FAA reauthorization, funding and modernization, labor relations, additional security taxes and fees, reduced Essential Air Service (EAS) funding and regulatory changes topped the agenda as the Regional Airline Association's (RAA) 42 member airlines met in Dallas last week. These issues all have the potential to raise regional airline costs and reduce small and medium community service.

It remains unclear when FAA will release its proposal for funding the agency, despite the fact FAA briefed airlines the opening day of the gathering. Horizon Air President Jeff Pinneo, chairman of RAA, outlined the challenges facing the industry this year, including the development of the Next Generation Air Transportation System (NGATS), "to determine how air traffic and aiports are managed in the future, how security will be provided to protect our passengers, aircraft and airports, how to protect our environment and how processes in government and the private sector can increase safety and efficiency." He reported that RAA is already engaged in the process and anxiously awaits the release of the FAA proposal. RAA President Debby McElroy emphasized that, ultimately, the funding mechanism cannot disproportionately increase regional airline costs or put small communities, which are already under pressure as the result of continued industry restructuring, at a disadvantage. RAA said there has to be allowances for small communities and the time of day.

"Some community service is economically very fragile with any change in economics making some markets -- such as Moses Lake -- no longer viable," said Pinneo. "How much service is available depends on the cost of access, including user fees." He said that members of the RAA President's Council, meeting in closed session, agreed that the next generation funding mechanism needs to fund the modernization of the air transportation system, a decades old promise that remains unfulfilled.

The debate about user fees comes at a time when the BACK Aviation Solutions reported that the U.S. has lost half of all turboprop routes over the last decade (RAN, April 3). BACK predicts that small communities are at risk for another round of losses, by the proliferation of the 50-seat regional jets which have become overextended with the restructuring of the major carrier networks and high fuel prices. Markets under 300 miles have dropped by more than 20 percent. Even at the small turboprop level, fuel prices are forcing regionals to file with the Department of Transportation to eliminate service to EAS communities. However, this may be a bid for increasing EAS reimbursements since the only way to change the rates is to file to drop the service, something the industry is trying to change. Indeed, airports are developing new business models, such as eliminating landing fees, to retain service or attract new service. (RAN, April 17)

RAA called the industry's health robust despite what Pinneo called a year in which the airline industry "remained in a nearly constant state of tumultuous change." U.S. regional airlines transported 150.9 million passengers in 2005 or one out of every five domestic air travelers. Industry departures numbered 14,500 -- 40% of all flights -- from 750 communities in North America. The organization's members account for 97 percent of regional passengers. Seventy three percent of the 664 commercial airports in the country depend solely on regional airline service to connect them to the national air transportation system. Pinneo noted many hubs have higher and higher percentages of traffic served by regionals. In Seattle, he said, a third of nonstop daily flights are flown by regionals, which is mirrored in Dallas and Atlanta. O'Hare, he said, was at 51 percent in January 2006.

"Developments in the last year ranged from the merger of two major airlines to the bankruptcy filings of two others and the failure of an aspiring LCC," said Pinneo in reporting to members. "For several months during the year, approximately 45 percent of major airline capacity was operating in Chapter 11. Relentless upward pressure on costs has necessitated the renegotiation of contracts with labor groups and suppliers. Regulatory requirements and security costs continue to climb and our customers have often had to bear the collateral burdens associated with change, including reduced service levels, increasing airport congestion and rule changes that oftentimes run contrary to the customers best interests. He continued, "Scope clauses continue to hamper some RAA member airlines from providing service in larger aircraft that would allow their network partners to compete even more effectively with the so-called 'low-cost carriers'...Just as in previous economic downturns, however, [regional airlines] have proven that when the times are tough, we can adapt and prosper."