Landing Fees

[Bob Owens]

When I was looking at the 10Ks I noticed that despite capacity reductions Landings fees went up, not down.

Well the other day in a discussion with the company the issue of landing fees was brought up. Well it seems that what most of the airports are doing is jacking up rates as airlines reduce flights. Their reason? Because their costs are fixed, the real reason, because their profits are fixed.

So on average airport landing fees have increased by at least 30% I use that figure since thats around what the number of flights have been reduced by yet the costs went up.

So when the industry rebounds will the rates decline? Doubtful. Instead the Airports (or should I say the owners of those airports) have lined themselves up for a windfall, (less the windfall taxes of course) when the economy rebounds.

Why havent we heard any public pronouncments from AA, or the ATA (since everyone is being exposed to these increases)? Why arent they testifying before Congress about how they are being extorted by these Airport authorities?

A 30% increase during times like these!!! When workers who lost 40% of their pay ask for those types of increases they are called all sorts of things, none flattering.

But its the greedy employees that want their wages restored that grabs the attention of the media!! Labor costs , labor costs , labor costs, you would think that we were all pulling in millions like our executives!!

These airports are putting the economy at risk because they are making it impossible for the airlines to make money! $4000 just to land a 777 at JFK, and thats not including other fees, thats insane! How do they justify that? They dont have to and the Airlines and the ATA dont even try to make them. Why is that?

Why dont we hear any protest from these carriers and the ATA?

Maybe its because the same interests that collect the double digit interest rates on all the cash these carriers borrow own the bonds that are paid through airport revenues. The airports arent alone, apparently parts providers are doing the same thing.

Back in the 90s Crandall bragged that he had a $500 million dollar war chest and he could beat the pilots if they struck, back in 2003 the company was "broke" if they had less than $1 billion in cash, now they claim they need at least $3billion, my guess is before long they will have to be sitting on(and paying the banks double digit interest on) $10 billion in cash.

No matter how much we give up it wont "save the airline", all it will do is give everyone else more to grab. We have to stop believing that our concessions will help this company become consistantly profitable, it never will because the Money Masters know if it does they will end up having to share it with us, and thats the last thing they want to do.

 

[Boomer]

Bob,

Most aviation authorities charge the landing weight based on the max capacity of the individual aircraft: the issue should be elevated to the TWU International and to Congress due to the fact that it falls within the Interstate Commerce Clause and that actual TOW and ALW are available through ACARS.

No individual airline is willing to expend the resources for litigation in that a positive ruling will accrue to each and every air carrier doing business within a specified jurisdiction and therfore not creating a competitive advantage.

We only experience transparency when we unwound the layers of an onion; to the degree that individual layers seek to keep the layers intact and opaque, we find that lowered transportation costs are held hostage to a community that only seeks transparency when it results in a competitive advantage.

In the meantime: Congress only looks at issues those with financial interests place before them without a Trumanesque drive around the entirety of an industry in the interest of those they pretend to serve.

And the wheel goes round,,, round,,,round...

 

[eolesen]

Don't blame the airports -- they build based on what airlines say they're willing to provide in terms of service.... Costs for airports are largely fixed vs. variable, so when carriers won't provide the same level of service they originally told the airport they'd provide when it was in the planning stage, the airport still has to find a way of covering those costs. Taxpayers don't want the burden, so they either hike up landing fees, or chase concession revenues. It's easier to hike the landing fees since customers don't directly see that cost the same way they do on rental car surcharges, higher bar/food prices, etc.

The only airport not actively doing that is DFW, but that's because they discovered that drilling for natural gas is more profitable than landing fees, and the lowered rates are causing carriers to increase service...

I agree I'd like to see ATA take a position on it, but it's by no means going unnoticed -- it's just handled out of public view. You probably didn't see it, but when BUF, SYR, and IND rebuilt their terminal facilites, airlines went apeshit. Some pulled service out, others reduced it to Eagle so they could get around the MLW/MTOW issue Boomer mentioned. Two full 50 seaters will have a much lower landing rate calculation than a MD80 with 100 pax will have.

Bigger issue here is that airports have no real competition. In major cities, you see the same authority operating both (or more) airports with commercial service.

Essentially, organizations like the Port Authority are cartels. If somehow NJ could set the landing rates for EWR independently of JFK and LGA, you'd see landing fees at all three NYC airports plummet because they know if EWR is 5% lower, airlines will move operations across the Hudson in a NY minute.... The same could happen at ORD and MDW if the latter it is ever successfully privatized.

Just look at MIA and BOS for two examples of how airport competition actually works. FLL has undercut MIA pretty well over the past ten years. Lower rates at FLL have MIA in a real bind, so MIA has to keep raising rent and landing fees to make up for the lost traffic. In BOS, you have MHT and PVD actively recruiting carriers to poach from BOS. Before the new tunnel, it was a good proposition. BOS responded with some lowering of rates, so traffic shifted back to BOS.

 

[Bob Owens]

Bob,

Most aviation authorities charge the landing weight based on the max capacity of the individual aircraft: the issue should be elevated to the TWU International and to Congress due to the fact that it falls within the Interstate Commerce Clause and that actual TOW and ALW are available through ACARS.

No individual airline is willing to expend the resources for litigation in that a positive ruling will accrue to each and every air carrier doing business within a specified jurisdiction and therfore not creating a competitive advantage.

We only experience transparency when we unwound the layers of an onion; to the degree that individual layers seek to keep the layers intact and opaque, we find that lowered transportation costs are held hostage to a community that only seeks transparency when it results in a competitive advantage.

In the meantime: Congress only looks at issues those with financial interests place before them without a Trumanesque drive around the entirety of an industry in the interest of those they pretend to serve.

And the wheel goes round,,, round,,,round...

Why doesnt the ATA do it? After all they go after labor .

 

[eolesen]

The ATA works with safety and public policy as it affects airlines. Do you want the airports nationalized the way the auto manufacturers and health care are being nationalized?...

Frankly, I'm a little tired of the government stepping in to "fix" things...

 

[Bob Owens]

The ATA works with safety and public policy as it affects airlines. Do you want the airports nationalized the way the auto manufacturers and health care are being nationalized?...

Frankly, I'm a little tired of the government stepping in to "fix" things...

Yes big business has done such a good job that we regularly have to kick in billions to save them from themselves in addition to a Tax system that doesnt make them pay their fair share. I'll gladly pay 35% after I write off everything needed to run my family.

Aren't most airports government owned? ISP by me is owned by the Town of Islip, all the major airports in NYC are owned by a joint NY-NJ Port Authority. Usually Eminent Domain is used to aquire the land for Airports so I would imagine that most would have to be government owned.

The point is like I've said, as the airlines cry poverty everybody except the workers are jacking up what they charge the airlines. Airport expansion is usually funded through Bond sales, and built upon the premise that 'If we build it they will come".When traffic picks up I doubt that any of these airports that jacked up their rates are going to say "well since our costs are fixed and we have a lot more landing fees being paid due to increased traffic we are going to cut the fee".

A 30% increase is sizable, why isnt the ATA before Congress complaining aboute this? I think I already answered that question.

 

[eolesen]

Sure, most are owned by local governments, with a few run by the states. And a very small number are privately owned or contracted out to management companies. But the fact is that they set their rates independently.

Again, you avoid the question, Bob. Do you want the airports nationalized? Because that's the only outcome that complaining to Congress is going to accomplish. Maybe you could try and tie landing fees to appropriations for runway upgrades, but in the end you're doing the same thing --- exerting federal control over what is up to the local governments. And that may just push more airports away from public funding (not a bad thing, actually).

You've already got a similar situation with highway funding. Some states have opted to fund new roads via tolls as a way of freeing themselves from the strings (and sometime unpredictability) attached to federal funding.

There's already one airport in Missouri who is self-funded, and they have the right to restrict who can fly there. If you want to see more of that, I can pretty much predict that it will be carriers like AA losing, and the smaller carriers like Spirit, Allegiant, and the more fiscally sound carriers like Southwest will be locking up exclusivity agreements in the totally private airports.

Not saying it's a bad thing, but once Congress gets involved, outcomes tend to just get worse than what they were.