DAVID FIELD WASHINGTON
At its latest annual forecasting conference in Washington, the Federal Aviation Administration said it believes the industry will recover slowly from recent events, but that this could give breathing space to add infrastructure capacity
There is bad news and good news. The bad news is that the US airlines will not recover for years. The good news is that this gives the US industry some breathing space before it again faces gridlock.
For the FAA, still getting its air traffic operations plans into place, the recovery should be evenly paced but, perversely, could come too fast. Twelve months ago the administration estimated that US carriers would carry a billion domestic passengers by 2010. That is now postponed until 2013, according to the FAA's most recent annual forecast. But despite the grim short-term outlook, there were calls for renewed preparation to meet the inevitable gridlock which will come when numbers do grow again.
The sombre gathering in the capital brought the industry together just as carriers began showing signs of confidence that the worst has passed. As the meeting took place, Southwest Airlines, United Airlines and US Airways announced significant route restorations or additions.
Nevertheless, US airlines will not be fully back to their pre-attack traffic levels before 2004, according to the FAA - and that assumes the best conditions in terms of the economy and the political environment, says chief forecaster John Rodgers, FAA director of aviation policy and plans. "Clearly, we are counting on no further terrorist events," he adds.
Traffic returns
The overall forecast is for US airlines to see a dip in the immediate future, with traffic falling about 12% for the current fiscal year, which neatly runs to the end of September. Then the FAA is looking for a rebound in 2003 before the market settles down to annual growth at around the 4-5% mark over the next decade. Within that total, there are some marked regional differences. Pacific traffic is expected to continue to lag for a couple of years, while numbers on the Atlantic and to Latin America should show growth within a year. The FAA is also forecasting that US domestic traffic will be back setting new records records by 2004, giving perhaps a couple of years before the next capacity crunch.
Administrator Jane Garvey says that a year ago the industry was overcome by gridlock and rising public anger about flight delays and congestion. Regardless of the short-term decline, she says, the growth forecast "underscores the need of the government and the industry to continue adding capacity to our system".
She urges the industry "not to lose that sense of urgency" it had a year ago about adding infrastructure. Other FAA officials are more dramatic. Louise Maillett, acting assistant administrator for policy, planning and international aviation, warns that "ever stronger growth" between 2004 and 2013 could again overwhelm air traffic infrastructure. "We have to continue to focus on the issue of capacity," she says. "The growth shows we are going to be back in that type of system very quickly."
Some of the FAA's biggest customers - the airlines and the airports - say they are already close to being overwhelmed. Airports Council International-North America president David Plavin says: "The delays of 2000 have not disappeared. They've just moved from the air side to the terminal side."
Plavin says airport security checkpoints have become the new delay points for passengers. He notes that passengers are now usually asked to arrive at least 90 minutes before their flight leaves. Before 11 September, customers could often arrive within minutes of departure and still board.
Richard Anderson, chief executive of Northwest Airlines and this year's chairman of the Air Transport Association (ATA), agrees. He asked for a commitment that the new Transportation Security Administration (TSA), which took over airport checkpoints in February, would implement transportation secretary Norman Mineta's promise that security checks will not delay passengers by more than 10 minutes.
Anderson says that passengers need to experience consistent security procedures from California through to New York. "If I do it in Burbank, it is the same at LaGuardia. If I do it at LaGuardia, then it is the same at Chicago," he says. Solving this one issue, Anderson says, will help airlines meet the FAA forecast.
Maillett says she is aware of such concerns. "We are focused on security needs," she says. "We also recognise that building the infrastructure is very important. If we delay, we'll be ruing that day two or three years from now."
A few bright spots do emerge from the FAA outlook. Regional airline traffic will grow by 8.2% this year and 7.3% in 2003. The 70-seat regional jet (RJ) fleet will rise four-fold over the next decade, from 696 to 2,900, according to Rodgers. The trend is being accelerated as carriers replace their mainline jets with RJs.
This trend will increase the regional's average passenger trip length by almost 23km (14 miles) this year from 1,350km in fiscal year 2001. Some regional carriers are already posting double-digit growth. For instance, Atlantic Coast, which flies as both United Express and Delta Connection, says its February traffic increased 76% on a 51% increase in capacity. Skywest Airlines, a Delta Connection and a United Express carrier, saw its traffic rise by a similar 77% on a 62% capacity rise.
Supply balance
Another encouraging sign is that the supply of airline seats is "back in balance" with demand, says Airline Planning Group consultant Steve Still. Some aircraft retirements were needed and it is likely the ageing Douglas DC-9 narrowbodies often used by start-up airlines will be "tin cans for Budweiser a year or two from now", he says.
By 2013, the US fleet will have increased to just under 8,500 aircraft, up from 4,801 last year, the FAA predicts. Last year was the first for a decade in which the fleet decreased, in this case by 223 aircraft. Civil aircraft orders in 2001 fell to what the Aerospace Industries Association (AIA) calls a six-year low. For the first time in ages, Avitas consultant Adam Pilarski told the conference, "there was no overbuying of planes".
Growth is also still possible in some areas. The FAA sees Latin America as having the strongest potential, Rodgers says. Despite the virtual collapse of one major economy (Argentina) and turmoil in another (Brazil), opportunities are there. Early data shows that the 11 September events having a lesser impact on Latin America than on other regions, Rodgers says. Although growth in 2002 is expected to lag in the first six months, it will rebound by as much as 14% in the second half. After that, US airline traffic to Latin America is expected to average annual growth of more than 8%, well ahead of any other region. Some carriers have seen a comeback already. At Delta Air Lines, load factors to the region are now within two percentage points of their pre-attack levels.
US carriers have increased their share of this market over the past decade, from close to 59% in 1991 to just under 64% in 2000. That has been due in part to the need for regulatory reform, says Latin American International Air Transport Association chairman Juan Emilio Posada. "To achieve critical mass and the right scale, we need unification of regulations," he told the conference. But Posada is not the first to make that plea - nor is he the first to make it at an FAA forecast conference.
Source: Airline Business
