A Discussion With David Plavin

WASHINGTON, D.C. — He has led the Airports Council International - North America through the high growth of the 1990s, the capacity crisis, 9/11, and the ensuing debate over security. David Z. Plavin, who is retiring from his post as ACI-NA president, will officially hand over the reins to Greg Principato (see sidebar) at the group’s annual meeting in Toronto in September.

During this summer’s annual ACI-NA/AAAE Legislative Issues Conference in Washington, D.C., Plavin sat with AIRPORT BUSINESS to discuss the state of the industry and the issues facing it. Following is an edited transcript.

AIRPORT BUSINESS: Is there anything you’d like to discuss up front regarding the industry?

Plavin: It seems we are headed for fundamental change in the way the business works. Nothing in this business is working right. We’re not going back to $30/barrel oil anytime soon. Even Southwest agrees that if they hadn’t figured out a way to hedge fuel they’d have lost their shirts in the last couple of quarters.

Now the question is, what happens and what does the federal government allow them to do?

The other part of it, which I’ve just come to understand, is there are an awful lot of people who have figured out that they can make money by lending it to a company in bankruptcy. They can charge high rates, they can guarantee that they get paid. The aircraft leasing companies would rather have their rental payments reduced somewhat than have the planes put back to them. So they’re willing to give these guys a break.

A whole bunch of people have an interest in maintaining the status quo, from the point of view of keeping these darling airlines viable.

The air traffic control system is underfunded and underdirected, in the sense that given the kind of Congressional oversight they have to live with, I don’t see how it’s possible to manage it in a businesslike, cost-effective way.

And with security, I don’t see how the security needs are going to be dealt with, given the current inclination and rules that we have to live with.

AB: Regarding the airlines, when you look at what’s happening with pensions and federal relief, it would seem people ought to be in an uproar over it.

Plavin: I don’t understand why we have a pension law that has been routinely ignored for years. That is to say, requiring full funding of accumulated pension liability. Then everybody is sort of surprised at how much unfunded pension liability there is.

With these kinds of laws it ought to be, get your house in order, fund it properly, or go out of business.

But, frankly, the federal government set this in motion when they took deregulation. And with deregulation the winner turns out to be the low-cost provider. Well, if the winner is the low-cost provider, anybody can come in, not have the costs that these legacy carriers had, and will by definition win the game. We also have a policy in this country where we say, if you’re a have-not we favor you.

If you’re a have, we figure out a way to limit what you can do.

I think ultimately the airlines are going to merge together, but that’s only half the issue. The other half is, what happens to the capacity that all of this competition is generating? As they’re all scratching for incremental revenue they’re all putting all kinds of new capacity into the system. The interesting thing for me is, if you look at the impact on airports and air traffic control, it puts huge burdens on them, at the very time that the federal government is being squeezed for resources.

If you look at the Trust Fund payouts over time, in the last few years more and more the Trust Fund is being used to pay the salaries of air traffic control guys and less and less for infrastructure investment, either for ATC or airports. If you’re not going to get any federal money, where’s the infrastructure come from?

AB: Any additional thoughts on the ongoing security debate?

Plavin: Take passenger screening; it’s well done; the guys are well-trained; they’re properly compensated, for a change, there aren’t nearly enough of them, yet at the same time we’ve got all of these consumer liaisons, and attorneys, and airport and airline liaisons, and federal inspectors who add no value to the security process. But the screeners, who really make a difference in terms of how people move through the system, there aren’t enough.

Meanwhile, there’s totally inadequate involvement in baggage screening technology. Totally inadequate. All of the things we’ve proposed to them over time, they can’t do it. By the time you get finished, the federal government does not ever fulfill the responsibility it arrogates for itself. Never does.

AB: Which is to say, airports will have to figure out how to pay for it?

Plavin: I think that trend is already very clear.

AB: You’ve long argued for the economic deregulation of airports. Where are we in that debate?

Plavin: We have a regulatory environment that makes it real hard for airports to do what they’re supposed to do. You have all these rules and regulations in place about how you can raise your money and what you can do with it, and how you can levy a fee, etc. At some point an airport’s going to have to say, I’ve got a business to run here, I’m going to figure out how to get out from under the federal system. It’s interesting that a lot of airports haven’t reached that conclusion already. The reason is that there’s no way that local governments can resist the bribe of federal funds. Nobody is willing to take the public relations risk at the local level, particularly at airports that have big hub carriers.

AB: So, how do you get out from under the federal umbrella if you’re an established airport, or do we look at using exclusively private money to build an airport?

Plavin: It’s looking more and more attractive. Ten years ago, I would not have said that privatization – I don’t like the word, it’s commercialization – is a good solution. These days, I’m becoming more and more convinced that it is a good solution. And for air traffic control as well.

An airport ultimately is going to have to be picking up whole bunches of stuff that the airlines can’t or won’t do anymore. It includes things like ground handling, baggage service, fueling. At some point, some smart airline operator is going to say, “Airport, if you want me to come to your airport, you provide that service and I’ll buy the incremental services I use.”

AB: FAA has been looking at modifying the grant assurances. Are you encouraged by that initiative?

Plavin: I’m encouraged by the fact that they’re looking at it and seem to have an open mind. But, a lot of the grant assurances that we find most troublesome are in statutes, not at FAA’s whim.

I’d like to see two grant assurances, period. They are, no unjust discrimination and no revenue diversion. Everything else ought to go away; there’s no value added.

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