What an unusual year. Two main themes in aviation and aviation ground support have emerged over the last 12 months - Anxiety and Hope. Last year's industry outlook article formed the opinion that aviation and aviation ground support were "on the bubble" for growth. Unfortunately, that bubble burst early this year with political tensions from the impending war and then the SARS epidemic that magnified the problems surfacing in our industry. Like Y2002, 2003 saw more airlines launched as well as grounded. There were bankruptcies and layoffs and restructuring and rebirths.
Bold Changes Needed
Earlier this year at its annual general meeting, IATA General Director and CEO Giovanni Bisignani called for "bold changes" that were necessary to "ensure the long-term financial sustainability of the air transport industry." He chronicled the events - September 11 and a world economic slowdown helped to generate losses of $US25 billion for the years 2001 and 2002. And, according to IATA, add another $US6.5 billion to the loss column for 2003 from SARS and the war in Iraq. Bisignani offered suggestions to consider for members and governments such as new approaches to labor relations as well as a call to action to open communication regarding liberalization, standardization, and regulation.
There's no doubt that the aviation industry has been, and is still, under serious scrutiny by OEMs, suppliers, government, financiers, media, as well as the flying public. Major changes have been taking place with the rise of new low fare carriers entering the market, often where mainline carriers have pulled back - the most recent example being Southwest Airlines filling many empty slots at St. Louis left by American Airlines. Business travelers have not returned in droves to the ticket counters to purchase expensive walk-up fares, but are opting to buy tickets priced to lure leisure travelers and often, will drive farther to those airports served by low fare carriers such as the JetBlues, the AirTrans, Frontiers, and the Southwests.
Businesspersons know that they are responsible for their own bottom lines and when faced with choices that can differ by hundreds of dollars, they're savvy enough to choose the best deal, which often means the airline with the lowest fare. Many airlines admit they have lost track of how many passengers are actually business travelers. To cost-conscious travelers, the old fare structures of mainline carriers are exactly that - old. To compete, these carriers will have to match or beat the prices of those low fare airlines that are entering more and more hubs. According to JP Morgan analyst Jamie Baker, by the end of 2006, the seven US low-cost carriers will make up 40 percent of domestic mainline aircraft movements.
Unfortunately, any ancillary supplier, service provider, fueling supplier, can only watch from the ramp. Those that are willing to look to other opportunities either within aviation or elsewhere, will have a better chance for staying afloat as the airlines sort themselves out. If you are reading this article, odds are good that you've been resourceful enough to find ways to survive the turbulence surrounding airports worldwide.
Such was the scenario for the first three quarters of 2003. By the beginning of the fourth quarter, the mood had changed to a more hopeful one. Many in the aviation ground support industry deferred to the cyclical nature of aviation, - we've been here before - and many have found new life through military contracts as well as through diversification of services. Whether it was the power of positive thought or things really are starting to improve is up for debate. A recent survey from American Express predicts a surge in air travel in 2004 with 55 percent saying that they are planning a domestic or international flight, compared to 44 percent in 2002. Over 75 percent are drawn to discount airlines such as JetBlue and Southwest. The survey also reports that more than a quarter of Americans will be traveling over the upcoming holidays and that Hawaii, Alaska, Las Vegas, New York, Orlando, and Miami look to be the top destinations in the new year. Many people are making plans to travel internationally for the first time since September 11, 2001. With 2004 being an Olympic year, it's no surprise that Athens is near the top of the traveler's list for international cities. Goldair Handling SA is a full handling services provider at the Greek Airports of Athens, Heraklion and Thessaloniki and is ramping up for what should be a good year.
"After two years of competition, we achieved a remarkable market share and healthy growth as well as a good reputation based on sustainable investment in state-of-the-art GSE and of course, staff. It will be an interesting year in Greece as the 2004 Olympic Games are coming to Athens," says Goldair's Commercial Director, Wolfram Pinhammer.
"The industry is definitely on the up," claims Mike Ethridge, Director of Aviation Services for DALGlobal Services in Atlanta. "We're seeing more diversification in passenger services. We're getting passenger services contracts that we don't normally receive and we're seeing more outsourcing services along the lines of what European and Asian handlers provide." Things must be going well for them as Ethridge predicts his group should be adding a good number of ground support equipment next year particularly motorized GSE.
In April, Ground Support Magazine interviewed Regional Airline Association President, Deborah McElroy and at that time McElroy offered that RAA estimated that the regionals carried about 88 million passengers last year. "The Industry provides service to 98 percent of all of the airports that receive scheduled airline service. However, 70 percent of those airports receive service exclusively from regionals." She also shared that when she first joined the association in 1987, regionals were providing air service to small communities, "but now it is 1 out of every 7 passengers flying domestically."
Her prediction that the RJs will continue to be the backbone and will lead the industry back to profitability has been supported by a recent study performed by the Regional Air Service Initiative. (RASI), which analyzed regional jet service for the first nine months of 2003. RASI reports that U.S.-based operators of regional jet aircraft (RJ's) now serve 240 North American airports, with 15 receiving first-ever schedules during the first nine months of 2003. Of particular note, in the period from January 1st to September 30th, 2003, U.S. regional carriers announced new RJ schedules on 137 airport-pairs - a rate of three-and-a-half per week. For the full findings of this study, please visit RASI's website at www.regionalairservice.org.
Cargo and Security
In its Fiscal Year 2004 budget briefing, The Transportation Security Administration (TSA) has proposed spending $US20 million on air cargo security. Critics say more needs to be done as passenger plane security still appears to be tighter than that of cargo planes. The TSA has received 40 recommendations covering 22 topic areas from the agency's Aviation Security Advisory Committee (ASAC) and, at the time of this writing, is developing a strategic plan to then draw up a Notice of Proposed Rule Making (NPRM) to be made by December 31, 2003. Some of the recommendations include strengthening the Known Shipper Program, enhance regulation of Indirect Air Carriers, and raising the security of IAC agents and contractors. Many of the recommendations involved improving the technology associated with databases and screening equipment. The TSA has earmarked $US575 million in its FY2004 Budget proposal for Airport Staff and IT Support.
Airports Council International - North America's President, David Z. Plavin, predicts that air cargo traffic will grow faster than passenger traffic over the next 12 years and that it will have "a tremendous effect on the way airports do business, from marketing objectives and facilities development.
New Equipment Launches
As for OEMs, no one appears to be sitting on the success of current product lines. New equipment has been and is being designed, developed, manufactured, and launched. Major GSE manufacturers such as Stewart & Stevenson TUG, FMC, and TLD have all been actively researching and developing new products - many with alternative fuel technology such as Stewart & Stevenson TUG's MX4H Hybrid Electric Baggage Tractor - as well as equipment designed to handle the upcoming A380 aircraft.
FMC is launching an improved version of its Commander loader in 2004, the Commander 15i. FMC's Product Development Manager, Nick Heemskerk, gives a little insight as to what will be important for the company in future products. "As we look further out, we are focused on alternative fuels, towbarless tractor growth in the US, and servicing the new A380 aircraft."
TLD has been designing and developing new equipment over the last two years: new generation ACE 4000 GPU, 727 3.5 tons aircraft loader, an electrical towbarless tractor, towable NBT conveyor belt loader, and an electrical baggage tractor. The TPX 500 towbarless tractor that was brought out two years ago, offers a version that is A380 compatible.
Onward and Upward
So, what will the next 12 months bring? All aspects of security will be at issue as will be the actions associated with moving the industry onward and upward.
Aviation will anxiously await the coming year with the sincere hope that it is truly on the right path to recovery.
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