had the opportunity to visit a number of new airport sites – hard to believe in an era when it’s more commonplace to see established airports disappear so they can become residential developments, industrial parks, or … worse yet … strip malls.

Let’s see. There was the new Denver International, which when I first visited was a massive earth-moving project with a developing terminal stuck in the middle. There were Caterpillar trucks and graders everywhere … it was invigorating to see an industrial complex in the making, all in the name of creating a new airport.

There was Stafford, VA, where they built a new reliever some 30 miles south of Washington, D.C. And Concord, NC, where they built a new airport some 30 miles north of Charlotte adjacent to a legendary NASCAR track. And there was the Alliance Airport north of Fort Worth, where the Ross Perot Group turned a small Texas town and bunches of acreage into the massive residential/commercial development it is today. Remarkable. If anyone doubts the ability of an airport to generate economic activity and jobs, just read the history of Alliance.

Paulding Northwest director Swafford says the two key lessons he’s learned through the process of building a new airport is that one can’t plan too much (music to FAA’s ears) and buy as much acreage as one can afford, to inhibit encroachment.

It’s just so much fun being around the development of a new airport. It’s like a rebirth. Guess I’ve had the lobotomy.

Thanks for reading. jfi

… the focus is on policies that can help revitalize general aviation. At the annual Washington briefing, General Aviation Manufacturers Association president Pete Bunce expressed GAMA’s continued support for air traffic control modernization through coordinated government/industry development of NextGen and the Single European Sky ATM Research (SESAR) initiative.  “The FAA made important progress in the implementation of NextGen in 2009 with initial deployment of the ground infrastructure and the publication of technical standard orders (TSOs) for Automatic Dependent Surveillance – Broadcast (ADS-B),” explains Bunce.  A key next step, he says, is an acceleration to equip aircraft with the avionics needed to utilize new satellite-based technologies.

Adds Bunce, “As we work our way out of this severe recession, pro-growth, pro-manufacturing measures and policies, such as bonus depreciation and improving credit availability, will be crucial to allow our industry to bring back lost jobs.  The right policies will have a profound impact on the success of thousands of companies and communities that rely on general aviation through the more than one million jobs that our industry supports.”

The GAMA numbers:

Meanwhile, Sparta, NJ-based Brian Foley Associates, an industry consultant, reports that its projections show GA “deliveries rising at a steady 2.7 percent per year (Compound Annual Growth Rate) between now and 2019,” says president Brian Foley. In all, some 8,900 business jets worth $170 billion will be delivered through the period. According to Foley, some 48 percent of these will go to non-North American markets, compared to a historical 30 percent — a major shift.

The consulting firm also offers projections on fuel usage. According to Foley’s data, some 1.6 billion gallons of jet-A were used by business jets in 2009, reflecting the drop in flying hours caused by economic factors. Foley forecasts 21 billion gallons to be consumed through the coming decade, with the annual average reaching 2.5 billion gallons in 2019 – a 57 percent increase.”

* * *

A final note …
The National Air Transportation Association recently announced that Gary Driggers, a long-time executive at Midcoast Aviation, is this year’s recipient for the William A. "Bill" Ong Memorial Award, the association’s highest honor. Driggers, a former NATA chair, recently retired from Midcoast Aviation after 22 years of service. He got into the business after serving as a helicopter pilot in Vietnam.

The list of Ong award recipients reads like a historical ‘Who’s Who’ of fixed based operators. The addition of Gary Driggers complements that list well. Congratulations to a long-time industry friend.

Thanks for reading. jfi

Last Thursday I arose at 4:00 a.m. in a hotel in Nashville, TN, to catch a 6:00 a.m. flight to Dallas. I distinctly remember thinking, “Well, I’m just going to Dallas and will return late this afternoon. I surely don’t need hat, gloves or overcoat to go to Dallas.”

Do any of you remember what happened in Dallas on Thursday, February 11? It snowed—hard—in Dallas all day and for all I know that night. It snowed great, fluffy flakes at a near-blizzard rate without letup.

At 3:00 p.m. my meeting (with the nice folks at Turbine Aircraft Services, Inc.) was over and I returned to DFW to fly back to Nashville. My flight was canceled, but, no sweat, American had already rebooked me on a later flight. We boarded that flight only a half-hour late, which I figured was pretty good for a Texas airport on a snowy day.

Then it took three and a half hours to get the airplane deiced. The entire planeload of passengers clapped and cheered as the wheels left the ground.

The interesting thing is that nobody on the plane seemed mad or even irritated. All in all, we were a pleasant group. Nobody was snarling. I’ve thought a lot about that. How did American pull that off? In the first place, we all knew that it was not American’s fault. Nor was DFW to blame. True, deicing took much longer than it would have at a northern airport, but we understood that, too.

Also, the American crew kept us well and frequently informed. The captain began most of his announcements with a deep sigh and words such as, “Well, folks—sigh—it looks like we blew the estimate again.” We got the definite opinion that he was on our side, and doing the best he could.

When I was telling my brother, an infrequent flyer, about the ordeal he said he wouldn’t have put up with it. He would’ve gotten off. Why, he asked, didn’t I get off? Well, I told him, I wanted to go to Nashville.

I think everyone else felt the same way.

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… in what might be viewed as a sign of the economic times for the airline and airport industry. The proposed rate increases are directly related to the massive $15 billion O’Hare Modernization Program (OMP), which still needs two more runways and a western terminal built to reach completion.

Chicago newspapers report that American and United in a February 3 letter — which the Tribune labels “scorching” – to aviation commissioner Rosemarie Andolino that the carriers will not continue to discuss funding of Phase Two of the O’Hare expansion until the city rethinks its current strategy. According to the Sun Times, “Airlines are being charged an increase of 15-17 percent in rental rates and 38 percent in landing fees. The landing fee increase is being used to fund prepayment of debt not scheduled to mature until after 2030” – the latter being a major point of contention, along with the proposed $3 billion western terminal, which the carriers say they don’t need.

According to Crain’s Chicago Business, “The airlines were expecting an increase in fees to begin paying off bonds sold in 2005 to pay for the $3.1-billion first phase of the O’Hare expansion project, which was completed in late 2008. But the airlines, which are still losing millions of dollars, were outraged to find out that the airport also wanted to prepay some debt ahead of schedule.

“But they argue that the city only needs $5.40 per 1,000 pounds to pay the scheduled debt related to the first phase of the O’Hare expansion. The rest will go to prepay debt, a difference that equates to $63 million annually in extra payments for all of the airlines at O’Hare. The airlines say it is ‘fiscally irresponsible . . . to be prepaying existing debt with a 4 percent variable interest rate.’” Crain’s reports that terminal rents will rise some 28 percent in 2010 at O’Hare.

The Chicago Department of Aviation in a statement maintains that the rate increases were anticipated as part of the OMP Phase 1 funding agreement reached with the airlines in 2003. It also says it prefers not to negotiate with airlines through the media, which at present appears to be what is happening.

Chicago Mayor Richard M. Daley has a history of getting what he wants. Yet, even the powerful mayor may have to accept a new reality: that the economics of the airline industry have changed dramatically. O’Hare isn’t the only airport getting resistance for infrastructure projects – Sacramento International, for one, significantly altered its terminal construction plans because of airline considerations.

Of course, with one stroke of the pen President Obama, a product of Chicago politics and a Democratic ally, could sign an O’Hare stimulus plan and make the discussion moot. The way they’re printing money in D.C. these days, it’s not the craziest of thoughts.

Thanks for reading. jfi

… the aviation sector gets a reprieve. The alphabet groups in Washington breathed a collective sigh of relief with the release of the proposed Obama budget, expecting a renewed user fee battle following the President’s suggestion a year ago that new fees would be in the offing. Even the response of the Air Transport Association, which has led the call for new fees to get business aviation to pay more, was fairly muted in its response. ATA’s primary criticism was regarding the proposed increase in the security fee paid by passengers.

Some selected excerpts from the trade groups …

NBAA president Ed Bolen: "The proposal introduced by the White House today stands in clear contrast to language we saw last year. Our community, which has been so energized and mobilized by the user fee threat, should be heartened by this news.”

NATA president Jim Coyne: “While NATA is pleased with the Obama administration’s choice to omit a user fee proposal in the FY 11 budget, the industry must remain vigilant to ensure that any future user fee proposals are unsuccessful."

AOPA president Craig Fuller: “Today’s budget proposal makes it evident that our voices were heard. Someone in the Obama Administration decided to hit ‘pause’ when they came to the aviation user fee option.”

ATA president James C. May: “While we are pleased that the federal government is supporting significantly increased federal funding for Advanced Information Technology machines and Federal Air Marshals, we are disappointed that they again proposed increasing passenger security fees by an additional $7 billion from 2012 through 2015."

AAAE president Chip Barclay: “Airport executives remain committed to seeing the enactment of an increase in the federal cap on local Passenger Facility Charges to $7.50 with indexing for construction cost inflation along with a permanent extension of relief from the AMT penalty for airport bonds. Taken together, these measures would improve our infrastructure, stimulate the economy, and create good-paying jobs.”

ACI-NA president Greg Principato: "Since NextGen begins and ends at the airport, we are glad to see that the President has included $1.1 billion to help speed the development and implementation of a modernized air traffic control system. Airports look forward to working with the Administration and FAA on providing the ground infrastructure necessary to make NextGen a reality."

One thing that the industry has become united on in recent years is support for the NextGen air traffic control modernization program – from installing the critical infrastructure to calling for government support for equipage of aircraft. For the airport community, top issues that remain include the PFC increase; AMT relief; and continued funding for the Essential Air Service program. A concern in the Obama budget is that it “zeroed out” funding for the Small Community Air Service Development program, which assists airports in attracting new air service – an ongoing critical issue for many communities.

With the user fee debate (temporarily?) behind us, perhaps the legislators on Capitol Hill can finally get to passing long-term FAA/industry reauthorization. But then, that could be just too much to ask.

Thanks for reading. jfi

Like many of you, I was interested with the few details available when the Ethiopian Airline aircraft crashed into the Mediterranean on January 25. Other than the fact that all 90 on board were presumed dead, very little information followed, so I didn’t think about it much more. The accident was, after all, thousands of miles away.

Then, on the following Saturday, we got a telephone call from son Brett, our youngest, and all of a sudden the accident became quite interesting. Brett is a side-scan sonar operator/technician on a recovery vessel and he calls from places like England, Gibraltar, and Nova Scotia. All of his calls are important to us, but this one was even more so.

“By the way,” he asked, “do you know about the Ethiopian aircraft that crashed into the Mediterranean? We’re looking for it.”

Well, I’ll be danged.

Brett was calling from Beirut, Lebanon. The airplane crashed just off the Lebanese coast, and it seems the Lebanese government contacted the company Brett works for soon after the crash. Their ship is now actively searching for the aircraft with the side-scan sonar that Brett (and others) operates. All of a sudden this accident from thousands of miles away became much closer to home—kind of in the family, so to speak.

Oh, I do hope they find it.

I would fill you in on all the details, but I don’t know the details and may never know them—but if I do, you can read about it in a later Blog.

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… much of the discussion centers on economic recovery and pending security regulations for business aviation. Some 100-plus leaders of fixed base operations and others were on hand for the reformulated meeting hosted by the National Air Transportation Association. The Leadership Conference is now being held in tandem with the NBAA Schedulers & Dispatchers Conference, being held at the convention center here the rest of the week.

Richard Aboulafia, VP of analysis for the Teal Group Corporation and a favorite on the prognostication circuit, led off the NATA event saying that “I feel very good about saying the worst is over. We’ve got stabilization. The next step is recovery; then growth.” During the past year, according to Aboulafia, business aviation in North America has seen a 30.5 percent reduction in utilization, with the most notable drops being in the mid-size and smaller corporate aircraft segments.

Aboulafia also says that the used aircraft segment has also made the turn from its downward spiral and “things have stabilized.” Yet, there is still a glut of sorts in the marketplace, which will in turn impact new aircraft deliveries for some time.

He is optimistic, he says, about business aviation long term, and forecasts that some 10,117 new aircraft will be delivered over the next ten years, at a value of some $168.2 billion. That said, Aboulafia sees a sluggish 2010. Looking forward he says the key barometer for business aviation is corporate profits, and he recommends tracking the Bureau of Economic Analysis (www.bea.gov) for those numbers.

On the security front, one of the original leaders of the Transportation Security Administration – Asa Hutchinson – was on hand and expressed concern that the agency has been without a leader for the past year. A central issue regarding that appointment has been the unionization of TSA employees, which he opposes. Comments Hutchinson, “I’m opposed to the unionization of TSA because it’s a security organization.” He fears that TSA could find itself having to negotiate with union bosses to transfer employees or make other moves.

Regarding business aviation, Hutchinson says that there is a danger of TSA shifting its strategy and treating bizav like the airlines. It is not the same threat, according to Hutchinson, who comments that TSA should “analyze the risks, first and foremost” before imposing new security requirements on the industry. He does point out that TSA’s original Large Aircraft Security Program proposal was met with such industry opposition that the agency pulled it for a rethink. In all more than 7,000 industry comments were sent to TSA, which got the agency’s attention. “Your voice was heard,” he says.

Thanks for reading. jfi