Forecasts (Chapter 2)
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Chapter Two FORECASTS The definition of demand that may airport planning studies. The FAA reasonably be expected to occur reviews individual airport forecasts during the useful life of the airport’s with the objective of comparing them key components is an important factor to its Terminal Area Forecasts (TAF) in facility planning. In airport master and the National Plan of Integrated planning, this involves projecting Airport Systems (NPIAS). In addition, potential aviation activity for a 20-year aviation activity forecasts are an timeframe. Aviation demand forecast- important input to the benefit-cost ing for the Salina Regional Airport anal-yses associated with airport (SLN) Master Plan will consider development, and FAA reviews these commer-cial passenger service projec- analyses when federal funding tions, general aviation forecasts for requests are submitted. based aircraft, and aircraft operational activity projections by aggregate As stated in FAA Order 5090.3C, Field annualized totals and by specific Formulation of the National Plan of categories. Finally, military oper- Integrated Airport Systems (NPIAS), ations, unmanned aircraft system forecasts should: (UAS) operations, and peak period • Be realistic activity should be examined. All of • Be based on the latest these demand categories will serve as available data the basis for cur-rent and future facil- • Be reflective of current ity planning. conditions at the airport • Be supported by information The Federal Aviation Administration in the study (FAA) has oversight responsibility to • Provide adequate justification for review and approve aviation forecasts airport planning and development de-veloped in conjunction with 2-1 Recognizing this, it is intended to develop FAA NATIONAL FORECASTS an Airport Master Plan for Salina Regional Airport that will be demand-based rather Each year, the FAA updates and publishes than time-based. As a result, the reason- a national aviation forecast. Included in able levels of activity potential that are this publication are forecasts for the large derived from this forecasting effort will air carriers, regional/commuter air carri- be related to the planning horizon levels ers, general aviation, and FAA workload rather than dates in time. These planning measures. The forecasts are prepared to levels will be established as levels of ac- meet budget and planning needs of the tivity from which specific actions for the constituent units of the FAA and to pro- airport to consider will be presented. vide information that can be used by state and local authorities, the aviation indus- The demand-based manner in which this try, and the general public. The current Master Plan is being prepared is intended edition when this chapter was prepared to accommodate variations in demand was FAA Aerospace Forecasts – Fiscal which can be caused by many factors, in- Years 2012-2032, published in March cluding changes in the aviation industry 2012. The FAA primarily uses the eco- as well as the economy in general. De- nomic performance of the United States mand-based planning relates capital im- as an indicator of future aviation industry provements to specific demand factors, growth. Similar economic analyses are such as based aircraft, instead of points in applied to the outlook for aviation growth time. This allows the airport to address in international markets. capital improvement needs according to actual demand occurring at the airport. Over the past decade, the commercial air Therefore, should growth in commercial carrier industry has suffered several ma- passenger boardings, aircraft operations, jor shocks that have led to reduced de- or based aircraft slow or decline, it may mand for air travel. These shocks include not be necessary to implement some im- the terror attacks of September 11, 2001, provement projects. However, should the rising fuel prices, and the most significant airport experience accelerated growth, global economic recession since the Great the plan will be flexible to allow for expe- Depression. Airline business plans dited development opportunities. changed significantly to address the vola- tility in the industry. Carriers began In order to fully assess current and future charging separately for services histori- aviation demand for the Salina Regional cally bundled in the price of a ticket such Airport, an examination of several influ- as checked luggage fees and food fees. To encing factors is needed. These include lower operating costs, carriers eliminated national and regional aviation trends, his- unprofitable routes and grounded older, torical and forecast socioeconomic and less fuel efficient aircraft. By 2010, the demographic information of the area, and industry returned to profitability for the competing transportation modes and fa- first time since 2007. cilities. Consideration and analysis of these factors will ensure a comprehensive outlook for future aviation demand at Sa- ECONOMIC OUTLOOK lina Regional Airport. The aviation industry in the United States has experienced an event-filled decade. 2-2 Since the turn of the century, the industry back with growth in consumer spending, has faced impacts of the events of Sep- a turn-around in the housing market, and tember 11, 2001, scares from pandemics traction in the labor market. such as SARS, the bankruptcy of five net- work air carriers, all-time high fuel prices, Economic growth on the global scale is and a serious economic downturn with expected to be higher, with emerging global ramifications. The Bureau of Eco- markets in Asia/Pacific and Latin America nomic Research has determined that the leading the way. The global GDP was worst economic recession in the post- projected to grow at an average of 3.3 World War II era began in December percent over the 20-year forecast period. 2007. Eight of the world’s top 10 econo- mies were in recession by January 2009. COMMERCIAL PASSENGER AIRLINES As the recession began, unemployment in the United States was at 5.0 percent. Although the recession has been officially While it grew through 2008, unemploy- over for more than two years, carriers ment intensified in 2009 until peaking at continue to deal with economic uncer- 10.1 percent in October, although the re- tainties with business travel budgets still cession officially ended in June of that strained and unemployment still above year. As of the end of 2011, unemploy- eight percent. Capacity reductions in re- ment stood at 8.6 percent of the labor cent years helped to counter fuel costs force. and reduce demand. Load factors and trip lengths have increased, while availa- This recession did not face the high infla- ble seats per aircraft mile (capacity) de- tionary environment of the recession in creased. The reduction in capacity did the early 1980s or the high-energy costs allow the carriers to raise air fares when of the mid-1970s recession. While reces- demand began to return. This has al- sions during the post-war era have aver- lowed the industry to post net profits the aged 10 months in duration, this one last- past two years. ed 19 months. Continued levels of high debt, a weak housing market, and tight The passenger airlines in the United credit are expected to keep the recovery States are comprised of 16 mainline car- modest by most standards. The resolu- riers that use large passenger jets (over tion of those factors will determine the 90 seats) and 68 regional carriers utiliz- future path of the recovery. ing smaller piston, turboprop, and re- gional jets (up to 90 seats). In addition, The nation’s gross domestic product there are 26 all-cargo carriers providing (GDP) is the primary measure of overall domestic and/or international air cargo economic growth. The FAA forecasts services. Three distinct trends are emerg- were based upon a 3.1 percent annual av- ing in today’s commercial air carrier in- erage growth in GDP from federal fiscal dustry: year (FY) 2013 through FY 2017. For the long term, the FAA forecasts are based • Convergence of the network and low upon real GDP growth slowing to 2.5 per- cost carrier business models and unit cent annually. GDP growth rate in 2011 costs; was 2.1 percent with signs at the end of • Continuing industry consolidation and the FY showing pent-up demand coming restructuring, and; 2-3 • The proliferation of ancillary revenues • Mainline carriers shifting some routes (e.g., baggage fees). to regional carriers. A sign that the low cost carriers and net- Over the past few years, however, this work carriers are converging is the nar- trend has slowed down considerably. In rowing share of capacity flown between 2011, mainline carrier passenger growth these two groups and the fares they was up 3.4 percent over 2010, while re- charge. Low cost carrier capacity has gional carriers declined by 0.4 percent. been on the rise. Since 2000, the share of capacity flown by the low cost carriers The FAA provides several measures for has almost doubled, going from 17 per- commercial airline forecasts. After expe- cent in 2000 to 32 percent in 2011. Air- riencing growth in 2011, domestic system fares have also been converging as low capacity was projected to decrease slight- cost carriers and network carriers are ly in 2012 by 0.8 percent. Similarly, main- lowering fares. line carrier capacity is forecast to de- crease when compared to 2011 (down 0.3 The industry continues to consolidate. percent). Regional carriers were forecast Network carriers Northwest and Delta to decrease 0.5 percent in 2012, following merged in 2010. Frontier Airlines com- modest growth of 0.6 percent in 2011. pleted its acquisition of Midwest Airlines. For the entire forecast period, domestic Also announced in 2010 was the merger capacity is projected to increase at an av- of Continental and United Airlines, erage annual rate of 2.5 percent, with Southwest and Air Tran, and SkyWest’s mainline carriers growing slower (2.4 acquisition of ExpressJet.