In a wide-ranging report which includes suggestions for 9/11-like government bailouts of both airlines and airports and finally shifting security costs to the government, the AAAE Energy/Air Service Task Force issued recommendations from its July summit addressing three fronts – national energy policy, a national air service policy and emergency measures to help airlines, airports and local communities hit by high energy prices and service losses. Related Story
The call for national transportation and energy policies echo similar calls Former AMR Chair Robert Crandall has been making for two years. Related Story  More recently he called for a special congressional session to develop a national energy policy. Related Story
Despite the list of recommendations, the linchpin of any effort centers around quickened rollout of the NextGen air traffic control system, stymied by a lack of action in Congress which, for two years, has been unable to pass an FAA reauthorization bill postponing any hope of action until next year.
Perhaps the most controversial aspect of the Task Force recommendations is resurrecting the Air Transportation Stabilization Board (ATSB) formed to provide federal monies to help airlines in the immediate aftermath of 9/11. The Task Force wants the ATSB to be able to guarantee airport bonds as well as airline loans. It also wants DOT to develop a program of emergency grants to air carriers to supplement ATSB loans and an emergency grant program for airports to cover operating costs needed to meet safety and security requirements. The grant program should restore large and medium hub airports to their full entitlement allocation without regard to the level of their PFC charge, on a temporary basis and without penalty to smaller airport funding levels, said the group.
The group would also have the government temporarily suspend limits on foreign investment in US airlines with buy-back provisions and a requirement to meet national air service needs as determined by the DOT Secretary.
The task force’s 30-plus recommendations on a national air service policy seek to ensure universal access to air service, give airports greater financial flexibility and expedite existing initiatives — such as FAA’s Next Generation Air Transportation System.

Small Airports
“It should be a priority of the federal government to ensure that people who live in urban and rural areas continue to have access to our nation’s air transportation system,” said the Task Force in its report, advocating a “universal service fee” similar to that paid by telecommunications companies to ensure rural phone service at reasonable rates. “If the market is unable to persuade airlines to provide service to those communities, the federal government should take steps to ensure that those who live in rural areas and small cities have adequate and efficient access to our nation’s air transportation system.” The Universal Service Fund would be funded by airlines and/or the federal government which would provide subsidies to certain small communities, according to the Task Force.
The task force focused on the Essential Air Service Program advocating many of the changes sought by regional airlines for some time including increasing the $200 per-passenger subsidy cap for inflation and rising fuel costs. It also recommended that emergency changes to the EAS system should be considered and designed to retain air service to communities covered.
“Some members already see their communities in an ‘emergency’ as a result of severely reduced airline service,” said the report, “while others see a ‘looming’ crisis if energy costs remain high or climb higher yet. Not surprisingly, smaller airports are being hit particularly hard. Flights between non-OEP airports are expected to decline by 13.3 percent during the same timeframe. The Senate Appropriations Committee indicated that three Essential Air Service (EAS) carriers have shut down in the past year. When all the service disruptions are added up, EAS communities are expected to be without air service for a total of at least 133 months.”
The Task Force would also have the government grant airlines temporary anti-trust immunity to meet and discuss routes and fares to maximize a national system of air services at the best possible cost to passengers. Such meetings would be under the supervision of Department of Justice and DOT, but with representatives of local communities.
The group called for a stable source of funding and, if necessary, increase funding for the EAS program to accommodate rising fuel costs. It wants a new mechanism designed to quickly adjust subsidies when cost skyrocket. But it would have EAS funding go directly to the community, similar to the Small Community Air Service Development Program. It also wants , the funding for SCASD increased to a minimum of $50 million per year.
The Task Force would allow airports to continue to receive minimum entitlements if their enplanements dip below 10,000 as a result of reduction of service related to increasing fuel costs. It also providing additional financial incentives to attract more carriers to the EAS program. It would require requiring code-sharing and interline agreements between subsidized and non-subsidized small community air carriers and mainline carriers.
The task force would expand the uses for federal funds for such use as helping small airports reduce costs by using the funds for ground handling services.

Making the Case
The task force quoted a recent report from The Campbell-Hill Aviation Group, Inc. showing U.S. civil aviation sector accounted for more than $1.3 trillion in national output (5.8 percent of U.S. economy), supported more than 12 million jobs (8.8 percent of U.S. economy), and accounted for more than $400 billion in personal earnings (5 percent of U.S. economy).
It also said that it was time for the federal government to get serious about curbing oil usage, noting that, worldwide oil consumption is estimated at 87 million barrels a day with the U.S. consuming 21 million barrels, one quarter of the entire world’s daily consumption. It noted that the U.S. currently produces only seven million barrels a day of oil.
According to the House Transportation and Infrastructure Subcommittee on Aviation, air carriers have eliminated service on more than 400 routes since March 2008. In addition, said the report, the Air Transport Association contends that airlines have already eliminated scheduled air service in 60 communities and that approximately 40 additional communities will lose service later this year. ATA indicates that it is “not unrealistic” to expect that as many as 200 communities could lose air service by early 2009.

• Atlanta departures for the year are down 5 percent. The airport has reduced its operating budget and cut $225 million from its capital program. Further cuts of $50 million are being contemplated for capital projects.
• Memphis suffered a 6 percent loss in seats and significant reductions in airport revenue, including a 6.25 percent loss in parking revenue.
• Columbus experienced a 30 percent reduction in seats overall with 24 percent fewer flights.
• Toledo Airport has lost half of its service. Two airlines have left and three markets have been lost.
• Little Rock lost eight flights a day; 7-8 percent reductions in seats.
• Richmond forced a 75 percent cut in its capital budget.
• Tulsa will experience a 20 percent reduction in flights/15 percent reduction in seats by Q4.
• San Luis Obispo put capital projects on hold with the 38.7 percent reduction in seats, capital projects on hold. (See related story Mainlines, LCCs Replacing Competitor’s Dropped Services in this issue.)
• Bangor capacity is down 24 percent; passenger traffic down 9 percent.

Looking strictly at flights, a number of major airports will see significant reductions this fall, said the group. “According to Official Airline Guide (OAG), total system arrivals and departures are expected to decline by 7.3 percent between October 2007 and October 2008,” said the Task Force. The flight reductions at large and medium hubs include:

• Cincinnati: -22%
• Orlando: -18%
• Chicago Midway: -16%
• Cleveland: -15%
• Salt Lake City: -10%
• Los Angeles: -10%
• Phoenix: -9%

“Flights between the top 35 airports in the FAA’s Operational Evolution Partnership (OEP) are expected to decline by 6.2 percent between October 2007 and October 2008,” it said. “Unfortunately, these reductions often translate into drops in passenger levels and revenue from Passenger Facility Charges (PFCs), parking facilities and other sources of airport revenue. When combined with the ever increasing construction costs, the results of the high price of fuel could have a severe financial impact on large airports and their ability to meet existing bond covenants.”

The task force consisted of nearly 100 airport executives representing airports of all sizes from around the country. The 16-page report includes 18 recommendations related to a U.S. energy policy addressed production/supply, conservation, and innovation within aviation sector, plus broader national policy initiatives.
The airport executives also made 14 “emergency action” recommendations aimed at providing relief to airlines, airports and communities in an immediate crisis situation caused by high energy prices.
“The task force’s work and resulting recommendations show the enormity of the challenge that the aviation industry faces as it grapples with rising fuel costs and the resulting impact on air service and general aviation operations,” said Aspen/Pitkin County Aviation Director and AAAE Chair Jim Elwood, A.A.E. “Our recommendations reflect the views of a cross-section of airports that serve as the foundation of our national air transportation system, and we hope our report will serve as a guide for lawmakers and regulators as they contemplate key policy decisions to address emerging energy and air service issues.”
AAAE, on behalf of the task force, will deliver the recommendations to Congress and urge lawmakers to keep the aviation industry’s unique challenges and value to the economy in mind as they push forward on a national energy policy. AAAE also will work with lawmakers, regulators and other aviation groups on solutions aimed at ensuring that necessary levels of air service are maintained at communities around the country.

Side Bar: Recommendations for the Federal Government
Recommendations seem aimed at develop alternative fuels for other energy consuming sectors to make more available for aviation. Many of the recommendations include many items already on airport association agendas including increasing PFCs and allowing them to be used for other than their original purpose. High on the recommendations is reducing airport and airline security costs by eliminating unfunded federal mandates and moving responsibility for them to the federal government.

Energy
• Establish a deadline for energy independence for the United States and devote the necessary resources to meet that deadline.
• Develop new environmentally responsible aviation fuels.
• Increase resources devoted to the commercialization and deployment of low-carbon clean coal technologies to produce electricity in a more environmentally sound fashion.
• Promote development of commercial-scale renewable energy.
• Support next generation biofuels.
• Provide tax credits and promote greater utilization of next generation hybrids, alternative-fuel vehicles and electric cars, both within and outside of government. Make federal grants available for alternate fuel vehicles at airports.
• Allow greater access to the U.S. Strategic Petroleum Reserve (SPR) and provide for an “Aviation Draw,” giving the aviation industry priority utilization since there are no alternative fuels currently available for air travel. Such a program should be temporary and require replacement of oil taken from the SPR.
• Develop a jet fuel price subsidy program for temporary periods.
• Enact legislation aimed at curbing excessive oil speculation.
• Conduct a comprehensive review of federal regulations with the goal of making changes that enhance fuel efficiency and conservation.
• Expand federal R&D on improvements to aircraft engine fuel efficiency.
• The government should develop an emergency coal-to-jet fuel program.
• The government should temporarily direct emergency refining capacity to jet fuel if needed. The government should also take emergency steps to reduce or eliminate the non-cost-based “spread” between jet fuel and other refined products of crude oil.

Federal Funding
• Increase Airport Improvement Program (AIP) funding to allow airports to develop anti-congestion construction projects allowing airlines to save fuel.
• Permit airports to use AIP funds or PFC revenue for debt service costs (principle and interest) on a temporary basis, after certifying capital safety and security needs have been met at their facility
• Include a provision in the next FAA reauthorization bill that would raise the PFC cap.
• Tax new airline-imposed fees at the same 7.5 percent tax to ensure that the Airport and Airway Trust Fund is not being shortchanged.
• Provide U.S. treasury grants to airports for operational expenses.
• Reject labor’s Aircraft Rescue and Fire Fighting proposal, which could dramatically increase infrastructure and operational requirements for airports of all sizes and further jeopardize service to small communities. Permit a fair rulemaking process to conclude instead.
• Suspend any new unfunded federal mandates that would cause additional cost, congestion, or service derogation until such time as a comprehensive transportation and energy plan is in place to ease the impact of high fuel prices on the air transport industry.
• Temporarily suspend eliminating airports from eligibility for AIP entitlement funds due to falling below the minimum passenger enplanement requirement.
• Temporarily suspend changing an airport’s category or priority for navaids, contract towers or other FAA facilities due to a drop in operations.
• The FAA should adopt emergency ATC procedures that safely result in fuel savings for users.

Security
• Reduce airport and airline security costs by eliminating unfunded federal mandates.
• Make security a federal responsibility, with costs born by the federal government rather than the aviation industry.
• Ensure that the federal government performs or pays for the collection of biometrics for the U.S. VISIT program.
• Require the Transportation Security Administration to have a process in place so that the agency can quickly redeploy screeners to airports that regain commercial air service.
• Require the U.S. Customs and Border Protection (CBP) to have a process in place that allows the agency to quickly redeploy CBP inspectors to airports that regain international air service.