JIA Flight Numbers Down, But Officials Optimistic

Bob Molle is under no illusions about what the coming year holds for him.

"I'm calling this spring 'the perfect storm,' " he said, a half-smile on his face. Even he's not sure if he's joking.

Molle, the Jacksonville Aviation Authority's director of engineering, is in charge of building two new concourses at Jacksonville International Airport, a two-year, $100 million project that will replace the 40-year-old structures where passengers now embark. Behind the scenes, he'll also be overseeing a complete overhaul of the airport's baggage screening system, rushing to get a new, $18 million setup in place before the 2006 holiday season.

"I'm quite confident we'll be up to the task," said Molle, who is also in charge of a $44 million expansion of the airplane parking areas.

But, as the airport is looking at expansion, the aviation industry is facing contraction, with the number of carriers and the number of flights all trending downward in 2005 as airlines struggled with skyrocketing fuel prices and increased security costs.

The Aviation Authority has no plans to slow down its construction plans, though, no matter the state of the aviation industry. The local market will continue to grow, authority officials are betting, leading more carriers to find Jacksonville an attractive place to be; a bigger terminal and higher level of service can only help the airport become even more competitive, officials with the authority said.

IT'S BEEN A ROUGH COUPLE OF YEARS

To attract more carriers and get more First Coast residents to pass through JIA's gates, though, local aviation officials have to hope that the airline industry can work itself back into decent shape -- although, ironically, the airlines getting too strong could be detrimental to local airports.

The balance sheets of airline companies have been in a steep dive since 2000, the last time the airlines as a group have reported a profit. Since that $2.5 billion payday, airlines have posted a cumulative $42 billion loss, including a projected $10 billion loss last year.

The industry is responding by getting smaller: The number of airlines in operation has dropped, from 164 in 2003 to 124 last year, and the number of people employed by U.S.-based passenger airlines has dropped compared to the previous year each month throughout 2005.

In November, the latest month for which data is available, employment was down 6.4 percent industry-wide, with the large legacy carriers having a full 9 percent fewer employees in November 2005 than it did the year before. That was the 11th consecutive month of year-over-year declines in airline employment levels and the largest decrease during the year.

Since 2001, legacy carriers -- the large national airlines that were founded decades ago, before the airline industry was deregulated -- have shed 28 percent of their workforces.

"People say demand [for air travel] is back, and I always say 'Back to what?' " said John Heimlich, vice president and chief economist for the Air Transport Association of America.

Although Heimlich has a somewhat optimistic outlook for 2006, he points out that revenue levels are still far below what they were projected to be five years ago. And, he says, air travel as a percentage of Gross Domestic Product is smaller than it was just a few years ago.

With an $11 billion fuel bill last year, that makes becoming profitable a difficult task.

Cutbacks have an effect locally, too. Next month, the eight airlines that serve Jacksonville will have an average of 726 flights per week, providing about 73,000 seats -- down from last year's peak of 805 flights in November and 731 in December. Last February, the average week saw 777 flights with 84,000 seats, and January 2005 had 709 flights with 71,846 seats.

That drop has an effect on revenue at JIA, which makes money both by renting gate space to the airlines and by getting $4.50 from each passenger who boards an airplane. With the now-out-of-business Independence Air no longer leasing the one gate it had there, for example, the airport is losing about $20,000 a month.

SHAKEUP COULD MEND THE MARKET

The paradoxical hope of the industry, though, is that the troubles of 2005 might actually help make things better for the airlines. Despite the travails, some in the aviation industry actually see the situation improving in the next 12 months. The main reason: a tightening in capacity -- a drop in the number of seats, each of which can then go for a higher price.

Seats per mile, a typical industry measurement, is down 3.9 percent from last year, according to the Air Transportation Association: With supply down, and demand still high, the carriers can charge more for the seats that are left, bumping up ticket prices.

"The trend has been to cut capacity," said Heimlich, which means the airlines can make more money per customer and pay less in fuel, maintenance and landing fees.

And it does appear that demand is staying strong, said Daniel Petree, dean of the College of Business at Embry-Riddle Aeronautical University in Daytona Beach.

"It's pretty clear that ridership is up, capacity utilization is up," Petree said. "We're back at pre-Sept. 11 demand levels. If you look at commercial aviation as a whole, it looks like a long-term growth industry."

This is particularly true in Florida, the management professor said, with both the population increasing and the number of tourists to the area on the rise.

"There's a lot of reasons to come to Florida," he said. "There's no reason to expect that demand would decline."

At JIA, the number of passengers is finally recovered from the Sept. 11 terrorist attacks that sent the industry into a tailspin in 2001. The year before the attacks drastically reduced passenger levels, 5.29 million passengers passed through JIA's gates, dropping to 5.08 million the year and then steadily declining.

In 2005, though, the airport served 5.74 million travelers.

With more people looking to fly and fewer seats available for them, the airlines are in a stronger position, meaning that not only can they charge more, but they can also pressure airports for better deals, Heimlich said. "In terms of attracting service, we are in a period where [airports] have to compete a little more," he said.

Airports might have to charge lower fees to the airline, which look at such measurements on a per-passenger basis. (Jacksonville is already ahead of the curve on this front: JIA's charges work out to around $6 per passenger, more than a dollar lower than the national average.)

Going through the bankruptcy process can help the airlines as well. In Atlanta, for example, bankrupt Delta Air Lines is asking the courts for permission to back out of a lease it has on a hangar at Hartsfield-Jackson International Airport, a move that will save the airline millions of dollars while slicing that revenue out of the airport's balance sheet.

JIA NOT WORRIED ABOUT FUTURE

Local officials, though, say they aren't worried about such a fate befalling JIA. For one, the aiport is not a hub which gives it a diversified customer base. And, they see local demand keeping the market strong but not to the point of overheating.

"My experience has been that a strong airport environment is one which balances low-cost and full-service airlines," said John Clark, executive director of the Aviation Authority. "We have a mixture of airlines providing a range of services."

Consolidations in the airline industry are actually good for JIA, Clark said, with things like the merger between America West and US Airways opening up the city to new markets on the West Coast. Services like that, he said, would help the airport keep the customers who should fly from here, although about 7 percent of them go to other airports, such as Orlando.

"I think we'll have success getting non-stop service to the West Coast," Clark said, "and then there wouldn't be a reason to drive to Orlando."

The expanded terminal should also help attract travelers, say airport officials, with bigger waiting areas, more retail shops and a restaurant located past the security checkpoint.

"It will be more inviting and appealing and convenient for passengers," said Molle, the airport executive heading up the construction.

The new concourses will be 100 feet wide (the current ones are less than 70 at their widest points), providing room for moving walkways, more waiting room and more businesses -- changes that the Aviation Authority thinks customers will embrace.

"I think it's going to go over very, very well," said Director of Airport Properties Larry Aldrich, who is responsible for luring both airlines and other businesses to the airport. "People want to get in line and get through security. Then they have all kinds of time to relax and look about. The concession program is going to provide a high level of services to the passengers."

Such services are a hallmark of modern airports, said Petree, the Embry-Riddle professor -- and they can benefit airport management even more than they do customers.

"Airports look more and more like malls," he said, "and that's not an accident."

Partially to offset the drop in revenue from air carriers, airports are getting into the real estate management business, he said, catering to the captive audience they have waiting for flights.

"That's very valuable space," he said. "People have more time on their hands when in airports. The big growth in commercial airports these days is in the share of revenue they get from retail operations."

timothy.gibbons@jacksonville.com, (904) 359-4103

HITTING HOME

Next month, the eight airlines that serve Jacksonville will have an average of 726 flights per week, with 73,000 seats. Last February, the average week saw 777 flights with 84,000 seats. Airport officials say, hwever, that belt-tightening within the industry will be good for the airport in the long run.



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