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Seeking a Place at Airports
By SUSAN STELLIN
Published: January 25, 2010
Virgin America has managed to survive skyrocketing oil prices and an economic crisis since it started in mid-2007 and even hopes to achieve an operating profit this year.
Start-up airlines have trouble getting access to scarce runway slots and terminal gates at some of the nation’s biggest and busiest airports.
But the airline, based in San Francisco, still faces the same hurdle that has daunted previous start-ups: getting access to scarce runway slots and terminal gates at some of the nation’s biggest and busiest airports.
“We’ve been told at Newark that we can’t get in, and we’ve been told at J.F.K. that we can’t expand,” David Cush, Virgin America’s chief executive, said, referring to negotiations with the Federal Aviation Administration, which has limited flight operations at both airports to ease delays.
Even if an airline can gain access to runway slots at appealing times, it must negotiate the right to use an airport’s gates, which are typically controlled by the airport authority and airlines that have long-term leases. Established airlines have been reluctant to sublease their gates to low-fare competitors. Or, if they do, they demand high rents, which is why airlines like Southwest have gravitated toward secondary airports like Chicago Midway instead of O’Hare International Airport.
Virgin America has been trying to establish service at O’Hare, where a runway built in late 2008 opened more takeoff and landing slots but has not yet opened the door to new competition.
“Ninety-nine percent of the departures out of O’Hare are operated by legacy carriers, and that is quite unique given the size of the market,” Mr. Cush said, but added that he was optimistic he could negotiate access to gates at O’Hare “in the next couple of months.”
The battle over access to slots is also likely to intensify this year as the economy recovers and the F.A.A. revisits the issue.
In 2008, the government tried to assert its authority and address delays, by proposing to reclaim and auction off about 10 percent of the slots at La Guardia, Newark Liberty International and Kennedy airports. That idea succumbed to challenges from the airlines and the Port Authority of New York and New Jersey, which owns all three airports. But the F.A.A. is working with the current administration to develop a new plan for the slots, said Robert E. Robeson, who manages the agency’s policy analysis division.
“I know the airlines have some disagreement with our decision on this, but the F.A.A. position is that we own the slots,” he said.
Nor is the issue of access solely about competition from new airlines. Aviation specialists contend that the legacy airlines have effectively hoarded their slots by scheduling small planes that pay lower landing fees. But those small planes, the specialists argue, clog runways that could be used for bigger jets carrying more people, contributing to an inefficient system of allocating scarce resources.
“If we let US Airways or American or Delta run 175 of these little 50-seat planes out of La Guardia and use up the runway capacity, that means JetBlue and Southwest and America West can’t come in,” said Hubert Horan, an aviation consultant who is among those supporting flat-rate landing fees, instead of fees based on weight.
“That doesn’t solve the problem but it will break the logjam,” Mr. Horan said, adding that the higher cost of hoarding would motivate airlines to trade slots or schedule bigger planes.
But he conceded that such a remedy was unlikely to be adopted, for the same reason that proposals to auction off slots or charge higher landing fees at peak times, known as congestion pricing, have run aground.
“Every vested interest is opposed for one reason or another,” he said.
While the recession pushed this issue aside, it is bound to return to the fore as the economy improves and airlines increase their schedules — or sooner if the March 1 closing of a crucial runway at Kennedy Airport for repaving worsens delays.
Yet the recession has also spurred some movement in the gate-slot trade. The bankruptcy of ATA Airlines enabled Southwest to buy ATA’s slots at La Guardia for $7.5 million
last spring — its entry into New York City’s major airports. And US Airways has agreed to swap some of its slots at La Guardia for some of Delta Air Lines’ slots at Ronald Reagan National Airport in Washington, in a deal some analysts predict will lead to more efficient use of La Guardia’s sought-after runways.
“US Airways had these very valuable assets and in all candor was misusing them by flying very small planes,” said Darryl Jenkins, a consultant who posted his analysis of the transaction at TheAirlineZone.com. These types of deals have also enabled some start-up airlines to negotiate their way into busy airports. JetBlue is now a major tenant at Kennedy Airport — and even opposed the F.A.A.’s slot auction plan — and will soon be the largest airline at Logan International Airport in Boston, expanding as other airlines have cut back.
But it is still struggling to get access to other destinations, said Robin Hayes, the airline’s chief commercial officer, citing Reagan National as an airport “we still have not been able to penetrate.”
“In some cases, you’ll find carriers hanging on to gates even when they don’t need them just to stop other airlines from coming in,” he said.
Analysts say the success of Virgin America and other low-fare airlines suggests that competition is good for the industry and consumers.
“Cities like Chicago should be working to find ways to bring airlines like Virgin America in,” said Henry H. Harteveldt, a travel analyst for Forrester Research.
“The fact that Virgin America is still flying is a testament to the product, the people and the management,” he said. “Clearly, they’re making it because they’re selling something enough people want to buy.”
By SUSAN STELLIN
Published: January 25, 2010
Virgin America has managed to survive skyrocketing oil prices and an economic crisis since it started in mid-2007 and even hopes to achieve an operating profit this year.
Start-up airlines have trouble getting access to scarce runway slots and terminal gates at some of the nation’s biggest and busiest airports.
But the airline, based in San Francisco, still faces the same hurdle that has daunted previous start-ups: getting access to scarce runway slots and terminal gates at some of the nation’s biggest and busiest airports.
“We’ve been told at Newark that we can’t get in, and we’ve been told at J.F.K. that we can’t expand,” David Cush, Virgin America’s chief executive, said, referring to negotiations with the Federal Aviation Administration, which has limited flight operations at both airports to ease delays.
Even if an airline can gain access to runway slots at appealing times, it must negotiate the right to use an airport’s gates, which are typically controlled by the airport authority and airlines that have long-term leases. Established airlines have been reluctant to sublease their gates to low-fare competitors. Or, if they do, they demand high rents, which is why airlines like Southwest have gravitated toward secondary airports like Chicago Midway instead of O’Hare International Airport.
Virgin America has been trying to establish service at O’Hare, where a runway built in late 2008 opened more takeoff and landing slots but has not yet opened the door to new competition.
“Ninety-nine percent of the departures out of O’Hare are operated by legacy carriers, and that is quite unique given the size of the market,” Mr. Cush said, but added that he was optimistic he could negotiate access to gates at O’Hare “in the next couple of months.”
The battle over access to slots is also likely to intensify this year as the economy recovers and the F.A.A. revisits the issue.
In 2008, the government tried to assert its authority and address delays, by proposing to reclaim and auction off about 10 percent of the slots at La Guardia, Newark Liberty International and Kennedy airports. That idea succumbed to challenges from the airlines and the Port Authority of New York and New Jersey, which owns all three airports. But the F.A.A. is working with the current administration to develop a new plan for the slots, said Robert E. Robeson, who manages the agency’s policy analysis division.
“I know the airlines have some disagreement with our decision on this, but the F.A.A. position is that we own the slots,” he said.
Nor is the issue of access solely about competition from new airlines. Aviation specialists contend that the legacy airlines have effectively hoarded their slots by scheduling small planes that pay lower landing fees. But those small planes, the specialists argue, clog runways that could be used for bigger jets carrying more people, contributing to an inefficient system of allocating scarce resources.
“If we let US Airways or American or Delta run 175 of these little 50-seat planes out of La Guardia and use up the runway capacity, that means JetBlue and Southwest and America West can’t come in,” said Hubert Horan, an aviation consultant who is among those supporting flat-rate landing fees, instead of fees based on weight.
“That doesn’t solve the problem but it will break the logjam,” Mr. Horan said, adding that the higher cost of hoarding would motivate airlines to trade slots or schedule bigger planes.
But he conceded that such a remedy was unlikely to be adopted, for the same reason that proposals to auction off slots or charge higher landing fees at peak times, known as congestion pricing, have run aground.
“Every vested interest is opposed for one reason or another,” he said.
While the recession pushed this issue aside, it is bound to return to the fore as the economy improves and airlines increase their schedules — or sooner if the March 1 closing of a crucial runway at Kennedy Airport for repaving worsens delays.
Yet the recession has also spurred some movement in the gate-slot trade. The bankruptcy of ATA Airlines enabled Southwest to buy ATA’s slots at La Guardia for $7.5 million
last spring — its entry into New York City’s major airports. And US Airways has agreed to swap some of its slots at La Guardia for some of Delta Air Lines’ slots at Ronald Reagan National Airport in Washington, in a deal some analysts predict will lead to more efficient use of La Guardia’s sought-after runways.“US Airways had these very valuable assets and in all candor was misusing them by flying very small planes,” said Darryl Jenkins, a consultant who posted his analysis of the transaction at TheAirlineZone.com. These types of deals have also enabled some start-up airlines to negotiate their way into busy airports. JetBlue is now a major tenant at Kennedy Airport — and even opposed the F.A.A.’s slot auction plan — and will soon be the largest airline at Logan International Airport in Boston, expanding as other airlines have cut back.
But it is still struggling to get access to other destinations, said Robin Hayes, the airline’s chief commercial officer, citing Reagan National as an airport “we still have not been able to penetrate.”
“In some cases, you’ll find carriers hanging on to gates even when they don’t need them just to stop other airlines from coming in,” he said.
Analysts say the success of Virgin America and other low-fare airlines suggests that competition is good for the industry and consumers.
“Cities like Chicago should be working to find ways to bring airlines like Virgin America in,” said Henry H. Harteveldt, a travel analyst for Forrester Research.
“The fact that Virgin America is still flying is a testament to the product, the people and the management,” he said. “Clearly, they’re making it because they’re selling something enough people want to buy.”
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