Transitionary Phase: Industry continues to play catch-up, sees change ahead

Discussions with aviation leaders recently confirm that much of theindustry is still filling in the holes left by 9/11 and the recession.As activity picks up, how it all shakes out may not be what has been.A big question is, what will be the role of microjets?

Some of the anticipated new directions for the industry include: new designs for airports that more thoroughly accommodate the security threat; new financing and revenue schemes which rely less heavily on airlines; peak pricing to regulate capacity; an influx of various microjets — the impact of which the industry is still trying to figure out.

And, of course, any discussion of the state of aviation must include funding and whether legislators in Washington will continue to impose requirements on airports and users that are essentially unfunded mandates, best evidenced today by the baggage screening dictum that has left many airports scrambling to determine how to pay for what is required.

MICROJETS AND INFRASTRUCTURE
They have yet to reach the delivery stage, but the much anticipated microjets from the likes of Eclipse, Hondajet, Cessna, and Adam Aircraft are seen by many — including legendary American Airlines ex-CEO Robert Crandall — as the next wave of change. A May 19th article in The Wall Street Journal says of the microjets, “The new planes have the potential to revolutionize transportation.” Similarly, a session at the annual convention of the National Air Transportation Association, which represents charter operators, saw reps from the manufacturers, FAA, and an insurance company all bullish about the microjet’s prospects.

The greatest impact is expected to come from the air taxi segment, with many predicting a network of small charter jets traversing the U.S. by way of smaller commercial and general aviation airports. While such a scenario may have little impact on capacity-strained large commercial and hub airports, they are raising serious questions about the infrastructure of smaller airports and air traffic control to handle the aircraft as well as the need for a higher level of training for a small jet that typically will only carry four persons.

THE ROLE OF FAA
Since FAA’s role of promoting the industry was eliminated in 1996, there is concern about the diminishing role the agency plays in the industry. Says James Coyne, president of NATA, “Promoting aviation doesn’t seem to be an issue for anyone.”

Paula Hochstetler, president of the Airport Consultants Council, comments, “FAA’s role has changed from one of technical review to one that’s administrative. It has prompted ACC to pursue training in how to develop airports.

“FAA is updating the ACs (Advisory Circulars) at an increasing pace. It means that while it has a diminished technical role, it is committing time and money to update very old criteria that is used by industry to develop facilities. I don’t see it as a positive; I see it as a fact.”

CHANGING ECONOMICS
At one time, getting funding for the Airport Improvement Program was a constant battle. Now, with four-year AIP funding in place of $3.4-plus billion a year, industry faces economic challenges of unfunded mandates (security, etc.) and uncertain airline dynamics.

A March 30th ruling by a U.S. bankruptcy court allowed United Airlines to back away from commitments for special facility bonds, long used to guarantee airport infrastructure. Comments Steve Van Beek, VP with Airports Council International-North America, “Special facilities bonds remind us that aviation has shifted from airline-centric to airport-centric. Now, most of the airlines have junk bond status while airports are well above investment grade.”

Adds Spencer Dickerson, VP with the American Association of Airport Executives, “Airports have been pushing for the whole reclassification of airport bonds. If you reclassify the bonds as government use, you decrease the tax on those bonds and those savings can be passed onto the airlines.”

Meanwhile, Massport recently unveiled a peak period pricing plan for Boston Logan, a move supported by airport groups but which NATA and others say takes the eye off the main issue: expanding capacity.