Airport Business

JUN-JUL 2018

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42 airportbusiness June/July 2018 WASHINGTON WATCH By Kevin Burke, ACI-NA President & CEO Reversing the Race to the Bottom Through Competition As the connection point between passengers and the sky, airports serve a vital role in fostering competition and providing passengers with the price and service options they demand. Through that important work, airports emerge as powerful engines of economic growth for local communities. While airports embrace competition for the benefit of passengers, the airlines continually reaffirm their opposition to real competition by undertaking policy initiatives that protect profits and maintain control. Do not be fooled by airline rhetoric that claims the airlines are more competitive today than they ever have been. The airlines routinely fight against ideas that would enhance competition through necessary infrastructure investment and expanded carrier options, leaving passengers with limited choices and high airfares. What's resulted is a race to the bottom in air travel. Simply look to the Passenger Facility Charge (PFC) user fee. With nearly $100 billion in infrastructure needs through 2021, airports across the United States face unprecedented infrastructure challenges. The logjam that exists in keeping vital infrastructure projects moving is directly tied to the user fee that has languished for 18 years. In fact, airport infrastructure costs have increased more than 32 percent over the last two years. Without action by Congress, costs will continue to sky rocket and America's airports will be left behind. The PFC user fee was designed by Congress as a tool to spur infrastructure investment that would create competition among the airlines. Through more efficient and modern facilities, airports would be able to reduce operating costs and attract new service options. Each time Congress considers modernizing the PFC to meet current economic conditions, the airlines use disingenuous lobbying strategies to stifle investment and competition. Let's not lose sight on the real reason the airlines oppose the PFC: they want to control airline competition and protect their oligopoly status. Without competition, passengers are left holding the bag with higher airfares and limited flight options. In recent years, international passenger traffic has grown at a rapid pace. The economic opportunity that comes with robust access to international passengers is too powerful to deny. That's why it is important to protect and expand Open Skies agreements with countries around the world. Ensuring access to the global market creates competition. It's no surprise that many U.S. airlines have tried to diminish the positive impact of Open Skies agreements in recent years. It's time to reverse this troubling trend and instill more competition across the industry for the benefit of passengers. While airports continue to work with Congress and the Trump Administration on modernizing the PFC and protecting Open Skies agreements, we have a new opportunity to ensure the aviation industry is made better through enhanced competition. Nearly 300 congested airports around the world are governed by an airline imposed, airline-administered management system known as slots. Dating back to the 1970s, slots can be thought of most simply as a reservation system that provides airlines with dedicated windows of time in which to land or depart an aircraft at highly congested airports. So much has changed in our industry since the slots management system was put into place nearly 50 years ago. As such, airports are working through the ACI World Expert Group on Slots to examine opportunities that strengthen airline competition by reforming the global slots system. Of course, the airlines think the current system is already the "gold standard," despite clear evidence to the contrary. Most notably, airports should be involved in slots-related decision making. While airports best understand the functionality and capabilities of airport infrastructure to help drive efficiency, airports currently do not have a seat at the table in slots management. The airport perspective is essential when ensuring airport infrastructure and services are used as efficiently as possible. Passengers will also benefit from greater transparency and a more consistent application of global rules that govern slot management at congested airports. The slots program has long been heralded as a system that protects incumbent airlines and prohibits new entrants from accessing a market. In some cases, an airport's slots program has become a highly lucrative trading scheme in which one airline profits by selling their unused slots to another carrier at a high premium, driving up costs instead of relying on competition to drive more efficient use of airport infrastructure and lower costs for passengers. Airports exist to provide for the safe, secure, and efficient movement of people and goods. Our airline partners are an important part of that equation, but their main focus is ensuring continued profitability. Airports have a different focus in representing the views of local communities within the broader aviation system, and that includes ensuring the most competitive industry possible for the benefit of our passengers, customers, and communities. Through competition, we can improve air travel for everyone, even the airlines. ABOUT THE AUTHOR Kevin M. Burke Kevin M. Burke, is President and CEO of Airports Council International – North America.

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