FAA to US airlines: Forecast is for more lip service

There were sprigs of hope, according to LaHood, whose performance at last year’s FAA Forecast Conference went over like a lead balloon. Indeed, at that time it did not even seem as if he knew he was talking to an aviation audience. To be fair, he was just weeks in office but, as a former House legislator, one would think he would have provided more meat.

He provided more meat this time by promising that the White House is actually working on help for the US airline industry. The industry, having long since given up on the government, as evidenced by Continental CEO Jeff Smizek’s comments at Tuesday’s JP Morgan conference, just wants to be left alone to recuperate from their critical condition. "Just do no more harm", they say. See related report: Tarmac rule influenced cancellation decision for US airlines, revenue loss now at USD176 mln

LaHood was mouthing the right words in linking the health of the economy to NextGen. "A safe, efficient and vibrant aviation system is vital to our nation's economic health," he said. "We must find long-term solutions that will keep the US aviation industry competitive and moving forward into the future."

“This forecast makes a very strong business case for NextGen,” said Babbitt. "Without NextGen, we won’t be able to handle the increased demand for service that this forecast anticipates. With NextGen, we’re safer, we’re more efficient, and we’re a whole lot more green than we are right now. Pick any one of those, and the business case for NextGen stands on its own. All three together are a slam dunk.”

But the industry has been making a better business case than the forecast – more than USD1 billion contribution to the economy – for years, and it has largely fallen on deaf ears, as successive administrations and Congress hold billions of dollars in tax revenue hostage through various forms of budget shenanigans.

Don’t hold your breath

Perhaps the best indication was the conclusion of a tax analyst. Deloitte Tax LLP Partner, Terry Kurtenbach, said the trust fund system for funding transportation – or any other big-government program – has never worked.

“If there were plenty of money in the system, we’d already have NextGen in place,” he said, crystallising the problem. “Some kind of special funding – public or private or a combination of both – is necessary. But to think the FAA is going to pay for upgrades through an annual tax authorisation is pretty foolhardy.”

It was all enough to make one choke on the words of these two politicians, since the government and Congress has been walking away from both forecast and actual statistic for decades. The pattern is always the same. Look as if you are doing something to address system delays, congestion, the efficiency and the environment - and then do nothing.

Failing to understand the industry

Babbitt mentioned that equipage is a big issue, especially how it will be funded. However, he forgot to mention that the industry has equipped for the promised of modernisation before only to watch that equipment grounded with the aircraft lost to the last recession, never having been used because modernisation is so far behind. The industry is rightly bitter – and vocal – about this, especially as it is an industry that pays its own way only to watch high-speed rail get USD8 billion from the general fund as part of the last year’s stimulus.

However, the industry received a stern warning from LaHood who responded to a question on the disparate funding for high-speed rail compared to aviation. “Let me give you a little bit of political advice,” he told attendees in a like-it-or-not tone. “Don’t be against high-speed rail. It’s coming to America. This is the president’s vision, this is the vice president’s vision, this is America’s vision… We’re going to get into the high-speed rail business. People want alternatives. People are still going to fly, but we need alternatives. So get with the program.’’

His response completely missed the point of what the industry has been saying.

Maybe the US does need such service, but does the government have to subsidise it at the expense of an industry that is forced to pay its own way? How come the government and Congress can be so free wheeling in its spending when it keeps such tight purse strings on the Aviation Trust Fund? How come the industry’s requests for stimulus money was rejected for not being “shovel ready” when high-speed rail is only so much pie in the sky?

LaHood conveniently forgot to address those issues, instead advising the industry to put up and shut up. It seems it has little choice but to join the European carriers who have been complaining about just this kind of subsidization for years.

FAA, said Babbitt, will incentivise the industry to bet on the come once again by implementing a policy of best equipped is best served. He seems to have forgotten the industry has equipped on the promise of modernisation before only to watch the millions invested go to waste as the aircraft on which the equipment was installed went unused, became obsolete and was grounded with the recession.

Babbitt also noted reauthorisation is once again in play, this time in the Senate. But, given the polarised political atmosphere that blocks nearly every bill, the industry has heard this before and watched reauthorisation bills and continuing resolutions come and go for the past several years with little action.

For the record

The FAA’s 20-year forecast for Fiscal Years 2010-2030 predicts domestic passenger enplanements will increase by 0.5% in 2010 and then grow an average of 2.5% per year during the remaining forecast period. Total operations at airports are forecast to decrease 2.7% to 51.5 million in 2010, and then grow at an average annual rate of 1.5% reaching 69.6 million in 2030. At the nation's 35 busiest airports, operations are expected to increase 60% from 2010 to 2030.

The FAA predicts that US airlines will reach one billion passengers a year by 2023, some eight years later that the prediction it made in 2005. It also expects the number of passengers on US airlines domestically and internationally to increase from 704 million in 2009 to 1.21 billion by 2030.

Mainline Air Carrier and Regionals

• Total mainline air carrier and regional enplanements are forecast to increase from 704.0 million in 2009 to 1.21 billion in 2030, an average annual rate of 2.6%. Domestic enplanements are projected to increase 0.4% in 2010 and then grow an average of 2.5% per year during the remaining 20-year forecast period. International enplanements are forecast to increase 0.9% in 2010 and then grow an average of 4.1% per year for the rest of the forecast period. Total system enplanements are expected to reach one billion in 2023.

Mainline Air Carriers

• US mainline carrier domestic enplanements are forecast to decrease 0.9% in 2010.  For the remaining 20 years of the forecast period, enplanements grow at an average annual rate of 2.4%, reaching 760.9 million in 2030.

U.S. Mainline Air Carriers Enplanements by World Region (Average Annual Percent Growth)

World Region	Fiscal Year
	2009	2010	2011	2010-30
Domestic	(8.5)	(0.9)	1.3	2.4
International	(5.6)	0.8	4.0	4.2
Atlantic	(4.9)	(2.5)	4.7	3.4
Latin America	(5.0)	3.2	3.7	4.4
Asia/Pacific	(8.7)	0.7	3.6	4.9
System	(8.2)	(0.7)	1.7	2.7

• Total passengers to/from the United States (US and foreign flag carriers) are projected to increase 3.3% in 2010.  The average annual rate of growth between 2009 and 2030 is 4.2%, with passengers increasing from 147.1 million to 347.9 million. The fastest growing region is Asia/Pacific at 5.1% per year, followed by Latin America (4.3% per year), Atlantic (3.9% per year) and Canadian Transborder (3.4% per year).

U.S. Mainline & Foreign Flag Air Carriers: Passengers by World Region (Average Annual Percent Growth)

World Region	Calendar Year
	2009	2010	2011	2010-30
Total U.S./Foreign Flag	(4.6)	3.3	5.0	4.2
Atlantic	(3.9)	3.4	4.6	3.9
Latin America	(4.3)	3.4	4.7	4.4
Asia/Pacific	(6.4)	3.8	7.2	5.2
Canadian Transborder	(4.8)	2.8	4.0	3.4

• Domestic mainline passenger real yield (adjusted for inflation) is forecast to increase from 11.96 cents in 2009 to 12.15 cents in 2010 (up 1.6%). Thereafter, domestic mainline carrier real yield declines at an average rate of 1.0% dropping to 10.01 cents in 2030.  International mainline real yield is forecast to increase from 11.69 cents in 2009 to 12.05 cents in 2010. Thereafter, international real yield declines at a rate of 0.7% annually, falling to 10.45 cents by 2030.

U.S. Mainline Air Carriers: Real Yield (Average Annual Percent Growth)

Region	Fiscal Year
	2009	2010	2011	2010-30
Domestic	(8.4)	1.6	1.0	(1.0)
International	(12.6)	3.1	4.7	(0.7)

• U.S.mainline air carrier passenger jet fleet increases from 3,666 aircraft in 2009 to 5,342 aircraft in 2030, an average annual increase of 1.8%. The fleet is projected to shrink by 0.5% in 2010 (17 aircraft), with most of the decrease attributed to the grounding of less fuel-efficient aircraft during a period of reduced demand.

Regionals

Regional airlines now represent 53% of commercial flights, Regional Airline Association President Roger Cohen indicated during a presentation at the 35th Annual FAA Forecast in Washington, DC, today, underlining regionals provide the only scheduled air service to 492 US airports, nearly 75% of the nation's airports. During the past decade, the number of regional airline passengers has more than doubled to about 160 million.
Regional Carriers

• Regional carrier enplanements are forecast to increase 4.6% to 163.4 million in 2010, and grow 2.9% a year thereafter, reaching 289.3 million in 2030.

U.S. Regional Air Carrier Enplanements (Average Annual Percent Growth)

Region	Fiscal Year
	2009	2010	2011	2010-30
Domestic	(3.4)	4.6	3.4	2.9
International	(27.2)	4.6	3.4	2.9

• The regional carrier passenger aircraft fleet increases from 2,612 aircraft in 2009 to 3,401 aircraft in 2030, an average annual increase of 1.3%. The fleet is projected to shrink by 4.3% in 2010 (113 aircraft).
  • Regional jets increase from 1,710 aircraft in 2009 to 2,441 aircraft in 2030, an annual increase of 1.7%.  All of the increase is attributed to jet aircraft in the 70-90-seat category.

Cargo

• Total air cargo Registered Ton Miles (RTMs) (freight/express and mail) increase from 30.8 billion in 2009 to 86.6 billion in 2030 – up an average of 5.0% a year; domestic RTMs increase 2.1% a year; international RTMs increase 6.3% a year.

U.S. Commercial Air Carriers: Air Cargo Revenue Ton Miles (Average Annual Percent)

Region	Fiscal Year
	2009	2010	2011	2010-30
Domestic	(17.7)	1.3	2.0	2.2
International	(23.0)	4.7	6.6	6.4
Total	(21.0)	3.4	4.9	5.1

• The cargo fleet increases from 854 aircraft in 2009 to 1,531 aircraft in 2030, an average increase of 2.8% a year.