• What about Skywest and Mesa? Both just upped their alliances with United, a carrier that's wallowing in Chapter 11 like a brontosaurus in a tar pit. UA employees are getting restless, and just one minor labor disruption at UA, and the jig's up. Neither SJP can lose sight of the outcome of the Air Wis alliance with United. Nothing is permanent.

• Then we have Independence Air, which has a business plan that seems to have been dreamed up by the same folks who brought us the Edsel. If they go 86, that's another 58 or so excess CRJs available - and lease rates will head toward the storm sewers. Will that torpedo some of the Island-dwelling SJPs? Or, will it open new opportunities for crafty players like Mesa?

Some Hard Facts About Regional Jets. In the real world, it is going to be an issue of survival for some SJPs.

One thing is certain: as we've pointed out for over three years, there is a glut of "regional" jets, and the economics of RJs will become dicier and dicier in the future. While other consultants are only now noticing, our fleet and traffic forecast clients have been forewarned about this for years. Best estimate is that there are at least 50 to 75 CRJs and ERJs that may end up in the desert by the first quarter of 2006.

Let's Dump The RJ Lore. Some key points regarding RJs and SJPs that should be noted, regardless of the pap put out from the usual suspects:

• RJs are economically viable in large numbers only when they are wedded as part of a major carrier network. In today's fare environment, stand-alone RJ operations outside of revenue-contributory missions, are relatively few. Some point to point flying works, but typically this succeeds in markets that are high-yield and shielded from low-fare competition. The unfolding Independence Air fiasco is a glaring example. The carrier was alone in having the management vision and the foresight to see a "Survivor" situation coming among SJPs. Unfortunately, the path they took, and continue to take, shows that a big fleet of RJs can't cut it as an independent carrier.

• RJs are not "small community" aircraft. Their costs are way too high to be economic in such missions, unless the small community can feed strong flow revenues through the major partner's hub. Fact: RJs were never designed to be saviors for East Upchuck Municipal Airport. They were designed originally as growth airplanes for what were then independently-branded regional airlines.

• Small Jet Providers are inexorably tied to their major partners. It's mostly lost-in-space academics who blather that profitable "regional airlines" could jump in if a major airline fails. Sorry, professor. The revenue streams of these "regional airlines" come directly from those legacy carriers. No legacy carrier, no "regional airline."

Regardless of what type of organic matter they may be smoking, the analysts and consultants who keep touting the success of "regional airlines" as if they were independent marketing entities don't have a clue. SJPs are vendors, just like a company that sells lavatory supplies to major carriers.

Just because they make money selling services to major airlines doesn't necessarily mean that either company could morph into a major airline if US Airways or United goes Tango Uniform.

By The Way... It's issues like this one that we'll be covering at our Tenth Annual Aviation Forecast Conference in Savannah on October 16-18. Our attendees get cutting-edge insights that step out and above ambient thinking. Real forecasts are provided, covering traffic trends, fleet trends, and strategic shifts in aviation.

Sorry, we won't be inviting the FAA Administrator or the head of the TSA. Our conference focuses on facts, not prepared speeches from government hacks. For details and to register, click here.

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved

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Hot Flash -  May 9, 2005

US Traffic Forecast: Deflation On The East Coast?
Mid-Size Airports: 2005 May Be A Tough Year

The latest update to The Boyd Group's Airports:USA forecast indicates that there may be some rude enplanement surprises for a number of mid-size airports along the Eastern Seaboard later this year.

Two words: Independence Air.

I-Air has just reported its latest results, and they're the financial equivalent of a coyote date. Ugly. Cutting to the chase, the carrier would need to maintain its current 68% load factor, and almost double its average fares to break-even. Try that in an environment where consumers choke on a $10 fare increase. I-Air reported ASM costs of over 18 cents a mile, operating against airlines with costs less than half that figure.

The point of all this is that much of the 68% load factor has been generated via low fares. Those low fares have in turn stimulated some impressive enplanement gains at a number of airports. That part is great. The dodgy part is that those fares - some as low as $29-$59 bucks - are unsustainable. At some point, probably within the next three months, those fares are going to evaporate. When that happens, a substantial part of the enplanement growth at several airports will quickly disappear.

One hopes that's all that disappears. It's now obvious that the I-Air experiment - high frequency with high-cost RJs - is a failure. While the carrier correctly concluded that staying as a United Express operator was a dead-end, the fact remains that the alternative model chosen by I-Air is also a non-starter. The expansion of the airline's A-319 fleet may be a route out of this quagmire. And maybe not. Not pleasant news, but reality is reality. Independence Air got some really bad advice somewhere along the way.

Further findings from this latest Airports:USA update can be found in this week's Monday Traffic Update.

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He's Failed At Almost Everything He Was Supposed To Do...
That Means He's A Leader To The AAAE

It must've been a real experience, being at the American Association of Airport Executives conference in Seattle last week.

In particular, the annual award for "leadership" should have been a hoot. It's often given to some real pieces of work. For example, just after 9/11, when the FAA's negligently-managed security system allowed four planes to be hijacked and 3,000 people to be killed, the honchos at the AAAE felt that Jane Garvey had earned their undying appreciation.

This year, the AAAE almost outdid even that affront to professionalism. Wonder what the ceremony was like when they announced the winner...

The master of ceremonies approaches the podium. Booming into the microphone, his enthusiasm rivals that of a plaid-jacketed salesman about to foist a defective used car on a gullible old lady.

"Ladies and gentlemen! We have a winner!"

The crowd goes hushed. The spotlights twirl through the crowd, the screens on the walls briefly flash the potential nominees for this year's award...  Maybe Jane Garvey, who couldn't spell "security" as FAA Administrator, but who's now a Washington lobbyist ... Marion Blakey, who may have just arrived, her plane being delayed because her antiquated ATC system went on the fritz... Mary Turano, now a hotshot at the FAA, coming off her pre-9/11 performance at BOS that allowed two airplanes to get hijacked... Willie Gripper, another FAA security honcho, who's just been awarded the triple crown by a court of law - sexual discrimination, racial discrimination, and lying under oath.

So many potential awardees. Just one award. What to do..  What to do...

The announcer rips open the envelope. "This year's winner of the American Association of Airport Executives annual leadership award is (drum roll, please) .... Admiral David Stone, Administrator of the Transportation Security Administration!... Let's give him a big round of applause..."

And accepting the award for the now-defrocked and recently fired Admiral Stone will be Osama Bin Laden's first cousin, Bob, who's here in Seattle getting treatment for a goiter. And also setting up a small terrorist cell...

A New Definition of Leadership. However the ceremony went really doesn't matter. It still goes down as an event that any airport manager across the nation should hold in the highest disgust. This year, not only did the AAAE give an award to a proven incompetent, but one that has actually been fired from his job for that reason. Sure, it's been couched differently - that he was asked for his resignation. And the politicians all lauded the guy on his way out the door. But the truth is that he was asked to leave. He was fired - something that would not have taken place if the guy was doing anything close to a credible job.

It's a new low in Alphabet-Group groveling. It is nothing short of contemptible.The award won't even buy a favor or two. As of next month, Stone's out on the street.

For those of you playing the home game, let's outline the great "leadership achievements" of Admiral Stone's tenure at the TSA. The ones that apparently so impressed the AAAE.

• Report after report concluding that airport security is no better than before 9/11, despite billions spent (read: squandered) and thousands of people hired at the taxpayers' expense.

• Major management problems with incompetent Federal Security Management at Seattle, Spokane, Newark, and Washington/Dulles. And those are just for starters. At Newark, Stone's TSA laid $20,000 on the FSD as a performance bonus last fall. Three weeks ago, the same FSD was identified for management weakness. Real standards, Admiral.

• Major holes in security at certain airports such as Orlando. Holes that the TSA missed.

• Screeners on the job without proper training. And, at least at Atlanta, the TSA lying about it, saying that the training was really being done, it's just that the screeners didn't know it. (?)

• Failure to implement any consistent standards by which to measure the effectiveness of airport screening. No standards means no security, because we don't know if the system is working. Stone certainly didn't.

• A recent report, covered by the New York Times, that the TSA has spent $4.5 billion on screening equipment that doesn't really work very well. Great leadership.

Well, okay. All this may be a little harsh. Let's give him some credit - Stone's leadership has successfully maintained the status quo. Which is that we remain sitting ducks for any semi-sober jihadists looking for a date with those 29 virgins. Just like on 9/11.

If It's Got A Title, Pander To It. Only somebody with a degree from the North Korean College of Journalism could take this track record and call it "leadership." But the top folks at the AAAE did. Hey guys, how was Pyongyang, by the way?

But if Stone's actual achievements aren't proof enough of his total incompetence, last week he did his level best to make sure we all knew beyond any doubt that he's completely out of his depth. Maybe out of his mind, too. In an AP story, he defended his screeners' consistently crummy testing performance, saying it wasn't their fault.

This head of the TSA actually whined that the failures were unfair because the people doing the testing "intentionally loaded the bags in a certain way to exploit the equipment's limitations" thereby causing items to get through. Naturally, a terrorist would never do this.

The fact that security was faulty wasn't any concern to Stone. He just thought that it was unfair to blame anybody. Like, it's just not fair to demand that the TSA not tolerate failure. After all, it's only the lives of half a billion annual airline passengers that are at stake. After all, only 3,000 people died on 9/11 because of negligent security management. Just like Stone's.

Stone said in the story, "It really is unfortunate that people take the results and blame the screeners..." You betcha, Stone. They should be blaming you. And, by the way, here's a flash, terrorists know exactly how to exploit not only your equipment's "limitations," but also the limitations of the entire amateur act you pass off for airport security.

But this is the caliber of performance that the folks at the top of the AAAE call "leadership." This is the definition of contemptible.

So Incompetent, Even Bush Noticed. Actually, this guy's performance has been so bad that the head of Homeland Security has fired him. In the context of the Bush Administration, that's almost unheard of. It's the equivalent of a mob boss being kicked out of the Mafia for using dirty language. Under Stone, the TSA's performance, beyond any question, has been a comedy of errors. And based on his comments above and some he's made in other venues, he's made himself look like a nitwit. Sorry if that seems harsh and unkind. But this is national security, not some PTA.

It's astounding to think about it - A nitwit job the American Association of Airport Executives just honored as an icon of leadership. The TSA is a raging failure, according to every credible source. Airports are still at risk because of that failure. And the AAAE goes out of its way to reward the folks in charge.

Really high standards, eh? For all we know, in 1941 these AAAE bigwigs might have voted to give Admiral Kimmel a leadership award for the great job he did protecting Pearl Harbor. Sure, the Pacific Fleet got hammered into Budweiser six-packs, but, the AAAE plaque would have probably pointed out the "big job" Kimmel had, and how well he did it.

The AAAE should be ashamed of itself. Instead of demanding better, its leaders have opted to take the politically-correct route of praising whatever bozo is in office, regardless of the fact that the job isn't getting done. Political access and political points are important, don't ya know.

But, so what. That AAAE "Leadership" award has all the value of a roll of Charmin. If people like Jane Garvey, who has blood on her hands, and David Stone, who has undeniably mucked up his job at the TSA, are the standards to which the AAAE aspires, it's time another organization was formed to represent America's airports in Washington.

Awards Like This Spit On 9/11 Victims. Here's a mental image that might put things into perspective. Try to remember those pictures of innocent people leaping to their deaths from the flaming World Trade Center, victims of an airport security system that was as fatally flawed as the one we have today under the direction of David Stone.

Then picture the cheering empty suits at the AAAE conference giving an ineffective former TSA Administrator an award. Wonder what those people who died that day in New York might say.

But the real mystery is, why aren't more people in the airport industry saying it?

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved
__________

Hot Flash -  May 2, 2005

Quick Update
The Small Community Air Service
Development Grant Program

Career Advice: Probably the toughest job in Washington today is that of the folks administering the Small Community Air Service Grant Program.

As of today, there were just 82 proposals submitted, down from over 170 two years ago. If the DOT is going to issue the full 40 grants that the program allows, choosing from just 80 or so makes the job a lot tougher. They've got Solomon-like choices ahead.

To be sure, some of the proposals are, to be gentle, fruitcake. A couple were right out of La-La land. But others - indeed, most - appear to have real value in doing what the Program intended. The folks at the DOT have to read every one of these, and make decisions regarding what's the best use of the paltry dollars congress allocated.

Not only is it difficult, but it also probably puts these people in the position of afterward having to justify every grant award to a raft of irrational congress people whose state or community was passed over.

Best guess, depending on the workload at the DOT, look for announcements to be made within 60-days, maybe less.

_________________

Just Buying Time?
Doesn't Matter What Category of Airline ...
It's Probably Fundamentally Losing Money

The most expensive item in the airline industry cost mix today isn't fuel. It's time.

The airline industry is in a code-red situation to get costs down (and/or revenues up) to compensate for permanently higher fuel prices. And do it before all available sources of long green are gone.

The question is whether they all have the cash to get to the finish line.

Despite some trendy media drivel, it's fuel that is driving the industry up the financial wall. No, it's not the "broken legacy model" and it's not those nasty labor unions. It's as simple as this: the price of jet-juice has skyrocketed faster than the airline industry can adjust in other cost areas. This includes all types of airlines. Legacy, LCC, and - which will become painfully clear in the near future - small jet providers, a.k.a. "regional airlines." Nobody's immune.

The price of time, however, is obscenely expensive.  To buy it requires two resources. One is lines of fresh capital. The other is management that understands the gravity of the situation and has the vision to do what's necessary to lower costs of hurling an airline seat across the sky. Any carrier that doesn't have both of these in place is likely on its way to the dustbin of airline history.

Regardless of sunshine stories about United "successfully" dumping pension plans, Southwest's fuel hedges, Republic investing in US Airways, and Delta maybe selling ASA to raise money, the hard fact is that things are getting uglier by the day. In reality, none of these actions are solutions to the problem. They're just time-buyers - funding sources of last resort, and they're getting harder to find.

That scraping sound may really be an iceberg, Captain...

In The Meantime, Where's The Cavalry To Save Us?  When all factors are included, just about every airline is operating at a loss. The entire industry is relying on alternative - and in some cases, last-gasp - finance sources that are at the moment essentially funding this red ink.

Funding Source: Bail Out The Mother Ship. US Airways has reportedly received $250 million (so far) in investments from Air Wisconsin and Republic. Both of these entities have a vested interest in keeping US Airways alive: they need a home for their regional jets. Air Wis needed a place to move the 70 or so that were kicked out of the United system. Republic knows it's got limited options for its RJ fleet if US Airways bites the big one. Problem: This infusion doesn't change the fundamental issue: US Airways is still losing money by the truckload. The dough from Air Wis and Republic might buy time. It won't buy lower costs or higher revenues.

Funding Source: Lessors. General Electric has become the villain of choice among some of the alleged airline experts in the media. "They're preventing necessary industry consolidation!" is the whine. They contend GE has violated Sacred Scripture by concluding that some airlines may not need to comply with the death sentences issued by some in the media from the safety and security of their newsroom desks.

Nevertheless, rent holidays, lease-rate reductions, and other financial gymnastics only buy time. They don't fix the fundamental problem - which is getting other areas of structural costs down, and on-board revenues up.

Funding Source: Fuel Hedges. It's the in-thing to point to Southwest's fuel hedges and conclude that the rest of the industry (most of it, anyway) are a pack of morons for not hedging fuel themselves. Here's a news flash. A fuel hedge is a bet. A well-considered bet, but a bet nonetheless. Oil prices are driven by a complex range of factors, and when an airline hedges, it's wagering on a lot of things happening - or not happening.

To be sure, Southwest is to be lauded. But it did take a bet - one that was by no means the easy, everybody-could-see-it slam-dunk as some in the media describe it. If the Chinese banking system had taken a dive last year - as some suggested - oil prices might not have gone the same way. If a rigged election in Venezuela had not been affirmed by some senile US ex-President, oil prices might not have gone the same way. If insurgency had not developed to the levels it has in Iraq, oil prices might not have gone the same way. If labor peace was reached in Nigerian oil fields, things could be very different. If (by some miracle) oil companies were suddenly allowed to plan and build new refineries and pipelines, even that long-term planning would have effected oil prices.

The bottom line is this: Southwest won the bet, big time - likely bigger than they or anyone else could have predicted. But that goo coming out of the ground is still $50 a barrel, whether the jet fuel it produces goes into a Delta airplane or a Southwest airplane. The folks who lost the hedge bet, if you will, are paying the difference for Southwest. It's really a no-interest, no-payback loan. But if it weren't there, Southwest would be losing money, too.

Sell The Regional Partners. Forget it. Some have reported - with a straight face - that Delta and other carriers could raise cash by selling off their regional partners, like ASA or Comair. To be sure, there are likely people out there who would buy. P.T. Barnum told us that years ago.

The point is that these "regional carriers" don't have any real revenue stream except that coming off the major airline partner, which is losing money. So, where's the play in somebody buying an operation such as Comair or ASA?

There isn't any. Regardless of who owns them, these small jet providers are chained to the future of the majors to which they provide lift.

Cost-Cutting: Airlines Still Have A Lot Of Territory To Cover. There are a lot of cost areas where ex-fuel expenses can be slashed.

What cost areas? Lots of 'em. Here's just one: ATC. Ten years ago - like, a full decade - study findings presented to congress by The Boyd Group indicated that air traffic control inefficiencies were costing the industry an easy $5 billion. That, apparently, was low, because an internal United Airlines study came up with a figure of $2 billion just for its own operations.

Since that time, ATC has gotten worse. It's more understaffed, more mis-managed, and more dangerous. The airline industry, if it decides to start treating the FAA as a vendor instead of an omni-potent god, has a lot of cost-saving opportunities. As long as the industry insists upon the fantasy that ATC inefficiencies are not human-related, they are going to continue to operate inefficient systems. Delays? Here's a tidbit of information: when related to what block times should be, and what airlines must schedule to accommodate the inept ATC system, the fact is that all flights are "delayed."

Dump The VP of Operations. Hire A VP of Production. Another issue is the airline production line. Captain Michael Baiada, who really is the visionary who brought Free Flight ATC out of the back closet, contends that the days of having VPs of Operation, or VPs of Flight, are over. These need to be replaced by a Vice President of Production - a person in charge of the total system that results in getting passengers and cargo to the destination in the most cost-effective manner possible.

Today, this production line is mostly handled by stovepipe departments, Flight, In-flight, Customer Service, and Dispatch. One example of this is the blind adherence to leaving the gate "on-time" - regardless of managing weather, revenue flows, or connecting passenger issues. At most airlines, those are secondary to getting the machine off the jetway in compliance with a paper deadline that is not related in real-time to the operational needs - the production line - of the airline or its passengers.

This isn't the forum to expand on the point. However, anyone who's witnessed a modern auto factory can get a feel for the level of sophistication that airline passenger operations are missing, and, in fairness, have not really needed up until now.

One car on the production line might be a green Outlander SUV with a gray interior. The next could be a red Gallant sedan with a black interior. The one after that might be a Chrysler Sebring convertible. At each station on the production line, the specific parts - wiring harnesses, dash boards, seats, etc. - all different - are ready and staged for each car as it passes. The precision is astounding. And it's what's largely missing from the planning and execution that goes into an airline hub operation. Precision that can save millions of dollars.

The point is that the airline industry is living on time borrowed at exceedingly high costs. Those that have the money and the vision to get ex-fuel costs down the fastest will survive.

Time is running out. And getting more expensive.

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved
_________________

Hot Flash -  April 18, 2005

DOT IG: FAA's Screwed Up Air Traffic Control
Airline Industry: Gee, That's Okay.

Small Airports: Don't Laugh. Your Air Service Is At Stake.

This is a hoot. We have a system that's run by proven incompetents, over budget, and enormously failure-prone. It's constricting air service, costing airlines unnecessary billions, and putting half a billion annual air travelers at risk, and guess what?

Everybody's happy.

The Stockholm Syndrome. Thanks For Not Killing Us All. Yet. On one hand we have a totally mis-managed air traffic control system, one that's known to be collapsing by the day. It's choking growth in air transportation and the national economy. It's costing the airline industry billions annually. It is making small community air service increasingly out of reach. It is by any measure a national embarrassment.

On the other hand, we have the victims. And they're all lined up cheering these clowns on.

The airline industry is being zapped with higher costs, yet they nearly coo every time Marion Blakey, the FAA Administrator makes a speech. (United and American admitted that ATC failures are costing them over $500 million each year. Oops, that was in 1994. It's a lot more now.) The AAAE, as we've noted over the years, is a shameless cheering section for these incompetent bureaucrats. And we have the Administration in the form of Norman Mineta, who's proud that he's forcing airlines to fly less, and thereby reduce the stress on the ATC system he's too inept to fix.

As If On Cue, From the Tampa Tribune...

TAMPA - A malfunction left air traffic controllers at Tampa International Airport unable to hear pilots for about 20 minutes Saturday afternoon.

Officials said the tower did not lose radar and no planes were in danger or diverted to other airports...

Think it through. Communication with flights at one of Florida's busiest airports was lost, and the FAA says safety wasn't compromised in any way. The FAA's definition of "not in danger" is based on the fact nobody was killed.

It's Baack! The FAA's ATC Cover-Ups

This Tampa story comes as if to underscore a report made to congress last week by the DOT Inspector General. It basically said - between all the sing-song, politically correct, don't-name-names lines - that the FAA continues to have a perfect track record in making a dog's breakfast of the air traffic control system.

The format for IG reports to congress is the same as the ones the GAO makes. In each section, it starts by noting - or concocting - some "success" of the agency under fire, then slips in the facts. This IG report was no different.

State It As Fact. Let The Reader Find The Lie. As an example, the IG made note that the FAA's ATO (that's the jive sheepskin organization that supposedly runs ATC) had "reduced the number of operational errors from 1,185 to 1,150." (Like, still, over a thousand errors, and this guy's giving kudos. Go figure.)

But then, the IG slips in the fact that even that "improvement" is a piece of concocted, dishonest garbage. The IG just sorta mentions that only 20 of 524 airports have any automated system at all of reporting controller errors. Yup, 20 of 524. The rest are on the honor system. That's real sophisticated.

Then, the IG reported that he found several instances when operational errors were, well, not reported at all. Yup, this ATO is really fixin' things.

Spend Money. Waste Money. In typical IG-speak the report gave credit to the ATO for their "incremental approaches" to implementing ATC upgrades. The translation of "incremental" is, we find in the report, "late, delayed, or mis-managed." The IG lauds the ATO for its incremental implementation of one huge upgrade program of controller displays, and in the next paragraph explains how the program is really $2 billion over cost estimates and years late. He then notes, almost off-handedly, that because of this late program, displays on which controllers depend are "locking up randomly." Indeed, at Denver, the number six airport in the nation, it's happening at least once a week, he noted.

Yessir, only in Fantasyland or in Washington would literate people accept this without a whimper.

But, the FAA insists, safety is not impaired. That's because nobody's been killed yet. (Actually, that's not true. ATC failure has been a factor in a number of fatal crashes, including one in Guam where a 747 went down with over 200 deaths.)

The following is a summary - directly from the DOT - of the "progress" of the FAA's ATC upgrade programs:

There's only one conclusion - one that the Beltway dwellers and their fellow travelers won't admit. The FAA's management of necessary ATC upgrades is totally incompetent. It is the reason for burgeoning "delays." It is a major cost contributor to the airline industry, one that is harming the national economy. Controller displays locking up on a regular, random basis? Once a week at some airports?

And don't buy into the "they need more money" line. That's a flat out lie. The problem is that the FAA has no respect for money, as even the IG report  noted.

The performance of these people is disgusting. Marion Blakey should be fired. Whoever's running this ATO Peanut Gallery should be fired.

But, don't expect anybody to do anything about it.

Hey, this is Washington, where accountability doesn't exist. As long as airlines accept this, as long as airports accept this, as long as Alphabet groups accept this, and as long as congress accepts this, everything's okay. We get what we deserve.

After all, it's only safety that's at risk.

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved

Hot Flash -  April 11, 2005

The RJ Glut.
Now, Everybody's Noticing

It's official, now that it's in the rearview mirror.

There's a big-time glut of 50-seat "regional" jets.

Even Wall Street has taken notice. A recent report by one of the most respected analysts, Robert Ashcroft of UBS, alludes to GE and other lessors and finance entities getting stuck with litters of RJ kittens.

It Ain't Braggin' If You Done It. The Boyd Group was the only consulting firm to accurately predict this situation, well before it took place, and - note this - during a time when other consultants were "predicting" the great and near endless demand for RJs. Some are still doing it.

The Boyd Group fleet forecasts first indicated an oversupply of 50-seat jets almost four years ago. We noted it here back in 2000, again right after the Comair strike, and have kept our forecast clients updated since that time. These include, by the way, manufacturers and suppliers who are directly involved in the production of 50-seaters, as well as airlines who own the things. (Unlike some other consultants, when we're hired to do forecasts, that's what we do. Results come as-is, where is. Our clients know that if they want guaranteed warm-and-fuzzies, they'd best go out and buy a puppy.)

Somebody's Fixin' To Be Out In The Cold. The game of musical RJs is just starting. Air Wis moves 60-70 of them (mostly 50-seaters) to US Airways. Then, somebody's got to be odd man out, because with all the pricing and cost challenges facing US Airways, there's not only a limit to the number of RJs US Airways can afford, but that "limit" is likely going to be a declining figure.

We could be looking at somewhere near 40 to 50 excess RJs in the not too distant future. And that assumes that US Airways remains among the living.

Used RJs? Great For Desert Shade. It gets worse. Toss in the possibility of 50 or 60 RJs getting grounded at Independence Air, and that that means swarms of these things buzzing off to the sunny climes of the Arizona desert.

Oh, and do ignore the nonsense spouted by some that there'll be a huge secondary market for 50-seat RJs. Like, where? Not the US - this is where the glut started. Not Europe - the LCC craze there has put RJ economics into the ceramic fixture. Not China - hey, folks, they're building their own RJs, and aren't likely to buy many used ones from Foreign Devils.

The Boyd Group is forecasting that between 75 and 150 CRJs and ERJs will be all dressed up with no place to go within the next three to five years. Sure, lessors can and will cut deals to make them more attractive to airlines. But that doesn't change the biggest challenge to RJ operations: high operating costs.

This is not a question of 50-seat jets disappearing. They are fine aircraft. They are necessary aircraft. They'll be part of the airline picture for the next 10 to 15 years, filling niche roles. The point here is that the number of those niches will decline, and so, too, will the total number of RJs that the market can support.

Prediction: The operating economics of E-Jets, the 70-110 seat mainline aircraft being produced by Embraer, may well accelerate the retirement of RJs. Another prediction: The E-Jet will also change the role of small jet providers (what rearview mirror worshipers still call "regional" airlines.) While there may be a culling-out of these entities, those left will evolve into operators of larger and larger aircraft, up to and possibly including what is now the sacred territory of mainline airline unions - 737s and A-320s.

RJs are fine airplanes. But if you're going to invest in one, do it with somebody else's money.

____________

The "Airline Quality Report" - As We Predicted.

Guess what? The academic wizards who crank out this Airline Quality Report have determined that Jet Blue Airlines is the best in the nation, according to their double-secret airline ranking methodology.

And the media repeated it as if it came special-delivery from Delphi. Not that the carrier they are presumably referring to isn't one fine organization. The real news story, missed by most of the media, is the fact that the authors don't even know the proper name of the airline they claim is #1.

Hey, guys, it's jetBlue Airways. And it's Delta Air Lines. Before pontificating on the airline business, get to know the players. And, as we noted last week, "loading docks" are not part of the baggage flow at airports.

The usual practice from the last few years was again followed. The AQR contained page after page of unintelligible gobbledy-gook based on  some esoteric "formula" that is beyond the ability of we mere mortals to understand. Then, separate from all that stuff, the authors translated their tea leaves for us by opining on all the problems of the airline industry.

One of the big findings these guys stumbled across, according to reports in the AP - something that the "data" had nothing to do with - is that "airlines that fly to small communities" are chipping away at the majors. Be nice if theses guys understood where these airlines get their revenue streams. But the DOT data indicates that Skywest and ASA and Comair are "airlines" so, according to these professors, they are independent carriers of passengers. DOT data, the foundation of this document, must not be questioned. Even if it is garbage.

Most of the lemming media didn't bother to question the data, the findings, or the idiotic opinions expressed by the authors. But some, however, did, including the Las Vegas Sun.

Kudos to them.

The terrifying truth is that, when not putting out silly reports like this, these people are teaching our kids.

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We're Not Interested In Little Airports...

From the AFP...

"...Atlanta, one of the busiest airports in the world, has refused to make changes to accommodate the A380 saying that no airline using the Georgia hub had indicated it wanted to bring the new jet there. But Airbus said this was not important as most of its traffic is domestic...."

Just like ORD. And DFW. And LAX.

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved
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Hot Flash -  April 4, 2005

The AQR - Promises To Meet Expectations

Today, according to news reports, the much-awaited "Airline Quality Report" is expected to be issued. As we've noted in the past, this document can make for really great reading. The initial teaser press release issued yesterday gives us a clue that this year's document may be a real winner.

Implying that airline service has "deteriorated" - again based on unverifiable and unreliable DOT complaint data, it appears that the AQR has determined that staffing levels are the main culprit, due to airline cutbacks.

And when it comes to indicating the depth of knowledge the authors apparently have regarding the airline industry, dig this AP quote from one of the learned professors who compile this yearly statistical comic book, in regard to airline employee attitudes:

``Morale's going to be down and they're not going to care if they get the bags to the loading dock in five minutes, 10 minutes or 15 minutes,''

"Loading dock?"  Now, there's a real tidbit of new airline-ese.

Hello, professor. Before you sally forth to critique the industry, it'd be nice to first learn what happens at an airport. Bags, professor, are taken to baggage make-up areas, if they're outbound. And if they're inbound, it's to the baggage claim area. Loading docks, learned one, are for trucks and freight.

One might expect airline industry "experts" to at least know and understand the airline lexicon.

What to watch for in this year's edition: expect an indignant broadside regarding the failure of airports to upgrade runways and terminals. Expect huge criticism of airlines for employee reductions, probably without having accomplished any real analysis of workloads, staffing, and workforce needs.

What not to expect, based on past AQRs, not to mention the teaser quote above, is anything really of value.

There's nothing wrong with issuing studies on the airline industry. But they'd better be supportable and based on hard, verifiable data sources. The random, unverified complaint system at the DOT does not meet that standard. In the past, the AQR, which gets lots of coverage from an un-questioning media, has not met that standard, either. Click on the link to the left regarding DOT Consumer Data to get an overview of the type of garbage the AQR relies upon in coming up with its grand conclusions.

Note to the media: do ask some hard questions before regurgitating the stuff that's in the AQR. Do check for facts.

You may be disappointed.

(For reviews of yesteryear's hilarious AQRs, click here and then click on the appropriate links.)

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New Feature:
Monday Traffic & Trend Snapshot

Starting today, The Hot Flash will include a weekly airport traffic and data snapshot, from the Airports:USA Suite of analytical tools. The Airports:USA Forecast is the only enplanement and trend projections accomplished independently in the private sector, covering 130 individual airports. Airports:USA DataMiner is the only traffic analysis source that addresses the inherent and widespread errors contained in native DOT DB1 and T-100 data.

Airports:USA is updated throughout the year, providing the most accurate traffic and trend projections available anywhere. In addition, the Snapshot will occasionally include updates from Airports:USA DataMiner, revealing key trends in enplanements.

This Week:
Hubsite Forecasts - PHX, ATL & MKE Top Three In Enplanement Growth
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Hot Flash -  March 28, 2005

News & Reviews

Quick! Somebody Better Tell Continental.
And Clue-In Mr. Kelleher, Too

In an article regarding Singapore Airlines' plans for the A-380 WhaleJets it has ordered, the Wall Street Journal dropped a bombshell revelation on the airline industry...

"...Super-jumbo jets will be added to the fleets of all major airlines over the next few years, forcing airports to strengthen and widen runways..." (WSJ, 3/10/05)

It's official, gang. The WSJ has spoken. All, count'em - all - major airlines will be ordering the the A-380. Whether they know it or not.

Can't wait to see what Shamu'll look like on the side of a Southwest A-380.

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TSA: The Wonder of It All...
Airports: The Terrorist Bulls-Eye Is Still There

Let's catch up on how well we're doing countering terrorists. If you're rooting for the terrorists, you're in luck.

The TSA has claimed that they've tightened up security at airports...

• So much so that a whole bunch of illegal immigrants were just rounded up at Boston Logan. They were working in sterile areas. Great security.

• So much so that we're regaled by the following article from the Associated Press...

"... Baggage screeners at CVG noticed an X-ray image that resembled a gun after the passenger had picked up the bag and left the checkpoint, said Christopher White, a Transportation Security Administration spokesman in Atlanta..."

"...after the passenger had left the checkpoint..."  Like how 'bout "...after the whole place had been blown to smithereens..."  And this, according to the patronage hack running the TSA, is the best screening in the world.

• So much so, that now security wait times are a big issue. Not security quality, which, for the information the occasional me-too journalist, has nothing  fundamentally to do with how long mama waits to have a screener at CVG miss the .357 in her rollerbag.

From a TSA talking head, "... I don't think 20 minutes is a long time to ensure (an) aircraft is safe..." said Ann Davis TSA spokesperson. Great, but the truth is that it doesn't ensure anything except for a 20-minute wait.

The TSA seems to think that a long line is an indication of intense security. Wrong. With tens of thousands more screeners than before 9/11, and security breaches up the national whazoo, and Homeland Security IGs declaring screening to be "poor," long wait times at any airport likely are more indicative of inept management than of tight security.

• So much so, that at Boston, it was found that contractors trucks entering the airport were just waved right in, with no - zip - screening. That was part of a media investigation done by a local TV station with the help of Brian Sullivan.

Mr. Sullivan was one of the honest FAA security inspectors that tried to warn the agency before 9/11. Jane Garvey ignored them. Today, Sullivan's vilified by the TSA. Jane Garvey's been given awards for "excellence" from the AAAE and others. And because of her ineptitude, 3,000 people are dead. Go figure.

• So much so that now lighters cannot be carried onto airplanes, for fear that they might be used to light the fuse to a bomb. So much so that screeners are - reportedly - getting training to detect such items in carry-ons, including the proven terrorist-stopping tactic of actually asking the passenger, "do you have a lighter in your bag?"

Meanwhile, matches are okay. Maybe because a secret Homeland Security study indicated that terrorists like to flick their Bic. Who knows. But it's a fact that any semi-lucid college kid could figure out how to get the components of a bomb onto an airliner. Nathaniel Heatwole did, and don't get deluded into thinking that Admiral Stone and his Junior Security Rangers have taken steps to stop a repeat.

With guns getting through at security checkpoints, and illegal aliens from who-knows-where running around in sterile areas, only an idiot would believe that getting a bomb on an airplane would be difficult for trained, organized terrorists. Like the ones on 9/11. Like the ones that the TSA was created to stop.

• So much so, that screeners in ATL have complained that they aren't getting monthly training.

TSA countered by telling the media that the training was being given, but the screeners simply weren't aware of it. Think about that response for a second. Obviously, the Training Department at TSA is being run by Ward Churchill.

• So much so that the leaders of the TSA have no problem blatantly lying to congress and the American people.

The GAO just issued a study that found the TSA intentionally "misled" congress in saying they didn't make use of certain booking information supplied by, or strong-armed from, various airlines. Admiral Loy, the one who let the Heatwole affair slide, and who was lauded by the congressional sub committee overseeing the TSA, outright lied about the situation. Hey, wasn't lying to congress something bad?

Great. We're "protected" by a TSA run by people who are dishonest. How wonderfully Third-World.

Get it. We are not safer than before 9/11. We're actually more vulnerable because those organizations who're supposed to watchdog the TSA are encouraging dishonesty, ineptitude and mis-management by lauding, not condemning, the nitwits running the agency.

Security means not accepting mediocrity. That's what we did before 9/11, and that's where we are today. Too many airports care more about long lines, instead of the known fact that screening could - and must - be made professional. Too many of the Alphabet organizations are too busy making award plaques for TSA and FAA officials, instead of sending hot missives to congress, demanding they be fired. Too many in the media are more concerned with "getting the story" one-on-one from some dishonest TSA press hack, than with getting the truth.

Bad things happen to a nation whose leaders accept bad security.

_________________

Finally, In Passing

Delta's installed informational signage explaining their zone boarding system. Take a look at the example they're using.

The poor schlemiel holding that boarding pass has more problems than just finding overhead space after zones 1 through 5 get on before he does.

Before he gets "In The Zone" he's going into the pen, where he'll have no choice but to come clean when he's asked the tough, terrorist-identifying question:

"You got a lighter in your bag, pal?"

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved
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Hot Flash -  March 21, 2005

As Big A Crisis For Airlines As Post-9/11. Maybe Bigger.
Fuel Costs. Irrational Competition. Capital Shortage.
Plan On Lots of Changes - Soon.

Triple-Whammy time in the airline industry. Jet-A prices are going Tiffany. Fares in some regions, particularly the East Coast, are being decimated by whacko pricing wars. And finding fresh capital is like looking for a hooker in the Vatican.

Let's Start With Fuel

A year ago, what with major cost reductions from labor and other sources, the industry was in a clear recovery mode. Then fuel prices went into orbit and stayed there.

Unless the price of jet-A drops real fast, real soon, standing in the doorway of a bankruptcy court in the next several weeks could be hazardous to your health, what with phalanxes of lawyers charging in with airline Chapter 11 filings.

The fact is becoming obvious - fuel costs are going to be fundamentally higher, permanently. High enough to make traditional airline operational approaches completely un-economic. High enough to Hoover out airlines' cash hoards.

And this is not a legacy v LCC story. Every airline is facing this hard fact: higher fuel costs can only partially be offset by higher fares. The way the airline product is being produced is now uneconomic. At some level, that includes Southwest and every single LCC. Some are less exposed than others, but that's just the equivalent of having a stateroom on a higher deck of the Titanic.

But