April 2008

Economic Situation

For some time, common sense has suggested that the traditional U.S. network airlines will not survive in their present form. All have cut costs, but none has fundamentally changed. A severe economic recession can be expected to force real change, mergers or elimination. The best run foreign network carriers don’t seem to be in such a delicate situation. Further liberalization recently engendered by the US-EU agreement opens the door to change on the North Atlantic; a change that likely will slowly undermine a key international sector which currently is keeping the major network carriers alive.

Air Service

· COPA, the Panamanian-based carrier that provides one-stop service to the northern and western parts of South America. A COPA marketing team is visiting Washington on April 16^th and the Task Force is working with the Airports Authority to introduce them to businesses that generate travel to their portions of South America. COPA has a code share alliance with Continental Airlines, and thus is able to carry passengers working under contract to the United States government. (Much of the Washington market is barred to foreign carriers by “buy America” provisions.)

· Avianca plans to inaugurate service between Dulles and Bogotá, which will provide a nonstop service to compete with COPA’s service via their Panama City hub.

International Aviation Policy

In preparation for the start of Stage 2 US-EU negotiations in May, the USDOT asked for comments on specific issues they have identified for consideration during these talks, including further liberalization of traffic rights, foreign investment opportunities, and the effect of environmental measures and infrastructure constraints on the exercise of traffic rights. DOT has also asked for any further suggestions to be added to the objectives. The Secretariat of USA-BIAS prepared and circulated a draft letter for membership review, supporting inclusion of liberalized airline ownership and control provisions in Phase 2.

FAA Annual Forecasting Conference

The Task Force attended the FAA’s Forecasting Conference on March 10^th and 11^th. The FAA forecasts a flat year in 2008, followed by modest but steady growth through 2025 for domestic air travel and more vigorous growth for international air travel. Points made by conference speakers included:

The nation's air transportation system handled 765 million passengers in 2007 and is expected to handle one billion passengers in 2016. Flight operations are projected to nearly double by 2025, compared to 2007, again placing emphasis on the critical need for Next Generation air traffic control and expanded airport capacity.

A Wall Street credit risk rating of major U.S. airlines gave American Airlines a 65% chance of entering Chapter 11 within five years, Southwest a 10% chance, jetBlue and the other majors a 50% to 55% chance. The U.S. airline fleet is aging and the majors will need to improve their credit standing if they are to finance replacement fleets at reasonable cost.
No airline in the United States is able to earn profits with fuel at $100 a barrel, however most would be profitable at $75 a barrel. Both Wall Street and federal OMB forecasts projected that fuel would drop back to $75 a barrel after the current hump above $100 a barrel.
The airline industry spent approximately $40 billion on fuel in 2007. Approximately $9 billion of the fuel cost was wasted on delays caused by air traffic control and airport constraints.

Environmental concerns are on the rise for aviation with water quality, emissions, aircraft noise, greenhouse gases and waste disposal being the agenda items. Waste disposal includes waste from aircraft manufacture and the recycling of old airframes, including their electronic components. The disposal of carbon composite airframe components may become the “vulcanized rubber” problem of the future.

Within Europe, and particularly in the UK, air transportation has been demonized for its (very slight) impact on global warming. The United States should be wary of Europe’s sound bite politics being imported to seek caps on aviation growth in the United States. A major difference between Europe and the United States: In Europe, aviation fuel consumption has increased about 30% since the year 2000. In the U.S., the growth has been achieved with a 4% increase in fuel consumption.

Airport congestion: 270 major airports around the world have inadequate capacity to meet demand. Only three are in the United States.

Conference papers are available at http://www.faa.gov/news/conferences_events/aviation_forecast_2008/agenda_presentation/

Air Traffic Control

At their March meeting, the ATC User Group learned that a new departure sequencing tool should come into operation in April to enable the region’s three airports to handle departures more productively during inclement weather.

Congestion Management

The Task Force’s response to the USDOT’s request for comment on its proposed congestion pricing scheme was refined by member comment and filed with the DOT. Click here to see the Task Force submission.

Tarmac Delay Task Force (TDTF)

The WATF is participating in the working group to examine the causes of tarmac delays. The group is chaired by Kevin Hudson, the CEO of Frontier Airlines, and by Captain Larry Newman with the Airline Pilots Association. The main causes are obvious, and the objective is to define the underlying causes.

Ground Access

Dulles Loop

The Dulles South Business Alliance - DSBA (mainly Route 50) and the Route 606 group were briefed March 13^th and their opinions sought. The Task Force’s objective is to present the implementation plan to the two counties and VDOT with strong support from stakeholders. Both meetings were successful and led to subsequent meetings with landowners who had been unable to attend. The group’s President provided a letter of support.

The contractor, Michael Baker, now is developing the short term implementation plan based on their earlier proposals, which should be ready for presentation to the implementation group in April.

Dulles Rail

· The state is working with Secretary Peters’ office and it appears that real progress is being made. Work to move utilities and complete final design continues.

· Congressmen Wolf, Moran and Davis have asked House Appropriations to include $100 million for the project in FY2009.

· All the future plans for Tysons Corner are contingent upon the rail project. Without rail, current zoning would allow an additional 25 million sq. ft. to be built at Tysons. With rail, Fairfax County is considering two proposals for added density. The first would allow an additional 97 million sq. ft. to be built focused around the four proposed rail stops. The second proposal would add 127 million sq. ft. and include a Tysons circulator system to allow a more even distribution of higher density. The circulator system would also link the portions of Tysons inside the Beltway to the rest of Tysons.

· While dense mixed use development is required to make the rail cost effective long term, Reston’s covenants prohibit residential use adjacent to the Dulles Corridor. A 90% vote of landowners is required to change the covenants, and a recent effort to get a change to allow mixed use stalled at 73%. However, the covenants can be changed with a 50% vote at 20-year intervals.

NVTA/Local Transportation Funding

· The Virginia Supreme Court rendered the taxing authority of the Northern Virginia Transportation Authority (NVTA) unconstitutional, gutting the 2007 legislation (HB3202) that authorized it to levy a potpourri of local taxes to fund transportation initiatives.

· Delegate Albo, an architect of HB3202, has offered a “repair bill,” which would require the state to levy approximately half the taxes and leave local municipalities to levy the other half. Reportedly, the bill also requires the money generated to be applied to bonds to fund stated NOVA projects in an effort to address concerns that NVTA could divert money from the intended purpose.

· The major political inhibitor to a new or revised funding bill appears to be division over whether the solution should be statewide or purely local to Northern Virginia and Hampton Roads, i.e. it’s said by some to be an urban vs. rural rather than a Republican vs. Democratic issue. The Governor and the Senate want a bill that embraces statewide as well as a local solution, while the House wants to resolve the local funding problem first, and then address the statewide issue.

· A state sales tax on the bulk sale of gasoline (i.e. a sales tax on gasoline “at the rack,” which some politicians can describe as a tax on oil companies) reportedly is finding merit with many House Republicans. A 0.5% increase in the sales tax also finds favor, as 25% to 30% of the revenue comes from outside purchases. An income tax increase, even if dedicated to transportation, is considered totally unacceptable by Legislators.

· WATF continues to participate in the Transportation Alliance’s coalition. Coalition members have been asked to provide guidance on which taxes they would prefer to see used.