Facing the Times: Airports convene at NAC, seeking answers to today's new challenges

By John F. Infanger, Editorial Director

Facing the Times

SAN DIEGO - Aviation funding, of course, headed the list of concerns for airport managers meeting here in September, with passage of the federal reauthorization legislation in doubt. Other hot topics: DOT's ongoing insistence on competition plans for major airports, despite the financial dire straits many are in due to carrier bankruptcies, - another top concern; and the array of unanswered questions relating to security, with heightened focus on funding and cargo.

Airports were here for theannual F. Russell Hoyt National Airports Conference, put on by the American Association of Airport Executives.

Top of mind for most was the ongoing funding battles in Washing-ton, both for aviation and security. The four-year aviation reauthorization package, mired in a Congres-sional tug of war over privatization of control towers, is also holding up funding for the Airport Improve-ment Program, a vital concern for most airports. As a result, the aviation system was being funded by a 31-day continuing resolution, beginning October 1. [As of press time, the legislation was still being debated in Congress.]

Funding for the Transportation Security Administration was also in question, and of critical importance to airports is the money that will pay for in-line baggage screening systems now being planned at most commercial facilities. According to Spencer Dickerson, executive vice president for AAAE, some $9 billion has been spent to date on TSA activities.

Woodie Woodward, FAA's asso-ciate administrator for airports, says that although technically the TSA has taken over airport security, FAA continues to fund security-related projects with AIP monies. In FY2003, she says, FAA distributed some $130 million for security projects such as fencing and access control, an increase from $100 million allocated in 2002.

Also a top priority for managers at large airports is the continuing emphasis on competition plans that many in industry today see as ludicrous, considering the state of the air carrier industry. Comments James Bennett, A.A.E., president of the Washington Metropolitan Airports Authority, "I would like to see the FAA's competition plan."

Bennett says he is concerned that DOT is interfering with the relationship between carriers and airports, at a time when both are suffering economic hardships. And, he questions the point of the exercise, noting that Reagan National Airport had to submit a competition plan even though it is a slot-controlled airport.

Woodward adds that FAA is seeing more airports raising red flags about their financial situations, and the agency is undertaking a study to explore the impact of airline finances on large airports in the U.S.

On hand to discuss security was Stephen McHale, deputy adminis-trator for TSA. The biggest problems facing TSA, he says, are related to funding. He says the original cost estimates for security were "wildly out of line.

"We had huge sticker shock coming in," says McHale, relating that it has led to a hesitancy in Congress to authorize TSA monies. Further, putting TSA under the Department of Homeland Security umbrella has put it in a position of competing with other departments for funds.

Regarding the letter of intent (LOI) program now in place in which TSA promises to later finance upfront costs being spent by airports today for in-line systems, McHale says it's a promise dependent upon Congress later following through with the money. He cautions that the LOI program must not become so large that it hampers other initiatives in future years.

Carter Morris, vice president of transportation security policy for AAAE, says that one of the greatest challenges facing airports currently is perimeter security. Specifically, how the actual physical screening at the perimeter will be accomplished is a question.

Airline Bankruptcies
For most commercial airports, airline economics are directly tied to airport economics, a reason a session on airline bankruptcies at the NAC was in demand. Jeffrey Fine, a partner with Hughes & Luce, L.L.P., says challenges facing airlines include operating in a capital-intensive business; high fixed costs; too many stakeholders (labor, airports, lessors, pensions, etc.), and that oftentimes most equity value has been lost.

"Chapter 11 is being used by airlines to ... weed out costs," he says. He calls it an "unfair system" in which airlines in bankruptcy don't necessarily have to honor their financial commitments, while airports do. For example, an airline that has filed for bankruptcy protection is prohibited from paying most pre-petition obligations until a court has accepted its reorganization plan.

Fine also expresses concern about moves by United Airlines and others to back away from guarantees for bonds that have been used to finance facilities. It's a situation, he says, that could have "grave consequences" for U.S. airports.end mark