Are you paying for an airstrip of convenience?

by Tom Johansmeyer on

Taxpayers are paying to subsidize several airports around the country. Many don’t service commercial passengers and do very little to add to the communities in which they reside. Take Williamsburg-Whitley County Airport in Kentucky. It was built with $11 million in cash from the U.S. government and usually sees only a handful of flights a day take off or touch down – some days, the runway is empty.

The source of this largesse? A federal program that few know about. To understand what’s going on, you’ll need to think back to the last airline ticket you bought.

You know the drill, there’s the price on the screen … and then there’s the price you pay. In addition to the fare, you realize quickly that fees and taxes can mount to seemingly absurd proportions, but you have little choice in the matter. The taxes alone can hit 15 percent of what you pay for a flight. Have you ever wondered where that money goes?

(Well, now you know that a piece of it goes to Williamsburg-Whitley County Airport.)

Some of the tax money from air travel transactions is used to build new airports and maintain others – a network of 2,834 in total in the United States – that do not service passenger flights. These “general-aviation” airports are separate from the 139 commercial airports in the country that take care of almost all passenger flights.

USA Today, which deserves a hell of a lot of credit for digging into this, reviewed the first full examination of the 28-year-old Airport Improvement Program and found that $15 billion was sent to general-aviation airports. That’s a considerable amount of cash to give recreational fliers a place to land.

In all fairness, there is probably some truth to the notion that these airports can attract commercial and residential development and provide some important services around medical transport via air, as some members of Congress insist. But, is it enough to justify the expense?

To Congressmen, perhaps.

USA Today reports that that “[m]embers of Congress took 2,154 trips on corporate-owned jets from 2001 to 2006,” per a 2006 study by independent research group PoliticalMoneyLine. Again, in fairness, some of these airports actually provide access to their constituents. But, should a taxpayer in San Francisco finance an airport in North Andover, Massachusetts?

However you quantify the utility, it seems as though the cost is a lot higher than the benefit.

Jonathan Ornstein, CEO of Mesa Air Group (a regional), tells USA Today, “Congressmen are spending millions building runways at these little airports. That is just a complete waste of money.” This is especially the case, he says, when “there is a huge requirement to overhaul infrastructure at major airports.”

Click here to read the entire investigation and analysis; it’s worth it.

Making sense of the airline industry

by Tom Johansmeyer on

The situation is currently grim for airlines, having gone from “bad in January to ugly by March,” according to USA Today, mirroring the U.S. economy as a whole. But, some feel that the worst is behind us. At the same time, a decline in business traveler traffic may suggest that we have a long way to go.

That’s why I love USA Today … two perspectives for the price of one!

Let’s make one thing perfectly clear: airline executives are unanimous in refusing to state that a recovery has begun. Keep in mind that CEOs have to be incredibly careful whenever they speak. Something that’s interpreted as a prediction could be disastrous later. A prediction becomes a goal to be met, and failure to do so can have harsh implications on the stock price.

In case you don’t know, that means real people lose real money.

That being said, Delta, American and Continental executives allowed themselves some modest hope, suggesting that “at least traffic levels aren’t collapsing the way they did last year.”

For now, there’s little to celebrate aside from the hope that we’ve hit bottom. Continental’s revenue per available seat mile (RASM) fell 4.8 percent in January, 11.5 percent in February and 20 percent in March. April is likely to be down 13 percent to 15 percent.

RASM basically tells you how much revenue an airline pulls in for every seat flown. Let’s make it easy: assume that a plane has two seats and flies 100 miles. One passenger pays $200 and the other pays $100. The first passenger pays $2 per mile, and the other pays $1 per mile. It averages out to revenue of $1.50 per available seat mile.

Now, assume that we have a third seat … and it’s empty. So, we’re working with $2, $1 and $0. That’s RASM of $1 (as opposed to the $1.50 above).

Figuring this out for an entire airline for a full month is obviously much more complicated, but you can probably see the value in doing so. It’s a way to figure out just how productive every seat on every plane is – even the empties.

Delta’s perspective is that things aren’t getting worse right now, even if they aren’t good, and American believes that it’s too early to tell.

The decline in business travel is seen as a big part of the problem. Business travelers tend to spend a lot of time in planes, and they don’t always get the lead time to buy tickets (or prepare their families for long absences) that they’d like. As a result, they often pay more for tickets than vacationers, who have the luxury of planning ahead.

To keep expenses down, many companies are trying to cut their spending on travel, opting for other collaboration alternatives. While face-to-face meetings are nice, they tend to be a lot more expensive than webinars and conference calls. When you have to squeeze the budget, travel is an easy place to cut spending a bit.

I saw this firsthand during the last economic downturn (following the collapse of the “dotcom economy” and the terror attacks of September 11, 2001). I was a management consultant and flew every week. While my clients were willing to foot the bill for weekly travel, I found myself under a lot more pressure to find cheaper flights, stay at hotels that were less expensive (and less convenient) and take a taxi to the airport instead of driving and putting my car in the lot for a week.

Though business travel can be cut, it won’t go away completely. There will always be a need. While many cite conventions as a source of business travel, you’re more likely to run into weekly grind travelers at airports in this economic environment. Catch the first flight out of a major airport on a Monday morning, and you’ll see business and business casual attire, laptops clutched and weary looks. These people make the same run every week, returning home on a late flight Thursday or Friday. When you have a lot of people dropping $500 a week on flights – each doing it 40 times a year or more each – the airlines benefit. When they slow down, the airlines feel pain.

To compensate, as you’ve seen here on Gadling, airlines are coming up with more fees – and they’re not all as crazy as the Ryanair pay-to-pee proposal. Baggage charges seem to be most common, with Delta hitting up passengers for $50 to check a second bag on international flights (starting July 1, 2009). The airline hopes this will generate another $100 million this year.

Delta’s not innovating, here; it’s just the most recent.

The need is salient, given recently released first quarter financial results. JetBlue and AirTran stood out by turning profits ($12 million and $28 million, respectively), largely because the cost of jet fuel dropped. Take that out of the equation, and AirTran’s 31 percent revenue decline would have had a greater impact.

Meanwhile, US Airways posted a $103 million loss. Alaska Air Group lost $19.2 million for the quarter. Delta, American and United showed substantial losses, as well.

Leisure travel isn’t the primary driver, as fare deals have kept this section of the market fairly active, if less profitable. It’s the business travelers who are straining airline financial performance. It will take a turn in the economy to solve this problem. Any measures available to the airlines are more likely to slow the bleeding than repair the situation as a whole.

When will that happen?

Like the airline CEOs, I’m not crazy about making predictions, as my success is shaped more by luck than clairvoyance. But, I’ll take a small step out on a limb. Businesses will green light travel increases when they see an upside to doing so. When sales teams encounter big opportunities, they will be able to make the case to fly. This means that a client has to be ready to write a big check. Also, startup activity will result in the use of venture capital funding to hop on planes with the hope of pitching new ideas to clients interested in growing their businesses or realizing a cost savings.

You won’t notice it at first; these trends take a while to gain steam. Success builds upon success, with each win leading to several new opportunities and a willingness to fund travel for them.

Am I willing to throw a date or timeframe out there?

No way!

We’ll all have to wait and see.

How will your holiday travels go? Do some research with the Holiday Travel Cutback interactive graphic

by Anna Brones on

For me to get home for Thanksgiving, I’m lucky enough to only have to take Amtrak. Even though train stations are popping at the seams with travelers during the November holiday weekend, airports are even worse. And this year is no different.

As a matter of fact, during this year’s Thanksgiving and Christmas travel periods, airlines will operate about 2,500 to 3,000 fewer domestic flights than compared with the same periods in previous years. That means that one way or another, you’re probably going to be affected. To visualize just how your travel plans might be impacted, USA Today’s travel blog Today in the Sky has put together an interactive graphic to show how flight cutbacks by airlines could affect your travel choices.

The graphic can be used to find flight changes for select days from every domestic airport with flights to the following seven hubs: Atlanta, Charlotte, Chicago O’Hare, Dallas/Fort Worth, Denver, Houston (Bush) and Minneapolis-St. Paul. The map is dotted with red and green squares to signify fewer or more flights to the hub, making it pretty simple to see what routes are going to be more problematic. But if you’re lucky, you’ll find that your particular route has that great green box, meaning that you’ll actually be able to take advantage of more flights to get you home for the holidays.

To check out the graphic for yourself, click here.

Galley Gossip: The problem with “soaring” ticket prices

by Heather Poole on

Remember what airline tickets used to cost? Oh no, I’m not talking about last year, go back a little bit further, okay a lot further, like 1950 further…remember those prices? I didn’t think so.

A couple years ago I went just a wee bit crazy, spending too much time (and money) on eBay bidding on airline ads from the 1960’s and 1970’s. They were big and bright and colorful and they said things like: “fly me,” “just a working girl working,” “think of her as your mother.” They were sexy and sexist, totally wrong, and yet so right — at the time. I loved them. Still do. Had them framed. Hung them on the wall. And then, last year, tucked them away in a drawer for safe keeping (and a clutter free office). I think of one of those ads often whenever I hear people complaining about the price of airline tickets, or whenever I read articles like the one by Dan Reed in USA TODAY entitled “Airline Tickets Soar This Summer” that was featured on AOL with the caption, “Passengers Can’t Bear to Look.”

Well I’ve got something for those passengers to look at, something that may force them to rethink the definition of soaring ticket prices. I mean, soaring? Don’t you think we’re being a bit dramatic here? Especially when people are willing to spend hundreds of dollars on fast food, botox, designer clothes, and even video games for the kids. Give me a break. Because the ad, the one I mentioned above from 1950, lists the price of a ticket from New York to Paris for $326. Please, can anyone tell me, what else out there costs the exact same price as it did over fifty years ago?

Precisely.

Yeah, I know, service in the air has gone down hill big time. You don’t have to tell me. I live it every time I put on my uniform. In fact, I spend most of my time at work apologizing because we don’t have this and we don’t have that to a flight full of miserably cramped passengers. I feel for those passengers. I really do. It’s gotten bad out there. Worse than bad. Flying, today, is just not what it used to be, for everyone involved – passengers and crew alike.

But what gets me is that thirteen years ago I worked at a no frills airline called Sunjet International Airlines. The ticket price back then was $99 to fly one way from Dallas to Fort Lauderdale, Newark, or Long Beach. That was thirteen years ago. Fuel prices were 1/3 of what they are today. Keep in mind that price was on an airline that offered pretty much nothing but a seat (a broken seat covered in duct tape), a lot of delays (I’m not talking a few hours delayed, I’m talking two-day delays), lost luggage (or no luggage at all. What do you mean you checked bags?), and a burnt chocolate chip cookie, depending on who happened to be in the galley that day. Then, in 1995, I found myself working for a major US carrier, on probation for six months without flight privileges, in the month of December. The price of a ticket from New York to Dallas was oh just $800. In Coach. Needless to say, I didn’t get make it home for Christmas that year.

Now flash forward thirteen years and you can fly nonstop on a major carrier from New York to Los Angeles for as little as $235 round trip. I’m sorry, but that’s not bad. In fact, it’s so not bad that I just bought myself a seat on that same flight (even though I’m able to fly standby for free) I challenge anyone to drive that same distance for less money. Yes, airline ticket prices are up 200% from last year, but when you realize they were down 700%, that’s still a good ticket price! So when someone writes a piece about the “soaring” ticket prices of today, I have to shake my head and think, how soon we all forget.

More U.S. passport regulations coming soon

by Justin Glow on

Are you one of the many Americans that still don’t have a passport? Shame on you. But being shamed by some random travel blog on the Internets is the least of your worries, especially if you plan on re-entering the U.S. by land, ferry, or small boat.

According to USA Today, those re-entering after January 30th “must carry either a passport or a government-issued photo ID plus proof of citizenship such as a birth or naturalization certificate.”

I’m surprised this is just now happening. You’d think having the correct documentation is common sense, but I’m sure they’ve had people show up with things like a Macy’s card and a picture of their uncle in front of the Statue of Liberty trying to get across. What? This doesn’t prove anything?

Turnaround time for passports ranges from four to six weeks, so get a move on it.