Industry feels fallout of global terror plots

 - November 26, 2007, 12:04 PM

As the tragic events of September 11 unfolded in New York City and Washington, D.C., the potential effect on the regional airline industry’s bottom line paled in significance to the loss of life and the implications to global peace. But as the days wore on and the initial shock of the tragedy subsided, the recognition of the profound changes in store for the entire air transport business became painfully apparent. Never has an event so tarnished the image of air travel. But perhaps more significantly, never has a single event so affected people’s appreciation of their freedom to fly from place to place unfettered.

“This is an industry that has more to contribute than possibly any other industry to promoting international understanding. It is the height of sad irony that it was used as a tool for exploiting divisions,” lamented ERA director general Mike Ambrose three days after the September 11 terrorist attacks on the World Trade Center and the Pentagon. “The mood of the general assembly will be far more subdued than in previous years, but one in which we recognize that a great wrong has been done, not just to the United States, but in the sense that such a noble industry has been used as the instrument of such evil.”

In the aftermath of the attack at press time, as the majority of airports in the U.S. began opening for limited service, regional airlines across the country felt immediate economic distress. The first to feel the ultimate effect, Durham, North Carolina-based Midway Airlines, went out of business on September 12, sending another 1,700 employees to the unemployment line. A week earlier the Canadair Regional Jet operator secured $15 million in debtor-in-possession financing after filing for Chapter 11 bankruptcy protection and laying off 700 workers on August 13.

“There are other carriers that are teetering,” warned Regional Airline Association president Deborah McElroy, who projected losses of $20- to $30 million by a number of individual regional airlines during the month of September due to service disruptions and the cost of enhanced security measures.

She estimated that security costs would double. Other concerns centered on escalating insurance costs and instances of civil lawsuits filed
by passengers.

On September 14 the RAA and the Air Transport Association asked the Department of Transportation and Congress for immediate financial assistance to save the industry from total collapse. A day later, the House of Representatives refused to earmark the requested $2.5 billion in emergency aid. At press time RAA efforts to secure the monetary support continued.

Longer-term solutions to the devastating financial effect on the U.S. regional industry appeared less clear-cut. In light of new security requirements, the RAA has
advocated that the federal government assume responsibility for passenger screening. However, McElroy offered no immediate answers to the less apparent problems specific to regional airlines. For example, with check-in times expected at least to double, U.S. regional airlines fear that more passengers may opt to use automobiles on trips where they might have otherwise flown.

In recognition of the implications of last month’s attacks, ERA changed the theme of the general assembly’s annual roundtable discussion to the consideration of the long-term effects on Europe. “It would be foolish to pretend [Europe] won’t be affected by this,” said Ambrose. In particular, he pointed to the potential need to reroute SIDS and STARs to avoid flights over major cities, which, he said, would likely decrease overall capacity and translate into “operational penalties.”

The ERA director general also expressed concern about regional airlines’ ability to withstand the financial penalties related to that loss of capacity and increased security measures. “Regional airlines don’t have the deep pockets of the majors,” said Ambrose. Optimistically, however, when regionals do face a crisis, their flexibility allows them to react more quickly than bureaucracy-laden majors. Moreover, he reasoned, the major airlines will undoubtedly feel a desperate need for more interline feed, hypothetically helping the regional airlines’ cause. “I think we have some opportunities, perhaps, where we could undertake [the majors’] operations more economically…But very often logic does not follow through to executive action,” Ambrose cautioned.

On the subject of the inevitable reappraisal of airport security measures, Ambrose called for a “far more contiguous security standard” throughout Europe. “Now that routes are no longer relevant and markets are no longer relevant, as has been demonstrated [on September 11], there is a need for all airports to adopt the same kinds of standards,” he said. In fact, the European Civil Aviation Conference devoted its security meeting scheduled for the week of September 17 entirely to changes needed following the attack on the U.S.

Asked to find some positive byproduct of the tragedy, Ambrose surmised that the loss of freedom of mobility Americans suffered may help convince politicians throughout Europe of the importance of regulatory harmonization on the continent. “We have been struggling for the last five years under an increasing weight of restrictions designed to curtail the industry’s development,” said Ambrose. “We can at the moment say…‘well, let’s just move everything to rail.’ It’s only when you really lose air transport or suffer major restrictions that you start to recognize what a great contribution to society it makes, and that basic mobility cannot be replaced by rail.”