Airports Have Greater Economic Clout than the Economies of South Korea, Mexico or Switzerland

Sometimes you might wonder exactly why people care so much about debates over investment in infrastructure.  Isn’t it just all politics?  Does it matter?

A study released today by ACI-NA, Economic Impact of Commercial Airports in 2010, offers an emphatic YES.  (Go to www.airportsforthefuture.org to see the study).

See, in 2000, two very important airport infrastructure policy decisions were made.  The first, allowed local communities to raise more local resources to finance infrastructure by increasing the cap on the passenger facility charge from $3 to $4.50.  The second decided that funds sitting in the aviation trust fund and paid by air travelers should not just sit there, but should be invested.  So the Airport Improvement Program was increased and money paid by air passengers for capital improvements was spent on its intended purposes.

As a nation, we (through our Congress and President) decided to increase our investments in airport infrastructure.  Our study, the first undertaken since those policy changes went fully into effect, shows the very positive results.

America’s airports support 10.5 million jobs.  America’s airports support $1.2 trillion in economic activity, larger than the GDP of South Korea.  “Airports, Inc.” directly employs 1.3 million people, making it the second largest employer in the nation, behind Wal-Mart.  Total airport payroll equals the total payroll of the State of Michigan.  The total economic clout of airports:  8 percent of U.S. GDP and 7 percent of U.S. employment.

Those are big numbers.  But if you are still not convinced, consider this:  during that time, the jobs number increased by 56 percent.  Total payroll has gone up over 90 percent.  And the total contribution to the output of the American economy has more than doubled.  All this has happened despite the industry being devastated by the largest terrorist attack in history.  All this has happened despite the most severe economic downturn since the Great Depression, including spikes in the price of fuel.

This economic growth occurred because we decided to invest in our economic future.  In economic times as difficult as most of us will ever experience, those investments paid off.

That is why it is so discouraging that the recent FAA bill leaves in place federal limits on what airports and local communities can do to generate resources.  That is why it is so discouraging that the president’s budget reduces investment in airports.  That is why it is so discouraging that local communities cannot raise their own resources because of decisions made in Washington.  We are putting the future in peril, just as we are set to take off.

Some have called for a new national airline policy, designed to promote the financial strength of airline companies.  I am a strong proponent of strong airline companies.  But the purpose of the air transportation system is the movement of people and products to destinations and markets.  It is not to ensure shareholder value for airlines; that’s what airline executives and boards are supposed to do.

We do need a new national AVIATION policy, looking at all aspects from NextGen to financing airport infrastructure to the regulatory environment in which aviation must operate to the tax structure, all of it.  It must be designed to strengthen the air transportation system, not merely any one component of it.

We are now stepping back from investments in aviation at the same time as our competitors around the world are stepping up.  We are in peril of becoming what the steel industry became in the 1970’s and 1980’s, out of date and non-competitive.

We have a chance to avoid that.  Our study shows the benefits in terms of job creation and economic impact when good decisions and good investments are made.  I worry that the next study will show when the opposite happens.

Frustrated, Relieved, Frustrated, Now Angry!

I spent last week in Salt Lake City at our CEO Forum.  Airport directors from all over the U.S. and Canada came together to meet, network, commiserate and discuss some of the top issues of the day.  The recently passed FAA Reauthorization bill was a hot topic.

When it passed I was at first enormously frustrated.  After all, the bill did nothing to empower localities to raise resources to invest in infrastructure as is done all over the world, and it cut the federal program.  It was frustrating to realize that, after years of work and having come so close to achieving a good bill, that this legislation just doubles down on our current flawed system was the best we could get.

Then I was relieved.  Relieved that airports and the FAA would not have to endure any more temporary extensions.  Relieved that a bill had passed with some ACI-NA backed provisions, including liability protection for SMS data and a provision permitted expansion of the TSA Screening Partnership program.

Then frustrated again. Knowing that there is no reason this couldn’t have passed earlier with much better provisions providing invectives to invest in infrastructure. No reason, that is, except for the dysfunction of our current political system.

All that, though, is replaced today by anger.  Seething anger.

The administration released its budget today.  It calls for an increase in the cap on the passenger facility charge and a large cut in the airport improvement program.  You might ask why I am angry.  After all, I wrote to the congressional super committee last year suggesting they consider an increase in the PFC which might allow a decrease in federal spending and perhaps taxes.  A group of large airports wrote a similar letter a few weeks later.  Isn’t this what I had suggested?

NO, it is not.  If the administration was serious about promoting investment in aviation infrastructure it would have made a serious proposal during consideration of the FAA authorization.  After all, the authorization had been pending every hour of every day this administration has been in office.  NEVER ONCE, in the context of the consideration of this legislation, did the administration weigh in on these subjects in a meaningful way.  If they had, we might have a system today that permits localities the ability to raise more of their own resources, while permitting the consideration of changing the federal program.  But, NO.  All that time, just silence.

Only in the context of a budget submission did the administration make this proposal.  To be fair they suggested the same last year. But anyone who has been around long enough sees this for what it is:  proposing a change in policy they are not really prepared to fight for, in this case a PFC cap increase, to dress up a budget proposal that allows a billion dollar cut.  This is an old budget trick, perfected by David Stockman 30 years ago.

In the end, the PFC proposal will be treated as unserious.  But the AIP cut proposal will be seized on by the Hill.  The recently passed FAA bill will result in less investment in aviation infrastructure.  This budget may result in even less than that!  What a joke.

My aviation industry colleagues like to talk about how we need to invest more in aviation, and that the system is outdated and leaves us behind our overseas competitors.  Jeff Smisek, CEO of United Airlines, wrote in a recent Hemisphere magazine article, that other nations have enlightened aviation policies and the U.S. has a benighted one.  I agree.  And this budget submission, especially when combined with the disappointing FAA bill just passed, leaves us further behind.  It is a real shame, and it did not have to be this way.

Skip Conrad

Before ending, I wanted to say something about a friend of mine, and of many in our industry, Skip Conrad.  Normally I might not write something like this in a blog such as the one I just wrote.  But having known Skip as someone who liked to, as they say, “call timeout on B.S.” I’d like to think he would approve.

Skip worked at the Oakland Airport.  For many in the commercial, concessions and properties end of the airport business, Skip was a pioneer and a mentor.  He helped change the way airports look at every end of the commercial part of the business.  One colleague tells me that many of the concessions trends of the past 30 years were really conceived and promoted by Skip.

I participated in a meeting last September in Portland of the Western Regional Airport Property Managers.  Almost every minute I was there I saw the other attendees gathering around Skip.  This was a generally younger crowd of airport professionals.  I joked with Skip that he and I were the oldest people there, by far.  But every minute, I saw people around him.  I think this was because he was the kind of person who gave off energy that people could feed from.  I think it was because his passion was contagious.  I think it was because, while he was usually the oldest person in the room (we established that he was a little older than me), his ideas were among the youngest and freshest.

I doubt Skip ever said something should be done “because we’ve always done it that way.”  Skip left a mark, not just by the ideas and innovations he championed, but through all the people he mentored.

A few weeks after that meeting in Portland, Skip found out he had cancer and the prognosis was not good.  No one knows what they would do in such a situation.  What Skip did was re-dedicate himself, as if it were even possible, to his work and to his family.  He died a week ago Saturday while on the way back from an Italian vacation with his wife.

I know all of us will miss Skip’s presence.  But we will never forget his example, we will continue to feed off his energy, and all those he mentored and helped teach will be improving our industry for decades to come.

Skip Conrad.  RIP.