In this issue:
- Landmark noise settlement in Ft. Lauderdale
- Backscatter body scanners under new scrutiny
- Europe’s “Better Airports” report–not
- Niche airlines and airports test new business models
- Airport finance Webinar next week
- News Notes
- Quotable Quotes
Landmark Noise Settlement Enables New Ft. Lauderdale Runway
For 18 years, residents south of Ft. Lauderdale International Airport (FLL) fought proposals to lengthen the airport’s south runway so it can handle commercial jetliners instead of just smaller planes. Residents of Dania Beach understandably did not want the increased noise and fumes that would result from the much longer runway. But that airport capacity expansion was one of four top priorities identified by the FAA in 2007 (along with Newark, LaGuardia, and Chicago O’Hare), and Broward County officials were committed to making the project happen.
In October 2011, a historic agreement was reached between Dania Beach and Broward County. Based on noise impact analysis done by the FAA, it will provide what appears to be unprecedented compensation to homeowners in the impacted areas. That analysis found that 857 homes would be subjected to average noise exceeding 65 dB over a 24-hour period. Their owners will have the option of getting a check worth 20% of the home’s market value and remaining there, or selling the house and getting a check for up to 25% of the market value if the sale price is lower than market value. In either case, the owner would sign a deed restriction accepting noise and “vibrations, aircraft lights, fumes, dust or other particulate matter, fuel particles, fear, interference with sleep, enjoyment and communications, and any and all other effects” of nearby aircraft, waiving the owner’s right to sue the airport. That agreement will remain with the property indefinitely. About 1,700 other homes that would be subjected to 24-hour average noise close to but not exceeding 65 dB will be eligible for up to $80,000 worth of soundproofing, which is a fairly standard part of noise compensation agreements. They would also have the deed restrictions, under which they give up their right to sue in exchange for the compensation.
Additional features of the deal include the county giving Dania several pieces of vacant land near the airport as well as agreeing to a curfew on the new runway between 10 PM and 5 AM. (The parallel runway on the north side, which is adjacent to a freeway, has no curfew.) Overall, the cost of the deal to FLL will be about $200 million, of which 80% is expected to come from the FAA, with local airport revenues covering the rest. That sum adds about 25% to the $790 million direct construction cost of the runway project. The FAA is expected to give swift approval to the deal, and construction is expected to begin early in 2012, with the runway scheduled to open in early 2014.
Los Angeles World Airports has what is probably the country’s largest soundproofing program, targeting 9,400 residences exposed to 65 dB or greater from flight operations at LAX. About 7,000 of them have received soundproofing over the years, with another 2,400 still to go. Unlike the FLL agreement, however, LAWA in 2001 ceased requiring those receiving soundproofing at airport expense to sign deed restrictions agreeing not to sue, which, in my view, was a huge mistake.
Backscatter Body Scanners Under Increased Scrutiny
A major investigative report released last month by ProPublica/PBS NewsHour raises a host of questions about how backscatter X-ray devices got approved for use at U.S. airports. And just two weeks later, the European Commission banned their use at airports in all 27 EU countries, “in order not to risk jeopardizing citizens’ health and safety.”
The ProPublica report, by Michael Grabell, is well worth reading. (www.propublica.org/article/u.s.-government-glossed-over-cancer-concerns-as-it-rolled-out-airport-x-ray/single) It provides extensive background on the issue, dating all the way back to the 1940s and 1950s when shoe stores exposed millions of kids to X-rays via “fluoroscopes” of their feet in new shoes. After a 1967 incident in which 90,000 color TVs were recalled due to radiation exposure, the Food & Drug Administration created a Bureau of Radiological Health. That body developed safety standards for numerous products, but in 1982 it was merged into the FDA’s medical-device unit-and radiation safety of non-medical devices took a back seat. Today, reports ProPublica, there is an FDA safety standard for X-ray baggage scanners, but none for X-rays that scan people at airports. In 1998, after limited and controversial use of then-new backscatter X-ray machines at prisons, an FDA advisory panel recommended the creation of safety standards for people scanners. But the FDA delegated that task to an industry body (without any independent scientists on it), which released its voluntary standard in 2002.
Thus, when backscatter scanners were first marketed to the TSA, they were not subject to any federal safety standard. The TSA, acting in the name of homeland security, skipped the normal public comment and review period before deploying them, and relied on a small number of unpublished research papers to maintain that they are safe. Only this July, a federal appeals court ruled that TSA had indeed failed to follow required rule-making procedures, a decision TSA is appealing. Last year, the agency contracted with the Army Public Health Command to do independent surveys of the radiation produced by the machines (which currently are inspected only by the manufacturer, Rapiscan). But ProPublica uncovered emails suggesting that local TSA officials received advance notice of the Army visits and could “pick and choose” which systems they could check. And the agency has continued to ignore demands from its own screeners that they wear radiation-exposure badges, like nearly everyone else who works around sources of ionizing radiation.
TSA continues to maintain that the X-ray doses received by air travelers are miniscule, but this ignores three inconvenient facts. First, radiation damage is based on cumulative exposure, so frequent flyers and flight crews are at greater risk than occasional travelers. Second, some of those in the population-such as children and pregnant women-may be at greater risk than average. (Indeed, the FAA’s medical institute has advised pregnant pilots and flight attendants that their combined exposure from flight time at high altitudes plus regular scanning could put them over the occupational limit for radiation exposure.) Third, TSA’s claims are all based on the assumption that all the backscatter machines are operating within normal tolerances-but there is no independent verification of whether this is the case, something which routine use of radiation badges by screeners would address.
The potential dangers of backscatter machines could be avoided by two policy changes. The first would be to substitute millimeter wave body scanners (which use apparently harmless radio waves instead of ionizing radiation) for backscatter X-ray machines, instead of the current TSA plan to use about half of each type. The second would be to do as the U.K. does and use body scanners only for secondary screening (i.e., for a small number of random cases and for higher-risk travelers).
In a weak response to the ProPublica report the day after its release, TSA Administrator John Pistole told the Senate Homeland Security Committee that the TSA will study the health risks of backscatter scanners. That is not an acceptable response. What is needed is independent scientific study, the results of which would let Congress-not TSA-weigh the trade-offs of radiation exposure vs. aviation security. TSA’s prior actions on this issue demonstrate that it cannot be trusted to make such a decision.
The European Commission’s Disappointing “Better Airports” Proposal
On December 1st the European Commission unveiled its much-anticipated “Better Airports” legislative proposal. Although described by the New York Times as offering “a new market-oriented system for allocating takeoff and landing slots at airports,” it is nothing of the sort. A market system would involve either allocating runway space via market pricing of landings and takeoffs or by treating slots as the property of airports, to be leased by airlines. The proposal does neither.
The EC proposal is the result of a large-scale review of existing slot regulation in Europe, in the context of a growing mismatch between demand (aviation growth) and airport capacity. According to the report, five airports are already at or near full capacity (Heathrow, Gatwick, Frankfurt, Dusseldorf, and Milan Linate-though this seems to ignore the large capacity increase from Frankfurt’s new runway). By 2030, if present trends continue, the report projects that 19 key airports will be in that condition.
The only market-based element the report proposes is to legalize secondary trading of slots among carriers (illegal in most of Europe now), as well as increasing the use-it-or-lose-it rule for slots from the current 80% of the time to 85%. Those changes are modeled as permitting EU airports to handle 24 million more passengers a year by 2025.
Reactions among aviation stakeholders have been mostly negative. All the European airline groups oppose the 85% slot-usage requirement, as does the International Air Transport Association (IATA). But whereas IATA supports legalizing secondary trading, the European Low-Fare Airlines Association is strongly opposed, making a slippery-slope argument that this change “leaves the door open for a possible amendment [to] permit the primary auctioning of grandfathered slots.” That more fully market-based proposition was actually considered by the EC researchers, but dropped. The European Regions Airline Association and the European Business Aviation Association don’t like the slot system to begin with, and have commissioned their own study to critique the “Better Airports” study’s methodology and findings.
Actually, I think charter and business aviation groups should oppose the slot system in any form, since there is no fair way to allocate slots to non-scheduled aircraft operators. Since airport congestion will remain a major problem in Europe, even with maximum efforts to expand runway capacity, the better solution is runway congestion pricing. A pricing system gives access to charters, business jets, new-entrant airlines, and anyone else willing to pay the price for landings and takeoffs at various times. And a properly conceived runway pricing system provides additional revenue to the airports, whose investments in runway capacity make it possible to accommodate continued aviation growth. Slot trading systems-even primary trading-do not do this.
Niche Airlines and Niche Airports Chart New Courses
While legacy airlines continue to struggle, entrepreneurs continue to pioneer niche markets via new business models. Some focus exclusively on leisure travelers, others exclusively on business travelers, and a few on all passengers in under-served markets. Most also make considerable use of secondary or tertiary airports, generating new business in places that are hungry for it.
One of my favorite success stories, as regular readers know, is Canada’s Porter Airlines. It links Toronto’s downtown Billy Bishop Airport with (thus far) 12 Canadian and four U.S. cities, all within less than 500 miles, using economical Bombardier Q400 turboprops. Porter’s focus is on business travelers, and it seems to have found a ready (and profitable) market. It carried 1.5 million passengers in 2010 and is on track toward 2 million in 2011. Potential new U.S. destinations include Washington Dulles and Philadelphia.
Another approach to a business-focused airline is recent start-up Ultimate Air Shuttle. It has evolved out of Ultimate Jet Charters, in operation since 1984. The two share a small fleet of 30-passenger Dornier 328JET planes, based at Cincinnati’s downtown Lunken Airport. Its initial scheduled routes from there serve Morristown (NJ), Chicago Midway, and Washington Dulles. Passengers at those airports are handled by the local fixed-base operator, making the service feel like using a corporate jet. Flights typically leave in the early morning and return at the end of the business day. Ultimate Air Shuttle told Aviation Week‘s Jim Ott that they need only 12 passengers to break even on a route, a load factor of just 40%. Possible future markets from Cincinnati include Atlanta, Charlotte, and Dallas.
At the other end of the business model spectrum are leisure-only airlines. Instead of serving major airports from a tertiary airport, airlines such as Allegiant and Vision Airlines link secondary and tertiary cities with major resort destinations. Allegiant’s largest destination by far is Las Vegas, which it serves from places like Bellingham (WA), Stockton (CA), McAllen (TX), and Wichita (KS)-and more recently, Long Beach (CA). Adopting most of Allegiant’s business model, Vision-like Ultimate Shuttle-is an outgrowth of charter carrier. Its leisure destinations include Destin, Punta Gorda, and Orlando (via Sanford Airport) in Florida, with the recent addition of Grand Bahama Island (which it is now serving from Louisville, Richmond, Raleigh/Durham, and Ft. Lauderdale). Vision uses both Dornier 328 and Boeing 737 aircraft, while Allegiant flies only MD-88s. Both charge very low basic fares and charge for numerous other services, as well as selling tour packages that include hotel accommodations and car rentals.
They have been joined in the leisure market by charter carrier Direct Air. Instead of creating a scheduled affiliate, it charters Boeing 737 flights from Sky King Airlines and Vision. Direct Air is based at leisure destination Myrtle Beach (SC), but it has made Niagara Falls International a major focal point, linking that airport to points in Florida including Punta Gorda, Melbourne, Lakeland, and Orlando-Sanford. Starting last month, it added service to San Juan and Nassau. Another cold-weather origin for Direct Air is Worcester (MA), from which it serves the same Florida destinations as from Niagara Falls and is also adding Nassau this fall.
A start-up airline based at northern San Diego County’s McClellan-Palomar Airport is getting closer to flight operations. California Pacific Airlines plans service to Las Vegas, Oakland, Phoenix, San Jose, and Sacramento from there, using Embraer 170 jets. In August, it filed its Phase 1 application with the FAA, including something like 20,000 pages of manuals it has written over the last 18months. With that milestone behind it, the company is now moving toward a private placement to raise serious start-up capital. There are four more phases to go before it can win its operating certificate from the FAA.
We read many articles about how the airline business is inherently unprofitable, but I’m not persuaded. Southwest and a number of other low-cost carriers have created successful business models, and Allegiant has pioneered another one. What we are seeing is the typical process of “creative destruction” that free markets engender. May the best business models win!
Airport Finance Webinar Next Week
The Airport Consultants Council (ACC) several months ago asked me to put together a Webinar on financing U.S. airports in the future. It is scheduled for next week, specifically on Wednesday, December 14th. There is no charge. To register for this one-hour session, go to the following site: https://acc.peachnewmedia.com/store/seminar/seminar.php?seminar=10221
News Notes
Screening Device for Pallets and Containers
L-3 Communications has announced two new products aimed at X-ray scanning of cargo pallets and containers. Both offer dual-view X-ray scanning, via openings large enough to take cargo pallets or certain types of containers. If approved by the TSA, the devices would permit such packaged freight to be scanned without unpacking the contents. No such TSA-approved device is currently available.
Good Reading on Aviation Security
Christopher Elliott posted a good piece on Huffington Post last month (Nov.8th). Called “10 things the TSA Should Do on Its 10th Anniversary,” it includes such proposals as to stop using body-scanners for primary screening, eliminate the new “chat-downs” by Behavior Detection Officers, and cut back its bloated budget.
(www.huffingtonpost.com/mobileweb/2011/11/08/10-things-the-tsa-should-do_n_1080132.html)
Politicians Appeal for FAA Intervention on Ontario (CA)
Claiming that Ontario Airport has lost 40% of its seat capacity since 2007 due to poor management by Los Angeles World Airports, Rep. Jerry Lewis (R, CA) and Rep. Ken Calvert (R, CA) sent a letter last month to DOT Secretary Ray LaHood urging the FAA to intervene. They questioned whether LAWA should own three airports, rather than concentrating on LAX. Both FAA and LAWA officials responded by noting that it is airlines, not airports, that determine where and how much they fly.
Should the Department of Homeland Security Be Dismantled?
In a thoughtful 33-page policy study, with 172 endnotes, legal analyst David Rittgers analyzes the performance of DHS and finds it wanting. He suggests that it be dismantled, rather than being (mostly) rehoused in a $3.4 billion complex currently under construction in southwest Washington, DC. Its component agencies would be re-assembled into smaller, more functional units. All, that is, except the TSA. Rittgers would devolve airport security to the airport level, and leave security policy to be handled by intelligence agencies. (www.cato.org/pub_display.php?pub_id=13650)
Privatization Adds Runway in Dominican Republic
Grupo Puntacana, the company which holds the build-operate-transfer concession for Punta Cana International Airport in the Dominican Republic, opened its new runway and control tower on Nov. 25th. The runway is 10,171 feet long, sufficient to handle major jetliners. The tower includes a TRACON and weather station, and can back up the national radar center in Santo Domingo, the national capital. Punta Cana handled 4.5 million passengers in 2010.
E-Gates at Taiwan Airports, as of January
A new system scheduled to go live as of January 1, 2012 at Taiwan’s three major airports will offer departing passengers a 12-second passage through border exit formalities. Taiwan citizens may enroll in the system by providing proof of identification (passport, etc.) and having their fingerprints and a photo taken. Upon arrival at airport immigration control, a member will scan his/her passport and have the biometrics verified at an “e-gate.” Those gates will use information from the National Immigration Agency’s Advanced Passenger Information System to match against those using the e-gates. That system checks for criminal suspects attempting to leave the country by air.
More In-Terminal Hotels
Last month’s News Note on the trend toward more in-terminal airport hotels left out several U.S. examples, readers reminded me. Among them are the long-standing central terminal hotel at Miami International (MIA) and the relatively new hotel at Detroit/Wayne County International (DTW).
Cargo vs. Passenger Security
Which poses the greater terrorist threat: passengers or air cargo? That question provides the framework for a thoughtful article by Richard W. Bloom of Embry-Riddle Aeronautical University in the Transportation Research Board’s TRR News, July-August 2011. (http://onlinepubs.trb.org/onlinepubs/trnews/trnews275AirportSecurity.pdf)
Kanafani Receiving TRB Carey Award
UC Berkeley professor Adib Kanafani of the Graduate School of Civil and Environmental Engineering, will receive the W. N. Carey, Jr. Distinguished Service Award for 2011 at the Transportation Research Board’s 2012 annual meeting in Washington, DC. Kanafani’s involvement with aviation policy is long-standing, including drafting the first aviation policy agenda for TRB’s predecessor, the Highway Research Board, in 1975.
Quotable Quotes
“[L]et’s stop going, hat in hand, begging [Congress’s] indulgence. Let’s just tell them to get out of the way and free airports to generate their own resources, in their own communities, to build and modernize their own facilities with money that stays at the airport and is not sent to Washington. This is the way to build infrastructure; this is the way to create jobs; these are the tools those places around the world are using to beat our brains in. Want to create jobs? Want to build 21st century infrastructure? Set airports free; give us the tools in use all over the world; remove the Nixon-era, job-killing shackles and watch what we can do.”
–Greg Principato, quoted in “Airports Seek Economic Freedom,” John F. Infanger and Brad McAllister, Airport Business, November 2011.
“Politicians, policymakers, and the lay public will hear something like ‘SPOT is significantly more effective than random screening’ and may assume that this program is effective, useful, and has been adequately scientifically evaluated. To this point the effectiveness and usefulness have not been established. The scientific evaluation has been inadequate and has not been approached in a manner that would lead to greater knowledge regarding the program. Establishing scientific credibility has the potential to be helpful to programs of this sort, but that requires full, well thought-out, independent, credible, and open scientific review.”
–Dr. Philip Rubin, Chair, National Academies Board on Behavioral, Cognitive, and Sensory Sciences, testimony before the House Science, Space, and Technology Subcommittee on Investigations and Oversight, “Behavioral Science and Security: Evaluating TSA’s SPOT Program,” April 6, 2011
“As the Washington Post reported, China’s stimulus spending produced ‘an astonishing frenzy of building-highways, subways, airports, bridges, high-speed rail lines, and even new cities constructed, literally, in the middle of nowhere.’ Chinese citizens are staring at new airports in small counties to which few passengers will fly, now subway lines in small cities that may not have needed them, and high-speed trains with ticket prices many cannot afford.”
–Ying Ma, “A Model to Avoid: The Dark Side of Chinese State Capitalism,” The Weekly Standard, Oct. 24, 2011
“Given the breadth and complexity of threats to commercial aviation, those who criticize the TSA and other aviation security regulatory agencies for reactive policies and overly narrow focus appear to have substantial grounding. Three particularly serious charges can be levied against the TSA: it overemphasizes defending against specific threat vectors (such as hijackings or passenger-borne IEDs) at the expense of others (such as insider threats or attacks on airports); it overemphasizes securing U.S. airports while failing to acknowledge the significantly greater threat posed to flights arriving or departing from foreign airports; and it has failed to be transparent with the American people that certain threats are either extremely difficult or beyond the TSA’s ability to control. Furthermore, the adoption of cumbersome aviation security measures in the wake of failed attacks entails a financial burden on both governments and the airline industry, which has not gone unnoticed by jihadist propagandists and strategists. While the U.S. government has spent some $56 billion on aviation security measures since 9/11, AQAP prominently noted that its 2010 cargo plot cost a total of $4,900.”
–Ben Brandt, “Terrorist Threats to Commercial Aviation: A Contemporary Assessment,” Combating Terrorism Center at West Point, Nov. 30, 2011 (www.ctc.usma.edu/posts/terrorist-threats-to-commercial-aviation-a-contemporary-assessment)
“[T]he incumbent [EU] carriers . . . argued that while secondary trading of slots was mandatory-to be fair, we have it now, but in the dark, not the light-primary trading was evil incarnate. To put that in other words, carriers should be given their slots for free, but be entitled to sell them and trouser any proceeds. When challenged on the equity of that, Air France noted only, ‘These were different issues.’ Absolutely: one is acquiring an asset for the lowest price possible; the other is disposing of it for the highest price possible. Obviously different. You might think that secondary trading rather begs the existence of primary trading, but such thinking is ungood crimethink.”
–Andrew Charlton, “The Airports Package: Ignore Your Partner for the Self-Interest Tango,” Aviation Intelligence Reporter, November 2011.