SM4 Pirate
27th May 2006, 01:20
http://www.suntimes.com/output/business/cst-fin-amr25.html
American CEO says air traffic control costs unfair
May 25, 2006
BY MARY WISNIEWSKI Business Reporter
American Airlines CEO Gerard Arpey said business aviation -- like the private jets used to carry executives -- should pick up more of the costs for the air traffic control system.
Speaking at an Executives' Club of Chicago luncheon Wednesday, Arpey said that a small business jet carrying a few people poses the same challenge to air traffic control as a 777 full of passengers. Airlines pay 90 percent of air traffic control costs while using two-thirds of its services, while business aviation pays 5 percent of the cost while using 19 percent of its services, Arpey said.
"To a beacon, a satellite or a computer a blip is a blip, and costs are determined by the number of blips being managed," Arpey said.
Arpey advocates charging user fees based on the amount of service a company receives -- so every plane pays the same amount. User fees are opposed by the business aviation community.
"Crazy as it sounds, under the current system, the airlines -- one of our country's most important, but least healthy industries -- are actually subsidizing the corporate travel of other -- presumably much healthier -- entities, as well as individuals who can afford their own jets," Arpey said.
He said he realized that a few of those people were probably at the luncheon, and he recommended they fly American.
Arpey said it is a "scandal" that the nation's air traffic control system depends on outdated technology that routinely bogs the system down and compels airlines to fly inefficient, indirect routes -- "burning more fuel, creating more emissions, and wasting everybody's time and money."
Ed Bolen of the National Business Aviation Administration, a Washington, D.C.-based industry group, said treating all planes the same ignores the fact that commercial airlines, with their hub-and-spoke operations and multiple, large planes, dictate the cost of the air traffic control system.
"The controllers are not there because of business aviation," Bolen said. "The problem is 50 airplanes all departing O'Hare at 9 o'clock."
Arpey noted in his Chicago speech that American is the only traditional airline that has not filed for bankruptcy, though like the rest of the industry is struggling with high fuel costs and competition from low-cost carriers. He credited American's ability to adapt as key to its success, and said the airline hoped to have its first profitable year in more than five years.
"Our hard-earned progress is gratifying, but with no fuel relief in sight it is also very fragile," Arpey said.
American flies from Chicago to 22 cities outside of the United States, along with domestic routes. Arpey said he would like to fly more destinations from Chicago, but has to reach profitability with American's current stable of airplanes before buying new ones for more routes.
SM4 Pirate
27th May 2006, 02:05
More on topic
http://www.businessweek.com/magazine/content/06_23/b3987036.htm?campaign_id=rss_magzn
Snarl In The Sky
Private jet traffic is creating commercial flight delays, safety concerns, and calls for small planes to pay more into the system
Andrew Lessman appears regularly on the Home Shopping Network to sell his company's multivitamins, antioxidants, and meal replacement products. He lives in the Las Vegas burbs, and HSN's studio is 2,000 miles away in St. Petersburg, Fla. But that's no biggie because the ProCaps Laboratories founder owns two Citation X jets, $20 million craft that can get to Florida in about three hours.
Even better, Lessman need not line up at the check-in counter like most of us. Nor does he hang around waiting for his flight. Lessman simply parks his car next to the hangar at Vegas' McCarran International Airport, and within minutes he's airborne. From 40,000 feet, Lessman e-mails associates, naps in leather seats that fold out into beds, and watches movies on one of several flat-panel TVs. "I never believed I'd have a company jet," says Lessman, who runs an air charter business on the side. "But when you travel as much as I do, you pretty much have to."
There are more and more Andrew Lessmans out there these days winging across the country in the rarefied confines of their private jets. Envy these folks all you want, but it's hard to blame them for flying private. Who wouldn't want to avoid the chaos at the nation's airports, especially during the summer travel season, when congestion, delays, and intrusive security can bring even hardened road warriors to the brink of tears?
DOUBLED IN A DECADE*
But if private jet travel gives its participants a warm glow, it has airport managers and the Federal Aviation Administration wondering if the nation's creaky air traffic control system can handle all those extra aircraft. More than 10,000 U.S. companies now own private planes, both prop- and jet-driven -- nearly double the number a decade ago.
Yes, many private jets land at small airports rather than the larger ones frequented by the majors. But not always. Private traffic at McCarran, for example, is up by about a third since 2001. And private plane travel is expected to take off even more dramatically as a new generation of so-called very light jets, also known as microjets, arrives later this year. The FAA estimates that 5,000 of these tiny planes will be flying by 2017.
With the skies getting more crowded, a dogfight has broken out between commercial and private aviation. The big carriers point out that it costs the system exactly the same to land a Boeing 737 with 180 passengers as it does to land Donald Trump's plane. And yet private aviation, despite having many more jets in the sky, pays a fraction of the annual tab required to keep order in the skies. With a pricey modernization of the air traffic control system planned, the carriers are lobbying to ensure that private fliers pay their share.
The battle will come to a head next year as the FAA looks to change how it funds the traffic control system. One option: ditching taxes on air fares and fuel and instead charging user fees based on how far a plane flies, be it private or commercial. "We're trying to figure out a way to make sure this scarce resource is serving the public good," says US Airways Group Inc. Chairman and CEO W. Douglas Parker. "Right now, that doesn't seem to be the case when one small plane is paying dramatically less than one large plane."
It used to be that only the extremely wealthy could afford to jet around in a private plane. Doing so began to get more affordable in the 1980s, when NetJets Inc., now part of Warren E. Buffett's Berkshire Hathaway Inc., introduced fractional jet ownership. Instead of shelling out $7.1 million for a new eight-passenger, 500 mph Hawker 400XP, a 1/16th share can now be had for about $400,000. And even when they buy the whole plane, many executives figure it's still worth it. One is Ronald Duncan. The president and CEO of GCI, which provides cable TV and phone service in Alaska, figures he saves as many as 24 working days a year by piloting his own Gulfstream.
Now private jet travel is about to get even more accessible. In the coming months a number of manufacturers will begin rolling out very light jets, including startups such as Eclipse Aviation in Albuquerque, N.M., entrenched players like Cessna Aircraft, and even Honda Motor, which unveiled its ultra-efficient HondaJet last year. These planes typically carry six to eight passengers, weigh about the same as an SUV, and fly 1,300 miles without refueling. They cost a third of what small jets do now, as little as $1.5 million. And they can be operated for 80 cents a mile, less than some prop jobs.
Those who don't want their own plane can opt for a jet taxi, which sells individual seats to people in a hurry to get somewhere. Over the past few years several companies have announced plans to start up such services. One is DayJet Corp., a Delray Beach (Fla.) company launched in 2002 by Citrix Systems Inc. founder Edward E. Iacobucci. He aims to be flying by the end of the year and figures he can cut travel time in half between such Florida cities as Fort Myers and Tallahassee. Iacobucci will charge $660 for a round-trip ticket, 30% more than the commercial fare, but he figures the time savings will more than compensate. "We're going to bring a lot more people into the market," he says.
That kind of talk has the FAA and the airports wondering how they will be able to accommodate all the new jets. "The small airplane is going to become ubiquitous, much like the SUV," says FAA Administrator Marion C. Blakey. "It's good for the business community, but they're flying in some prime real estate. That's causing delays even on blue-sky days."
For a glimpse of the future, it pays to visit McCarran. The Las Vegas airport handles 600 private planes a day, at least a third of total traffic. Air traffic controllers keep commercial jets and private planes on separate runways. But the paths of the planes intersect, forcing controllers to orchestrate a delicate air ballet almost all the time. Airport authorities get little advance notice of private jet activity because pilots typically file flight plans only minutes before takeoff. On a recent Thursday morning, not a busy one by local standards, the departures of two commercial flights were delayed about 10 minutes when two private jets landed.
On busy days, controllers ask pilots to separate themselves by greater distances to delay their arrival. Sometimes they ask planes to stay on the ground a little longer at airports as far away as Los Angeles or Denver. The FAA has begun sending letters to the private aircraft community asking owners to avoid McCarran at peak times, such as Sunday mornings, when delays can reach an hour or more. "We tell them to go have brunch or play a round of golf," says J. Scott De Hart, the FAA's traffic management officer at McCarran.
Clark County, which owns the airport, is taking more dramatic steps. In June it will introduce a complete remodeling of Henderson Executive Airport, a 10-minute drive southeast of McCarran. The county spent $30 million, financed in part by federal grants, to build a new tower, runway, and other facilities, replacing snack machines and trailers with a restaurant and pilot's lounge. Randall Walker, the county's director for aviation, says McCarran is subsidizing the cost of landing fees and fuel at Henderson to encourage private plane owners to switch.
Whether he can persuade high rollers to forgo McCarran, a five-minute ride from the Strip, remains to be seen. Air traffic controllers in Las Vegas tell the story of one Gulfstream owner who, after being told that McCarran had run out of parking spaces for private jets recently, left his plane in an area designated for unloading passengers. Told that he would be fined $1,000 a day, the plane owner simply paid. "If you're flying a G5," says Walker, "you're not worried about the money."
FAA OVERHAUL*
So if private and commercial jets increasingly will be jockeying for the same space, what's the answer? Well, for starters, modernizing the aviation infrastructure is crucial. The FAA has begun replacing its old radar-based ground stations with newer equipment that uses global positioning satellites. With a more accurate picture of air traffic, controllers will be able to land more planes per hour by squeezing them together. The first phase of the modernization will be complete in 2010 and will cost $600 million. The FAA wants users of the system to cover a good part of the outlay.
To help pay for the overhaul, the carriers hope to persuade Congress next year to change the way the air traffic control system is funded and to charge private aircraft more than they're paying now. Last year the airlines paid $9 billion in taxes to help fund the system, vs. $600 million from private aviation, even though there are many more private planes in the sky.
The private plane guys argue that they put less of a strain on the system than the commercial carriers do. "We try to avoid the peak times," says Edward Bolen, president of the National Business Aviation Assn., which represents private aircraft users. "We're flying into airports the airlines don't." But even the so-called reliever airports can be in need of relief. Exhibit A: New Jersey's Teterboro Airport, just across the Hudson River from New York City, where noise complaints and a series of accidents prompted authorities to hike landing fees 50% and impose voluntary curfews to reduce traffic.
Right now, commercial airline passengers account for the bulk of the system's funding, in the form of a 7.5% tax on airfares and other fees. Private jets typically pay a federal fuel tax of 21.8 cents per gallon. James C. May, president of the Air Transport Assn., which represents airlines, says charging plane owners a user fee would be more reasonable. Most countries charge such a fee based on the weight of the plane and how far it flies.
FAA head Blakey won't say what she's planning but has hinted in speeches that she favors a user fee. "The FAA's funding stream is tied to the price of a ticket," she told a gathering of airport executives in April. "It might as well be tied to the cost of a gallon of milk."
Switching to a user fee from ticket taxes might help the FAA modernize its infrastructure. But it won't deter the executive class from buying and leasing private jets. As costs fall and the indignities of commercial travel rise, more people will shift to private planes. From his office in McCarran's control tower, Bryan S. Baker, president of the local air traffic controllers' union, speaks for many of his colleagues when he says: "It's crowded out there, and it's just going to get worse."