What's holding the airline sector back, in addition to high jet fuel prices, and keeping the likes of AMR's (NYSE: AMR) American, Delta (NYSE: DAL), UAL's (NYSE: UAUA) United, Southwest (NYSE: LUV), and Continental Airlines (NYSE: CAL) from realizing their potential?
Many economists and analysts would agree that, along with other infrastructure and related investments, the nation's air traffic control system must be upgraded, if the United States seeks an air transportation system capable of maintaining a high level of safety -- and better service -- in the 21st century's more-crowded skies.
Further, that the United States has not already replaced an essentially generation-old air traffic control technology with a modern system is a serious demerit, and one that has -- through delays, cancellations, and other problems -- taken a toll on the flying public and the major carriers.
To date, the Bush Administration's plan to end gridlock on the runway has largely consisted of replacing a primarily flat-fee system (based on aircraft weight) for departure slots at airports with a market-based system: airlines would pay more to schedule flights at heavily congested times (for example, Mondays at 8 a.m.) than at other times (such as Wednesdays or Thursdays at 1 a.m.).
However, while some elements of market-based slotting will help, the nation's skies still won't be able to reduce mounting delays (absent a severe recession) until new air traffic control software has been installed. The Federal Aviation Administration has spent $3 billion on new air traffic control software, but the system is still years away from implementation.
Airline Sector/Travel Analysis: It seems the airline sector can't catch a break. A couple of quarters after its recovery started following the massive decline in travel following the September 11, 2001, terrorist attack, rising oil prices sent jet fuel costs to unprecedented levels. Next, globalization and the rise of emerging market airlines intensified competition for international travelers. Then long-planned new air traffic control software was delayed. Given the above, in addition to an already full domestic plate, one of the first tasks the new U.S. president will have to undertake is a redoubled effort to get next-generation air traffic control technology deployed, for the good of the flying public, airlines, and investors.
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Reader Comments (Page 1 of 1)
8-03-2008 @ 12:39PM
Anonymous said...
What a load of bollocks. The new en-route software isn't going to work miracles for delays, and neither is NextGen. The simple fact of the matter is that airports have a physical cap on the number of operations that they can accomplish per hour. Nothing can change that, aside from the addition of new runways that don't interfere with the current configuration. Example? http://gettheflick.blogspot.com/2008/07/when-same-means-worse.html
8-03-2008 @ 4:55PM
Justin S. said...
I agree that new technology is needed, but I don't feel that it will the fix-all solution to the industry problem. But looking 5-7 years down the road, when this technology will most likely be implemented, one (or more) of the airlines first mentioned may no longer be in operation which will may be all that is needed to ease the current traffic issues.