Will US Airlines Make a Turnaround in 2009?

By Beacon Staff

NEW YORK – America’s aviation system was once the envy of the world, with its cutting-edge technology and stringent safety standards.

Now it’s at best a “B” player, and American travelers have become accustomed to aging, crowded planes; regular delays; and indifferent customer service.

But the advent of a new administration in Washington is fueling hope that some underlying causes of the aviation malaise can be addressed – from the archaic air-traffic control system to the congested airport runways.

The incoming Obama administration is expected to dedicate at least $5 billion in its stimulus package to upgrading airports and other aviation-related projects. Congressional leaders have also pledged to move quickly to pass a long-delayed reauthorization of funding for the Federal Aviation Administration, which would include money to upgrade the air-traffic control system.

But even the optimists warn it will take years for the US aviation industry to recover its status as a world leader, and they caution that the airlines’ problems cannot be addressed alone. They’re calling on the Obama team to take a significant step back and address airline issues within a larger context.

“No piecemeal solution is going to work,” says Robert Mann of R.W. Mann & Co., an aviation consulting company in Port Washington, N.Y. “Somebody has to really step back and take a big-picture view: all the disciplines – environmental, economic, and transportation and energy policy – together. If things are done in a vacuum, they will absolutely, positively cripple some segment. ”

US airlines have become accustomed to operating in economic-crisis mode, and that’s expected to serve them well during this recession. Since 9/11, they have lost tens of billions of dollars, laid off tens of thousands employees, cut back their flight schedules, and restructured their operating costs. Several have been in and out of bankruptcy. Last summer’s unprecedented spike in the price of oil was just one more challenge.

But all their trimming and reorganizing, combined with the recent drop in fuel prices, have helped prepare the airlines for the current challenges. Some analysts are even predicting that the industry as a whole could be profitable this year – which would be only the second time since 9/11.

But to ensure long-term stability, the airlines themselves say that modernizing the aviation infrastructure has to be high on Washington’s agenda. Yet they recognize that any major infrastructure improvements should be made with an eye toward their environmental and economic impact as well.

“These are all interconnected,” says David Castelveter, a spokesman for the Air Transport Association, which represents the major US carriers. “If we modernize the air-traffic control system, we’ll be flying more directly, [saving money], and spewing less CO2.”

President-elect Obama has nominated former congressman Ray LaHood to head the Department of Transportation. One of his first tasks will be shepherding through Congress the FAA reauthorization. The FAA has been operating on an extension of its old funding authority since September 2007.

One major stumbling block has been a battle over what type of taxes should be levied to pay for aviation infrastructure. The major carriers want smaller, private business jets to pay a larger share than they currently do. They, of course, are balking. LaHood has been praised as being as thoughtful and evenhanded in dealing with such complex issues.

But aviation experts are also hoping that he can look beyond the immediate issues to the larger context. “A major question is whether the secretary of Transportation will be able to reach beyond his immediate purview and help bring some sense to energy and environmental policy that also impact the airline industry,” says Kevin Mitchell, chairman of the Business Travel Coalition in Radnor, Pa., which represents corporate travel managers.

Not all experts are sanguine about those prospects. Although LaHood has been praised as someone who can take a fresh look at the industry’s problems, he’s also been criticized for his lack of deep understanding of transportation issues.

“We have a DOT secretary who knows nothing about the industry, so he’ll take all of his cues from the bureaucrats at the FAA and the DOT,” says Michael Boyd, president of the Boyd Group, aviation consultants in Evergreen, Colo. “I don’t see anything on the horizon that says anything is going to be shaken up. We can rest assured the air-travel experience will be just as inconvenient as ever.”