Budget Cuts Grounding Fliers, Airlines Find

The federal budget ax that is known as the sequester is starting to hurt the airline industry.

While flights have not yet been canceled in response to the cuts, and there are not long lines at security screening in airports, including Philadelphia International, US Airways Group and Delta Air Lines said the federal spending cuts reduced March revenue due to fewer last-minute bookings.

US Airways said that passenger revenue for each "seat mile" flown was flat in March compared with March 2012. US Airways president Scott Kirby said the revenue drop was "believed to be driven largely by the sequester."

Delta reported the same thing on Tuesday, saying that March unit revenue fell short of expectations and pointed to "lower than expected close-in bookings driven by the sequester" as one of several reasons. Close-in bookings are tickets bought close to the date of departure, often a more expensive ticket and a manner of travel more common with business travelers.

The automatic budget cuts began taking effect on March 1. US Airways had expected revenue growth of 2 percent to 4 percent last month.

"US Airways has a fairly significant exposure to the Washington, D.C., area," with its military and other government customers, analyst Michael Derchin, of Capital Group L.L.C., said in a client note. "US Airways' management disclosed that the U.S. government results were down 'double digits' for the month."

US Airways operates 220 daily flights at Ronald Reagan Washington National Airport, and caters to federal business travelers.

It's not just federal employees who are cutting back travel; it's also consultants and goverment contractors who believe the spending sequester will hurt their business.

Philadelphia International Airport has not seen an impact from the sequester, but CEO Mark Gale said there could be longer lines during peak summer travel, when furloughs, reduced overtime, and hiring freezes take hold at the Federal Aviation Administration, the Transportation Security Administration, and U.S. Customs and Border Protection.

"The longer sequestration goes on, ultimately you may see some longer lines in security or to get through Customs, but as of right now we haven't seen any direct impacts," said Gale, after speaking at a Greater Philadelphia Chamber of Commerce breakfast Wednesday.

"As we see the heavy summer travel season - June, July and August - we'll be watching it very closely," Gale said.

The FAA has announced 149 traffic control towers will close at small airports nationwide, starting Sunday. The agency is losing $637 million in sequestration cuts through Sept. 30.

The closures include Trenton-Mercer Airport and, in Pennsylvania, control towers in Harrisburg, Latrobe and Lancaster. However, the airports plan to remain open because pilots are trained to take off and land by communicating on common radio frequency without ground controllers.

Frontier Airlines, which flies from Trenton to four Florida cities and New Orleans - and to five additional destinations beginning Monday - said it will operate normally in good weather. In inclement weather, Frontier said it may divert flights to another airport, such as in Philadelphia or Newark, N.J.

Contact staff writer Linda Loyd at 215-854-2831 or lloyd@phillynews.com.

 

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