"Turbulence ahead for regional airports"

Wednesday, June 25, 2008

Turbulence ahead for regional airports 
Albany International, others could see loss of flights, carriers as oil
prices pinch airlines  
By ERIC ANDERSON
The Albany (NY) Times-Union


COLONIE -- Albany International Airport and dozens of other airports
nationwide are likely to see deep cuts in service if airlines don't find
relief from $130-a-barrel oil, an organization representing business
travelers warns.

The impact -- fewer flights, much higher fares -- could be felt as soon as
this fall.
   
A study by the Business Travel Coalition, a Radnor, Pa.-based trade group,
says airlines and passengers are facing their "darkest future" and that
"fast-approaching airline liquidations will cripple the U.S. economy."

"The whole idea of deregulation has been a democratization of travel," said
Kevin Mitchell, chairman of the group. That now is at risk.

Airports that depend on regional jets are particularly vulnerable, the
coalition warns, because they've become the least profitable aircraft to
operate. At Albany International Airport, 35 of the 70 daily departures are
regional jets.

And airports such as Albany that are served by both Delta and Northwest
airlines are likely to see service cutbacks as the two carriers merge and
eliminate overlapping routes.

Even the presence of Southwest Airlines, which has kept overall fares here
low, increases the likelihood of cutbacks by competitors who previously
would have matched its fares.

"Those airports with a lot of low-cost presence are more vulnerable than
others," Mitchell said. "Even Southwest said last week at a Merrill Lynch
conference that it, at $130 a barrel, would have to cut hundreds of routes."

Southwest has long-term contracts that have kept its fuel prices well below
$130, but those eventually will expire.

The Albany airport isn't alone on the coalition's list. In New York,
airports in Rochester, Islip, Binghamton, Ithaca, Newburgh and White Plains
also face deep cuts as fuel prices rise.

Also on the list are the airports in Manchester, N.H., Providence, R.I., and
outside Hartford, Conn. The list was compiled for release today.

The coalition's study, "Beyond the Airlines' $2 Can of Coke: Catastrophic
Impact on the U.S. Economy from Oil-price Trauma in the Airline Industry,"
warns airlines won't find relief in Chapter 11 bankruptcy protection because
the credit crunch has dried up the financing they would need to reorganize.

Rather, the weakest carriers will face "outright and immediate extinction,"
the study says.

It also warns that, "given the precarious state of the domestic airline
industry, multiple failures of major U.S. airlines are not a remote
prospect."

Mitchell said carriers have announced cutbacks equal to about 13 percent of
their service. But he said analysts estimate that, with $130-a-barrel oil,
they'll need to cut 20 percent to 22 percent.

"Other, more difficult decisions are likely," he said.

Albany airport officials are developing other sources of revenue to help
keep carriers' costs of operating here competitive, said Albany County
Airport Authority spokesman Doug Myers.

"We understand the dynamics of the industry right now," he added. "There's
going to be some give and take because the airlines are not profitable."

The airport has found tenants for vacant industrial land and attracted other
businesses, including factory service centers for a new generation of
so-called very light jets. The added revenue helps subsidize airport
operations.

"You want to keep costs (of boarding a passenger) down for the airlines,"
Myers said.

At least one carrier, Continental, has begun replacing some of its regional
jets with newer, larger turboprops that consume about half as much fuel. The
Q400 aircraft, operated by Continental Connection carrier Colgan Air, are
being maintained at Albany.

And while United and other carriers have announced cuts in flights
systemwide, a small regional carrier, Cape Air, plans to begin service
between Albany and three northern New York cities on Sept. 16 with the help
of federal subsidies.

The airline will use nine-passenger propeller-driven planes.

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