Myths & Realities
Airline Consolidation

Air Service Rationing:
It's Started

Small Community Air Service
Presentation To Senate Commerce
Committee Symposium

What Our Research Indicated
About Southwest In 2006

Missing In Action:
United's TED

No-Frills Airlines
Flying In The Wrong Direction

DOT O&D Data:
Don't Pay For Bad Numbers

Airline Bankruptcy Myths

Rural Air Service:
Rules of Dis-Engagement

Hot Flash Archives
Jan 2007 - April 2007

Hot Flash Archives
Oct-Dec 2006

Hot Flash Archives
Jan-May 2005 

Hot Flash Archives
Through June 2006

The Boyd Group, Inc.
Advisors to the Aviation Industry
Since 1984

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Aviation Insight & Perspectives
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Archives May - August, 2007
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Hot Flash - Monday, August 27, 2007

From The
They-Don't-Hear-Thunder Department

The short answer is no. The long answer is no.

That's pretty much directly what Delta's new CEO stated when asked if he was looking at pursuing a merger with Northwest. He ought to know what can be done, what can't be done, and what won't work in this regard, having been CEO of both airlines.

Things like fleets that have about as much in common as locomotives and street trolleys. Things like the enormous expense of integrating entirely different ops specs, maintenance programs, and pilot seniority assignments. Things like the revenue growth potential for wider cooperation within the current DL/NW/CO and SkyTeam alliances, without the wreckage a merger creates.

But that hasn't stopped the usual-suspects on Wall Street from confidently "predicting" such an event, usually accessorized with some babble about the "great route synergies" a combined DL/NW would represent, and the "billions" in "new value" that would result.

Keep this in mind: a lot of these financial "analysts" speak first, and worry about factual data later. The fact is that a lot of these folks literally have no basic knowledge of how airlines work. They look at a route map and start spouting.

Another trendy bit of Sacred Wall Street Scripture that's also coming up in many of these articles is the unquestioned pronouncement by analysts to the effect, "legacy carriers such as Delta are abandoning domestic routes - which are less profitable - to low cost carriers and are instead expanding into more lucrative international markets..."

That's flat out nonsense. Not within three zip-codes of airline reality. The truth is that carriers such as Delta are not being chased out of any major mainline O&D markets by LCCs. To the contrary, over the last two years, it's been Delta harassing LCCs by tossing in RJs to siphon traffic in a number of markets LCCs have entered. The fact is that Delta, Continental and Northwest have added international flying to feed and strengthen domestic markets, not as a refuge from Southwest. And it's that international feed revenue that gives the comprehensive network airlines an on-board revenue advantage domestically over LCCs.

These blind-leading-the-intellectually-lazy babblings from some (but certainly not all) corners of the Wall Street cognoscenti are more clear indications that a Sealy Posturpedic is a better place for consumers to trust their money than with some of these alleged financial "experts" - many of whom couldn't tell you the difference between a CF-6 and a PT-6.

But do expect this type of misinformation to become more and more of a chorus line in the next few weeks. It will be one of those subjects in media stories that takes on a life of its own, with its validity based mostly on the number of times it gets repeated, not on hard facts or industry knowledge. Lots of times some of the media does no real fact-checking on matters that "everybody" knows, simply because "everybody's" repeating them over and over and over again.

The Flat Earth Society Lives. Just don't take their investment advice too seriously.

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Looking Ahead: The Boyd Group Aviation Forecast Conference
New Heresies - To Be Presented October 14 - 16

We thought we'd outline some of the areas that will be covered at the 12th Annual Boyd Group Conference this October 14-16 in Sarasota.

Air Traffic Growth Trends - Spotty & Disruptive.  The Boyd Group's Airports:USA™ Forecasts indicate that the nation is on track to experience approximately 580 million passenger trips, equating to 712 million enplanements, in 2007. That's 2.7% above last year.

However, closer analysis indicates that much of the growth is based on LCC capacity increases that may not be sustainable in the event of an economic downturn. It is also of concern that some of the 2007 LCC expansion efforts have resulted in fare-based traffic growth that has not necessarily translated into bottom-line profitability.

Factors we'll be covering in the Traffic Forecast Session of the Conference include:

• The effects of economic slowdown on each airline sector.

• The potential of $80 oil & what the aviation industry can expect

• Airport enplanement shifts expected by region

• Continued constriction of rural air service levels & quality

• The increasing importance of general aviation to the economy

• Potential new strategies at LCCs to shore up revenue streams

• The rising revenue bar for small community air service & the dynamics driving it

• The importance of emerging international cross-flows to CNCs

• Fundamental difference between "traffic growth" and "air service growth"

• Identifying new international traffic generation at non-hubsite cities

One disruptive dynamic Airports:USA™ is looking at is the disparate capacity increase between Comprehensive Network Carrier Systems and the LCC sector. The CNC segment has limited additional net new capacity coming on line, while the LCC sector will be looking for markets to place a disturbing number of new 737s/A-320s/E-190s. That means some fare stimulation in some regions, as LCCs claw for market share and look for ways to fill additional 100-seat and larger airliners

We've identified several outcomes of this - including stronger leakage trends within some regions, and we've found a number of potential scenarios where traffic could see sudden declines, as LCCs begin to re-structure their strategies.

We'll be cutting new ground, as usual, and discussing trends other conferences and analysts well be noticing years down the road.

Program Update. We're happy to again confirm that the FAA Administrator, the TSA Administrator, and DOT Secretary Mary Peters will not be attending The Boyd Group Aviation Forecast Conference in Sarasota, October 14-16.

That's for the simple reason that The Boyd Group Conference is an event where new territory is covered. We are not particularly interested in canned speeches that have been repeated over and over at prior Alphabet group conferences.

Questions ATA Should Ask, But Won't. We did however, give serious thought to inviting the outgoing FAA Administrator, with the goal of asking her to answer two simple questions. The first one: since the ATC system is indeed, as she claims, "at the breaking point," yet the (old and outdated) stuff planned in the FAA's alleged NextGen program won't be fully operational for a decade or more, then what exactly does the FAA propose airlines do in the meantime? Cut back? Ration flying?

The second question would be, with the proven track record of the FAA's inability to meet deadlines, why should consumers and the aviation industry give any credibility to the FAA's promises? Both questions are rhetorical.

Free Flight Revisited. The Conference will have a very exciting session that will review new approaches that can, and must be done to address the ATC and avoid the economic hit that is on the near horizon due to a constricted air transportation system. The impact - and the opportunities - for airports, airlines, and suppliers are immense. There are solutions, and they don't involve a decade of more FAA bungling.

Captain Michael Baiada and Mike Boyd will be tag-teaming in a presentation on the applications and potential of a real Free Flight ATC system. NextGen is mostly simply shifting the data links from radar to satellite - good, but as the GAO has noted, upgrades that may be out of date by the time the FAA gets them finally up and running. There are better approaches, but the FAA has not pursued them.

For more information and to join the aviation leaders who make this Conference  a must-attend event, click here.
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(c) 2007 The Boyd Group, Inc. All Rights Reserved

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Hot Flash - Monday, August 20, 2007

Ten Years On The Web

This month marks ten years of AviationPlanning.com. From initially being the perfunctory eye-candy "cyber-brochure" on the firm back in 1997, the site quickly developed into one of the most influential aviation sites on the web, updated with new insights, information, and discussions on aviation issues virtually every week.

We want to thank the quarter-million plus annual visitors for making this website a success, and especially those who from time to time provide us with feedback - both positive and sometimes not so positive.

The New Trendy ATC Fix:
Toss Small Communities Under The Bus

It's like the fashion industry.

Every year there's a new line, a new trend in aviation that "everybody's" accepting as an article of faith. You're not "in" nor "informed" if you're not chanting the latest mantra. Whether it has any factual basis or not isn't important. It's just that everybody's doin' it, and it's snicker and sneer at anybody who's so unfashionable to disagree.

Last year it was "over capacity" and the unquestioned immediate "need and inevitability" for airline consolidation. It was the mantra - there're too many seats, so stand by for all the mergers. It was a certainty that airlines were going to start to act like wildebeests in rutting season. 

Those trends - over-capacity and consolidation - are now passe. There's barely a word about either to be found, 'cause they were last year's aviation fashion trends.

New For '08: The Airport & Airway Crisis. Announcing the new-for-2008 Aviation Media Mantras: The air traffic control system and how small jets are clogging the airways across America. 

Notwithstanding the fact that the ATC system's been a deteriorating mess for the last two decades, it's now "in" as the latest aviation story. Interviews with the FAA Administrator are the thing for up-and-coming reporters. Almost daily there are the reports about how - golly, gee - the ATC system is years behind, and how the poor, beleaguered FAA is the victim of things beyond its control and is working sooooo hard to fix it.

There are companion stories about how terribly crowded the skies are. Stories about how there are just too many airplanes flying around. Stories that make the reader think that the ATC system is just like snowstorms, tornadoes, and earthquakes - it's a natural phenomenon around which the air transportation system must adjust for safety. According to the mantra, ATC's a system that's pretty much not subject to human intervention. We just must accept it. Those record delays and cancellations, according what the FAA is feeding, are simply things that are the natural result of man putting too many airplanes into the sky.

Amazingly, there's little or no recognition of the fact that delays are primarily are due to a failing ATC system - one that is not a natural phenomena, but a mis-managed set of outdated computers, obsolete philosophies, and botched upgrade programs that are now choking our air transportation system. There's little media consideration given to the fact that it's the ATC system that must adjust to the nation's demands, and now that it cannot do so, it is a national disgrace.

The FAA has successfully bamboozled much of the media into not doing any investigative research into the Agency's failure record. Interviews with the FAA Administrator are generally love-ins devoid of any pressing questions, and tend to be PR platforms where the reporter ends up writing a story about how under-funded the agency is, and how hard they're working - regardless of the fact the system's falling behind by the day.

The Emerging Villain: The Small Jet. The nation is paying - and will continue to pay - a very high economic price for this situation, and the bill is starting to come due at smaller airports.

Accessorizing the 2008 Aviation Mantra is the new revelation that it's those "little jets" that are gumming up the skies. The stories vary, but generally they focus on how airlines are insisting on using them to make more money, and since they take up the same airspace as bigger airliners, that's an outrage. It's not a case of what the market demand will bear and support.

See, the foundational belief in many media stories is that the ATC system is what it is, and therefore, it's the air transportation system that must adjust. And if those greedy airlines continue to insist on tossing RJs into O'Hare, or DFW, or - god forbid - LaGuardia, action must be taken to limit their use. (Anybody remember the Aviation Mantra of 1998? That was when the FAA decided to open LGA to almost unlimited RJ access, with the belief that since these were "regional" jets, that would open New York to more service from small airports. Right.)

The Solution: Let Smaller Communities Sing The Blues. So, there's a growing belief that, in light of all the delays, the use of jets under 100 seats must be limited and restricted. It's the Mantra of 2008. Force airlines to use bigger jets and fly'em less frequently. Make consumers in Charleston, Lansing, Fresno, and other small and mid-size communities adjust to the fact that they have no right to the levels of air service their economies need. Certainly not if there are delays. Certainly not if the FAA's ATC system can't handle it - even in light of the fact that the reason is inept management over the past 20 years.

This is not a drill. The FAA really does have a lot of people in the media - and probably in Congress - believing that restrictions in air service are the only solution to reducing delays. Pending, of course, their implementation of YesterdayGen - the upgrade programs that are years behind and will likely stay that way. Heck, if the FAA had been in charge of highways in the 1950s, the Washington Beltway would today be two-lane blacktop.

What this means is that some communities which today generate strong viable air transportation demand are in the crosshairs to lose some air service - maybe more than just some. Already, we've seen Delta cut back ATL service at more than half a dozen small communities. Economics are the reason - regardless of, in some cases, high load factors. The congestion and delays caused by the ATC system raise the economic bar, and since the FAA isn't doing dukey to substantively improve it, plan on airlines looking at doing more cutbacks in the coming months.

But the real danger is the FAA itself and its ill-informed supporters in the media. There have already been suggestions of restricting flights on the basis of airplane size at larger - read: hubsite - airports. As the public outcry about delays is fed by oh-so-outraged politicians and talk show hosts, there's a good chance that the half-knowledge of the subject matter could result in some communities losing more air service access.

For example, if a community has Delta service to CVG, the FAA could try to restrict any under 100-seat access to ORD, on the basis that the community still has connectivity via CVG. Or, prohibiting small jet service to the three main New York airports, allowing them only into Stewart, or Islip, thereby essentially cutting NYC access for many communities.

Don't think for a minute that these types of draconian actions are out of the realm of possibility.

The fact is lost that the ATC system should have been upgraded to accommodate the needs of the nation. The fact has been lost that the current upgrade programs - regardless of who pays - are years away. The fact that any such restrictions being considered are intended to adjust our air transportation system to the incompetence of the FAA is also lost.

But points like that are outside of the new 2008 Aviation Mantra. "Everybody knows" that the system is over-burdened. "Everybody knows" that it's RJs that gum up the system. Therefore, additional, more in-depth investigation or information isn't needed. Just cut flying down to the level that the ATC system can handle, and all will be well. And a lot of smaller cities will find that they don't have the air service access they need.

Targets. We've identified a range of outcomes and scenarios that can be expected at rural airports in regard to the deterioration of the ATC system. There's no question that the response of the FAA - to protect itself - will be shoot first and worry about economic fallout later. As it stands today, the FAA has outwitted most of the media and Congress into believing that the agency is in control and have a plan. They don't.

We'd suggest that communities need to take matters into their own hands. Right now, there's no help on the horizon inside the Beltway. The only focus there is on how to "reauthorize" and fund the same FAA that wants to cut air service to accommodate the ATC system. There is no - zero - focus on nor criticism of the FAA. And that means that there will be no near-term answers coming from Washington.

Within this, our Aviation & Airline Trend Forecast session at The Boyd Group Aviation Forecast Conference will be covering where the fallout may be felt, and what communities and airports need to do to make sure their air service isn't molested as a result of the FAA trying to dumb-down the system to their level.

But make no mistake. As it stands today, air service at small and mid-size airports will be tossed under the bus (or, is it under the RJ?) to adjust for the FAA's failures.

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Gee, That's Not How They Do It In Nogales...

As many as 20,000 passengers were delayed for several hours at LAX, including thousands stranded inside airliners, when the US Customs computers that check incoming international passengers for criminal records went down.

The Customs people were adamant that there was no alternative:

“We just can't take a risk knowing that one bad guy can harm our country significantly,” said U.S. Customs and Border Protection spokesman Mike Fleming.

So we make thousands of passengers sit on inbound flights for hours to stop the potential of that "one bad guy" getting in the country. Meanwhile, Congress and the Administration are content to let thousands of potential "bad guys" stream across the Mexican border without having to be inconvenienced by any computer checks or other scrutiny whatsoever.

But that's politics, don't ya know. Democrats apparently don't want to look uncaring and want to curry favor with certain ethnic groups. Republicans, apparently, want cheap labor - even a Wall Street Journal editorial a few weeks ago warned against the economic consequences of enforcing immigration laws. What was that again about the bad guys?

Yessir, air travel certainly is becoming more and more inconvenient. Come into the country as a ticketed passenger in 12E, holding a valid passport and whatever visa that may be required, and you can find yourself stuck for hours while Customs and the INS monkey around trying to plug in their computers, because passengers must be checked for criminal or terrorist tendencies.

Compare that to the thousands annually who come illegally across the border with Mexico. They have the full expectation that they can hitchhike or pay a coyote to take them to places like Denver and San Francisco, where the moron city councils have declared the cities to be "sanctuaries" that will hide them from any scrutiny or, unlike ticketed, passported passengers trapped on 747s in LAX, any need for a computer check.

With security and immigration systems like these, it isn't just the "bad guys" who're potentially harming our country.

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Hot Flash - Monday, August 13, 2007

Air Service Update
American To Re-Enter SRQ

Starting on December 13, Sarasota-Bradenton will again have access to the American Airlines system, with two daily Eagle flights to Miami. The service will provide omni-directional connectivity to American's global network, with access to Latin America, Europe and the continental US.

The Boyd Group is pleased to have been able to work with SRQ and AA in this successful new addition. If your community is looking for air service results, give us a call at (303) 674-2000. Or, click here for more information on why The Boyd Group is more successful than any other consultant in helping communities build long-term air service programs.

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Facing Realities... The Consumer Really Is Unhappy
Another Hit To The Airline Bottom Line

This past week, the Ninth Circuit Court ruled that once a person enters a sterile area at an airport, he or she is subject to security searches, regardless if they decide to fly or not, and must comply with security regulations.

It would be nice if there was also a ruling that once a person decides to take an airplane trip, he or she is subject to the laws of physics, and is not relieved of the potential of being possibly inconvenienced. Unfortunately, the current din in the media is that when something goes wrong, passengers have the God-given right not to experience discomfort, and when they do, airlines must pay. A Passenger Bill of Rights, it's claimed, will fix everything.

Over the past week-end, a customs computer went on the fritz, resulting in thousands of international passengers to be trapped for hours on airliners at LAX. Because they could not be cleared into the country, they had to be herded into hold areas, and when those were full, other passengers were kept on airplanes for hours. Regardless of the cause of the computer failure, the fact was that the operational and procedural physics of air travel meant that a reported 20,000 people were delayed for hours - many of them stuck on airplanes waiting to get processed.

A Passenger Bill of Rights wouldn't have done diddly to avoid this. The issue is a computer failure. The focus should be on fixing that. And fixing the FAA computers that went down three weeks ago, delaying over 100 flights at CVG. That's where the solutions are, not in passing laws to assure that the passenger in 13E has access to a soda pop while she's stuck in an airliner waiting on the ramp because of such events.

Tumble To It. Air Travel Has Potential For Discomfort. The same occurs with weather. Flights divert. Flights get delayed. Flights get cancelled. And consumers are being misled to believe that in such cases they have the right to be entirely sheltered from any discomfort or inconvenience. Consumers are also being led to believe that such events are entirely the airline industry's fault.

Two weeks ago, a Continental Airlines flight from Venezuela had to divert into Baltimore due to weather at Newark, along with a lot of other airliners. In this case, like at LAX, there were no FIS gates immediately available that could handle an un-cleared international flight. More hours for passengers on an airplane at the end of a long flight, and, voila! there was opportunity for another horror story about airline human bondage that will make inches of newspaper ink, as well as feeding the usual-suspect talk show hosts who'd rather rage on first, and worry about facts second.

Along those lines, an intrepid reporter from the Baltimore Sun jumped on to the BWI flight, writing another rip'em-up expose on how it was yet another example of airlines beating up passengers. Paragraph after paragraph droned on, describing the conditions passengers had to endure. Nothing was covered in any detail on the specific causes of the delay, the factors surrounding the diversion, or the physical issues that led to the event. No, just the human interest stuff about how outraged the passengers were, and the implication that the airline was entirely at fault. And, of course, there was the perfunctory quote from a consumerist gadfly who was about as objective as Osama bin Laden at a Bar Mitzvah. And about as well informed.

Then, way down in the story, well after the average reader was so angry as to be heading out to shoot the nearest airline employee, the article included some statements provided by the carrier. None of them were elaborated on nor investigated by the reporter. No elaboration on the fact that many aircraft were diverted to BWI. Or that the Continental flight was an international arrival that by law required that passengers enter the country on other than the swim-the-Rio-Grande approach. Instead, the article focused on things like how the passengers, once deplaned, were outraged because they were guarded. The legal requirements for this were left out of the story.

Media: Get The Facts - Then We Can Address The Problem. It's instructive that the writer and some of the people quoted in the story referred to the flight as "1669Y" - indicating their depth of knowledge of the airline industry.

The media has a responsibility to make reasonable attempts to learn about the airline business and the circumstances surrounding an event before they put pen to paper, or hot air to microphone, and start making blanket conclusions that any untoward customer service event is one the airline could have avoided. When flights divert, for example, it's not uncommon for there not to be a gate available to deplane passengers. When flights divert, typically the diversion isn't for hours, and is often one that can be lifted quickly. Therefore, going to a gate, even if there is one, may well mean an additional delay in getting folks back on the flight and getting the airplane pushed off the gate and into line for take-off. There's the issue, too, of security. Is there a sterile area sufficient to handle the passengers? In the case of 1669, (no, not 1669Y) the carrier couldn't just pull up some stairs (if there were a set available, and the airplane was in a spot were it was safe to do so) and let the people off, because they had to be processed into the country.

There are major problems with our air transportation system. Events like LAX and the flight at BWI are symptoms. Accurate, in-depth, and professional reporting, instead of amateur emotional stories, could go a long way in addressing those problems. Unfortunately, some in the media see what happened in instances such as the Continental flight, and jump to the conclusion that the solutions are simply a set of stairs, or a sandwich, or an extra roll of toilet paper in the lav.

Better reporters look beyond these things and attempt to identify causes and illuminate where the system broke down, if indeed it did, to cause the event in the first place. Getting quotes of outrage from consumerist Cindy Sheehan wannabes who simply have axes to grind against the airline industry doesn't do anything to get the facts.

The Airline Industry Misses The Point, Too. Regardless of the indignant outrage from some quarters, when planes divert, that doesn't mean that there's always going to be gates, hold space, food, and the staffing available to smoothly handle the situation. That's a fact, but it's not an excuse for really dumb service recovery. And is it absolutely true that airlines don't always think ahead in such cases. It is true that in general airlines tend to operate on automatic - "Diversions? We'll deal with 'em when it happens."  Planning is often a second-thought, regardless of the protestations from the PR department.

Airports and air travel are daunting. It's where consumers are herded around on the basis of rules, regulations, and procedures that must be enforced like a Papal Edict. Sort of like Army boot camp, only you have to buy a ticket to get in. Years ago, airline customer service employees were trained to guide passengers around and through the air travel maze. Today, too often, they are enforcers of the maze. Increasingly, and not in little part due to inflammatory stories like the one on "flight 1669Y," consumers look at the air travel experience with trepidation. That leads to anxiety. And anxiety leads to fear. Fear leads to the Dark Side - a.k.a. really clumsy federal regulations. It's up to the industry to address this, and silly "12-Point programs" are not the answer.

Ticking Off 1 Million Consumers Per Month? Passengers do deserve a travel experience that isn't a cross between gym class and rush hour on Ellis Island.  The hard fact is that the infrastructure cannot meet the demands of the nation any longer. Peter Greenberg, Travel Correspondent at NBC, has noted it clearly. In today's real-world environment of air traffic control delays, ramp congestion, and (at some cities) hubsite airport terminals spread out over a couple of zip codes, a published 50-minute or less connect time needs to be re-considered. In a perfect world, yes. In this one, where we don't have the ATC system we need, it's a recipe for lost luggage, misconnects, and coronaries with people running through terminals when their connecting flight arrives 15 minutes after schedule.

Flight arrivals are now approximating 20% off schedule. (Not just delayed, but off-schedule, because airlines have to add extra minutes to adjust for the ATC mess.)

Put this into perspective. The US generates about 50 million air passengers each month. Let's just figure that only 10% of the people on those late flights are badly inconvenienced. That's 2% of 50 million - or one million customers every month who are ticked off at the airline industry. No industry can afford that.

True, the delays are not caused primarily by the airline industry. True, flights are 80% full, and any cut back in capacity will result in less traffic, not better revenues. True, the costs to the industry of spreading out connecting banks would be enormous.

But this is the business airlines have chosen, and the conditions do not exist to allow as efficient an operation as the nation's air transportation system demands. Unless carriers can find better ways of dynamically managing their operations, the only future is an airline system that cannot grow with the nation's needs.

There's no rabbit coming out of the FAA's hat. The NextGen that is being touted as the solution is nothing more than a collection of the same programs the FAA has been bungling for years, and will continue to bungle for years more. This is the system that airlines are operating within, and there will need to be adjustments from the airline side of the table.

No Bill of Rights Will Reverse The Laws of Physics. Nevertheless, airlines are victims, too. They cannot avoid the ATC system, or weather, or customs computers from flummoxing the system. They have the responsibility to tell passengers exactly that. Bluntly. The Contract of Carriage should include the following: "You are agreeing to get on a big metal tube that we hurl across the sky. You must understand that things like weather, air traffic control, and mechanical problems are possible, and not always under our control.  We'll do all we can to reasonably minimize any inconvenience that may be encountered. However, you as a passenger understand the challenges these conditions can represent, and therefore you bear a portion of the assumed risk and responsibility for the discomfort such factors can sometimes cause..."

Most of the staff of The Boyd Group have been in and have managed airline customer service operations. We've provided customer service training to a number of carriers. We've seen both sides, and there's no doubt that there is a major perception problem that needs to be addressed. If the airline industry won't do it, then that vacuum will be filled quickly by self-appointed consumer crusaders whose only goal is to punish the industry, not improve it.

For some background on the airline service issue, click here. It originally was posted on this site in 2000, but it's still valid today. Unfortunately.

Or click here for a directory of several airline service related issues.

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(c) 2007 The Boyd Group, Inc. All Rights Reserved
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Hot Flash - Monday, August 6, 2007

The Economic Threat Is Real.
The FAA's Incompetence Is Real.
Aviation Industry: Start The Revolution.
Take Matters Into Your Own Hands

Let's put the situation in the proper perspective.

There isn't a single airline CEO who would tolerate doing business with a vendor who consistently fails to deliver goods on time, provides unreliable services that raise the airline's costs, is constantly over-budget, and then tries to cover it up by dishonestly changing deadlines and contract terms.

But that precisely describes what the senior management of the FAA has been doing with the air traffic control system for the past decade. So it's mind-boggling to find airplane seatback pockets stuffed with inflight magazines featuring ghost-written editorials trumpeting how FAA reauthorization is the wonderous key to a new ATC system that will reduce delays and vastly increase the efficiency of air travel.

Based on the clear performance record of the FAA, that simply isn't going to happen.

But the airline industry tolerates this fantasy, to the detriment of its own bottom line and to its customers. What's worse is that this ignores the economic impact to the nation resulting from the constricted, inefficient, and rationed air transportation system caused by the bungling of the FAA.

The Fuel Hammer Is Coming This Fall. The airline industry has known full well that the ATC system was an ever-increasing threat to their bottom lines. Suddenly, with FAA reauthorization in the works, they've got religion, standing up and urging the FAA to continue with a "satellite-based" ATC system. Unfortunately, they're in the Amen Corner of the wrong church. The airline industry knows full well that the "NexGen" system isn't new, and that the FAA isn't going to have any such thing in place system wide in the next decade.

It's also unfortunate with all this posturing, the airline industry may have run out of time. Too many years wasted trusting the FAA to get the job done. Too many years of silly public relations events, lauding the FAA, when, as we told Congress in 1994, CEOs should have been storming the Administrator's office demanding results every time an upgrade program was again delayed.

Today, thirteen years later, airlines not only are working within the same deteriorating ATC system that's draining their coffers, but the results of the ATC system - off-schedule flights, cancellations and service cut-backs - have the public and Congress enraged at the airline industry, not the FAA. Already, one state has passed a stupid, but very angry Passenger "Bill of Rights." Not a word about the ATC system, just about getting those greedy airlines to stop doing bad things.

Now, there's another cost crisis suddenly on the horizon. Tack the $9 billion or so that the ATC system inflicts on the industry to the news that oil prices are heading toward $80 a barrel, up from around $58 earlier this year, and it's back to the trenches for airline management. One might conclude that airline industry front offices would be in the full metal jacket mode, looking at ways to offset the higher jet fuel costs that are going to be percolating down to the airport level this fall.

Unless these cost factors can be offset by a combination of new revenues and higher efficiencies, 2008 could shape up as another near-disaster year for the airline industry, much contrary to what was foreseen just a couple months ago.

There are not many options to get costs down. Labor's tapped out. Staffing levels are anything but fat. Yet the biggest single excess-cost factor in the airline industry today - the estimated $9 billion in waste inflicted by the inefficient air traffic control system - is being side-tracked into silly internecine media battles between airlines and GA.

What those happy-face in-flight magazine editorials tend to gloss over is that, even if the FAA could actually do what they claim (which they've proven they cannot), it will be a decade before the ATC system is "fixed."  The fact is that the US air transportation system does not have the luxury of being able wait that long.

Trendy Reaction - Cut Small Community Service Levels. Because the airline industry has left its future to decisions by the FAA, instead of determining for itself what needs to be done, it may get a number of interim ATC "solutions" forced on it from gadflies in Congress and other self-appointed "experts" from outside the industry.

They will be "solutions" that will immediately hurt small and mid-size airports, and damage the US economy in the long-term. But the goals, remember, of Congress and the consumer wags-without-a-life are to eliminate delays and punish airlines. Having an air transportation system that keeps America globally-competitive simply doesn't have the immediate emotional value as taking shots at those fat cats who force people onto "packed airplanes."

For example, we're already hearing the trendy, easy-solution refrains... "Cut out those little jets flying to those little places. They just gum up the hubs at key times... Better to take care of the big cities, where the real business demands are!" 

Unfortunately, that seems to be what's naturally happening already. Some small and mid-size communities are getting air service pink slips - and the main reason is the new economics represented by an air transportation system that must now adjust to the higher costs and artificial limitations caused by a deteriorating ATC system.

Some "experts" are simply calling for air service to be limited to 80% (or some other random number) of what airports can handle. But what airports can "handle" is constricted by the ATC system. Therefore, the supposition that airlines should fly less and just use bigger airplanes on fewer flights, is amateur and inconsistent with realities of air travel demand. Aside from that being a cowardly surrender to the incompetence of the FAA, these kinds of armchair-expert "solutions" are nothing more than accepting a future where America becomes even less globally-competitive.

The Inept ATC System IS An Economic Hit To The Nation. Today, small and mid-size communities are experiencing an influx of new industry, new high-paying jobs, and new, often international investment. Without viable air service connectivity to the rest of the nation and the world, which is what the FAA's ATC bungling is threatening, this economic growth could be cut off at the knees. A couple of examples of the type of global growth we're seeing in rural America:

• Montgomery: First Hyundai, and now Kia, are putting enormous auto-related factories in the MGM region. Along with them come dozens of second- and third-tier suppliers, all of which generate and need viable air service. Unfortunately, that growth is being threatened by on-going ATC constrictions, particularly at Atlanta. The head of one of the major auto companies has noted that future investment in the region would be closely scrutinized unless reliability, such as delays and mis-connections, at Atlanta were not improved. Lost luggage, and in some cases, disgraceful Third-Worldesque customer service, are just icing on the cake. This illuminates the critical value to the national economy of a viable ATC system that frees the skies. And don't be bamboozled into thinking that the FAA's NextGen is the answer. Fundamentally, it represents the thought process that's got us into this mess in the first place.

• Columbus/Golden Triangle, Mississippi. This region is the poster child for the role of the New South in building America's industrial base. Walk out of the GTR terminal and the sun is almost blotted-out by a steel mill being completed by a Euro/Russian consortium. Depending which way you turn out of the airport, you'll pass either American Eurocopter's factory, or another aerospace manufacturing plant being built.

Not far away, the company that builds Kenworth and Peterbilt trucks is putting in a factory to produce Dutch-designed engines. When completed, the facility will generate demand for over 10,000 net new O&D passengers from around the world, just for training classes alone. That means air service access - east and west - will need to be increased, not choked off by the FAA's continuing inability to do its job in providing an ATC system that meets the nation's needs.

• Erie. This is the center of global locomotive technology, with rail units being shipped across the world. Air service access is critical. But that access is being threatened by air carriers having to take a hard look at what markets make the most sense for the limited and increasingly-valuable ATC capacity they are restricted to. So, even with load factors over 72%, Delta found it necessary to drop Atlanta access. Not a jobs-builder.

The Aviation Industry Can Unite. Or It Can Continue To Get Stomped On. Not having the air transportation system the nation needs is a serious economic threat, yet that's exactly what we're facing. Viable and robust air service connectivity will be critical to assuring that America can compete in a global economy.

But it's not up to the FAA anymore. As we've noted, that Agency has proven conclusively over the past two decades that it is structurally incompetent in regard to managing and upgrading the ATC system. To believe differently is to ignore reality. To continue to "trust" the FAA to get the job done is foolhardy.

Given the mess that the air transportation system has descended into this summer, Marion Blakey should be booed off the podium at AAAE meetings, not lauded like some latter-day Cleopatra stepping off the royal barge. It is time for the airport industry, the airline industry, and general aviation to join together and take matters into their own hands. The FAA's constant excuses over a period of years, and the dishonest "re-benchmarking" deadlines, and negligently "re-defining" ATC errors, all represent incontrovertible  evidence that the FAA in its current structure is not capable of addressing the issue.

Instead of cuddling-up to the FAA Administrator, the aviation industry needs to shed itself of its current Stockholm syndrome, and unilaterally begin to plan the ATC system that's really needed to meet the needs of all aviation sectors in the 21st century.

Forget "NextGen" or whatever the FAA is re-labeling the programs that it's failed implement over the last ten years. The industry can no longer afford to dither with ineffectual and money-wasting joint FAA task forces. No longer can the aviation industry take the senior management of the FAA at its word, because its word cannot be relied upon.

Take It Out Of The FAA's Slippery Hands. Instead, the aviation industry - not the patronage appointees running the FAA - must define the specific type of ATC system that's needed for the future, outline how it will be achieved, and then tell Congress to get it done or tell the American public why they don't have the aviation system it needs. That means the industry must - without the interference of the FAA - define the real capacity requirements, develop real forecasts, investigate various technologies, make cost projections, and prepare an implementation plan. Then, and only then, transmit it to Congress. It's then up to Congress and the Administration to assure that it is implemented.

Sure, some will immediately opine that such an approach won't work. Their intellectual dodge is in ignoring the fact that it's the current FAA approach that doesn't work. The industry can either take this bull by the horns or let the nation's air transportation system continue to get gored by the continuing excuses and non-results the FAA is so well known for.

The fundamental truth that should not be lost in all this is that the FAA in its present form is irrelevant. Irrelevant because the FAA has proven time and again that it cannot get the job done. Passing the project off to incompetents will result in incompetent results. Like we've seen from the senior management of the FAA's ATC program for the last 20 years.

It's time the aviation industry tumbled to reality. Before the FAA's ATC system tumbles our economy.

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Hot Flash - Monday, July 30, 2007

FAA Reauthorization:
Everybody's Lost Sight Of The Objective

Rarely has there been an issue as hotly debated as that of how to fund the FAA.

Tempers are flaring. Hype is flowing. Politicians are being lobbied. Various aviation alphabet groups are working to structure their position on the matter - for, against, on the fence, or just trying to duck stray bullets.

The senior management of the FAA is darting in and out of industry meetings, implying that reauthorization is the new key to having their NextGen (a.k.a. YesterdayGen) program implemented, notwithstanding the fact that it's years late due to their own mismanagement - mismanagement that no reauthorization bill will do anything to correct.

The fight has become so intense, they've all forgotten what the goal was in the first place. All the fight is focused on is simply who gets the bill to pay for a bureaucracy that has proven itself beyond any doubt incapable of spending the money properly, and incapable of managing an ATC upgrade program. Neither the airline industry nor the GA segment is demanding full accountability for how the money will be spent. Demanding results is not in the discussion at all. It's just that neither side wants to pay more.

They're both in for a surprise.

The Airline Position: We're Carrying General Aviation. On one hand, we have the airline industry, which feels that it's bearing most of the cost of the ATC system, while general aviation gets a free ride.

Their point is that "a blip is a blip is a blip" on a radar screen that has to be managed by ATC, whether it's a 747 or the orthodontist pushing the limits of his weekend flying skills in a v-tailed Bonanza. To that end, they have a point. Their ads, however, which depict fat cats sipping champagne on G-Fives at the expense of airline passengers crammed into middle seats, are a bit over the top. GA is a lot more than just executives in $30-million biz-jets.

GA Position: We're Paying Our Share. Folks on the GA side contend, correctly, that the current system has engendered a vibrant general aviation industry that's unrivaled anywhere else in the world, and which has enormous economic impact at communities across the nation, as well as on the US economy as a whole.

To that end, they are correct. Avoiding what's happened in Europe - taxing GA out of the skies by imposing punitive fees - is a paramount objective. But this group has also decided to descend to on-the-fringe advertisements, accusing airlines of wanting yet another big federal bail-out, and discussing airline CEOs getting bonuses that rival the GDP of Bulgaria. It's not only cheap emotion-baiting, but it has no bearing on the issue at hand.

For both sides, sticking closer to the realities would be a better approach. But, as we outline below, joining forces would be the best path, because they aren't each other's enemies. The incompetence at the FAA is a mutual threat they need to counter, and soon. 

Lost In The Heat of Battle: Results. Both sides are passionate. Unfortunately, they've both lost complete sight of the goal. Much to the FAA's delight, the whole debate has degenerated into the equivalent of arguing over who's going to pay the bar tab on the Titanic.

Regardless of who's paying, the ATC system is going down. Regardless of how the bill is split, the FAA will still get away with excuses as to why the ATC system is years late and millions over budget. That not a just a prediction. It's a description of the FAA's approach to ATC over the past 20 years.

Everybody's arguing over fees. Nobody, it seems, is too concerned with how the money will be spent. Nobody, it seems, is concerned about the fact that our ATC system today is a mess, and it's the mismanagement at the highest levels at the FAA that's responsible.  Nobody, it seems, has had the guts to ask Marion Blakey why.

Both the airline industry and GA are living in a dream world, assuming that a) if they win, they'll pay less, or at least not more than they do today, b) the FAA will use the dough to fix the skies, and c) the senior management of the FAA has a new plan to accomplish that goal.

All three of those points are outright false, and both GA and the airline industry should stop deluding themselves - the one core problem is lack of accountability at the FAA, not funding. 

Whoever Pays, The FAA Will Just Continue To Squander The Money. First, the FAA's hodge-podge upgrade program, now magically named "NexGen," is something that the FAA has proven itself incapable of implementing. They are, however, masters of the media sleight-of-hand, which never fails to succeed in diverting attention from reality. The FAA's PR stunts continue like a never-ending three ring circus, and nobody, it seems, wants to criticize the stumbling performances of clowns involved.

For the latest example, the FAA Administrator and her staff glittered into Oshkosh like a dancing-bear act to show off the great progress they've made. Then, carefully orchestrated, and with media cameras rolling merrily, she demonstrated the wonders of the "new" ADS-B system to the oohs and ahs of all in attendance. By 2014, she noted, ADS-B would be unclogging the skies of America.

That's seven years away. Left out of the show, and not mentioned by the FAA nor by any of the media in attendance, is the fact that the ADS-B project was originally to be in place by 2001.

Yup. Six years ago, and all we have to show for it today is some implementation in Alaska and, soon, over the Gulf of Mexico. Last year the estimate for full implementation was 2012. Now, it's 2014. Nothing like a moving target. And the FAA Administrator claims that their "NextGen" upgrade program, of which ADS-B is a part, is on track. And that track is going directly to nowhere.

What's amazing is that this silly burlesque from the FAA Administrator and her travelin' show took place at the Mecca-meeting of general aviation, and in front of the aviation segment that has the greatest fear of being gouged into zero-growth by some of the reauthorization proposals now in play. Yet nobody stood up and told her and the rest of her performing troupe that it was outrageous that ADS-B was a dozen years behind, and that any increase in fees must be accompanied by strict accountability in meeting deadlines and budgets. But at the official levels, GA is sitting like deer in an A-380's landing lights, just ready to get splattered into runway kill.

Then we have the airline industry, which is suffering at least an $8-$9 billion cost hit every year due to the failure of the FAA to properly upgrade and manage the ATC system. Their solution? Just make GA pay more, airlines pay less, and things will be fine. Sure, just as fine as it's been for the past decade of declining efficiency and increasing constriction in the skies.

Divide, Conquer. And Continue To Produce Non-Results. The senior management of the FAA has succeeded brilliantly in manipulating the situation. They've convinced the nation that they have a solution ready (they don't), and they have the public and the media swallowing the jive that delays, cancellations and constricted skies are all the fault of not having the money to pursue the necessary solutions (which is blatantly untrue.)

But most brilliantly, the FAA has succeeded in dividing its adversaries - getting the airline industry and general aviation at each other's throats like a couple of two-bit Iraqi warlords, instead of recognizing that the FAA is their common enemy. As of now, the public views the FAA as the good guys, when in reality, they're the ones most responsible for inflicting airline delays and cancellations on the US public.

Meanwhile, the airline industry is being hammered from all sides, taking the hit for delays, cancellations, and supposedly treating passengers like dirt on a consistent, planned basis. General aviation can't expect much sympathy, either. After all, the images of GA are rich folks flying or riding in their private jets, gumming up the oh-so-crowed skies and making the FAA's life harder.

Aviation Industry Solution: Cooperate, Consolidate, And Counter-Attack. While there needs to be some re-structuring of aviation fees, that process need not be one that torpedoes either the airline industry or GA. These two segments are co-victims of the FAA, and they need to sit down, sign an alliance aimed at making sure the skies of American do not degenerate into what's happened in Europe.

Most important to the alliance is standing up, and telling it like it is. Stop the pandering to the FAA. It is the mismanagement at the top of that organization - over the last two decades - that has gotten the nation's aviation system into this mess.

To imply that the current reauthorization debate is one critical to fixing ATC is dishonest - both sides know well what they're dealing with at the top of the FAA, and the current reauthorization debate has nothing to do with changing how the FAA has botched the ATC system. All it will do is continue what's in place today - the same system that "re-benchmarks" programs to mislead the public that they're on track. The same system that is not above mis-reporting errors. The same system that re-defines errors to make the system artificially look good. The same system that won't be one iota more efficient or accountable under the current reauthorization proposals.

Both GA and the airline industry must demand that reauthorization be tied to strict, enforceable goals and performance standards at the FAA. Both can either demand such goals, or they can continue to fight each other, while the FAA's mismanagement continues and gets rewarded.

One thing is certain. The aviation industry is at a crossroads. If they acquiesce to the current system - which is where they're headed now - they will both lose. GA will eventually get squeezed badly, and scheduled air service will, as we have forecast, continue to get "rationed." The decision is in the hands of the airline industry and GA organizations.

They can stand up, or they can continue to let patronage-appointees at the top of the FAA decide their fate and that of our air transportation system. 

____________________

 

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Hot Flash - Monday, July 23, 2007

Bangor Gains Low-Fare Service.

Bangor International Airport will see its first low-fare jet service this fall when Allegiant begins service to Orlando. The Boyd Group is honored to have assisted BGR in its  efforts to recruit the carrier.

One reason that The Boyd Group is more successful than other consultants in crafting air service recruitment programs is the depth of our work in all areas of aviation. Our expertise and our reputation for excellence is well respected in airline front offices. For information on how we can assist your community, click here.
_________________

It's Official: The FAA Is Now Irrelevant To Fixing The ATC System
The FAA Introduces NextFudge

The senior management of the FAA has stumbled on a new strategy to convince the world that they're doing a great job in rebuilding the air traffic control system. It's highly cost-efficient, because it massively reduces the need for new equipment, and it magically improves the performance of the various outdated contraptions they foist on air traffic controllers today. It's a key part of the FAA's NextGen program for the ATC system.

It's called NextFudge.

Don't Fix It. Just Change The Metrics. It's simple: when the numbers or results indicate something that the senior management of the FAA doesn't like, they'll just fudge'em. If there are too many failures, just lower the standards, then when the data comes in, the FAA Administrator can jump in front of Congress and announce the great progress that's being made.  If there are errors, just attribute 'em to something else. The slop, the failures, and the poor performance are covered up by adjusting the metrics, not fixing the system. That's a whole lot cheaper than actually doing the work and spending the money on something that might actually meet the needs of the US air transportation system.

NextFudge is a cornerstone of the FAA's much bally-hooed NextGen ATC program. And, like NextGen, it's a dishonest fraud.

NextFudge is in full swing and it's working wonderfully - for the FAA, but not for aviation safety. First we had the "re-benchmarking" of upgrade programs for the air traffic control system, where years-behind projects were suddenly trumpeted as being "on-track" by the FAA. Fudgeroo, and the media and congress have swallowed it like a live goldfish at a drunken fraternity party.

Then we had the revelation that the FAA management at DFW were intentionally hiding ATC errors by mis-categorizing them as pilot errors. It wouldn't look good to have the public know that the FAA's failures compromised safety, so they changed the paperwork to blame airlines. Fudgeroo. A little lyin' here and there won't hurt anybody, right?

Now, Dallas Morning News reporter Katie Fairbank has discovered that the FAA is moving the NextFudge program to a higher level. In the FAA's ongoing efforts to bamboozle the public as well as the gullible congresspeople who supposedly are overseeing the agency, we have yet another data-stunt. It's called "re-definition."

Like re-benchmarking, the concept is brilliantly simple - when something goes wrong, just change the nomenclature of the event - i.e., just say it didn't really happen. In this case, it's separation errors. Until last month, incidents when aircraft got closer together than allowed by FAA standards were categorized - logically - as an "error."  But, based on the FAA's own numbers - which may well be understated, in light of the DFW experience where the FAA doctored error data - there were over 1,100 separation incursion errors in 2006.

Much too high. So now they're going to improve the system, and, in their minds, aviation safety, by re-categorizing "minor" separation errors as not being errors at all, but as "proximity events." In that one flick of the pen, reported separation errors in 2007 will be reduced by around 30%. A massive improvement in FAA performance! Fudgeroo again. And at no cost to the taxpayer. Unless one considers safety a cost.

Fudging Has A Price - In Reduced Air Safety. But it's all smoke and mirrors. The skies are not safer. Separation incursion errors are not reduced. It's just that the FAA will make the decision not to report a lot of them as errors. The beauty is that FAA management will make that call, so, if there are an undue number in any one month, voila!, re-define a bunch of them as "proximity events" - they don't even use the word "separation." They claim that this will allow the Agency to concentrate on the "big" errors, but apparently lack of management integrity isn't one of them.

"We think that this is a quantum leap forward," was the statement from the FAA official in charge of oversight, no less, of ATC system performance. In terms of outright corruption and official dishonesty, he's right on the mark. But keep in mind that this statement is from the Agency which defines any event where nobody's killed as one where "safety was never compromised." Regardless.

An official with the union representing air traffic controllers commented, "Changing numbers around to try and show the system is safe doesn't mean the system is safe." It's pretty clear that he and his union are devoid of modern creative thinking. They probably still think 2+2=4, or that there should be some standard of right and wrong in the front offices of the FAA. They're obviously delusional, and are completely missing the wonders of living in a NextGen world.

FAA: Now Irrelevant To ATC Improvement. As we're going to cover at the 12th Annual Boyd Group Aviation Forecast Conference, the FAA is now totally irrelevant to the process of assuring that the United States has the ATC system it needs for the future.

Irrelevant - because it's been proven beyond any doubt that the FAA cannot, will not, and has not the integrity to take on the task.They doctor numbers. They re-classify errors. They have a "NextGen" program that is the same set of projects that are years behind and which have been proven by experience to be undertakings that the FAA is not able to implement.

Therefore, the FAA is not a factor in ATC improvement. To that goal, they are irrelevant.

Airlines: Leave The Stockholm Syndrome Behind. The hard reality is that the airline and aviation industries now have the ball in their court. There are processes that the airline industry can implement (sorry, your "continuous improvement task forces" have not considered all options) to tighten up operations and adjust to the fact that the skies are and will continue to be ineptly managed.

This is a new environment, and the old one, which subjected the industry to be a hostage to FAA mismanagement, cannot be allowed to continue. Airlines need to adjust their entire operations to fit within the ATC system realities. That means doing things differently, and changing the directional roles of the carrier, the PIC, and the FAA, in flight planning.

There Are Options. And The Airline Industry Better Pursue Them. Solutions are not going to be coming from the FAA, or any other agency which will stoop to doctoring data to cover up failures. So, we'd suggest coming to the Conference and hearing a no-holds barred presentation and subsequent discussion with Captain Michael Baiada, an expert in futurist ATC, and the real father of the concept of Free Flight. Click here for more details on the Conference.

In the meantime, relax. The FAA's making the numbers safer.

But not the skies.

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(c) 2007 The Boyd Group, All Rights Reserved.

Hot Flash - Monday, July 16, 2007

Too Late Now. We're Cutting Back To Accommodate Incompetence
Rural Air Service: Rationing Begins
Small Communities: Stand Up Or Get Zapped

The news is out.

Airline delays are at record highs! Cancellations are rampant! Passengers are getting stuck in sweaty terminals for hours or even days, waiting for the next flight! Flights are jammed, cramming passengers like sardines into airplanes! DOT complaints are going through the roof!

The media frenzy is at its peak. After zero deliberation, the verdict is in: airlines are guilty of consumer abuse. Their insatiable thirst for quick profits is driving them to cram too many airplanes into the skies of America, causing back-ups all across the country.

We have "delays" - and that's all that's necessary for a few in the media to feed into the TelePrompTer for the lead-in for the 6PM news. Why, how, and what the solution is, are not considered.

Something must be done!  As will be outlined shortly, that "something" is going to hit home hard at smaller communities - and it's already started. But the issue needs to be framed properly.

Short On Facts. But Lots of Fun Stories. Almost daily, there are media stories recounting the "skyrocketing" complaints regarding airline service. (Comparing the actual number to the volume of passengers is beyond the ability of most of these reporters, by the way. Do the math. If GM had a defect rate that low, they might even sell some cars.)

Then there are the perfunctory interviews with the usual consumer gadfly morons, recounting how airlines routinely keep people trapped in airplanes for hours on end, implying that this is happening daily, and can always be avoided. Feckless, pandering politicians call for Bills of Rights, without a clue as to what really is going on.

One enraged talk show host compared airlines to Big Oil, and has called for the FAA to investigate airline scheduling practices. Great. He must have done at least 30 seconds of research before coming up with that brilliant idea. The fact that it's the FAA itself that is a foundational cause of most airline delays is not one the guy would want to consider. That would widen the issue and maybe threaten the easy storyline that airlines are the evil dragon that's being bravely challenged. Better to be populist, and play to emotions - higher ratings, don't ya know. And anybody who dares disagree will be accused of being a running dog for the evil airline cabals, facts notwithstanding.

But behind all this hysteria is one real fact: the air transportation system really is in trouble. Off-schedule operations are up. Cancellations are up. Block times need to be scheduled to accommodate longer flight times. Connect times at hubsites need to be widened, reducing utilization. "Congestion" is an issue at major hubsite airports.

Some have claimed that there are too many airplanes in the sky. They are wrong. We have too little air traffic control infrastructure to efficiently handle the natural demand generated by our economy. It's not too many airplanes when the industry's running at 80%. (And the folks who glibly declare that the easy solution is just flying bigger and fewer airplanes, immediately cash themselves out of the game. Right, replace all that service at Montgomery with one 747 a day. That's more ignorance along the same lines as the news guy who called for the FAA to investigate airline scheduling.)

FAA Bungling: Irresistible Force. Air Service: A Very Movable Object. But there is one hard fact that, whether we like it or not, must be accepted. The FAA is nowhere near implementing an ATC system that is anywhere near the needs of the air transportation system. And Congress, the airline industry, and aviation alphabet groups are not doing much about it - beyond squawking and making promises to "work with the FAA" on "solutions." The same FAA that's still monkeying around with the same late upgrade programs for the past decade. "Solutions" are the airline side of the table. The FAA doesn't have any.

So, if the ATC system isn't going to increase capacity (which it is not), that means that the nation's air transportation system must adjust to what the ATC system can handle. Guess what that means.

ATC Incompetence First. The US Economy Second. So, the conclusion is inescapable: if all these nasty delays and cancellations and passenger-trapping are to be fixed in the near term, the US air transportation system must begin to adjust downward to the incompetently-managed air traffic control system. Regardless of the needs of the nation, and regardless of the economic hit involved in constricting air service, we have too many airplanes in the sky for the FAA's outdated, deteriorating, mis-managed ATC system to handle, and since that system won't be fixed anytime soon, some service must be pulled down.

Forget the fact that the system's load factors are now 80% or above - which means virtually full. Because the "delays" must be eliminated, according to the hysteria, there is only one option: less flying. And because flights are full because of strong demand, that means fewer seats available and higher fares. The new game will be highest and best use of the unnaturally-limited ATC capabilities - which means smaller communities will get hit first and worst. It's already starting, quietly along the margins of the air transportation system. A number of small and mid-size airports are getting unpleasant news this month.

View of FAA Management: Congress Is A Pack of Gullible Fools. This trend is unfortunate, because there're enough reports, events, evidence and facts to clearly show that the air transportation system is in crisis for one main reason: the senior management of the FAA has proven that it couldn't properly open a box of Cracker Jacks, let alone implement complex and timely upgrades to the ATC system.

Examples abound. A few weeks ago, the FAA's old flight planning computers went on the fritz, turning airports along the East Coast into winged gulags with ground stops. WNBC in New York investigated and found that new replacement computers were delivered to the FAA two years ago. The FAA's bungling senior management hasn't yet figured out how to get them installed and working. Maybe in 2008, they say. So, by then they'll be installing computers with three-year old technology, getting a real jump on obsolescence.

This is not an isolated example of the reason that the USA is facing air service rationing: the senior management of the FAA has no accountability for results. Worse, Congress thinks that the situation is just fine. Nobody in the FAA has any reason to worry about being fired for incompetence.

This was again demonstrated recently, when FAA Administrator Marion Blakey testified to Congress, delivering a giant load of dishonest yogurt that the pols swallowed hook-line-and-sinker. She boldly stated:

"If we're unable to have a financing reform bill in place. . .the delays and the missed connections and the headlines are only going to get worse--much worse. Without a reliable funding stream, the NextGen program will start to slow down, and when the bow wave of delays hits, it'll be too late."

This is like Paris Hilton calling for an end to bimboism.

Say what? The NextGen program will start to slow down? In light of the fact that most of these programs involved are substantially delayed already, to make this statement is to imply what's not true. In short, it is a lie. Funding isn't the issue. Inability to manage and produce results are the core problems.

Accepting It Means Supporting It. As long as the airline and airport industries accept this lack of integrity, they set themselves up for nasty and unfair criticism. Airlines have a difficult time telling consumers that the majority of delays are not their fault, when the airline industry itself has by and large accepted the FAA's incompetence. The airport industry forfeits its moral position to complain about loss of air service at smaller communities caused by ATC limitations, simply because it has not come forcefully out demanding results in light of the FAA's continued failures. If these industries go along with the smokescreen put out by the FAA Administrator, saying nothing, they have to take the responsibility for the consequences.

Here's a flash: the current FAA reauthorization debate is only about how the bill is split up. It's not about more money - which the FAA over the past 20 years has found innovative ways to waste. It's simply about where the current revenue stream will come from. But the projects the FAA is dishonestly passing off as being "on track" and needing funding are virtually all over cost and well behind planned schedule. Some a dozen years or more.

This FAA "NexGen" scam should be enough to have any lawmaker with a modicum of integrity call for the FAA Administrator's immediate resignation or removal from office.

"NexGen" is dishonest because the FAA's senior management is trying to imply that they've come up with a new, satellite-based system that's the magic fix to delays. The truth is that "NextGen" is a PR stunt to describe the same upgrade programs the FAA has been stumbling with for the past five years.

Congress, however, isn't interested. All they do is go through their own unique version of Kabuki Theater, a.k.a. Congressional hearings (definition: events where speeches are made that say nothing, and nobody listens, anyway). Quite the show: The FAA Administrator parades in with her minions, reads a prepared statement, answers a few softball questions by dodging facts, and then leaves, usually to the sickeningly-sycophant compliments and thanks expressed by the chairman of whatever sub-committee called the meeting.

Then the munchkin staffers of the various politicians rush into the hallway, trying get in a good word with the departing Administrator for that discretionary funding request for the local airport's new taxiway, or overlay, or tank farm, or whatever. ATC failures? Who cares?

The upshot: nothing happens, and the incompetent system that's choking air transportation, hurting economies of communities, and, yes, trapping passengers on airplanes, continues with the de facto blessing of the same congressional inhabitants who never hesitate to decry how the airline industry is a mis-managed mess.

Airlines Have No Choice. Cutbacks In Service Are Coming. The enormous excess costs inflicted on the airline industry by the FAA's out-of-date ATC system are now starting to come home to roost on Main Street, USA. Small town Main Street, that is.

Because the ATC system cannot handle the demand, capacity is restricted. That means the available capacity becomes more valuable. That means that the economic bar to air service is going up - way up. Small communities are starting to find that previously-viable air service may no longer provide sufficient return, based on higher costs and the declining ability of the FAA's ATC system to handle the nation's needs reliably.

So, some markets that worked in the past, - particularly those operated by RJs - may no longer work in the future. It's already started. Binghamton, New York, is losing Delta service to JFK and Atlanta - the net return on the flights has been eclipsed by the burdens of a declining ATC system. Erie is losing ATL service - not because of traffic, but due to the comparative return requirements within the new capacity constrictions of the ATC system. Newburgh, New York is losing service from the American Airlines system. Nonstops to Chicago are going away - even with an 80% load factor. The limitations caused by ATC congestion - extra flying and the potential for airport delays - have brought the term "highest and best use" home to the Lower Hudson Valley.

It also means that some smaller communities that once had a chance of attracting new service may as well howl at the moon. It's not coming.

Soapbox Reactions. Not Results. This isn't to say that we're not hearing from Congress about this. Yes, indeed, we are. Just this week, Senator Schumer of New York made public his oh-so-outraged missive to the Chairman of Delta, demanding that flights be reinstated at Binghamton. It's to the Senator's credit he stepped up the the plate, but he went to the wrong stadium. Note that the good Senator said nothing about the costs, restrictions and capacity limitations inflicted by the declining ATC system, and their effects on the ability of places such as the Southern Tier of New York State to support air service. Not to be left out, plan on Hillary jumping into the fray this week, too - with not much more intellectual impact than Schumer did.

Air Service Pink Slips.  More small and mid-size communities across the nation will be seeing announcements of service cut-backs in the months ahead. Plan on it. Add to that the increasing calls to get "those little RJs" out of the system - regardless of the fact that they are the current life lines for smaller communities' access to the air transportation system. While the 50-seat RJ fleets will continue to decline simply for operational cost reasons, the ATC mess is likely to accelerate the process, and result in a smaller long-term RJ residual fleet in operation. Not good.

But, in an environment where the nation must dumb-down demand to the negligence of FAA's ATC management, restricting RJs at major airports may be an eventual necessity. That will do wonders for the local economies at places such as Lansing, Kalamazoo, and Grand Rapids. (Note to Michigan DOT: Add another lane to I-94 and I-96 to accommodate the leakage to Detroit Metro.)

Memo To The Airline Industry: You Knew It Was A Snake... The pundits in the media who rant about how delays and cancellations are all the airlines fault are not completely wrong. Aside from the fact the industry has avoided aiming any of criticism at the FAA, they have known and seen this coming for years. It isn't any surprise.

In 1994, our study, "Free Flight - The Economic Impact" was published jointly by The Boyd Group and RMB Associates. It outlined the enormous financial burden imposed on the airline industry and its customers by the ATC system, including references to internal studies done by United and American which - way back then - found the hit to be around $500,000,000 annually to each carrier. We outlined how a fully-functional Free Flight system could be implemented, and within a fraction of what the FAA was then projecting.

But not one airline CEO stood up and demanded change at the FAA. Go along to get along, seemed to be the strategy. Months later, in a ridiculous photo-op, group of them posed with Bill Clinton, announcing yet another born-dead and brain-dead joint FAA/airline industry committee intended to end delays once and for all. But nothing changed. The ATC system continued to deteriorate. Now, when the media, consumers, and Schumer-esque politicians are screaming for airline blood, the airline industry is finally beginning to scream about the ATC system. That's the good news.

The bad news is that they're again playing the system, instead of demanding it be replaced. Airlines are pandering to Congress and the current FAA management to fix ATC, which is like asking the Five Families to fix the problem of organized crime. Until and unless the airline industry takes off the gloves, stops playing politics, and demands change at the FAA, there will be no improvement in delay and cancellation performance. Regardless of how the FAA's funded.

Forget Recruitment. For Some Airports, It's Now Air Service Retention. We are entering a new dimension in air service. Airline systems are going to be re-evaluating the financial performance of markets through the lens of limited ATC capacity. This means that for smaller communities, attracting new air service will become in some cases secondary to vigorously trying to hang on to what's already in place.

But neither the airline industry nor the airport industry can claim they didn't see it coming. And now, it's arrived.

Imperative: Cities Need To Educate Their Congressional Reps. This is not a drill. It's here, and it is real, and it is going to get worse. Small communities and mid-size communities are on their own. The Washington alphabet groups are not in a position to do much except play ball with the FAA. Heck, the AAAE is a major vendor to the federal government, so it's real unlikely they're in any position to take shots at a major source of their income.

So, the recommendation is that small airports and communities take the ball and run. Make sure that local congressional representatives are fully briefed on the ATC crisis. Don't expect them to figure it out - the airport and community has to educate them.

Otherwise, when you complain, Senator Snort will send a staffer to the FAA, where the PR department will give him or her the party line, and that will be your response.

Instead, you get the facts about ATC, and inform your congressional delegation. Hit on the lack of FAA progress, the nonsense being fed to Congress, the repeated failures of the system. The facts are there. It's just that Congress tends to see, hear and say nothing unless it's fed to them. This is a crisis, so it's important that you do the feeding. (If you need assistance in this regard, let us know here at The Boyd Group. We've been on this matter for over a decade.)

Since the folks inside the Beltway can't seem to fix the ATC mess, a little revolt out in the Provinces is needed to get their attention.

Either that, or wait until the air service Pink Slip arrives Then it will be too late.

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(c) 2007 The Boyd Group, All Rights Reserved.

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Hot Flash - Monday, July 9, 2007

It's Not Just An Airplane. It's A Complete Disruption To The Status-Quo.
The 787: A New Beginning.

The Boeing 787 is now being heralded as Boeing's competitive advantage. The company's foresight and vision in creating a new-technology airliner with breakthrough economics is the subject of endless media stories. All, to be sure, generally true.

Yes, the B-787 is breakthrough. It is indeed an economic wonder, assuming it meets the promised specs. The technology it represents will shift airline economics.

But, ominously, it wasn't just an airliner that came out of the hangar yesterday. It was the equivalent of letting a genie out of the bottle - a genie that Boeing has no control over, and one that may signal a very challenging future for the company...

Click here for our Research Review

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Hot Flash - Monday, July 2, 2007

As We Forecast...
Southwest Begins Major Rebuilding
Downloadable Research Review - Click At End of Article

The new Southwest begins to emerge. Fun. Friendly. New Frills.

And fixin' to pounce on competitors. Large airports - clear a gate or two. A few metro-peripheral and a couple of smaller airports now served by WN may be in for some empty counter space. And don't rule out part of the fleet eventually not having "737" in the description.

Southwest has signaled that, in addition to slowing its capacity growth, it may retire some planes, revise its product, and look for "ancillary revenues" - a buzzword for maybe charging for bag check or early seat-assignment. One thing is certain - the Southwest Airlines of 2009 will be very different than that of today.

Stumping The Wall Street Band. Lots of things will be seen at Southwest that will confound the me-too analysts who parrot all the stuff about "one fleet type," "no hubs," "no frills" and "fast turns" to describe the airline, most of which are attributes they've never even analyzed within the new context of the airline industry. "Everybody knows," is the general line among lightweight consultants, "Southwest is the model that avoids all the failures of those legacy carriers..."

Attendees at our Annual Aviation Forecast Conferences aren't "everybody" - instead, they're informed. They've expected big changes at Southwest. Looking at the data - the fleet issues, the competitive issues, and where new revenue streams were emerging - our professional forecasts indicated that Southwest would need to materially shift its approach or find itself behind the competitive 8-ball.

While the parrot analysts and consultants were repeating themselves over and over, The Boyd Group's airline trend and strategy predictions presented at our Conferences reviewed the emerging weakness in the LCC model. That included data indicating that Southwest and other LCCs are in the only airline segment that faces massive over-capacity, with way too many airplanes on order, and in fact, a dangerous lack of size diversity in their fleets.

Harrumph, intoned the usual suspects in the consulting and analyst crowd. The consensus disagreed, because they'd read just the opposite, just about everywhere.

Nevertheless, we made it clear that the "Southwest model" in its traditional form was nearing a situation where it would need fundamental revision if it was to stay viable. Southwest, in addition to facing rapidly-increasing costs, was also facing a revenue squeeze. The easy-to-stimulate markets were getting few and far between, and worse, Southwest was looking at a future where comprehensive network carriers were accessing stronger revenue streams - due to cross-feed hubbing, and having access to growth markets that WN could not enter with its current fleet.

At our Annual Forecast Conferences, we've pointed out that the "low-hanging fruit" markets for LCCs were getting picked clean, and with higher costs, the ATC mess, and airport facility issues, the amount of new LCC capacity coming on line was not sustainable. jetBlue subsequently slowed deliveries, and will likely slow them more in the months ahead. Now, even Southwest has backed off its 3-plane-per-month program.

Naturally, our forecasts were disagreed with by many in the airline analyst herd, who tend to rely on each other, not hard data, when making stock-buy recommendations. Not three months ago, yet another "analyst" came out with a glowing report about how Southwest has been consistently profitable, mainly, she declared, as if she had single-handedly just discovered it, that Southwest has stuck with a no-frills product and has always operated only "one type of aircraft."  What these rearview-mirror worshippers have missed is that those two supposedly valuable attributes (even though the one-fleet stuff is technically a myth) are precisely the Achilles' Heels of the Southwest operation.

(We bring this up simply to point out that our trend forecasts produced by The Boyd Group are based on hard futurist research, not "consensus" or what some stock analyst hyping or shorting a stock may publish. The result is that our clients and Conference attendees stay ahead of the consensus pack.)

Download Our Research Review. For a review of what we can expect from Southwest over the next 18 months, click here for The Boyd Group's latest research review. It reviews some of the challenges noted above, and potential paths WN can expect to take. There is also a chart of market changes.

 

The Boyd Group Aviation Forecast Conference
Aviation Leaders To Discuss Key Issues At SRQ

There are lots of conference events throughout the year. But only one provides not only hard, independent aviation forecasts, but also input from the key industry leaders that will be making the decisions that will shape the future of aviation. The agenda includes CEOs and top executives from Boeing, Airbus, Embraer, Northwest, AirTran, Delta, Frontier, Spirit, KLM, and more.

Make your plans to be in Sarasota on October 14-16 for The Boyd Group Aviation Forecast Conference. Now in its 12th year, this is the event that aviation leaders don't miss. And getting to SRQ is now easier than ever. In the past three years, lots of new service has been initiated, including extensive increases in flights operated by AirTran, jetBlue, and US Airways. (Maybe it has a little to do with the air service consultant they've engaged.)

Insight. Not Insipid Panels. Unlike other conferences, we do not inflict Torture by PowerPoint on the attendees. This Conference is all about imparting new data, new perspectives, and new insights. Instead of terminally-boring and indecisive panels, The Boyd Group has established an innovative format where one-on-one discussions are held with distinguished aviation CEOs and other executives, including fielding input from the attendees. No other conference has this informative approach, although some are trying to copy it.

So, Where's Regional Air Service Going? One of the more intriguing discussions we are looking forward to will be with Jeff Potter, CEO of Frontier. The Conference will be just a couple of weeks after the start of the Q-400 operations, and we'll be excited to hear what that means for regional air service in the West. The addition of large turboprops to the Frontier fleet signals a trend we've discussed at previous Conferences: LCCs will be moving to widen their revenue stream to compete better with not only comprehensive network carriers, but with each other.

Register Now - Early Conference Rate. For a list of the CEOs and other aviation executives confirmed at the Conference, click here. Then scroll up and down for all the information on the event. Go to the registration link to reserve your space. In 2006, the Conference was sold-out.  Same in 2005. So register now, and join your colleagues in Sarasota on October 14-16.

 

Hot Flash - Monday, June 25, 2007

Airline Industry Travails...
It's Super Congress To The Rescue!

American consumers are under attack from the forces of Airline Evil. In the past two weeks we've seen outrage after outrage:

• United's computers go on the fritz for two hours, temporarily snarling that carrier's operations, causing thousands of passengers to be trapped with no alternative options at Denver, IAD, and yes, that Gitmo of aviation, O'Hare.

• The FAA's speed-tape-and-spit ATC system goes glub on the East Coast, resulting in ground stops from Maine to Florida. Thousands more passengers stuck, with airlines even resorting to the aviation version of water-torture, trapping passengers for hours on airplanes.

• Delays, despite no increase in airplanes in the skies, are up in double-digit percentages  because of the FAA's ATC system failing. The Evil Airline Empire is, according to some in the media, completely responsible for this. It's all that "overscheduling" and using those little RJs that are intentionally and wantonly gumming up the pristine skies of America

• And the Evil Airline Empire even attempted chemical warfare, when they caused a lavatory to back up on a Continental flight in the middle of the Atlantic. One network analyst gravely intoned his condemnation of Continental... "They never should have let that airplane depart unless they were 100% sure the thing would flush..." In more than just maintenance parlance, it was a "no-go" item.

There's no doubt about it, friends, beleaguered and downtrodden air consumers need the help of, yes! - look up there, not in the sky, but on C-Span! It's a bird! It's a plane! It's a bad rendition of Aunt Bee from Mayberry! No, it's Super-Boxer (a.k.a. Barbara) and her bi-partisan team of Congressional Super-Heroes. They're going to save the day for air travelers.

They're going to defeat the forces of Airline Evil and pass a Passenger Bill of Rights!

Oh, happy day! No more delays. Every passenger will have the right to get off, even when the flight is forced to weather-divert to an airport that has no jetways or stairs to deplane the aircraft. When ATC causes un-defined ground holds, aircraft will be required to go back to the gate and let the prisoners, er, passengers get off, stretch their legs, buy a hot dog, or just send a quick Blackberry e-mail to Super-Boxer to say thanks. All this even if there isn't any safe way of getting people off. Even if it might well delay the flight more. Even if all gates at a given airport are clogged with other flights.

And we'll have no more toilet malfunctions, either. Our Congressional Super-Heroes will mandate it. They have long experience in dealing with such stuff.

America is under siege, Congress has determined. Not from al-Qaeda, don't ya know. Not from the flood of unknown illegals - some possibly being those recently-graduated suicide bombers we saw in the media last week -  coming across the Mexican border.

Facts & Solutions Need Not Apply. No, our intrepid Super-Heroes are going to take on the Dark Side of the Airline Evil, which intentionally delays flights, traps consumers on planes for hours, and for yucks and grins, delights in having toilets overflow. And we "all know" that a) these outrages are entirely avoidable, and b) they are the result of the airline industry intentionally cutting corners.

Neither is true, but instead of hard, investigative reporting, some in the media delight in ignorantly reporting half-researched and often pre-headlined stories on the "continuing failures of airlines."

Delays? Heck, That's Most Flights, Anyway. The fact is that most "delays" are not due to weather, but to the inability of the broken-down FAA to provide an ATC system that meets the needs of the nation.

More importantly, if some of these reporters would do their homework, they'd find that virtually all scheduled airline flights are technically delayed. If one computes what it should take to depart from point A and get to point B, and then compares it to what airlines need to schedule, we're looking at between 10% and maybe as much as 20% more time than is necessary, depending on market.

So, it's not delays we're measuring. It's more airliners arriving off-schedule.  Schedules that are built to address the environment airlines fly in - one that is affected by a mis-managed and failing ATC system. And, by the way, for those parrots who are just now proclaiming that the ATC system is out of date and needs to be replaced, welcome back to reality... that has been the case for over two decades, and, golly, gee, now it's what everybody's talking about. We prompted Congressional hearings on the issue in 1994, and the promises the FAA gave then are essentially the same today.

Constrict Commerce To Adjust To The FAA's Incompetence. And "over scheduling" - it is an issue. Airlines are in fact doing it. In fact, they are scheduling to meet the needs of the nation's air transportation demands - after all, the system's at around 80% load factor.

But the ATC system cannot handle it, which is a fact the industry knows full well. So, according to some accepted doctrine, airlines need to put fewer airplanes in the sky. And stop with the RJ stuff. Instead of all those little airplanes serving Bangor, and Montgomery, and Grand Junction, replace 'em with one daily 747. That'll fix things.

The main problems the consumer is facing today are based on the fact we don't have the infrastructure to meet our air transportation needs. It is unfortunate that the "fixes" proposed by consumerist gad-flys, self-appointed passenger vigilantes, and a disgusting pack of pandering politicians, won't do diddly to help the consumer.

To be blunt, it is entirely irresponsible for these folks, including the odd network airline "analyst" or two, to imply that passing legislation by a bunch of clowns who won't even protect our borders, will  magically protect passengers from delays and backed-up airplane toilets. These people know or should know that there's more to this, and to not include the FAA in their frequent and condescending airline skewerings is cowardly, ill-informed, and misleading to the American public.

Airlines Are Supporting Boxer's Legislation. Now, this isn't to imply that there aren't some really ugly airline messes out there. Anybody who experienced on any regular basis the (pre-Delta take over) ASA mess in Atlanta can likely recount outrages matched only by what might go on in some poorly-written spoof of the airline industry. (One hopes that Delta will fix it fast.)

Or, the United gaffe during last December's Denver snow fiasco, when they diverted two planeloads of Express passengers at a rural Wyoming airport, and left them to fend for themselves. Then there's the downsourcing of mainline customer service at many mid-size airports to some entities that are semi-incompetent. It is a cost saving that's likely one of the reasons that consumers want revenge.

The point is that airlines do needle passengers just enough to get them into a frenzy. Then consumers turn to pandering mediocrities like Barbara Boxer to get "relief" - which is sort of like asking the Godfather for a favor - there's always an unpleasant payback. In this case, an inept law that will attempt to avoid the real problem and defy physical reality.

So, if the airline industry is to protect itself - and its customers - from the likes of Super-Boxer and her Congressional Super-Hero friends, they'd best start to let the world know that it's the FAA that's the major cause of what's going on today, not the airline industry.

But beyond that, they'd better start to take a hard look at their customer service policies, procedures and implementation. This is particularly true of some of what they've downsourced to small jet providers at many airports. Cheap labor, yes. But in some cases, nothing less than amateur and un-professional passenger abuse.

The legislation can be stopped, but only if the airline industry starts telling it like it is. If it keeps on trying to dance around the issue, Super-Boxer will win.

And the consumer will lose.

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Hot Flash - Monday, June 18, 2007f

The FAA's Air Traffic Control Scandal:
First They Clutter The Skies.
Now, They're Clouding The Truth

You gotta hand it to political appointees at the helm of the FAA.

Even after two decades of failure to properly and professionally and safely upgrade the ATC system, they've once again engineered things to make themselves look like they're really, really working hard, the victims of conditions beyond their control. Conditions that they created themselves.

In particular, they have successfully transformed the current debate on reauthorization into a giant smokescreen to cover years of incompetence and dishonesty that has resulted in an ATC system that's deterating to the point that the nation's air transportation system is being constricted and the nation's economy is being affected.

It's Not More $$, Just A Different Billing System. The airline industry and the general aviation industry are at odds regarding how ATC fees and charges should be allocated. Airlines claim that GA has had a free ride over the years, and therefore, airlines should pay less, and GA more. Their argument is not that the total take needs to go up, just the split needs to be adjusted.

Into this, the FAA has successfully injected the tacit nonsense that resolving ATC failures and reducing airline delays are a key part of the reauthorization debate. Carefully-manipulated PR stories about congestion, and, in a new twist, admitting they really do have outdated ATC equipment, have led some in the media to conclude that shifting the cost burden to GA will give the FAA - the poor, overworked and victimized FAA - the extra money it desperately needs to cut out delays and handle the thousands of new VLJs that will blanket runways in the next few years.

Nothing could be further from the truth.

Write this down, because it's something that's over the heads of the veneer aviation analysts and ivory tower academics that pontificate on this issue: Reauthorization, regardless of how it comes out, will have no effect on the progress - or, actually, the non-progress - of upgrading the ATC system. The issue does not change the "plan" that's been in place for years. The plan that's years behind, and which has hamstrung the air transportation system.

See, all the airline industry wants to do is spread the cost burden more evenly between them and GA. It is not, a move that'll do anything to fix the ATC mess. It won't, despite media stories to the contrary, be the thing that allows the FAA the ability to build a new, whiz-bang satellite-based ATC system. But the FAA is trying to make it look like the years of failure and the billions wasted on incompetently-managed programs never existed, doesn't exist now, and all new ATC programs are proceeding full speed ahead.

They are trying intentionally to mislead the public. Big time.

Still Incompetent After All These Years. As one example, two weeks ago, the East Coast was messed up for hours when certain obsolete FAA flight planning computers went on the fritz. The back up plan collapsed, too.

It turns out that new replacement computers had been delivered to the FAA two years ago. But the FAA has failed to develop the software to make them work, and they won't have it done, supposedly, until next year. In the meantime, millions of dollars in computer equipment sits unused and unplugged. And, assuming they do get the software written, this machinery will be three years old in terms of technology before it goes into service.

Just Change The Schedule If It's Late. To describe what the senior management of the FAA is doing as lying, is a pretty stiff accusation. But with equipment failing, airline delays at record levels (without corresponding in increases in flight activity, by the way) and upgrade programs continually being late, there is no other term to use, when these political appointees blatantly tell the world that they're doing everything just right.

In the 2006 Annual Performance Report for the FAA Air Traffic Organization, the statement is grandly made, "...The major capital programs under development are on track..." A railroad metaphor - "on track" - is appropriate, because the reality is that a lot of these programs are stuck on the ground. Then in the very next paragraph, they describe the value and improvements that will derive from the Wide Area Augmentation System (WAAS), one of the "on track" programs.

The fact is that the WAAS program is now 13 years behind schedule. A baker's dozen. Enough to make a kid a teenager. To describe it as being "on track" is not honest. It is a lie.

WAAS was planned for operation in 2000. Now, the target date is 2013. Other "on track" programs, such as ASDE-X, STARS and ADS-B - all critical parts of the FAA's"major upgrade" programs are late, too.

But the FAA has "re-benchmarked" them with new, later completion dates, which they think gives them license to say they're really on time. This is like an airline, when a flight arrives late, retroactively changing the schedule so they can call it on-time. However it is characterized, it's a lie.

Then we have the new term, NextGen, to describe the FAA's upgrade program. Here's a flash - NextGen is really YesterdayGen with a new logo. It's just what the FAA had in the plan for the last several years. Yet they are trying to mislead the public and the media into believing that they've just now developed the Holy Grail to end flight delays. A PR stunt, not substantive planning.

PR Won't Reduce Delays. Neither Will Current FAA Management. Regardless of the dishonest semantics, the fact is that these programs are late, to the point that the GAO has suggested that some may be obsolete before they are brought on line. The fact is that airlines are having to add time to their schedules to accommodate the ATC mess, and the fact is that the air transportations system is being choked by the FAA's inability to get the job done.

As for the debate between airlines and GA regarding who should pay the tab for the ATC system, until they demand the FAA stop wasting the money and start producing results, it's a controversy that skirts the real issue.

Until then, bantering about who pays for ATC is like arguing about who's going to man the pumps on the Titanic.

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Speaking of Intellectual Deserts...

(c) 2007 The Boyd Group, All Rights Reserved.

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Hot Flash - Monday, June 11, 2007

Quote of The Week

"I would rather my luggage not get on the plane, and fly comfortably than struggle to get off the ground or land..."

- Tim Wagner, American Airlines spokesman, in a story regarding airline baggage problems. By all means... there's nothing more uncomfortable than being on an airplane that's struggling.

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Airport Security:
Yes, It's Sloppy, But Certainly Not Cheap

After five years of an almost perfect track record of mis-spending on things like $400,000 to re-decorate the Administrator's office, a couple hundred grand more to hire 50 screeners in Colorado, millions squandered on "puffer" machines that don't work, and airport screening quality that fails tests with more regularity than Iraq-denials from Hillary Clinton, the TSA has decided to make the airline industry pay for a bigger share of this circus.

Bad security, it seems, costs money. So the airline industry just got a bill for almost $220 million bucks from the Transportation Security Administration.

It's not setting well. Having 90% screener failure rates at some airports, having smuggling going on in secure areas, and even having baggage theft rings operating at the TSA - well, things like that are "understandable" and apparently tolerable to the airline and airport industries. But getting a bill, well, that goes over the limit.

From the same American Airlines spokesman who said above that he'd rather not be on a struggling airplane, comes this protestation regarding the TSA bill:

"We believe it is time for the TSA to develop a new system for allocating these costs ... This old system is fundamentally unfair..."

Not mentioned was the fact the the airlines are now being asked to join taxpayers to pay for a system that aside from being unfair, also doesn't work. Unmentioned is the fact that this "old system" is inept, mis-managed, and as a terrorist deterrent is about as effective as an unloaded pop gun.

Ya Knew It Was A Snake When You Picked It Up... The Alphabet groups in the airline and airport industries have unwisely coddled up to the TSA, tacitly ignoring the fact that they know full well that it is a major failure. "We're working with Kip Hawley to address these issues," is the type of polyester pap that's usually heard when some embarrassing security failure or policy gaffe occurs. "We discussed this with Administrator Hawley at the AAAE conference, and he's fully committed to addressing our concerns..."

After five years of consistently standing quietly by and giving tacit approval while the TSA squandered money on security that doesn't work, the industry is now indignant that it's getting the bill. When it was just taxpayer dough, they were quite content. But now that they're gonna get hosed, the system is suddenly "unfair."

For some fun, do a news search. Try to find just one article where an industry Alphabet group has specifically, aggressively and directly expressed outrage regarding a TSA failure or cost overrun. Or, has called for immediate management changes as the top subsequent to a major security failure. None there. But when the extortion note comes from the TSA for $220 million, well, then there's some outrage.

It's unfortunate that the fact that Hawley and his organization have done a negligent job doesn't seem to concern a lot of people. The fact that our airports are no safer than on 9/11 is not to be mentioned. Anyone who watched the 60 Minutes interview with Hawley on June 10th regarding the No Fly List fiasco ($110 million for a system that doesn't work) could see in a heartbeat that the man is clueless. Add this to his track record of failure and his track record of actually lauding poor screening performance, and the picture is clear: Hawley's not competent to do the job. He's not a driving leader in the war on terror. He's just another bumbling W-buddy appointee.

It is time the airline and airport industries stood up and faced the fact that security isn't just another policy issue to banter about. It has to do with protecting our infrastructure and the 600 million annual US passengers from terror.

Here's a flash for the airline and airport industries: the TSA system you're being asked to pay for isn't just unfair. It's also unsafe.

Deal with it accordingly before you write a check.

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Please, Say They Didn't Spend Money To Discover This...

WESTCHESTER, Ill. -- A lack of sleep may affect the performance of airport employees, which can, in turn, compromise the safety of airline passengers. Sleep deprivation can impair the ability of airport baggage screeners to visually search for and detect infrequently occurring or low prevalence targets that may ultimately pose a threat to an airline and its passengers, according to a research abstract that will be presented Monday at SLEEP 2007, the 21st Annual Meeting of the Associated Professional Sleep Societies (APSS).

"Abstract" doesn't begin to describe this incredible discovery. Wonder how many attendees will fall asleep during the presentation...

(c) 2007, The Boyd Group, Inc. All Rights Reserved

 

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Hot Flash - Monday, June 4, 2007

Homeland Security Is Shocked! Shocked!
JFK Pipeline Threat - Big Surprise To TSA

The press conferences were peppered with terms like "unimagined destruction" and "as big as 9/11" and a whole lot of other superlatives regarding the attempt on the fuel systems at JFK International. Local police, the FBI, politicians were all there, expressing shock and awe.

We're Still Reacting. Not Anticipating. The really scary part was not the plot itself. What was scary was the fact that all of these officials expressed surprise regarding the plot.

And that, friends, is yet another irrefutable proof that our aviation security is a negligent disgrace. See, the whole objective of security is to NOT get surprised. The idea is to think ahead of terrorists. An attempt to blow up fuel facilities is not something that takes a rich imagination or a doctorate in criminal science to anticipate.

But since 9/11, terrorists have delighted in giving us surprises. When it comes to aviation security, the folks in the Bush Administration are like kids in a circus - there's no end to the amount of wonder and surprise they experience. Of course, the Democrat leaders in Congress are "surprised" too, and at every photo op are today trumpeting how they're going to look into this pipeline thing with, yes! - hearings.   Great, after the event, they're going to take action by doing a C-SPAN show. This from the party that doesn't really care how bad airport screening is, just as long as it's unionized bad screening.

It's been trumpeted that various law enforcement and counter-terrorism agencies are now scouring the fuel pipeline system in the New York area to make sure it's secure. Nice they thought about it only after they caught a bunch of Islamic terrorists (yes, it needs to be said, Islamic terrorists) in the planning process.

Missing The Real Damage Threat. This is not to discount the hard work of the FBI and other law enforcement agencies in stopping this event, but there are some very disturbing points here. One was the implication that one bomb and the entire miles of pipeline would explode, taking whole neighborhoods with it. Not accurate. This means there was a lack of understanding - and underestimation - of the nature and the vulnerability of pipeline facilities.

That also indicates that little or no hard, anticipative security planning has been done at all regarding the value of these types of infrastructure as a terrorist target. This time, the suspects appear to be what one reporter at the Newark Star-Ledger described as "armchair jihadists." Next time, it could be professionally-trained individuals on a suicide mission who have a firm understanding of the economic damage that could be inflicted.

Pipelines - particularly those carrying jet fuel - are not necessarily one long potential bomb. Unless the entire system was booby-trapped with probably dozens of explosives along its entire length, the blast damage would have been mostly confined to the area where the explosion took place. If it were a fuel storage tank it might have been a huge fire and explosion, but it would have remained relatively localized. But the most disturbing point is that it's only now, years after 9/11, and apparently only after an informant tip, that pipelines are seen as a target.  The blast damage is the least of what would be inflicted.

Jet fuel pipelines are the supply arteries to the air transportation system. Cut any substantial part of it, and air transport goes into a tail spin. It's not rocket science. Any comprehensive, professional airport vulnerability analysis would illuminate it. But that's miles from anything done by Homeland Security, an organization run at the top by W's buddies and other political appointees. Planning comprehensive, aggressive, and anticipative security programs is light years beyond their ability. The reaction to this latest plot proves it.

For the benefit and edification of DHS and the TSA, such a program would include things like the following:

 

 

 

 

 

 

 

 

 

 

This schematic gives an idea of the scope of what a comprehensive, anticipative security approach needs to address. Note, this includes fuel farms and fuel pipelines. Protecting these is just common sense - sort of Security 101, a class that the Bush Administration and Congress have not bothered to attend.   Chertoff and Hawley are too busy to pay attention, what with PR stunts like "registered traveler" schemes and making sure nobody has more than 3 ounces (or, again, is it 3.4 ounces?) of toothpaste in the coach cabin.

We would point out that unlike most of the grave comments being made this week by Homeland Security and last-minute "experts" about "total airport security" (a concept which they just discovered), this schematic isn't something we just now put together. It's part of a presentation from over four years ago, and which has been on this website since then. A link below can take you there.

It's Not The Explosion That Does The Real Damage. It's been noted here, and by others since 9/11, that the system that supplies fuel to our major airports is not only vulnerable, but also fragile beyond belief. One reason is that jet fuel has become somewhat of a pariah among petroleum products when it comes to pipelines. For a variety of reasons, it's more profitable for pipeline companies to ship gasoline, diesel fuel, and other products through a system that has not had any real capacity increases in three decades. That gives a whole new meaning to the term "highest and best use."

Toss in other issues like the potential for jet fuel to leave in the pipelines what are now considered to be contaminants to the new low-sulfur diesel fuels, and the result is that jet-A isn't real welcome as a pipeline customer. So there aren't many alternatives for jet fuel distribution should the current system get zapped by a terrorist attack. Or, even more locally, by the idiot with a backhoe installing a cable line.

So if the existing jet fuel pipelines are destroyed - say, in a plot to attack five or six major hubsite airports - the air transportation system could literally begin to shut down within days. That's because, again, there is no adequate alternative system that can deliver fuel to these major airports in the event the pipelines are damaged or destroyed. Tanker trucks? Nope - there's nowhere near any such excess truck capacity at major cities to funnel, say, one million gallons of jet-A, every day to a mid-size hub airport. Even if the existing inventory of tanker rolling stock could be immediately diverted and converted to supplying jet fuel to airports, it would leave gas stations high and dry, not to mention, if it's winter, nobody to deliver heating oil. Even then, the costs of establishing an alternative emergency supply system would substantially increase the price of jet fuel.

Like the above schematic, The Boyd Group has covered these points at its various conferences over the past five years. These are not new concepts. Except maybe to the Department of Homeland Security.

It's The New Cause Celebre. So, this week will be showtime. The issue of airports' "back doors" will suddenly be a hot topic. Every pandering clown running for the White House will have an opinion, and will carefully find some cogent reason why it's their opponent's fault. A lot of the media will carefully edit stories to cut out any use of the work "Islamic" (we must be politically correct), and there will be a flood of media interviews with apartment dwellers who live near a pipeline, scared out of their wits that one late night they may instantly become crispy critters when the thing blows up. But, rest easy. Normalcy will reign. Nothing substantive will be done. That's because there's nobody substantive running Homeland Security.

Before 9/11, Red Team reports of airport security failures were doctored or suppressed by FAA Administrators, so they never became public knowledge. Today, we don't have that excuse. Time and again, we are shown massive gaps in our security systems, such as this pipeline event, and the people in charge simply get away with it. Worse, virtually everyone in positions of power within the air transportation industry know the truth, but most say nothing.

On 9/11, we were caught unaware. Next time, we're just going to be deer in the terrorist's headlights.

Click here to connect to the 2002 Presentation on what needed to be done then to secure our airports, but hasn't been done yet.

(c) 2007, The Boyd Group, Inc. All Rights Reserved
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Hot Flash - Tuesday, May 29, 2007

The Entire Coach Cabin As A Blue Light Special
Forget Fares! We'll Sell Timeshares In The Cabin!
(And We'll Lose Our Shirts Doing It, Too)
                              
...Ladies and gentlemen, on behalf of myself, Bubbles, your in-flight Senior Sales Associate, welcome aboard Air Buy-It-Now...

"...For take-off, we ask passengers who purchased the optional reclining seat feature to put their seatbacks in the full upright and locked position. When we reach a safe cruising altitude, and the captain, er, Cockpit Sales Director, turns off the seatbelt light, we'll be passing through the cabin with today's Blue-Sky Specials...

"...In addition to Coke, Sprite, Ginger Ale, and fruit juice, ($2 each, plus a deposit on the plastic cup) we've got some other super merchandise you can order on today's flight, including specials on term life insurance, condos in Costa Rica, washer-dryers, and the latest in polyester sportswear just in from China. For you married guys who're running off on a tawdry week-end in 'Lauderdale with some bimbo half your age, you can ease your conscience by coming home from your "business trip" with a genuine artificial mink stole for Mama. One look, and she'll forget to ask about that stink of cheap perfume all over your clothes. Just see Fast Eddie up here in the front of the cabin for details. And don't forget to ask him about this week's special on knock-off Rolexes, too... We take Visa, Master Card, and Discover...

"...Finally, remember that Lavatory Tokens are available for $1 and can be obtained by pushing your Sales Associate call button... Now, sit back, try to relax within the 29-inch seat pitch you're trapped in for the next four hours, but remember that Air Buy-It-Now offers coupons for great discounts at storefront chiropractors all around the country..."

Last year is was merger-mania. This year, there's a new trendy dogma bubbling up in the world of aviation reporting...

Airline Cabins - The Wings of K-Mart. It's the A La Carte airplane cabin, a.k.a. selling everything as an extra-cost option. The buzz going around is that airlines, which supposedly can't make it on ticket revenues alone, will begin looking for "ancillary revenues" by charging for baggage, seat assignment, soda, etc., and then look for other things to sell hapless passengers once they finally get strapped - trapped - into their seats. Want a bag checked? Extra. Want a pillow? Extra. Want a seat assignment? Pony up. Want a soda? $3 please. But it's going to go beyond that to a new dimension, according to some sources - the incarnation of the entire airplane cabin as a flying Blue Light Special.

To read the current stories, all breathlessly trying to jump on the bandwagon, it all sounds like it's a done deal - air travelers will become air-shoppers. They note that some airlines - but, not major carrier systems - have actually started charging for that first piece of checked luggage. Therefore, according to the parrots in the media, every airline will be nickel-and-diming customers for everything before long. There's no question about it, according to what we're reading, this is the future.

It's not.

Here's a flash: there's a limit to the last-minute extortion that's possible within the context of the US airline system. Not only that, but there's a limit to the amount and scope of junk that can be peddled on a one, two, or even three hour flight. But that's not considered in most of the media reporting. The model du jour for the media is Europe's Ryan Air, a carrier that many of these reporters probably had never heard of a year ago. It may work in Europe, but this is the Colonies, with a fundamentally different marketplace.

The latest see-it's-true centerpiece in these Ryanesque stories tends to be Skybus. Missing in the majority of the reporting is any hard discussion whether the Skybus business model makes a lick of sense or not. All that's seems to be important is the come-on of $10 seats that are supposedly transformed into instant profitability by slapping advertising on the overhead bins and hitting up passengers for $2 Diet Cokes. 

Aside from the fact that every Skybus seat that's sold at $10, $25 and $50 to Burbank represents a cost deficit that the other seats sold on the aircraft have to make up for, "frills" like bag checking and seat assignment are not a huge cost disadvantage for giant airline systems - which also have giant revenue streams - like United, American, or jetBlue. Furthermore, Skybus selling these as extras isn't the land-office revenue avalanche the media makes it out to be. Then there's the brilliance to schedule 25 minute ground time on 4-hour flight segments, and hire flight attendants at $9 an hour, assuming that they'll get rich on the 20-cent commission on every can of soda pop they sell during the flight.

The Skybus "model" - if you can call it that - is essentially a second-tier transportation curiousity that attracts net-new air travelers by shifting existing discretionary dollars from other applications. The open question is whether Skybus can divert enough consumers from Columbus-area Home Depots to make it work.

It's Travel - Not A "Retail Experience." Another facts-not-in-evidence assumption sometimes suggested is that significant ancillary revenue can be captured by hawking stuff both inside and outside the airplane cabin - enough to make fares real, real cheap, even at a loss, but making up the difference on the volume of kitsch sold in the cabin.

The belief seems to be that flight attendants who are paid burger-flipping wages can be transformed into latter-day Willy Lomans, pushing everything from veggie-wraps to life insurance on hapless passengers sitting in the coach cabin. A questionable concept at best. The airliner cabin is a travel environment - not a retail environment. And to buy into the lore that this type of sideshow revenue will be the magic path to lower air fares puts one on the call list as a potential buyer for the Brooklyn Bridge. Not in this country.

In The US - Competition Is Demanding Value Upgrades. Regardless of some events to the contrary, the hard trend in the US, particularly in the LCC sector, is moving away from bare-bones product offerings.

In fact, the most pressing challenge facing Southwest today is that they're competing with LCCs like jetBlue, AirTran, and Frontier (not to mention re-structured comprehensive network carriers such as Delta) that are offering a higher value-to-cost  product perception - things like seat assignment, free snacks (nutritional value notwithstanding) and inflight entertainment - at the same fares. Taking a gander at comparative market load factors at airports like PHL, IAD, and DEN will at least anecdotally validate this.

If WN is going to attain and maintain revenue share in some very key markets, they will need to at least add seat assignment to their product. And if they tried to even partially adopt the pay-for-everything lunacy being played out by Skybus, they'd be cut to ribbons in the competitive marketplace.

The problem here is that the media has seen one tree and assumes it's a forest. In reality, it's more like a financial desert.
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(c) 2007, The Boyd Group, Inc. All Rights Reserved

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Hot Flash - May 21, 2007

Review of Filings
Small Community Air Service
Development Grant Program - 2007

The DOT has received 75 applications seeking grants under the 2007 Small Community Air Service Development Program.

Of these, at least 40 are very much "in play" - i.e. are solid uses of the funds that have reasonable chances of success in improving air service. The unfortunate part is that there's not enough money to fund all of these - the viable applications entail approximately $18.5 million - nearly twice the $9.9 million that congress has supposedly authorized. So, the DOT has a job on its hands.

The remaining applications are likely dead for a range of reasons, from no local participation, to requests for things that DOT almost specifically said not to ask for, to requests for things that have no earthly chance of success. These include some of the usual proposals that are submitted annually for things like starting commuter airlines, paying a commuter to "connect" with Southwest, and - the 2007 trendy concept du jour - air taxi service. Funded or not, these things are lost causes.

Less Congressional Juice? One thing different this year may be the level of political pressure facing the DOT. The new Democrat regime in congress does not appear to represent any new, additional heavy-hitters who can put the strong-arm on the DOT.

California may not be in the play as strongly as in the past. Norman Mineta’s gone (thankfully), and unless the grant involves air service that departs Baghdad, Nancy Pelosi isn’t a factor, either. The huge grant a couple years ago to yet again "study" the need for intra-California air service, as expected, pulled zero air service rabbits out of the hat. It will be at least another year or so before that document will be forgotten, and some paperback-writer consultant will cash in doing yet another such "in-depth statewide air service review."  Like forecasting the results of an instant replay.

The Daschle duo is history (both Tom and Linda) so there’s less potential for another gigantic pork-award to the Dakotas. So all in all, it  looks like the DOT will be less badgered this year with demands from Congressional staffers to award money for things that won't work, but will make key political dragons happy.

Nevertheless, when the dust settles, the DOT is still facing at least 40 of the 75 applications that really do appear to have very strong credentials for success. Most of these involve support for additional capacity, with some very compelling arguments.

Captain Kirk Proposals: Going Where No Airline Has Gone Before. That much said, there was a lot of great entertainment value in some of the other applications.

These dovetail with the suggestions we gave the GAO several weeks ago regarding needed revisions to the SCASD program. (Go There) In particular, the DOT needs to be a lot more clear regarding what types of applications may be “innovative” and “out of the box” - as opposed to what’s simply off-the-wall and out of luck.

Another Trendy Idea Goes Bust. Along those lines, we can start with breaking news that bears strongly on a number of this year’s SCASD applications. Two weeks ago, it was reported that the rural air service scheme funded by the largest SCASD grant ever awarded finally went to dumb-idea heaven, taking a total of nearly $2 million dollars with it.

Those playing the SCASD home game will recall that this was the $1.5+ million grant made in 2002 to a consortium in the Dakotas that was expected to use the money to create the new paradigm for rural air service, by starting an intra-regional commuter/air taxi service, called Point2Point. As we’ve advised our clients repeatedly, such schemes are sure-fire ways of losing big time money, without producing anything that consumers in general would use. Regardless of the claims about "convenience" or, in this case, new ATC systems (?) - the economics of air taxi programs don't get within a couple of galaxies of what's needed to make rural air service work. 

But, regardless of hard realities, after getting the grant, the consortium started out by throwing a quarter million dollars (yup, $250,000) at an independent analysis to investigate the belief that consumers in small towns would be only too happy to shell out $350 an hour to shoe-horn themselves into a small plane to get to other small towns.

And, whaddya know, the completed study said, youbetcha they would. Then, whaddya know, the grant-supported operation was awarded to the same entity that did the study. Today, it's grant money good-bye.

Just Keep On Sticking The Finger Into That Live Socket. In our Guide To Filing A SCASD Grant Application, we outlined several amateur schemes like the Dakota debacle that communities should avoid.

Nevertheless, every year communities still fall victim to grand concepts which imply that there's more than a rat's chance at a dCon party for independent intra-regional commuters or air taxi airlines. Forget it - regardless whether they're operated with a VLJ, a Cirrus, a C-402, or a 747 - they don't work in the lower 48. Twenty years ago, yes. Today, no. These types of lightweight SCASD proposals do nothing except raise the expectations of the gullible, waste some serious money, and end up in failure. The Dakota experience proved it.

So one might think that communities would think twice, or at least look at the track record, before paying money to somebody to write and file a grant for what’s been proven to not work. But trendy is as trendy does, and there are few concepts today more chic than to propose air taxi operations with either Cirrus aircraft or with VLJs, as the answer for small communities. See, it's been in all the papers. It’s the panacea, don’t ya know, for what ails rural air service.

So, despite the Debacle In The Dakotas, this year at least three intrepid community explorers-of-what’s-already-been-discovered filed such SCASD proposals, replete with glowing descriptions of the wonders and mysteries of the coming VLJ air-taxi revolution.

And, Again This Year, The Pie-In-The-Sky Applications. Every year, there's got to be at least one proposal to start a commuter airline. No disappointment this year, as one community outlined how an independent local 19-seat operator will surely provide "connections" to all those big airlines at one of a number of hubs, the exact one to be determined later. (Real in-depth traffic analysis, eh?)

No details on the fundamentals, like T&B agreements, branding, financing, actual destination flows. Just the usual stuff about some local folks are willing to start an airline. Just the usual stuff that from the gitgo won’t work, but really sounds good to the uninformed.

And, almost as expected, one community got swan-songed into doing a proposal to subsidize a small independent commuter to provide "connections" to Southwest's low fare service. (Another inept and amateur idea that we warn our clients about in The Guide.) The fact that Southwest religiously avoids such interline agreements, as does AirTran, was not discussed much, regardless of the logistical issues that fact raises for making all those low-fare connections from a high-fare commuter flight. Nor were included any pesky details like route & revenue profomas, coordination schedules, and facility issues. How the commuter product would get retailed as having great connections to Southwest wasn't much of a concern, either.

Apparently, the community was not told that the majority of Southwest passengers book directly with the carrier's website, which is more likely to display photos of Paris Hilton doing the perp walk than flight schedules for a commuter airline pandering to do end-to-end connections.

Deliver Us From Drivel. A couple of Hail Mary applications were there, too, including one that claimed that adding a second carrier to an airport that today is registering less than 30% load factors will magically spike traffic by over 500%. It's amazing that somebody convinced this community that a major airline would actually even consider taking $18 million dollar 50-seat jets and toss them a couple times a day several hundred miles into a market that boards less than 25 people per day. It’s okay to be optimistic, but this type of stuff borders on the type of bad advice that suggests the need for a drug test. Or at least a test on Airline Economics 101. Grant award or not, Santa Claus is more likely to arrive at that community. There are better, more realistic options for such communities, other than asking a major carrier to risk millions on such a program.

A number of applications involved zero local financial participation, which, again, was pointed out in the DOT docket to be essentially a deal-killer. Finally, there were a few shoot-for-the-moon, multi-million dollar proposals. Most were so outlandish that unless the community has secret pictures of the DOT Secretary having cocktails with Al Sharpton in a Washington strip club, they’ve probably by now been tossed into the dead pile.

Decisions: At Least 90 Days. The above fluff applications notwithstanding, the DOT is still facing 40 or more really valid proposals that represent about double the amount of the grant funding. No hard estimate of when decisions will be handed down, but given the relative merits of the really deserving proposals, the DOT has got a lot of heavy lifting to do. Plan on not before late July or early August.

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(c) 2007, The Boyd Group, Inc. All Rights Reserved
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Hot Flash - May 14, 2007

TSA Amazes Once Again
Security Never Means Having To Say You're Sorry.
Or, Competent

One might think that the agency responsible for securing our airports might be able to protect their own premises. But it's clear now that if you really want to lose something, give it to the TSA.

• First, it was revealed that thousands of TSA ID cards are missing across the nation. TSA has no idea where they are, but assure us that it's nothing to be concerned about. Nah, ID cards are no big deal... who'd ever use 'em?

• Then, there's the revelation that TSA uniforms are also missing. TSA again assures us that it's no big deal. Heck, it's not as if they're designer duds. And certainly, the sometimes semi-literate private-firm ID-checkers posted at airport security checkpoints are ready to vigilantly catch any wrong doers with a false TSA ID and a stolen TSA uniform. Why, they look at those IDs for, what, three to five seconds, at least.

• Last week, it was revealed that the TSA has no idea where a hard drive is that contains personal records of 100,000 current and former TSA employees. Social security numbers, bank records - stuff like that. It's not "lost" if you listen to the TSA. They just don't know where it is. But in "an abundance of caution" the TSA Administrator is offering short-term assistance (with a financial cap) to any employees who may have their identity stolen and misused as a result of the Agency's inability to locate (not lose, ya know) their own personnel records.

Put it all together, and we have a situation where a team of nasties could infiltrate a large airport without any real trouble. (TSA spokes-fibbers will hasten to say that's not possible, but they're lying.)

Say, ten or fifteen terrorists infiltrate, at various spots around a large hub airport, where there are so many screeners and such turnover that a couple of unknown faces in white TSA shirts is routine. Because screening of perimeter and other airport access is slapdash, these TSA wannabes could probably get, say, explosives, and at an appointed time, take a whole airport, and concurrently, our air transportation system, out.

The truth - which Congress, the Administration, and, unfortunately, much of the aviation industry want to ignore - is that the TSA has become a threat to national security, and it must be dismantled and a proper, professionally-managed program put in its place. But that's not likely to happen.

Check The Air Cargo. But, Please, Not The "Immigrants"  Example of how Congressional hypocrisy is running amok: People like Senator Schumer, Rep. Markey, and a host of other oh-so-concerned bi-partisan players will stand up and grandly demand that every piece of air cargo - every container, every box, every package - be screened for explosives.

But then it's perfectly okay with them - encouraged, actually - that illegal aliens be allowed to come into the country without any scrutiny whatsoever. The difference is that the illegals one day might vote. Not including, presumably, the terrorists that come in with them.

It's okay to have open, un-monitored borders where terrorists can easily come across unchallenged, and then maybe even be given "sanctuary" with no questions asked from weasel cities like San Francisco and Denver.

But don't let that load of bananas get into our ports until it's checked out.

With this idiot thinking going on in Washington, don't expect anything substantive to come from this Democrat congress in regard to fixing the TSA. They're perfectly happy with the status quo. Like they were before 9/11.

The truth is that this nation is highly vulnerable to another 9/11-scale attack, and given the fragile state of much of our infrastructure, such an event could take our economy down big time.

If Homeland Security can't protect its own ID cards, uniforms and computer records, it doesn't take the mental acuity of a chimpanzee to conclude that they can't protect our country, either.

Note to Congress and the aviation industry: ignore this at the nation's peril. Chertoff, Hawley, et al need to be fired. Now. They are not competent.
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Airline Industry Musings

Missing In Action: Ted

Anybody remember United's Southwest-killer, Ted?

The advertising has stopped, it seems. The quirky and expensive promotions are nowhere to be found. Remember, Ted was the mystical program that simply took some A-320s, re-painted them, put a few more seats in, and put them right back in service mostly where they were before, except that they were now were "low cost" airplanes.

Along with that, United gave the new sub-brand a persona, weaving the name into all sorts of aspects of the flight. "Ted wants you to be safe," says the inflight announcement. Silly plastic seat back cards announced "Ted tunes" and the same IFE earphones often found on other United airplanes were made "distinctive" with the addition of brightly-colored foam ear muffs. Wow, fun and frivolity and color in flight!

Unfortunately, most of the passengers, many of which were connecting from other United flights, had no idea what or who "Ted" was. Nor did they care. It wasn't a definable, separate airline, nor a separate route system. It was just a sub-fleet with a different paint job.

But according to United management - or, more likely the wizard outside advisors to which they paid hundreds of millions to tell them what to do - these simple changes were supposed to create a low-cost carrier, despite the fact that airport costs, fuel costs, aircraft costs, maintenance costs, and labor costs remained the same.

Well, actually not, as the increase in seating capacity required an additional flight attendant.

The rest of the industry was dumbfounded with jealousy - the CEO of one of United's competitors lamented that he, too, wanted to find the magic paint United was using - one coat, and, voila! lower costs.

This doesn't include the millions spent on installing dual-jetways at several gates in Denver, for the "fast turns" that these wizard outside advisors had read were so important to low-fare airlines. This despite the fact that Ted-painted airplanes at Denver were actually part of the hub bank, just like the rest of United's flights there, so "fast turns" were not really a factor. But according to news reports, these back-door boarding contraptions have already taken out at least one airplane when it collapsed on the wing.

But, now, it seems that Ted, as part of United's multi-dimensional strategy, is AWOL. It seems the ad budget and the hype-stream have been shut off.

Lots of smoke and mirrors, and millions of dollars spent on a quirky marketing gaff that nobody outside of its creators ever really understood. The public never has grasped what Ted was supposed to be, especially since the fare levels, particularly at Denver, never really changed much, given that United had already matched Frontier, and the arrival of planes in a new paint didn't change that. Mileage Plus Premier-level passengers sure noticed, as those expected first class upgrades to places like Orlando, Phoenix and Las Vegas were no longer available.

The Ted fiasco is sort of like an inside joke with not much of a punch line. Nobody's laughing except United's competitors, who don't understand the concept any more than does the flying public.

It's unfortunate that it was all funded from the millions in employee pay and benefit givebacks. If there aren't the results at United that employees might expect after bankruptcy and painful concessions, the thought process that created Ted is one of the core reasons why.

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Comparative Employee Question Answered

It was noted last week that as Delta emerges from Chapter 11, morale has probably never been higher.

At "coming out" parties, employees cheered and gave their CEO standing ovations. The CEO in return kept hammering back that it was the employees, not just he, that turned Delta around. At these events, presentations were given, showing how Delta has a clear, concise plan for the future, one of which its employees can be proud.

Compare and contrast the situation at United. Last week, that carrier's CEO appeared in front of hundreds of employees, too, who were attending an annual shareholders' meeting. He warned of dark, difficult times ahead for United, whose employees, unlike those at Delta, have completely lost most of their pensions. He again called for more airline consolidation, which, as we're seeing at US Airways, is just the thing to get morale up.

He defended his nearly $40 million benefit deal (plus nice goodies for his inner circle) claiming it was earned, even though United is losing money, and still, after three years in Chapter 11, has no real cost advantage over its competition. And he seemed to wonder why his employees are less then appreciative or proud of this fine track record.

Like at the Delta get-togethers, United employees applauded, too. But it was in response to statements from the audience including one from a UAL captain, who advised the CEO, "today, employees are no longer behind you." Signs carried by employees referred to management as "pigs" - likely due to stock deals that make it appear that senior management is feasting on the carrier while employees make do with 30%-40% pay cuts and a trashed pension.

The question is moot regarding which carrier has the best shot of survival.

At Delta, employees are toasting their management. At United, judging by what went on at the shareholders' meeting, employees feel management is toast.

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(c) 2007, The Boyd Group, Inc. All Rights Reserved
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Hot Flash - May 7, 2007

Small Communities In For Some Unexpected Shocks
Rural Air Service -
The New Rules of Engagement. Or, Dis-Engagement

Speaking of air service development, as of May 4, approximately 75 grant applications have been filed under this year’s Small Community Air Service Development Grant Program. After culling out the crackpot and just-in-from-Mars proposals, the DOT will still be left with a least 40 applications that really have strong potential for success in improving air service at the communities involved.

But, in the future, the hurdles to gaining more service will be going up sharply and unexpectedly for most small communities. Quietly and unnoticed, there are emerging changes in the core economic dynamics of the airline industry that are going to savage  air service levels at many small and rural communities.

Take it to the bank: with or without federal grants, with or without incentives, with or without schemes like "free" ground handling, "travel banks" or other trendy mechanisms, rural airports are about to face air service challenges that will make the last decade look like the Good Old Days.

In the past, an air service proposal that indicated strong net-new feed through a major carrier’s hub would generally get at least a one-on-one audience from the Planning Department, particularly if came with some SCASD loot or other financial goodies to offset the risk. But that's no longer a given. The reason is simple: The costs of providing rural air service are about to skyrocket beyond the ability of many communities to support it.

Four New Airline Industry Dynamics. Some very big and very fundamental shifts are quietly taking place in the structure of major carrier systems, and they’re all going to make recruiting air service at smaller communities a whole lot more difficult and more expensive. In some cases, it will be outright impossible.

• Trend: End of The Small Turboprop Era. Today, there are a lot of communities that are receiving service from comprehensive network carrier systems, provided by contract operators of 30- to 34-seat turboprops. The traditional and current economics of these airliners are great for service at communities that have limited traffic demand. American, Delta, United and Northwest all have these aircraft in their system fleets. Some are operating on a cost-plus contract with the major, others are on an at-risk basis.

But there's this little thing called age - those aircraft are getting older and the number in operation will continue to decline over the next decade.

Here's the kicker: there are no viable new replacements for S340s and EMB-120s. Just as the air service bar rose in the 1980s and 1990s as C99s, Twin Otters, and C-402s went out of service, this is going to be the case with the decline in 30-34 seat turboprop fleets. Ominously, as noted next, 50-seat jets are not the solution, either.

That means that some communities are going to find themselves odd-man out.

• Trend: RJ Operational Costs & Availability. Moving up the traffic-generation chain, some larger "small" airports that today are dependent on service from 50-seat RJs aren't completely safe, either. In the future, some of these airports will  also find themselves unexpectedly facing a shortfall in their ability to support viable air service. That's because the cost equation for 50-seat jets is going up, and fleets are beginning to shrink.

Therefore, not only is the revenue hurdle for air service increasing, but the availability of 50-seat RJs will be declining. The next step up - 70-seat RJs - have even higher sector costs. Many smaller communities simply may find that their traffic generation cannot expand as fast as airline operational costs, when small turboprops and 50-seat RJs get parked and replaced by larger, albeit more ASM-efficient, airliners.

Result: reduction or complete loss of scheduled flights, even at some communities that today have fully-viable air service.

• Trend: Feed Quality, Not Passenger Volume. Hub operations are at or near capacity, and, even in the face of high demand, major carriers are not adding much net-new mainline capacity. Therefore, the strategic value of feed provided by small jet providers is being carefully scrutinized. This is particularly true of feed from smaller communities.

With system load factors in the 80%+ range, major carriers are a lot more picky regarding the "quality" of the feed traffic they go after. If that  potential connecting traffic generated by serving East Wonderland Municipal is simply going to displace passengers off of already-full airplanes, the deal makes no sense. If they're mostly discretionary passengers on their way to Disney World, they've got a lot less value than current or potential feed from another airport that has a larger business travel component. One major carrier now claims that new feed traffic can result in as much as an 80% spill rate at one of its major hubs.

Add this to the fact that at some hubsite airports, facilities are getting tight. Weak quality of feed traffic, and/or the wrong mix of local and flow passengers, can be lethal to an airport's chances of getting or keeping service when there's a shortage of parking positions at the hub.

Volume of passengers is not the name of the game. Quality of the revenue is what will count in the future.

• Trend: SJPs & Pay-To-Play. Historically (which in the airline business means for maybe the last five years) the trend has been major carriers paying small jet providers within some variation of a cost-plus arrangement. The SJP just files the plane where the major tells it to, and gets a payment at the end of the month. No risk, no worries, no need for expensive infrastructure like sales, reservations, or revenue-accounting. Just a happy vendor. (That's over simplified, but it will do for the purposes of this discussion.)

Those days are coming to an end. Increasingly, instead of major carriers paying these SJPs on a cost-plus basis, the trend will be going in the opposite direction. There will be more at-risk flying, and with the emerging glut of 50-seat jets, we'll be finding some SJPs desperate to place excess airplanes. That means that majors will move gradually toward actually charging a “brand-use” fee to the SJP the operator for some, or even all, of the flying it does. That means, then, that those operators are going to be looking at sure-thing, slam-dunk markets for their excess jets. Small airports need not apply.

What all this means is that, a) the machinery that has traditionally had the operational costs to serve small communities will be getting more scarce in the future, b) the incremental new feed from smaller communities is becoming less and less valuable to major carrier systems, and c) the entities that would be operating such markets – the SJPs – are being pushed into taking more of the risk – or, in some cases, all of the risk – of such flying.

Add it all together, and a small community that sashays into a major carrier’s planning department, flashing a PowerPoint showing silly MIDT-generated maps, sloppy DOT O&D data, and whining about how much leakage it has, will get summarily tossed out of the building - assuming it can get an appointment in the first place. A whole lot more juice is going to be needed in the future to get and keep service at smaller airports.

How 'Bout New Independents Coming Along? There has been, and will continue to be, a lot of conjecture regarding the "opportunity" this all represents for new, third-tier airlines. The idea is that  new independent operators will take those parked S340s -or even 50-seat RJs - and fill in the gaps left when the service formerly supported by comprehensive network carriers is terminated. Fuggetaboudit.

Remember that the main reason these aircraft got parked in the first place was economics. That won't substantially change if Air Fred decides to fill in the alleged service voids - even if they actually can find pilots that are willing to work for slave-ship wages at a time when major carriers are desperate to hire them. Even if they can get a code-share with a major, the opportunities to make any kind of viable return on investment are between slim and none.

Take a look at the ExpressJet experiment. Saddled with around 49 excess ERJs, they're trying to fly under their own brand - in big-city markets only - as a third-tier carrier. The cost of the ERJs demands that ExpressJet try to find markets that can access what appear to be strong traffic flows. Their route map is entirely populated with destinations like Raleigh-Durham, Fresno, Kansas City, and Ontario - none of which are small, under-served communities. Communities like Merced, Ogdensburg, Aberdeen, Gainesville, and Pellston aren't in the cards for such third-tier experiments.

Air-Taxis: Non-Starters. Then we have the air-taxi solution, where supposedly some entity will get a fleet of Cirrus or Eclipse or Adam aircraft, and take advantage of all that pent-up demand in underserved small communities. It's the latest mantra. It's the solution to the future. It's also complete hogwash.

The first of these was Point2Point, a Cirrus operator that was supposed to be the next-generation airline system, providing service throughout the Dakota region. Last week, after a year or so of supposedly bringing new air service vitality to small communities, Point2Point checked into airline heaven.

It was an idea based on emotion, weak assumptions and bad research - from the start.

After blasting through a $1.5 million SCASD grant, plus a couple hundred thousand dollars in local money, Point2Point was found sleeping with the fishes last week. Like we predicted it would. (And, by the way, where were all those other aviation consulting firms on this issue?)

Tumble to it: air taxi operations are very expensive, and they don't meet the needs of the general flying public. Adam and Eclipse will be facing robust demand for their aircraft. But when the dust settles, on-demand air-taxi operations won't be anywhere near the market factor the trendies are predicting.

Historic Traffic Data Is Just That - History. So, what's the future for rural and small air service? First, the traffic bar to support service is going to go up - suddenly and unexpectedly for some communities. Service will increasingly be operated by aircraft larger than 50-seats, which means communities must be able to generate significantly higher system revenues, including international flows.

Second, only the connectivity provided by a comprehensive network carrier system (which some people still mis-labeled as "legacy" airlines) will be viable for such communities. As noted above, independent, no-brand service is not a solution. If the airport cannot support the higher costs of CNC service, the community is going to need to find regional access alternatives.

Third, inbound-generated traffic is often the only segment that can materially grow at a small community - more consumers flying into the airport for business. That means consumers domestically and internationally must be able to identify the service, and that means having brand identity. Air Fred won't have it. Neither will air-taxis.

But then that means that there needs to be some economic generator that induces more people from more places to fly into the small community. So, the data that  comprehensive network carrier systems will need to see before they will even consider adding service at a small community are hard points of evidence demonstrating that the feed quality going forward is such as to strengthen its network.

Therefore, the small communities that have the inside track to recruiting new service as well as keeping what's already in place, with or without incentive money, are those that have some major economic growth story to tell. Like the new Kia foundry. The Intel plant. The investment by Haier in a white goods factory.

The challenge is in identifying future traffic flows, and the "quality" of the air traffic demand those economic investments will generate.

Historical data is less and less valuable. Jive-time MIDT analyses (which are semi-accurate at best), raw DOT O&D numbers (which are inaccurate), or “ticket lift” studies (say what?) are mostly for amateur entertainment. These outdated schemes tell nothing about the future. Or about much else, for that matter.

What the carrier needs to see are the new traffic flows that will be generated by the establishment of a major new industry in town (like Toyota at Tupelo, or Israel Aero at GTR) and that will result in significant new high-yield passengers. Then the challenge is to quantify what that means in terms of net-new system revenue. That's what will get the airline's attention, not lovely maps showing the zip codes where a non-representative portion of last year's passengers supposedly booked their seats.

Admittedly, it is a complex matter to not only project new future emerging traffic flows, but also to determine when they will manifest as enplanements as a new industry expands in the region. But it has to be done - at least, it has to be done if the community wants to keep the air service it has and build more in the future. Remember again, the fleets that are available at CNCs to serve smaller communities are not getting bigger. The competition will be intense to keep what's left.

Nobody's Noticed - Yet. Except Our Client Airports. In summary, The Boyd Group's traffic and trend forecasts indicate that with the fundamental, but currently unrecognized, coming changes in fleets, strategies, and operating economics within the airline industry, rural air service in America is in for a very rough shock over the next five years. Communities that prepare will be ready.

Those communities that assume the future to be a continuation of the past are likely to get stuck there. In the past.

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Musings.... Delta Air Lines

Last week, Delta held a huge party for employees and vendors to celebrate its emergence from Chapter 11, as well as showcase its fundamental restructuring to compete in the new airline industry.

Its Chairman, Gerald Grinstein, rose to attempt to make a presentation at the beginning of the event. But as soon as he took the podium, the employees drowned him out  - with a spontaneous, enthusiastic - raucous, if you will - standing ovation. The man couldn't get a word in edgewise for five minutes.

Now, amid the nonsense coming from a few of the usual suspects in the financial industry, expressing concerns about Delta's competitiveness going forward, let's put this incident into context in regard to where Delta really stands in the industry today.

Let's skip over the fact that Delta didn't completely zap their employees' pensions. Let's ignore for the moment that Delta employees came out of C-11 with bonuses and stock in their company. And we won't go into little details, like in 19-months of bankruptcy protection, Delta re-framed itself, re-focused its route system, hired some of the best and brightest management away from the competition, and fixed pesky things like revenue gaps and stuff like that.

Let's just focus on the fact that after a year and a half of going through the grief and pain of a bankruptcy re-organization, Delta employees will give their CEO a standing ovation. We would submit that this represents a far more fundamental and valuable achievement.

Think about it. It's great to have lower operating costs. It's great to have a re-structured, re-focused product. But the hard reality is that an airline will rise or fall on the quality of its service. Quality of service depends on how employees view their company and its senior management.

At Delta, the employees are giving their Chairman standing ovations.

Wonder what the reaction would be in the same situation if Glenn Tilton addressed a similar group of United employees. Or if American's Gerard Arpey took the podium in front of a non-staged, non-filtered employee meeting. All three carriers represent employees that are at the top-of-the-line in terms of quality and professionalism.

Think about the fundamental differences in the way Delta treated its employees, and the situations at AA and UA - the well publicized situations - regarding how management treated itself, and treated its employees.

Again, at Delta, the employees are giving their Chairman standing ovations.

Now, ask yourself which carrier is better postured for the future.
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More Air Service Success

Congratulations to Rochester, Minnesota in recruiting Allegiant service to Las Vegas. The Boyd Group is honored to be working with the community in air service development strategies, including assisting in gaining this new access to ‘Vegas.

Also, Delta today inaugurates two daily roundtrips that will reconnect Binghamton with New York City, via JFK International Airport. We're also proud to have been working with BGM in this and other air service initiatives, including winning a SCASD grant that resulted in strengthened Northwest service to Detroit/Metro.

One of the reasons The Boyd Group is more successful in assisting communities build effective air service development programs, is, as noted above, a better understanding of the future dynamics of the airline industry.

Another is the respect airline industry executives have for The Boyd Group. In fact, airlines come to us for advice and input on strategic and planning projects. So when we present route and market data for an airport client, they know they are getting reliable, accurate, and real-world information, not fluff.

Our approaches are different. Our futurist views are different. And our results are different - i.e., better. Give us a call to find out what separates The Boyd Group from other consultants.
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(c) 2007, The Boyd Group, Inc. All Rights Reserved
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