Inside the Fence

May 21, 2008

Driving along U.S. Route 36 northwest of Denver, the thought turns to SUVs and the coming revolution ...

The radio talk show guys are expressing angst over the high price of fuel. As I listen to them exasperate about volatility and price spirals, the road ahead is a sea of 4x4 pickups and SUVs. The cars are in the minority. What the eyes see does not compute with what the ears are hearing.

And then the thought: This is all about to change. It’s 1975 and there’s a different transportation future down a road called 1980. Well, this time ...

It’s long been easy to say the airline industry has turned upside down. Since January 1, however, it actually has. Carriers are trying to dump capacity by merging; others are doing it by merely going out of business. Two U.S. airlines, Southwest and Allegiant, recorded a profit in the first quarter. Several became extinct.

For airports, the job of air service development has become one of maintenance. As airlines cut capacity they cut routes, frequency, communities. Ironically, the darling of the ‘90s — the regional jet — likely won’t be there to fill in the gap; at least, not the 50-seaters. Ala SUVs, they like fuel.

The other irony is that some of those small community routes will be filled by the new Q400, a reconstituted Dash-8 that looks a lot like a CRJ with props. It would appear the psychology of props is undergoing a sea change.

While Congress continues to mull over a long-term aviation funding bill, there has been surprisingly little talk of greatly expanding the Essential Air Service program. As capacity is taken out of the system and routes cut back, one can give odds on when Congress will ratchet up calls for EAS expansion. Definitely before November, one could guess.

Meanwhile, there are other signals of change. ‘Light sport aircraft’ is a segment that has kick-started new entrants and appears to have been a good idea. Yet, talk to anyone who sells avgas and they will tell you piston sales are down. Could it be we are witnessing the disappearance of a class of GA aircraft — those between LSAs and bizjets — because of fuel?

Then there is the VLJ, which continues to attract investors who envision air taxi networks around the nation and beyond. Dayjet had been growing faster than projected — but it just announced cutbacks.

Perhaps the VLJ market is where the EAS communities fall out. Maybe the feds will decide they need to buy a fleet of VLJs and take over service to these commercial carrier outcasts — an AMTRAK for the skies. (Egads.)

The one segment of aviation that continues to hum, business aviation, is the one that historically would take the big hit when the economy slowed. Not in 2008. Is this a signal that corporate aviation now mirrors the global economy? Considering half the FBO industry is now owned by overseas investors, it’s become quite interconnected.

Overnight, aviation has entered an interesting era. Not exactly sure where the road turned, but it did.

Thanks for reading.