AirportBusiness Blogs

Open any newspaper and you will learn—up front with big headlines—that the guvmint needs more money for the FAA and a jillion other things. That’s why a small Wall Street Journal story on page seven last Friday surprised me so much. The guvmint, it seems, is hard at work on a new bill to “bolster” the National Flood Insurance Program (NFIP).

Owners of property in flood plains depend on the guvmint for flood insurance—water damage as opposed to wind and other damage—since commercial carriers don’t want that market. The NFIP, according to the web site of Senator Trent Lott, Mississippi, “is administered by the insurance industry, but it is backed by the federal government in much the same way the Federal Deposit Insurance Corporation (FDIC) backs your bank.”

In other words, the commercial insurance carriers don’t want to put their money on the line so the guvmint—our generous guvmint—steps up to the plate.

I used to wonder why the guvmint would agree to insure what the professional carriers wouldn’t. Why should the rest of us pay for others—often wealthy folks building second homes on the beach—to build where the risk of flood is so high? Ah, but Ralph, I was told, the owners do pay premiums. This isn’t charity.

Now the truth outs. The WSJ informs us that the NFIP lost its collective you-know-what last year in hurricane-related damage. They borrowed from the U.S. Treasury to pay the claims. Not only that, but this new bill “would remove the flood-insurance program’s obligation to repay $20.8 billion in borrowings from the U.S. Treasury for last year’s hurricane-damage claims.”

In other words the NFIP borrowed it from us, and the guvmint wants to “remove the obligation to repay” us!

$20.8 billion dollars! The debt didn’t go away, they just transferred it to the rest of us. If we repaid it—with no interest—at the rate of $10 million per year it would take us—are you ready for this—2,080 years to pay it off! All of this, just so some people can build in risky places—places in which much scientific study indicates we have overbuilt already. Why do we do it? I don’t care what you are told—we do it because the people who want it done have powerful lobby groups.  

Remember this when the guvmint says it isn’t possible to cut the federal budget.

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The jury is still out on trickle-down economics, but trickle-down cost cutting is a reality.

On May 17 The Wall Street Journal (WSJ) ran a front-page story on how airline cost cutting is putting pressure on airports. This story is sorta the reverse of the song about the green grass growing all around, all around. This is more about penny pinching growing all around, all around.

The airlines are hurting so they cut costs where possible. As Wal-Mart proved years ago, one way to do that is to put pressure on suppliers, and airports are definitely suppliers to airlines.

Airports, says WSJ, have had a tendency to build “palatial terminals to showcase their cities and passed on the costs to airlines and passengers.” Airlines, “which have already won concessions from employees, travel agents and suppliers, are now putting pressure on airports to cut costs and fees.”  

The struggle, says WSJ, highlights a “strange fact about the airline industry.” Airlines historically have “struggled to earn profits.” Those dependent on airlines, however, including “maintenance firms, leasing companies, manufacturers like Boeing Co. and city-owned airports feed off the money-losing airline business, but are profitable themselves.”

I have long wondered about all this. I tend to think that all public buildings should be concrete block structures with four straight sides and a roof, no art, few windows and no frills. I am big on convenience and price, short on elegance.

Several years back, when our local airport, Huntsville (AL) International (which does most things very well, BTW), paid just short of a gazillion bucks for aviation art for the then-new terminal, I wondered how that was going to help me get from point A to point B. Still wonder.

Frankly, this seems like a good thing to me. Airline passengers have proved that they want low prices and will put up with a lot to get them. Seems perfectly logical to me that market forces be applied to airports.

Of course it makes absolutely no difference what I think. It is happening. It will continue to happen. There’s nothing I can do about it one way or the other. Good airport managers will adapt to the new market forces. Others won’t.

As usual, it’s fun to be watching!

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Two years ago while attending an air cargo conference in New Orleans I was struck by the attitude of attendees toward the Transportation Security Administration. Instead of the growing animosity toward TSA that seemed to be pervasive at many industry gatherings, the attitude among the cargo group seemed to be more collaborative. A very active industry working group was integrally involved in making recommendations for TSA’s final air cargo security rule, which was released last week.

This comes to mind primarily due to a phone interview on Friday with Pam Hamilton, who heads up the air cargo division for TSA. The final rule is expected to be published (probably this week) in the Federal Register. According to Hamilton, the rule is “a very, very important milestone” for a number of reasons: the creation of a centralized known shipper management system; background checks for the freight forwarder workforce; and, the creation of standardized training guidelines, soon to come from the agency.

From this chair, most significant – besides the actual rule being released – was the fact that this phone interview took place at all. It has been a tough row to hoe getting TSA officials to speak with the press since the agency was created in 2001. Hamilton and her group have been saying for some time now that they want to work harder at getting their message out. Apparently, she meant it. We welcome the change.

Thanks for reading.

jfi

Businesses are told in a blue zillion ways that they should—must—protect workers from injury on the job. (When I worked in the FBO side of the industry, they gave us an OSHA manual that was thicker than a teenaged boy’s collection of Playboy magazines. Nowhere in that book could we find the word airplane or aircraft!)One of the problems in occupational safety is the learning curve for a new operation. It turns out the guvmint is no better at that than business, and TSA has proved it. The following quote is taken from FederalTimes.com:

“In its first two years of existence, TSA was deluged with workers’ comp claims, mostly from airport baggage screeners who hurt themselves lifting heavy bags onto X-ray machines. It had the highest percentage of reported injuries and illnesses of any agency in 2003 and 2004—nearly six times the governmentwide rate in 2004.” Holy cow!

Many reasons are cited for this disaster, but most center around the fact that TSA was a new entity, involved in a job that never existed before. As the kids might say, “Well, I mean, like duh!”

Frankly, the guvmint wouldn’t accept that as an excuse from a private business expanding into a new field. Besides, just how new is the job of lifting and toting baggage? The airlines have been doing it for years with a fraction of the reported injuries for the hours on the job. Also, the guvmint has been regulating people who lift and tote for years. Did they not learn anything from all of that?

Now TSA is trying to turn the safety record around. Perhaps it is time to take some lessons from private industry and a good model would be Georgia-Pacific. When Pete Correll became president and chief operating officer (later CEO) of Georgia-Pacific, he had a problem. Making forest products is a rough business and the safety record was not good. Pete set out to change that. By 1997 the injury rate at Georgia-Pacific had become, according to OSHA, “about one-third the injury rate at the average bank—a place where the scariest piece of machinery around is most likely a photocopier.”

Pete is retired now. Maybe TSA could hire him as a consultant. (Pete Correll, BTW, was a high-school classmate of mine, but it really would not be fair to say that I taught him everything he knows.)

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It’s about a war and a system challenge

The nation, it seems, is split: those who remember 9/11 and the reasons we are in a war on terrorists; and, those want to forget it ever happened, recall our troops, and put our collective head back into the sand – which, of course, is what led to 9/11 in the first place.

The first message from viewing the movie “United 93″ is that everyone who remembers why we’re fighting should take everyone who doesn’t to see this film. “United 93″ brings home that fateful day. It’s a wakeup call for those who have gone to sleep on the dangers we face today, and on the perspective that the terrorists bring to the battle. Our determination must match and exceed theirs.

Much of the movie focuses on the activities of the U.S. air traffic control system on that day. There is much debate going on in Washington right now regarding the future modernization of the ATC system, and its future funding and operation. In fact, ATC is the focal point of the entire future system funding discussion. A segment of the film focuses on replaying taped footage of voices heard momentarily from one of the hijacked cockpits – a replay which indicated early on that more than one aircraft was pirated. I kept wondering how a digital system would have speed up this process (particularly communication between FAA and the military); it could have helped officials who were dealing with the unexpected more quickly recognize the gravity of the situation.

The big lesson of 9/11 was that the world had changed and we needed to change to survive. One of the changes has to be bringing to America the most sophisticated ATC system, one with an operational and oversight structure that allows it flexibility, dependable and predictable funding, and the ability to quickly absorb new technologies. It’s not only critical for the future efficient operation of the U.S. aviation system; it’s critical for response and defense against future attacks.

Thanks for reading.

jfi

As Bob Dylan wrote in 1964, the times they are a-changin’, especially in aviation. I can’t remember when there has been a more exciting time to be alive and watching our industry. True, the future is a great unknown, and some of the possibilities are, as my mother might have said, plumb scary. But you gotta admit it is nothing if not exciting.  

Some of the big-money folks are determined to build and sell a corporate SST. The amount of the investment is downright frightening. It will be years before such a machine actually flies, assuming they get the sonic boom thing solved, but by golly three different groups are working on it, last I heard, and I, for one, can’t wait to see the end result. The Very Light Jet (VLJ) thing is fast coming to fruition, and will probably change the industry forever. We don’t know yet who the winners will be, but the industry should come out ahead. Once there was only the Eclipse. Now it seems that everybody is on the VLJ bandwagon and the parade hasn’t even started. How will they all fare? I don’t know, but damn, it’s fun watching. Likewise with Light Sport Aircraft. LSAs are, like spring, bustin’ out all over. People are putting down serious deposits on these new aircraft, and some of them are nothing short of amazing. Could these be the trainers and recreational aircraft of the future? Nobody knows, but it is exciting.

FAA Administrator Marion Blakey says the ultimate goal is a “robust AIP (Airport Improvement Program);” the proposed cuts to AIP for FY07 are themselves robust. Talking to airports here at the annual meeting of the American Association of Airport Executives, Blakey says the cuts don’t reflect the importance the Administration places on the program, nor the necessary funding levels.

Which of course leads to FAA’s current call for a new way to fund the system - a plan which has been formulated but not yet publicized. Blakey says she expects it to be in the near future; observers say we might not find out the details until after November’s elections. Blakey says that despite proposed Administration cuts, the agency should be able to “support” current projects and initiatives. In the next breath, she explains that will be at the cost of entitlements, which will be cut in half, and the elimination of entitlements to general aviation airports. Unfortunately, the extended Southern drawl doesn’t make it all any more believable.

Among other items of note in San Diego: The discussion that the association is exploring creation of a guidance document or group that would be available for airports looking to get into airline services. Apparently, enough airports have expressed an interest to justify AAAE taking a look. This one is worth watching.

Thanks for reading.

“Hark! Hark! The dogs do bark,
The beggars are coming to town.”

That was the beginning of a Mother Goose rhyme during 16th century England. Methinks it applies today.

Then, the English homeless were begging for food. Today, the beggars want the guvmint to “do something” about the price of gasoline.

They say that the free market “isn’t working” in the case of oil and fuel. Hogwash! The free market is working perfectly!

The price of oil is basically a matter of supply and demand. When demand goes up and/or supply goes down, prices rise. That tends to cut down on consumption (demand) which tends to lower price. That’s the free market and it is working perfectly. The problem is, we the people aren’t happy with the resulting price right now, so we want the guvmint to interfere with the free market.

So far, the guvmint proposes or is already practicing the following interferences, among others:

1) The guvmint subsidizes every gallon of ethanol. Ethanol will not need subsidies once it can be produced and sold for less than gasoline. Guvmint subsidies falsely tend to make ethanol appear cheaper, and this reduces the incentive for manufacturers to produce ethanol more cheaply. Ethanol subsidies also reduce the incentives to work like hell producing other alternative fuels more cheaply.

2) The guvmint brags about investigating oil company profits, implying that profits are bad and perhaps fraudulent. Let them investigate all they wish, but in the meantime guvmint should favorably publicize the profits being made in the oil business. This would encourage others to rush into the market, thus increasing supply greatly and, voila, reducing prices.

3) Subsidizing, via tax breaks, hybrid cars. For crying out loud, don’t they know that people all over the world are working night and day to make hybrids and other cars more efficient? The market is already working feverishly on this. Why should we subsidize hybrid cars and thus reduce the incentive for the free market to really bring down the cost?

Guvmint also says it wants us to use less fuel (those of us who remember the early 1970s have heard this before). Question: If the guvmint wants us to use less oil-based fuels, why would they try to make the damned stuff cheaper by subsidizing it? The high prices already have us cutting consumption.

Why indeed? Because the beggars do come to town, not for food for their families, but for cheap gas for their expensive SUVs. (Ask in private and I will tell you about the medical doctor ranting that guvmint needs to cut fuel prices for his big vehicle.)

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