US Airways doubts need for big infrastructure projects
US Airways Chair and CEO Doug Parker confirmed what we have been suspecting since the restructuring of the US airline industry and the impact of the recession. Mr Parker said the infrastructure needs for the industry may be vastly overstated by the government and airports.
Speaking at the end of the airline’s Media Day, Mr Parker’s comments came as the airline explained its opposition to a fifth runway at Philadelphia. He also linked his comments to air traffic modernisation.
“Those of us in the business know how much the industry has changed in the last few years and all that is part of the future growth rates,” he said. “So there is a tension between the infrastructure proposals and we don’t think we are going to need as much as some suggest. We think there needs to be a better understanding on what the real growth is going to be and how that is changing the infrastructure requirements. This is a pretty mature industry and we don’t see a lot of growth. That is why the controversy about the developments in Chicago happened.
“The same for the ATC stuff,” he continued, noting Southwest’s reason for acquiring AirTran was because it otherwise had no growth opportunities. “That’s Southwest talking. The FAA says there is going to be so much traffic there will be gridlock and we say ‘what are you talking about, gridlock, who do you see adding any airplanes?’ So the domestic industry is largely mature. We are now at a point we have we won’t have a lot more airplanes flying around the US than we have today. We don’t think you’ll see 5% growth year after year. We, the operators, don’t share some of the views on what the industry is going to look like in 10 years and we need to help those people planning these projects understand there may not be the growth projected.”
Executive Vice President Corporate and Government Affairs Steve Johnson indicated that much of the US industry agrees with US Airways’ assessment of future infrastructure needs. He explained that the runway is part of a number of capacity expansion projects in Philadelphia’s master plan. The runway is budgeted at USD2 billion-3 billion of a USD9 billion project which the airlines feel is too expensive.
“That would be the most expensive runway project outside of Japan,” he said. “From our point of view there are a lot of capacity expansion projects at Philadelphia are great. We’ve told them the runway is too expensive given and unnecessary given the growth profile of Philadelphia. We are working to persuade them to focus on other parts of the capacity expansion program first.”
Mr Parker’s views suggest that the robust forecasts must now be tempered with the new realities of the US industry which has changed exponentially since 2008. Capacity discipline and high load factors are now the norm as are rising air fares which will likely stay, as Delta CEO Richard Anderson suggests, even if traffic is discouraged by them. The comments of the two airline executives is, above all, a fitting testament to how much the industry has changed and how much delivering profitable financial performance has taken over as a prime focus.
It also suggests that while the North American market still represents a powerful demographic, other markets will take the lead in building the future global airline industry, as the US focusses its sights on replacement, rather than growth, aircraft.