AirportBusiness Blogs

… and the agency is on the hot seat to get the money disseminated. Speaking at the AAAE/ACC Airport Planning, Design & Construction Symposium being held this week in the Mile High City, Benito ‘Ben’ DeLeon, director of FAA’s Office of Airport Planning and Programming, advises airports that they will play a key role in getting the dollars doled out at the rapid pace dictated by the American Recovery and Reinvestment Act of 2009. He calls it “a real tight schedule.”

DeLeon says the airports division has 120 days in which to distribute 50 percent of the $1.1 billion targeted for airports. The timeline breakdown: 30 days for applications; 30 days for agency review; 30 days for awarding the grants. FAA was working to get out the specific guidelines to the airport industry by the end of this week, or early next week at the latest. Any funds not distributed by February 2010 will be lost, he says.

The bill waives the 5 percent match which usually is required for FAA grants for most airports; however, larger airports that fall under the 75/25 grant/match formula are not being given the waiver. Thus, says DeLeon, the final amount of funds initially distributed will likely be in the $850-900 million range.

One challenge – a significant concern for consultants attending the conference – is the ‘Buy American’ provision in the bill, says DeLeon. It’s not mandatory, but airport grant applications that include non-U.S. suppliers will require a special waiver from FAA, he says.

On the subject of how the dropping prices of commodities – concrete; copper; steel; etc. – might impact airport grants, DeLeon says “it remains to be seen.” Central to that answer is how the stimulus bill impacts other segments, particularly highways. Competition for supplies and contractors will heat up, he says, and highways are a much more dominant force in this arena. Thus, at the end of the day it could be a wash, or prices could again begin to rise due to the increase in demand.

Overall, attendees at this year’s design/build symposium were cautiously optimistic. The legislation intended to stimulate has done just that, at least in terms of providing some positive momentum and an attitude shift. The ball is now in FAA’s court.

Thanks for reading. jfi

… a key question is: How will that extra billion targeted for airports in the Washington stimulus bill impact the system? If there’s an event at which one can expect to find some answers, this conference is it.

Officially, it is the Airport Planning, Design & Construction Symposium, and it brings together airports, consultants, FAA, TSA, designers, architects, planners, etc. The American Association of Airport Executives and the Airport Consultants Council jointly host the event.

While Congress continues to mull over a long-term FAA and aviation system funding bill, which is expected to bring $3 billion-plus annually into the Airport Improvement Program (should a bill actually ever be passed), the stimulus bill is injecting some immediate money into the system. It’s for projects that stand at-the-ready. Like everything else with this bill, the devil will be in the details.

Heading into the conference, there are a lot of questions. Like, how will the dropping prices in commodities (concrete, steel, copper) affect bids for airport projects? There are indications in the marketplace that the bids are coming in lower than expected. That would seem to indicate that the $1 billion (and future AIP monies) could stretch further than anticipated.

On Friday, we’ll run a follow-up blog to let the audience know how the discussion went on this hot topic, and what the potential impact will be. See you then.

Thanks for reading. jfi

Going to aviation conventions is fun and educational. Going to one again is even more so.

In January I spoke for NBAA’s Schedulers & Dispatchers (hereinafter called S&D) for the 2^nd time. What a difference. The first time was before September 11, 2001. Attendees’ worlds have changed since then. As their first chairperson, Gerald Graham, told me, the three biggest changes since have been security, security, security.

This was the S&D’s 20^th.anniversary. They are proud of that, and rightfully so. The business has changed a zillionfold since then, and they have adjusted and grown successfully.

This week I speak for Women In Aviation (WAI) for the 5^th time. It will be a wonderful experience. The first time I knew only Dr. Peggy Chabrian; this year I expect to meet many old friends. This is WAI’s 20^th anniversary also, and the group has grown like a weed during those years, both in size and in importance to the industry. Their exhibitor and sponsor lists read like a Who’s Who in aviation. I’m looking forward to getting back. Those women—and some male members, now—are industrious and determined people. I like them.

In April, I speak for the Aviation Insurance Association (AIA) for the 4^th time at their annual meeting in San Francisco. They are a fun and hardworking group. One year a non-aviation friend met me at the Tampa Airport for coffee, then drove me to the AIA meeting. As luck would have it, the hotel had experienced some kind of electrical problem, and AIA members had been temporarily evacuated from the building. They were standing outside the front door when I arrived, and immediately pretended to be out front for the purpose of welcoming me. They made a big (and loud) deal of it, and my friend remains impressed to this day.

I really like conventions. You learn something new at each one and usually it’s something important and exciting. Meeting old friends warms the cockles of one’s heart and making new friends is equally special.

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… and the initial reaction from this corner is: No Creativity.

Last week I highlighted the new media blitz being undertaken by Cessna to promote the aircraft as a business tool, following months of corporate aviation bashing on Capitol Hill. Now, appropriately, the National Business Aviation Association and the General Aviation Manufacturers Association are getting into the game, resurrecting the ‘No Plane No Gain’ advocacy campaign first launched in 1993.

Comments GAMA CEO Pete Bunce in a press release, “The contributions of business aviation to our nation’s employment, commerce, competitiveness, and health are profound but not always well understood. We are launching this new multi-media educational campaign to get the word out that business aviation is working for America. It is responsible for well over 1 million manufacturing and service jobs, and is one of the few industries that contributes positively to our nation’s balance of trade. It is also serving as a lifeline for communities all across the country that are seeing scheduled airline service being reduced or eliminated.”

The PR also states that the new initiative “will take full advantage of the changing ways people receive and process information today while building on proven advocacy techniques.” This includes a new website, www.noplanenogain.org.

Personally, I like Bunce’s line about “serving as a lifeline for communities.” At a time when just about everyone is in agreement that the world has changed and new approaches are called for, a stale ad and information campaign is just that – stale.

Managers at airports and aviation service companies across the U.S. well understand how corporate aviation connects their communities to the global business world. That is the overriding message that needs to be conveyed to the masses.

How about: “Corporate Aviation – Connecting Commerce, Communities” … ?

Seems to me that the industry remains in a justification mode.

Thanks for reading. jfi

… while AAAE testifies on the need to stimulate U.S. airports.

At a time when corporations are curtailing their flight activity due to economic conditions, or because of cowering to bad publicity, Cessna Aircraft Company is demonstrating once again why it is a leader in this industry sector. Readers of today’s Wall Street Journal couldn’t miss the full-page ad that is part of Cessna’s new campaign to promote the business tools they sell – that is, aircraft. The headline reads: “Timidity didn’t get you this far. Why put it in your business plan now?”

As Cessna CEO Jack J. Pelton says in a press release issued today, “We think it’s time the other side of the story be told.” Indeed. (For more on the campaign, visit www.cessnarise.com.)

Meanwhile, on Capitol Hill, Jim Elwood, A.A.E. airport director at the Aspen-Pitkin County (CO) Airport and chair of the American Association of Airport Executives, is testifying today before the House Subcommittee on Aviation/Committee on Transportation and Infrastructure. The House is once again taking on long-term FAA reauthorization, but the current stimulus bill was intertwined in his testimony, released yesterday.

As in the past, AAAE is pushing for an increase in the passenger facility charge cap from $4.50 to $7, if nothing else to keep up with inflation; long-term reauthorization; adequate funding for the Airport Improvement Program; investment in air traffic control modernization; and, installation of in-line baggage screening systems at airports across the U.S. (You know, that little item which Congress directed two months after 9/11 but has yet to fully fund.)

A couple of other items worth noting in Elwood’s testimony …

1. A call for suspension or elimination of the alternative minimum tax (AMT). “Federal tax law unfairly classifies the vast majority of bonds that airports use as private activity – even though they are used to finance runways, taxiways, and other facilities that benefit the public,” explains Elwood. “Due to the current financial crisis, virtually no long-term airport AMT bonds have been sold in the past few months. Consequently, airports are being forced to either postpone key infrastructure projects or find other sources of short-term financing.”
2. A call for increasing to $50 million annually the funding for the Small Community Air Service Development Program, intended to help cities attract and sustain commercial air service. According to Elwood, DOT received 66 proposals from communities in 32 states requesting more than $36 million last year. In September, DOT awarded grants to 16 communities in 12 states. However, a key concern is how much the program is costing DOT to administer it. Comments Elwood, “Airport executives were shocked to learn that of the $10 million that Congress appropriated for this program, only $6.85 million is actually slated to go to small communities that need assistance. According to DOT’s order, the other $3.15 million will be used to cover ‘current and future administrative support costs.’”

AAAE estimates that FAA’s airports division uses some 2 percent of AIP monies for covering the cost of administering the program. The SCASD program, however, eats up 32 percent of funds.

If what’s going on in the “stimulate me” environment of D.C. these days doesn’t scare people, the subsequent costs of administering the barrage of programs ahead should. Count on it – not too far down the road a major media story will be the vast amounts of money flushed down the toilet of bureaucracy because of poor administration and/or oversight.

Thanks for reading. jfi

In my last BLOG I opined that as long as the guvmint was determined to spend money on recovery it might be better for them to use that money to hire people to improve our neglected infrastructure rather than bail out Wall Street, banks and manufacturers. I was pilloried with comments accusing me of defecting from my free market beliefs, abandoning Adam Smith and, in general, attacking the foundations of he U.S.A.

Let it be known that I do hereby repent, apologize, and grovel. I see the error of my ways and promise to go and sin no more.

That being said, let us move on…

The airlines currently enjoy a warm fuzzy feeling of good will from the public, as well they should. There has been no fatality on a domestic flight for two years, and the “Miracle of the Hudson” has warmed the cockles of American hearts.

Corporate aviation, on the other hand, is wearing the devil’s horns through, as nearly as I can tell, no fault of their own, but instead from the ill-will generated by Detroit’s Big 3 when they flew three corporate jets into Washington to beg for money.

All of us should jump on the airline bandwagon and bemoan the attack on corporate aviation. Businesses—even industries—have been built around the utility of corporate aviation.

Like anything else, corporate aircraft can be abused. One recently-ousted CEO spent over one million dollars decorating his own office. That included an $87,000 rug, a $68,000 credenza and $800,000 paid to a “designer.” Now that’s abuse. But nobody has come out to attack the rug and credenza industries.

 … says that U.S. airlines and airports will be in a retrenching mode in 2009. The group says the U.S. air carriers will have 41 million fewer passengers this year and it doesn’t foresee a return to 2008 levels until after 2014. (View the Research Report at www.aviationplanning.com.)

As far as airline and airport forecasting goes, Boyd is as good as it gets. The company has been making its projections since 1992. Back in that era, co-founder Mike Boyd was one of the first (if not the first) to predict the onslaught of regional jets onto the U.S. transportation market, as communities across the nation sought to rid themselves of turboprops, which were viewed then as some sort of second-tier travel experience. A decade later, it was Boyd who was among the first to predict the decline of the RJs, primarily due to their inefficiency when the price of oil reaches a certain price level.

The Boyd Group’s latest report offers three projections: high, low, and baseline demand scenarios, with much of the forecasting based on the depth of the current recession and consumer confidence. Another caution is the circus now going in Washington under the guise of job growth.

For airports, a few Boyd notes:

• U.S. airports can expect to see almost 50 million fewer boardings this year over 2008, which was already approximately 2.6% down from the year before.
• Concession and other airport revenues will experience a corresponding dropoff
• Leisure destinations and communities dependent on one or a few industries will be affected most.
• Passenger facility charge (PFC) revenues will see a reduction of $150+ million in 2009 and over $220 million in 2010. Overall, airports will capture $573 million less in PFCs between 2009 and 2011. (Says Boyd: “This is one more indicator of the importance of raising the PFC cap to $7.00.”)

The airport industry has been calling for raising the federal cap on PFCs from $4.50 to $7. What has been a political hurdle in D.C. should be a no-brainer, says Boyd, despite airline industry objections. Says Boyd, “If passengers will calmly pay $2 just to get a drink of water on a four-hour flight, an additional $2.50 in PFC charges won’t be noticed.”

Boyd also projects that the feds will collect $4.9 billion less in aviation tax revenues this year. The group aptly notes, “The consolation here is that the feds largely aren’t using the money for aviation, anyway.” For three decades the U.S. Congress has been devising ways to siphon off those aviation tax monies into non-aviation programs – that “business as usual” thing we keep hearing about from our new President. Yet, on that same theme, Boyd cautions about the potential for new carbon taxes or pollution offsets that at the end of the day will do nothing for transportation and probably little for the environment.

Thanks for reading. jfi