Coinciding as they do, the multi-billion dollar openings and the airline service crisis reflect the industry's cyclical nature. Airlines tend to be in their steepest downturn when new airports are opened and indeed when new aircraft are to be delivered. As LECG consultant Dan Kasper puts it: "It's tough to get the cycles to coincide and there may have been some over-optimism on the part of some communities."
With about a billion domestic US passengers expected by 2010, capacity will be needed, but travellers are wary. Looming over any major new airport terminal is the Terminal Five fiasco at London's Heathrow, a technological disaster and architectural triumph from which British Airways is still recovering. In the US, travellers have vivid memories of the new Denver Airport opening in 1995 - the victim of a malfunctioning bag-handling system that did not work for several years.
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In Indianapolis, a major Midwestern banking and pharmaceutical centre, a new airport terminal opening in November is so much closer to the existing runways that taxi times will be reduced dramatically. But at $1.1 billion, the new terminal comes at a time when Northwest Airlines, the airport's major airline, is cutting and the city's number two and three, Southwest Airlines and AirTran Airways, are also trimming schedules. The city's home town carrier, ATA Airlines, went out of business earlier this year.
At Raleigh/Durham in North Carolina, a new $570 million terminal comes on line in late October just as the airport's largest tenant, American Airlines, cuts back. With about 24% of the market, American ended a dozen flights in September, shifted others to regional jets, and plans to cut more in November.
In the spring, American Eagle ended its nonstops to Bentonville, Arkansas, the headquarters of the world's largest retailer, WalMart, and the region is still recovering from the loss of their locally owned Midway Airlines. Although Southwest remains a major player at Raleigh/Durham, it has declined from the days when it was an American hub with more than 300 daily departures to about 200 in total now.
At New York's JFK, JetBlue Airways opened its own $800 million terminal last month. Although it will be the only tenant at the 26-gate Terminal 5 and therefore does not need to worry about attracting other airlines, JetBlue's traffic is anaemic. It increased less than 2% in the peak travel month of August when its load factor was down by two percentage points. The airline is losing money, cutting routes and selling aircraft.
Acknowledging that the airport capacity will be needed, Kasper says: "New airports don't attract service in and of themselves airlines look at the communities they serve and then ask can the airport accommodate efficient travel movement. The places where we really need capacity - New York and O'Hare - aren't getting it," although one new O'Hare runway is set to open this autumn.
Source: Airline Business
