Money Trouble: At Tampa, the focus is on financial challenges - for airports, airlines, security

By John F. Infanger, Editorial Director & Jodi Richards, Associate Editor

Money Trouble


TAMPA - U.S. Rep. John Mica (R-FL), chairman of the House Aviation Subcommittee, opened the 12th Annual Conference & Exhibition of the Airports Council International - North America with an admission, "I call TSA the little bastard that I helped create." For airports, the Transportation Security Administration has become the agency du jour, and an ongoing point of discussion, particularly as it relates to funding. In line as the other hot topics: the air carriers, their future, and the impact of their economic situation on airports

Congressman Mica adds that a top priority for him has become seeing that airports and TSA are able to work together to make the system safe and operational - "if it's the last thing I do before I leave Congress."

David Plavin, ACI-NA president, says that with all the issues facing airports - security, airline economics, funding, local control, and competition plans, among others - he has an overriding concern that leaders in Washington do not have a clear idea of what the U.S. aviation "system" should look like and become. More than ever, he says, airports need to be unleashed to be allowed to be more market-based in their operation. "For years, airports had been regulation magnets," he comments.

Mica calls the current impasse in Congress over aviation funding reauthorization a result of "unreasonable" efforts by the National Air Traffic Controllers Association, especially since the legislation being held up actually guarantees that 94 percent of controllers' jobs will not be privatized through the bill's four-year duration. The legislation would provide some $14 billion for airport infrastructure.

However, funding for airport/ TSA security is a different matter, and Congress is stalling on distribution of those dollars as well, caught between determining how much money is enough to secure the system while keeping a rein on TSA budgeters.

Admits Admiral James Schear of the Department of Homeland Security (DHS), "We have shortfalls that need to be addressed." He equates the effort to determine funding levels and dissemination of dollars to trying to change a fan belt while a car is running.

FAA associate administrator for airports Woodie Woodward comments that TSA's money challenges are going to increase because FAA is no longer going to help with the distribution of funds, something it had agreed to continue through the 2003 fiscal year. "TSA is having a very difficult time," she says.

Changing technologies and cargo security are other major hurdles facing TSA, says Stewart Verdery, assistant secretary for policy & planning for DHS. "TSA will need a toolbox of technologies" for cargo, he comments, and says that achieving secure cargo will require a partnership of all the affected parties.

Verdery explains that several airports in the coming months will become test beds for the proposed trusted traveler and transportation worker identification card (TWIC) programs, as well as TSA's CAPPS II initiative, which he terms a "threat-based system."

AIRLINES: Evolution, Implications
Regarding airlines, various officials spoke of a broken relationship with airports. Specifically, they say, air carriers need to recognize that airports account for a minimal portion of air carrier costs, and that there is little room to trim airport budgets or fees to airlines. Carriers also should not be allowed to hold hostage collected passenger facility charges to use against their balance sheet, say airports, and need to honor their financial commitments made for facility construction.

For the record, says ACI-NA, airlines lost some $11 billion in 2002 and another $4 billion the first half of 2003, and are expected to lose another $3 billion in 2004. The good news, however, is that carriers saw fares increase in July for the first time since March, 2001.

In a session entitled "The Evolving Airline Industry: The Implications for Air Service," Robert Hazel, senior vice president of Eclat Consulting, Inc., shared his thoughts on what the airline industry will look like in the coming years and how airports and communities can adapt to ensure continuing service.

Like many, Hazel sees the low-cost carrier business model as the one to emulate. He uses Southwest Airlines as an example. According to Hazel, Southwest's market capitalization is more than double the rest of the industry combined.

He says the industry will be smaller in terms of revenue, the low-cost segment will continue to grow, and network carriers will have minimal growth and will consolidate. He observes that Southwest carried more passengers than Delta in August 2003. Other data he points to in support of his theory: 24 percent of short haul flights have been eliminated due to post-9/11 hassle; and, in June 2003, JetBlue placed an order for up to 200 large RJs, while Southwest has said it's considering regional jets.

"At some point we reach equilibrium," Hazel says. Network carriers will exist, but there will be fewer. Additionally, network carriers may still command a revenue premium, but it will no longer be 70 percent. He also predicts increased battle over catchment area for airports.

The most pressure of consolidation will occur on Midwest hubs. The smaller markets will be affected the most, with loss of service and leakage to larger airports. Hazel stresses that it's important to "know your market and its strengths and weaknesses. Do not think of air service as a public utility to which the public is entitled." He says the airports can reduce the impact of the changing airline on the community by: Speaking the airlines' language- revenue; Developing a clear air service plan; Understanding that the airlines have fairly limited resources, so communities may need to share the marketing burden and a "use it or lose it" message needs to be delivered to the community; Motivating and involving the business community; and, once you have new service, that's not the end of the effort. end mark

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Other notes ...
TransCore, Inc. has developed and employed Automatic Vehicle Identification (AVI), a wireless data collection tool with landside/airside applications for tracking. AVI tracks patron and employee parking, ground transportation, taxi dispatch, and common vehicle operation. Comprised of tags/ transponders, readers, in-lane controllers, and database/control systems. AVI is installed at LAX, Heathrow, and John Wayne International Airport.

Lockheed Martin is selected by the Allegheny County (PA) Airport Authority to lead an $8.8 million security upgrade that will integrate and enhance the current baggage handling system with an automated explosives detection inspection process at Pittsburgh International.


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