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Now that Congress is focused on the problems in the airline industry associated with consolidation and lack of competition, we have a unique opportunity to possibly make a difference in the air service provided to smaller communities. It is an understatement to say that since the deregulation of the airline industry in 1978, smaller communities have often struggled to retain commercial air service. Now, as the airlines are experiencing record loads (69.9%) and operating profits ($7.9B), there are some indications that air service to smaller communities may be in for another round of air service cuts. Likewise, the hope and expectation that the new regional aircraft will improve service to smaller communities is also in question. To a large degree, the financial losses experienced by the major airlines between 1989 and 1993 were due to over-capacity, too many seats in the market. As one airline executive put it, "too many seats chasing too few butts." It is clear when one looks at the 1997 growth in domestic Revenue Passenger Miles (5%) versus the growth in Available Seat Miles (3%) that the lesson of over-capacity was not lost on airline managers. Airline capacity is lagging behind the demand for air service. As a result, both load factors and ticket prices have reached record levels. The solution to the shortage in airline seats is, naturally, more aircraft. However, there are several factors that are limiting increases in airline capacity. First, as airlines pump more resources into international markets to take advantage of open-sky agreements, the aircraft available for domestic use decreases. Second, the new aircraft coming on-line for U.S. service will replace older aircraft that are up for retirement. So, the incremental increase in additional aircraft capacity will not begin to catch up with demand until 2001. What about new air service opportunities that might be created by start-up airlines? The Value Jet accident in 1995 has had a dramatic effect on existing and potential start-up airlines. No new carriers started operation in 1997 and in 1996 there were only four new carriers. Recently, Western Pacific and PanAm both ceased operation. Additionally, the remaining start-ups have experienced drops in both load factor and profitability. The combination of predatory marketing practices by major airlines, a reduced supply of cheaper surplus aircraft, and the Value Jet legacy may continue to limit new start-up airlines and air service opportunities. On the bright side, the regional carriers are taking delivery of many new aircraft with 20-30 seat capacity and a variety of regional jets. These new aircraft have the ability to profitably serve smaller markets that, for years, have had gaps in air service. Unfortunately, it appears that the major airlines may utilize the new aircraft of their code-share regional partners to backfill on routes where major airlines are short on larger jet aircraft. In the Northwest, both United and Delta are turning over routes to SkyWest and Air Wisconsin that were formerly serviced by larger jet aircraft. If this practice continues, smaller markets will not realize the air service improvements anticipated as new regional aircraft come on-line. In the past two months, Congress has begun consideration of legislation designed to promote airline competition. At this point, there are several bills being proposed that address everything from slot allocations to market subsidies for carriers serving new and/or under-served markets. The number of legislators interested in the issues associated with the consolidation and integration of the airline industry is growing, but it is critical that we, as airport operators, express our concerns if we expect to see improvements in air service in the short-term. If legislation is going to help the smaller commercial service airports in the Northwest, it needs to stimulate and support new aircraft and operators that serve our segment of the commercial air service market. If you are not already talking to your representatives about air service, I encourage you to do so in the next few days. If you haven't received the information from AAAE on specific bills, give them a call. It is my opinion that we are going to see air service legislation in this session. It is our job to make sure our representatives are well informed before it gets to a vote. |
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