Page 1

Fasten Your Seatbelt How Misconceptions About Aviation Could Doom a Critical Industry... and the Economy

National Chamber Foundation 1615 H Street, N.W. Washington, D.C. 20062 www.uschamber.com/ncf tel 202-463-5500 fax 202-463-3129


5

Myth:

We have enough airports and runways.

Reality:

Airport capacity and air traffic technology can barely keep up with current demand, much less service an ever-growing number of passengers and amount of cargo. The air system is straining its capacity limits, producing delays and congestion and reducing productivity across the economy. According to FAA forecasts, air travel will explode from 641 million passengers in 2003 to 1.057 billion in 2015. Approximately 70% of U.S. air travel takes place at roughly 31 airports. But runways can take up to 10 years to build, and some of these airports will be unable to add the capacity required. In the skies over those airports—and in airways across the nation—airlines operate with an antiquated air traffic control system that inefficiently routes flights and increases congestion and delays. Failure to address the impact of air travel congestion on the mobility of Americans could cost consumers up to $20 billion a year by 2025.

A

ir transportation is the center of America’s just-in-time

economy. For decades, air transportation has been critical to our nation’s economy and to our quality of life. The nation’s entire civil aviation system was shut down for four days in September 2001, resulting in stranded passengers, undelivered packages, and bare store shelves. At that time, we realized just how dependent we are on a strong and viable aviation system. We must continue to reinforce the need for a healthy aviation system to keep our economy growing. Today, the aviation industry faces a looming crisis. The industry finds itself mired in debt, with excess capacity, weak revenues, and elevated fuel costs. An industry that once held a preeminent position is now seeing its global leadership position threatened. The consequences of not addressing this crisis will be severe. Congestion and delays caused by a deteriorating aviation infrastructure and declining airlines threaten our economic growth and hurt businesses. No single sector of the aviation industry—airlines, airports, manufacturers, or suppliers—can set the course toward long-term strength and viability.

6

Myth:

The government is picking up most of the airline security costs.

Reality:

Airlines are subsidizing national security and are being asked to substantially increase this commitment.

Nor can this highly regulated industry establish a long-term vision without the cooperative efforts of government. The U.S. Chamber of Commerce is committed to playing a role in bringing government and the private sector together to reexamine policies that will

No other U.S. industry subsidizes national security more than the airlines. Since 9/11, the government has placed an ever-expanding burden of fees, taxes, and mandated costs on airlines and passengers. Uncle Sam already collects nearly $2 billion in security fees alone each year from the industry.

affect the industry for decades to come. As we undertake this task at the dawn of the second century of aviation, it is important to address the myths that surround the industry. This document about myths and realities sets the record straight on the issues facing aviation.

While the government has contributed to aviation security, the brunt of the cost is being borne by the airlines themselves, including $3.8 billion per year in meeting federal security mandates.

4

1


Myth v. Reality 1

Myth:

The commercial aviation industry is no more or no less important than any other industry.

Reality:

A healthy commercial aviation industry is critical to economic growth, jobs, personal mobility, our just-in-time transportation system, and America’s international competitiveness.

3

Myth:

If the airlines are doing badly, then it’s their own fault.

Reality:

Airlines have learned to do more with less by cutting costs and raising productivity. Since 9/11, airlines have slashed operating expenses by 13%, shed jobs, cut wages and benefits, and reduced expenses by $12 billion, even as they have invested in innovations that enhance the traveling experience and increase productivity—from paperless transactions to streamlined airport check-in with automated kiosks.

Commercial aviation accounts for $900 billion in economic activity and 10 million jobs, representing 8% of the U.S. gross domestic product. Air travel touches every facet of our national economy by bringing people, products, and ideas together. Millions of business transactions are made possible every day because of passenger carrier flights, air shipments, or general aviation.

The roots of the airlines’ problems are based on factors that are mostly out of their control, including an unjustified onerous amount of mandatory taxes, regulations, and fees; rapidly deteriorating and congested airports; and an aging aviation infrastructure that impedes efficiency and threatens safety.

Passenger carriers move more than 600 million people a year, air shipments keep our high-tech and high-value production lines humming, and general aviation is a vital mode of travel for the U.S. business community.

2

Myth:

Reality:

Low ticket prices, new airlines springing up every day, and increases in air travel must mean that the industry is doing well. The aviation industry is in a financial crisis, with millions of jobs, economic growth, and America’s competitiveness hanging in the balance. With multiple airlines currently in Chapter 11 and others on the brink of filing, the aviation industry has never experienced such dire financial conditions. In fact, airlines posted cumulative losses of $23.2 billion from 2001 through 2003, which exceeded the total profit earned in the industry’s six best years of 1995 through 2000. Logic would seem to indicate that fuller planes mean a profitable industry. But the reality is different. Although planes may be carrying more passengers as a result of increased efficiencies, the amount of revenue per mile an airline makes per passenger is dropping. So even though planes are fuller, air carriers currently are earning less per mile per passenger—and piling up losses as a result.

2

move more than “Passenger carriers 600 million people in a year. ”

4

Myth:

If the airlines are in such dire straits, all they have to do is raise ticket prices.

Reality:

Today’s highly competitive aviation environment, and the enormous taxes imposed on each ticket, makes raising prices unrealistic. Airlines operate in an extraordinarily competitive pricing environment, and economic studies show that they cannot pass on added costs to their customers. As much as 44% of the cost of an airline ticket is federal taxes and fees, which surpasses that of cigarettes (18%) and gasoline (11.5%). If airlines were not burdened with collecting these taxes, consumers would see air travel for the bargain that it is— a case in which ticket prices have dropped in half in real terms (adjusted for inflation) since 1978. In addition, airlines are facing an increasingly costly regulatory burden for national security mandated by the government. Airlines are shouldering an estimated $3.8 billion per year in expenses related to security.

3


Myth v. Reality 1

Myth:

The commercial aviation industry is no more or no less important than any other industry.

Reality:

A healthy commercial aviation industry is critical to economic growth, jobs, personal mobility, our just-in-time transportation system, and America’s international competitiveness.

3

Myth:

If the airlines are doing badly, then it’s their own fault.

Reality:

Airlines have learned to do more with less by cutting costs and raising productivity. Since 9/11, airlines have slashed operating expenses by 13%, shed jobs, cut wages and benefits, and reduced expenses by $12 billion, even as they have invested in innovations that enhance the traveling experience and increase productivity—from paperless transactions to streamlined airport check-in with automated kiosks.

Commercial aviation accounts for $900 billion in economic activity and 10 million jobs, representing 8% of the U.S. gross domestic product. Air travel touches every facet of our national economy by bringing people, products, and ideas together. Millions of business transactions are made possible every day because of passenger carrier flights, air shipments, or general aviation.

The roots of the airlines’ problems are based on factors that are mostly out of their control, including an unjustified onerous amount of mandatory taxes, regulations, and fees; rapidly deteriorating and congested airports; and an aging aviation infrastructure that impedes efficiency and threatens safety.

Passenger carriers move more than 600 million people a year, air shipments keep our high-tech and high-value production lines humming, and general aviation is a vital mode of travel for the U.S. business community.

2

Myth:

Reality:

Low ticket prices, new airlines springing up every day, and increases in air travel must mean that the industry is doing well. The aviation industry is in a financial crisis, with millions of jobs, economic growth, and America’s competitiveness hanging in the balance. With multiple airlines currently in Chapter 11 and others on the brink of filing, the aviation industry has never experienced such dire financial conditions. In fact, airlines posted cumulative losses of $23.2 billion from 2001 through 2003, which exceeded the total profit earned in the industry’s six best years of 1995 through 2000. Logic would seem to indicate that fuller planes mean a profitable industry. But the reality is different. Although planes may be carrying more passengers as a result of increased efficiencies, the amount of revenue per mile an airline makes per passenger is dropping. So even though planes are fuller, air carriers currently are earning less per mile per passenger—and piling up losses as a result.

2

move more than “Passenger carriers 600 million people in a year. ”

4

Myth:

If the airlines are in such dire straits, all they have to do is raise ticket prices.

Reality:

Today’s highly competitive aviation environment, and the enormous taxes imposed on each ticket, makes raising prices unrealistic. Airlines operate in an extraordinarily competitive pricing environment, and economic studies show that they cannot pass on added costs to their customers. As much as 44% of the cost of an airline ticket is federal taxes and fees, which surpasses that of cigarettes (18%) and gasoline (11.5%). If airlines were not burdened with collecting these taxes, consumers would see air travel for the bargain that it is— a case in which ticket prices have dropped in half in real terms (adjusted for inflation) since 1978. In addition, airlines are facing an increasingly costly regulatory burden for national security mandated by the government. Airlines are shouldering an estimated $3.8 billion per year in expenses related to security.

3


5

Myth:

We have enough airports and runways.

Reality:

Airport capacity and air traffic technology can barely keep up with current demand, much less service an ever-growing number of passengers and amount of cargo. The air system is straining its capacity limits, producing delays and congestion and reducing productivity across the economy. According to FAA forecasts, air travel will explode from 641 million passengers in 2003 to 1.057 billion in 2015. Approximately 70% of U.S. air travel takes place at roughly 31 airports. But runways can take up to 10 years to build, and some of these airports will be unable to add the capacity required. In the skies over those airports—and in airways across the nation—airlines operate with an antiquated air traffic control system that inefficiently routes flights and increases congestion and delays. Failure to address the impact of air travel congestion on the mobility of Americans could cost consumers up to $20 billion a year by 2025.

A

ir transportation is the center of America’s just-in-time

economy. For decades, air transportation has been critical to our nation’s economy and to our quality of life. The nation’s entire civil aviation system was shut down for four days in September 2001, resulting in stranded passengers, undelivered packages, and bare store shelves. At that time, we realized just how dependent we are on a strong and viable aviation system. We must continue to reinforce the need for a healthy aviation system to keep our economy growing. Today, the aviation industry faces a looming crisis. The industry finds itself mired in debt, with excess capacity, weak revenues, and elevated fuel costs. An industry that once held a preeminent position is now seeing its global leadership position threatened. The consequences of not addressing this crisis will be severe. Congestion and delays caused by a deteriorating aviation infrastructure and declining airlines threaten our economic growth and hurt businesses. No single sector of the aviation industry—airlines, airports, manufacturers, or suppliers—can set the course toward long-term strength and viability.

6

Myth:

The government is picking up most of the airline security costs.

Reality:

Airlines are subsidizing national security and are being asked to substantially increase this commitment.

Nor can this highly regulated industry establish a long-term vision without the cooperative efforts of government. The U.S. Chamber of Commerce is committed to playing a role in bringing government and the private sector together to reexamine policies that will

No other U.S. industry subsidizes national security more than the airlines. Since 9/11, the government has placed an ever-expanding burden of fees, taxes, and mandated costs on airlines and passengers. Uncle Sam already collects nearly $2 billion in security fees alone each year from the industry.

affect the industry for decades to come. As we undertake this task at the dawn of the second century of aviation, it is important to address the myths that surround the industry. This document about myths and realities sets the record straight on the issues facing aviation.

While the government has contributed to aviation security, the brunt of the cost is being borne by the airlines themselves, including $3.8 billion per year in meeting federal security mandates.

4

1


7

Myth:

Government has done everything it can to make airlines successful.

Reality:

Government lacks a bold agenda to deal with aviation. Without a strong partnership between government and the private sector, air carriers will continue to lose money, the necessary infrastructure will continue to deteriorate, and broad U.S. economic growth will become slower because of an inadequate air transport system. The consequences of not addressing these problems are great. Government—working side-by-side with industry— must start immediately to address these issues with the goal of fundamentally transforming our air transportation system to ensure continued economic growth.

“ Civil aviation accounts for

$900 billion in economic activity, representing 8% of the U.S. gross domestic product, and 10 million jobs.

5


Fasten Your Seatbelt How Misconceptions About Aviation Could Doom a Critical Industry... and the Economy

National Chamber Foundation 1615 H Street, N.W. Washington, D.C. 20062 www.uschamber.com/ncf tel 202-463-5500 fax 202-463-3129

Fasten Your Seatbelt  

Fasten Your Seatbelt How Misconceptions About Aviation Could Doom a Critical Industry... and the Economy

Read more
Read more
Similar to
Popular now
Just for you