The recent major increases in fuel prices, exacerbated by the turmoil in the financial and credit markets, have provided the impetus for airlines to take a hard look at their operations and begin to tailor their operations to today’s needs. The increased fuel prices have a major affect on the ability of various aircraft in the fleet to produce positive yields, and the load factors necessary for all aircraft to produce positive yield. This has led airlines to critically evaluate demand and attempt to better match segment demand with capacity. The results of this endeavor are not final as of yet, but it generally means that capacity will be reduced on some routes while others will be eliminated entirely. As a result, many airport operators find themselves unable or unwilling to move forward with planned capital development programs. However, depending on each individual airport’s situation, this period may provide a real opportunity to move ahead and avoid the paralysis that typically accompanies uncertainty.
First, it is important to recognize that there are three very distinct categories of airports with respect to the likely impacts of the current airline restructuring. The first category includes those airports that are unlikely to see any material decline in passenger traffic even with a significant decline in operations. Basically these airports include those that serve the “federal” cities (i.e., those with federal agency regional offices or significant installations), are centers of finance and business, are fortress hub locations, are major international gateways, or are strong destination locations. All of these locations have non-discretionary origin-destination demand that is unlikely to change materially since competing travel modes are also impacted by the cost of fuel. In fact, considering the relatively small changes in airline fares we have seen so far, the adverse impact on the economics of air travel to these specific destinations may be far less than any competing mode.