November 05, 2008 • New York - Air Transport Association vice president of government affairs Sharon Pinkerton spoke at a recent New York City Business Travel Association meeting, providing ATA's views on airport slot auctions and next-generation air traffic control. She also discussed the industry's prospects in a challenging environment with highly volatile fuel prices. "In 2008, we are scheduled to have an $8 billion loss in our industry," she told attendees. "What does that mean for you all? It means we are reducing capacity. We have pulled out about 10 percent of our flights from the entire system. We have parked 750 planes, and we have laid off about 37,000 people." A portion of the question-and-answer segment of the discussion follows.
How long do you suspect it will be before we see a comprehensive energy policy?
Sen. [Barack] Obama--just for the sake of the discussion, we will assume that he is elected--has said that he wants energy independence. That is going to be one of the big items on the agenda, so I am actually optimistic and relatively confident that we will see something by May. I think it will be a comprehensive [energy] package that will be heavily weighted toward tax credits for renewable energy like wind, solar and things like that. I also think that we got closer to convincing Congress at the end of the last [congressional session, ended in September] that we need to do something in an environmentally sound way on supply, whether that is letting states opt in to do offshore drilling, etc. What concerns me is that now oil prices are down at $67 a barrel, so does that take the pressure off? Hopefully our message is the same, and that is: "It is the volatility that is really killing us and our inability to plan right now." We are not at all convinced that oil is going to stay at $67 a barrel; it wasn't that long ago when oil was down at $30 or $40 or $50. That is where it should be, and it is not there yet, so we are going to continue to make that a priority.
If slot auctions are not the right way [to fix the congested New York airspace], what is?
I fundamentally believe that the solution, or at least part of it, has got to be going from a radar-based system to a satellite-based system. Why? Because the efficiencies that can be gained by precise navigation are literally in the range of 15 percent to 20 percent. That's clearly got to be the answer. You all, and the [National Business Travel Association], have weighed in on what's called airspace redesign. The way the airspace has been segmented hasn't been changed in 20 years. We are dealing with bureaucracy, and there have been challenges on air space redesign. When you redesign the airspace, planes fly in a more efficient manner, and they might be flying over different communities, so noise is a huge issue. While the U.S. Department of Transportation has done study after study that demonstrates that airspace redesign will actually result in less noise overall, in some communities there will be a little bit more noise. We are in a situation now, especially around Philadelphia and the Northeast corridor, where airspace redesign may affect some small communities. I think there are 20 lawsuits right now, but the business community has a real opportunity and a responsibility to weigh in on the conversation to encourage Congress to do the right thing for the entire community, as opposed to letting smaller communities slow this down.
We are very supportive of moving to a satellite system, airspace redesign and different capacity initiatives. The [New York and New Jersey] Port Authority has a list of 77 different capacity initiatives; 77 things that could be done. This is an example of my frustration: The Federal Aviation Administration came to meet with the Air Transportation Association a couple of weeks ago, and we have been talking about these 77 capacity initiatives--giving us approval to do different kinds of departure routes and things like that--and after agreeing that these 77 initiatives were the things that we should do, they sat and told us they are not going to do those things. They decided that's not the most important thing. Instead, all of their energy is focused on these auctions.
What is the cost factor in moving to a satellite-based system?
It is not cheap and that, frankly, has been one of the hurdles. It is going to cost the federal government about $20 billion to put the satellites up, to take all of these ground-based radar systems out and to install different kinds of receptors at the airports themselves. So $20 billion is the cost to the federal government, and then the airlines and the industry are expected to spend an equal amount ensuring that our planes are equipped and able to use next-generation technology. A lot of the new planes that we have been getting are already equipped with the kinds of equipage that we are going to need. We are way ahead of the federal government in terms of our part, but in order to get us even further ahead we need the federal government to demonstrate that they have the commitment to get this project done.
What is your forecast for the remaining legacy carriers, and do you see more consolidation among U.S. airlines?
With Eos Airlines, we are up to 12 bankruptcies since the beginning of the year. You have folks like United and US Airways that don't even have time right now to talk about mergers because they are in the fight of their lives just to survive. Our message to policy makers has been, "If you want the U.S. domestic airline industry to survive and be able to compete internationally, things are going to need to change. We are going to need a more rational energy policy." The Europeans have a 40 percent advantage over us on fuel because of currency [exchange] and the weakness of the dollar, and they have different rules in terms of their ability to consolidate and merge, which has helped them, as well. Why is that important? It is important to have a strong domestic aviation industry because with all of those smaller cities all over the country, we have to have a system that connects the entire country and, obviously, the big international carriers are not necessarily going to make it their highest priority to bring all of those small cities in the United States into a hub like JFK or Newark.
What can travel buyers do to influence government?
We just had a strategy session internally at ATA yesterday, and one of the things that we need to do--and I think you can help us do--is just an education process with Congress. They think they know the aviation system because they fly in planes. Believe me, they don't know. I also think they don't understand, and this is where I think you can play a role: Why do we need a healthy and robust aviation industry? Why is it important to you? You guys are the best at making that argument about the value-add of having an aviation system that delivers you on time without delays to where you need to go, in an efficient manner without all of this wasted time. I think you can educate your member of Congress about why a strong aviation system is good for the industry.
