ATA executive asks help from North American airports
James C. May, president and chief executive officer of the Air Transport Association, based in Washington, D.C., told airport executives at the Airports Council International North America conference in Houston that airlines need help from airports and that both should cooperate to influence policymakers.
He suggested a “five-point plan” to encourage closer collaboration and cooperation between airlines and airports.
One is to choose only the most productive security programs and establish a risk-reward regime that enables policymakers “to reject ideas that don’t measure up.”
He added that airlines and airports have a common interest in working together within the political and legislative arena on taxes and fees. “Now is the time for us to pull together in presenting a united front, especially in Washington, D.C.,” May said. He called for a new tax policy that encourages the growth of commercial aviation. “I suggest to you this new thinking would be good for airports, good for airlines and good for the traveling public, and good for the nation’s economy,” May said.
He said airports must show “restraint in revising their plans to reflect the new budget realities.” Money spent on airports must be tied to real, cost-effective improvements.
“What is really astounding to someone like me who is still fairly new to the business is the contrast between the abysmal financial condition of our airlines and the excellent financial condition of your airports,” May said. While the vast majority of major airports have retained investment grade credit ratings, all but one of the 12 large airlines tracked by Standard & Poor’s has “junk bond” ratings.
“I say: God bless your flush pockets,” May said. “But I also say: We should all be troubled when so many airlines are either on the brink or close to it.”
“Two years into a recovery, and a little more than three years after 9/11, we have a growing financial crisis in the airline industry,” May said.
After losing more than $23 billion from 2001 through 2003, U.S. airlines will lose more than $6 billion this year, he said.
“We have major carriers that are bleeding cash and at the outer limits of their borrowing capacity,” the airline official said. “Two of the nation’s six legacy carriers are in bankruptcy, and a third is fighting to avert the same fate. There also is a popular misconception that things are going well for non-legacy carriers, but they too are projecting sharply reduced earnings or even losses.”
Although airlines are already cutting their costs and increasing their productivity, “the real problem is an overwhelming assortment of costs that a) are beyond airline control, and b) are nearly impossible to transfer,” May argued. With no offsetting revenues, these costs have fallen straight to the bottom line and are responsible for the huge losses that have occurred despite major improvements in operating efficiencies.
He cited security and fuel as uncontrollable costs.
“Congress has agreed in principle that airline and airport security is a federal responsibility,” he said. “That should mean that federal funds are provided to cover the cost of post-9/11 federal security mandates. But it hasn’t happened, and, as result, the airlines will take a hit amounting to almost $4 billion in 2004.”
The average price of oil through the 1990s was just under $20 a barrel, but moved this year above $40, May said. “That translates to an incremental cost of about $8.5 billion on an industry with annual revenues of not much more than $100 billion,” the airline official said.
The Air Transport Association represents both passenger and cargo airlines.
ATA executive asks help from North American airports
