An Industry in a State of Flux

Since our annual ‘State of the Industry’ report of June 2008, the world has turned upside down. About the only positive since that last report is that the price of oil, skyrocketing one year ago, has stabilized. Serious issues challenge the aviation industry — from airports to airlines to business and general aviation. For a comprehensive perspective on the issues and the potential solutions, AIRPORT BUSINESS asked the key trade groups representing the various aviation interests to offer their insights into where the industry is headed overall, and the specific challenges facing each group. Their edited responses are featured here, along with insights from a business aviation analyst.

Interestingly, one of the top issues of the past three years, reauthorization of the Federal Aviation Administration and the U.S. aviation system, appears to be nearing a resolution.
The two top roadblocks that have held that up in Congress have been proposed new user fees and the ongoing dispute between FAA and the air traffic controllers. Congress has at least temporarily moved past the user fee issue, while a mediation group has been set up with former FAA Administrator Jane Garvey to resolve the controllers dispute.

Yet, the Obama Administration indicated this spring that the user fee debate may be taken up another day.

On May 21, the U.S. House of Representatives passed H.R. 915, the Federal Aviation Administration (FAA) Reauthorization bill, authorizing programs under the FAA’s jurisdiction through 2012.
The bill provides $16.2 billion for the Airport Improvement Program and a $2.50 increase in the Passenger Facility Charge (PFC), raising the ceiling from $4.50 to $7 — something which airport groups have pushed for heavily, although they sought a greater cap. According to a survey by Airports Council International-North America, airports in North America have identified $94.3 billion in infrastructure improvements that need to made over the next five years.

As ACI-NA president Greg Principato states, “Aviation in North America has, and will likely continue to be, cyclical.”

FAA’s most recent estimates released this March predict passenger enplanements in the U.S. will drop 7.8 percent in 2009, followed by average growth of 2.7 percent through 2025. Last year, FAA predicted that the U.S. carriers would transport one billion passengers by 2016; they are not expected to do so now until 2021. In 2008, domestic enplanements dropped to 679.6 million, down from 690.1 million in 2007.

Regarding general aviation IFR operations, FAA sees total ops dropping some 5.5 percent in 2009, followed by an annual growth rate of 1.7 percent.

Meanwhile, airlines in the U.S. and globally continue to bleed money. With each new forecast by the International Air Transport Association comes more dire projections on airline losses for the foreseeable future — that despite lower fuel costs and dramatic cuts in capacity and personnel.

Among the issues the trade groups agree should be at the top of the list is the transformation of the U.S. air traffic control system through the proposed NextGen implementation. FAA estimates the cost of delays to the industry because of an outdated system at $9.4 billion a year. NextGen has become a priority with Congress as well, and is expected to be targeted with a significant increase in funding.

Business and general aviation are down in 2009 by 30 percent and more, depending on the segment and the region. New security regulations, they say, further threaten the industry. However, there may be relief on that score via an amendment to the FAA reauthorization bill which calls for restraint by the Transportation Security Administration when issuing Security Directives.

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