Getting back to speed with a new baby in the house isn’t easy, so I’m posting one more guest post today to help me catch up. (Besides, I need time to read through all the American Airlines changes as well as the FAA reauthorization bill for posts next week.) This one is from a familiar face . . .

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My frenemie Brett “Cranky Flier” Snyder begged me (ok, he just asked) to write a guest post for his tiny, insignificant blog. Normally, I would have just ignored Brett’s email (which I do 98.7% of the time). But he and his lovely wife delivered my baby avgeek niece or nephew, so I relented.

I had one of the best jobs in the world – airports and security editor for Aviation Week magazine. That, along with being a judge the past four years for Airports Council International-North America’s annual concessions contest and my extensive world travels going back to when I was 5, has given me a fine appreciation of what I like to see in airports when it comes to concessions.

I’m old enough to remember the days when airport concessions consisted of “Newstand,” “Restaurant,” “Snack Bar” and “Gifts.” but oh, how times have changed!! This change has come for two reasons.

One, as airlines have merged and cut routes and frequencies, they are paying airports less in landing fees and rent. Two, because of post-9/11 security changes, travelers are spending more time in airports, and they’re demanding more sophisticated food/beverage and retail options. So below are my five picks for airports doing great things with their concessions programs.

• Portland International Airport – This is a rare airport, in that they don’t contract with a big concession operator like HMS Host or Delaware North to handle their concessions. They use their own in-house team to come up with what I think is a near-perfect mix of local/regional and national brands. On the food side, they including the Laurelwood Brewing Co., Pizza Schmizza, Starbucks, and Panda Express. On the concessions side, there’s the iconic Powell’s Books, Columbia Sportswear, and The Oregonian news stand.
• San Francisco International Airport – I’ve had the chance to see my original hometown airport evolve over the years, and I love the changes. Among its treasures, this airport has a full-service medical clinic and a world-class art museum. As I write this, I haven’t been to the new Terminal 2, so nothing in there is in this post. But great food options abound: Andale Mexican Restaurant, Boudin’s Bakery and Café, Tomokazu and Peet’s Coffee. Retail options are U Threads (sells clothing and items from Bay Area universities), Aviator Books, Coach, and Ghiradelli.
• Phoenix Sky Harbor International Airport – This has always been one of my favorite airports because of features like free Wi-Fi, two pet parks, and one of the first cell phone lots in the country. Terminal 4 (home to Southwest Airlines and US Airways) has some great food choices: Blue Burrito Grille (restaurant and carry-out), Paradise Bakery and Café, Einstein Bagels and Quiznos. On the retail side, check out A to Z Kids, In Celebration of Golf, and See’s Candies.
• Chicago Midway Airport – I have actually scheduled some of my Southwest Airlines trips to go through Midway because I love the shopping options there. The main concessions area has an actual sense of place. Food choices include Harry Caray’s, Nuts on Clark (I’d kill for this popcorn), Ben & Jerry’s, and McDonalds. Available retail choices are House of Blues, Discover Chicago, and Kids Works.
• Dallas/Fort Worth International Airport – I did an insider’s tour of this facility a few years ago and had a grand time. This is a very passenger-focused airport, with concessions including free Samsung lounges (with seats, outlets and Wi-Fi) and the giant Shop 24 vending machine that sells everything from diapers to Caesar salads. I’m also a big fan of the La Bodega Winery, Cereality Breakfast Bar, Dunkin Donuts, and Au Bon Pain. Retail options include my beloved Bijoux Terner (everything is $10!), Natalie’s Candy Jar, Official Dallas Cowboys Pro Shop, and Bose.

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I appreciate Brett allowing me to blog on one of my favorite topics. You can follow my musings over at AviationQueen.com and follow me on Twitter at @AvQueenBenet.

I’m still out on leave, but I’ll be back soon. Enjoy this post about small communities . . .

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Over 70% of US airports with commercial air service are served exclusively by regional airlines. And almost all of those airports reside in or next to small or midsize communities. Unfortunately, both the communities and regional airlines face head winds in the coming years. New regulations coupled with the potential for additional taxes and reductions in subsidies will hamper the regionals’ ability to grow and operate with sustained profitability. This will have a direct effect on the small communities that regional airlines serve.

Most people have never heard of Pinnacle Airlines, ExpressJet Airlines, or Republic Airlines but have flown on them many times. An average regional airline flies turboprop aircraft or jet aircraft with less than 100 seats on a contract basis for mainline carriers such as United or Delta. Although separate companies, the regionals usually fly under the mainline’s brand such as Delta Connection or United Express. In most cases, Delta and United take care of scheduling, promoting, and selling tickets for the flights while the regional takes care of providing the primary product. Now, let’s hop into some of the issues.

One of the bigger impacts to the industry will be felt when new rules regulating pilot duty time kick in. (Cranky did a good job of breaking down this issue in a previous post.) These new rules were introduced to address ongoing concerns about pilot fatigue. Pilots will now work a little less and get more rest. This makes sense. Who doesn’t want a well-rested pilot at the controls?

But there is a flip side. The new rules governing duty and rest periods will force carriers to hire more pilots if they want to run the same schedules they have today. The savvy regionals will work diligently with their mainline partners to reoptimize schedules. But they will not be able to totally avoid higher pilot costs. Regionals will have to pass on the additional costs to their mainline customers to remain at current profitability levels.

Another new upcoming regulation will increase the minimum number of hours of experience a pilot needs to fly for an airline. Currently, a pilot only needs 250 hours along with a Commercial License to get hired with a regional airline. In a couple of years, this will increase to 1,500 hours and require an Airline Transport Pilot (ATP) certificate.

On the surface, this seems like a no brainer. More hours = more experience = safer flying. But there isn’t research proving that pilots with 1,500 hours consistently fly safer than someone with less experience. When this steep increase is implemented, it will create an artificial pilot shortage. Some pilots pay out of pocket or through loans to get to 250 hours. Getting to 1,500 hours on one’s own dime will push a bunch of would-be pilots out of the market. The shortage will push up wages to account for the lower supply and result in additional expenses.

In the fall of 2011, the Obama administration proposed creating a new $100 departure tax for all air carrier departures and general aviation jet departures. The proposal also increased security taxes on airline tickets and was given to the super committee for consideration. An impressive coalition of 30 organizations including airline trade groups, general aviation groups, unions, and manufacturers quickly got together to fight the proposal. The rally cry is that airlines and passengers already pay higher taxes than alcohol, tobacco and guns which are intentionally set high to discourage their use.

It appears that the White House quietly backed off the proposal because of the backlash it received during an election cycle. If the proposal was revisited and passed, it would have a disproportionate effect on regional airlines that carry fewer passengers each flight than their mainline counterparts. It’s much cheaper to spread $100 over 200 passengers than over 50.

Another debate in Congress has been the over subsidizing air service to small communities through the Essential Air Service (EAS) program. This program is designed to help provide small communities with air service that cannot, due to such low demand, support itself. I expect a haircut or possibly elimination of this program. Accordingly, many routes would cease to exist.

In isolation, each of these challenges would have a much smaller impact on the industry. Together, these policies would have significant negative economic effects and force airlines to cut flights on underperforming routes. And each flight lost in a small community has larger implications due to the community’s relative size.

These changes will burden an industry already struggling with consolidation and high fuel prices. Pinnacle is flirting with bankruptcy. SkyWest and Republic’s financials have been limping along since their acquisitions of ExpressJet and Frontier respectively. American Eagle’s anticipated spinoff from American Airlines will increase competition in an already saturated market. We’re seeing a steep decline in small jets which don’t work with today’s fuel prices. Turning a good profit in the regional industry is proving difficult even while their mainline counterparts are starting to enjoy being in the black.

Some municipalities and the airlines will come up with creative solutions to mitigate the effects. They will also need to continue lobbying the government to implement policies that have positive economic effects. Regardless, it appears that the end result will be fewer options in small communities.

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Matt Tregre is an airline enthusiast and has held positions in finance, revenue management, pricing, customer service, and baggage tossing with stints at Southwest, ExpressJet, & Pinnacle. During school, he developed marketing plans for small airports. He now works in revenue strategies for a corporate aviation company and greatly misses having flight benefits.

[Original photo via Wikimedia Commons user Paranomia/CC 3.0]

I’m still hanging out, getting to know my son, so here’s another guest post for you. This time it’s an interesting look at airports and their names.

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The name of an airport: we see it when we book reservations, on billboards as we cruise down the highway, on signs directing us towards the terminals, and we hear it constantly over the airport’s PA and on the airplane itself. As frequent fliers, we try to tune it out and focus on the three-letter airport code—it’s a daunting task given how often we’re exposed to the actual name.

But there are reasons why air travelers are constantly inundated with the full name of the airport. First, an airport’s name is the largest free advertisement in its attraction toolbox. It’s plastered everywhere, and mostly not at the airport’s expense. Flight search engines use the airport’s full name in search boxes, airlines use the airport’s full name in itineraries, and cities use the airport’s full name on signs on highways and roads. With this much expensive real estate freely displaying the airport’s name, it’s no wonder that this component is integral for attracting passengers. Second, the name happens to tie in nicely with the region’s economic development strategy. Not only is it important for funneling more passengers through an airport’s gates and services, but it also is important for the region the airport serves.

Take the example of what happened recently in Bozeman, Montana, where the name of its airport was recently changed from Gallatin Field Airport to Bozeman Yellowstone International Airport at Gallatin Field. Not only does the new name include “Bozeman,” the largest city the airport serves, and “international,” even though the airport does not yet have a customs facility, but also “Yellowstone” was added. The airport, which is approximately 90 miles from Yellowstone National Park, changed its name to better compete with other airports that serve the park (Yellowstone Airport in West Yellowstone, Montana which is just a couple miles from the park; Jackson Hole Airport in Jackson Hole, Wyoming which is approximately 47 miles from the park; and Yellowstone Regional Airport in Cody, Wyoming which is approximately 52 miles from the park).

Even though none of these airports are actually located in Yellowstone, their names all work to advertise their proximity to this popular destination. Numerous other airports utilize this strategy of including a nearby destination in part of their names: Fresno Yosemite International Airport, which is located in Fresno, CA, is approximately 60 miles from the park; and the airports that serve Washington, DC (Ronald Reagan Washington National Airport, Washington Dulles International Airport, and Baltimore Washington International Thurgood Marshall Airport) that all use Washington in their name yet none are actually located in the city.

However, not every airport that claims to utilize this strategy actually does so. Last year the airport that serves Budapest, Hungary changed its name from the Budapest Ferihegy International Airport to the Budapest Liszt Ferenc International Airport. With a new terminal opening at the airport and the country taking over the EU presidency, the national government claimed that a name change was necessary to be more descriptive and more attractive to European travelers—after all, who has ever heard of Ferihegy? To further support the government’s cause, they elicited the support of the population, naming the airport after the country’s musical hero, Franz Liszt, who is widely known and celebrated throughout Europe and the world. Throughout the negotiations, the government made the case that changing the airport’s name would better promote the region during such a crucial time and in the future. The problem is that it is hard to imagine that naming an airport after a prominent figure would actually increase passenger traffic—is Washington/National attractive to passengers because it’s now named after Ronald Reagan or is it because it’s mere minutes from the city center? While the name change in Budapest might promote Hungarian culture, it certainly does little to increase growth for the airport or the region.

An airport’s name is clearly an important asset, much like the names of sport stadiums in the U.S. Airports use their names as an advertisement to promote passenger growth as well as the region’s wider development. Sports stadiums lease or sell their names as an additional source of revenue. If airport finances get much worse, maybe we’ll start seeing corporate sponsorship there, as well—who knows, perhaps the GM Detroit International Airport or the Exxon Mobil Dallas International Airport will be on the next billboard you pass?

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Jacob Kuipers is an economic policy consultant who has lived in Vermont, Washington, DC, Montana, Boston, Budapest, and Cleveland over the past five years. His current clients include the U.S. government, the Harvard Business School, and economic development organizations. He is a student pilot and an airplane enthusiast. You can reach him at jacob /dot/ a /dot/ kuipers /at/ gmail /dot/ com.

I’m still on paternity leave, but today I have an interesting post on the world of leasing from someone on the inside.

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The aircraft leasing business is an integral part of the aviation world, yet the travelling public knows relatively little about it. Currently about 38% of the world’s commercial fleet is leased. This figure is expected to grow to over 40% in just the next few years.

Ireland, you may be surprised to find out, is a bit of a hub for aircraft leasing. Nine out of the top 10 leasing firms in the world operate here. This is due to a few factors. We have favourable corporation tax rates and tax treaties that allow leasing companies to be competitive. In addition to this, there is a big pool of aviation expertise in our country. One of the first major players in the aviation leasing industry was Guinness Peat Aviation. After its dramatic demise, several companies rose from the ashes and ever since, Ireland has been a major player in global leasing.

But first, why do airlines need to lease planes – can they not just buy them, you might ask? Well yes they can, but owning your own aircraft can present problems.

Price
Aircraft are not cheap. You only need to look at the list prices of Airbus and Boeing to see just how pricey they can be. Therefore some airlines might not be able to afford aircraft, or in a bid to keep their balance sheets looking healthy might not want to have such large outlays. Leasing allows airlines a relatively cheap way of getting aircraft, as there isn’t the same extent of expenditure, and it stops their balance sheets from looking too asset heavy, tying up capital. Also from an operational point of view, it allows airlines access to newer planes and more fuel efficient aircraft. Cranky Air might be able to buy a 737-200 on the market, but could afford to lease a newer 737-800.

Economic uncertainty
The last few years have been a good example of why leasing planes can be a better alternative than owning them outright. When demand is unstable, the more flexibility you have in your fleet levels, the better.

Take for example Cranky Air, based in Long Beach. They buy 5 aircraft from Comac, yet owing to a major corporation opening a plant nearby they now have enough demand to have 8 aircraft in service – this is where a leasing company can be the airline’s best friend. They can step in and relatively cheaply (relative to buying an aircraft) provide them with aircraft to cater for the spike in demand.

Conversely, let’s say the largest employer in Long Beach were to shut up shop and Cranky Air now only needs 3 aircraft for the next two seasons. If they own the 5 aircraft they would find themselves in a major problem, trying to fill the aircraft or lease them out. However if their fleet was composed of a few leased aircraft, they could arrange for the early return of the aircraft, and with some penalty payments, address their capacity issues.

Here’s the view from the lessor’s perspective.

Risk
When dealing with a potential new customer, there will always be risk analysis done on the airline. Do they have a good safety record or have there been any incidents in their past? What are the chances they might not pay us? If a customer is risky, there are mechanisms to protect yourself as a lessor. This would be done by getting guarantees or large deposits that you can access in the event of default by the airline. If they are too big a gamble as an operator – don’t put your aircraft in there in the first place.

Maintenance
Long leases are better for the lessor than shorter ones. The fewer changeovers an aircraft does during its life the better! When an aircraft comes off lease with Cranky Air, in an all business class configuration (owing to a misplaced opinion that an all business class Long Beach – Topeka route was a guaranteed success), and we want to place the aircraft with a new operator, Concierge Air, who want it in an all economy lay-out, reconfiguring the aircraft comes at a huge cost to us. Lessors try to avoid bespoke aircraft lay-outs like this, a colleague of mine refers to them as “Aircraft with a sushi-bar and split galley.”

Other considerations are maximum takeoff weights (MTOWs), repainting the aircraft, and inflight entertainment systems. So if we can place the aircraft in 2 ten year leases, rather than four 5 year leases – this is incredibly beneficial to the leasing entity. Like commercial airlines, our planes don’t make money when they are sitting on the ground, so we also try and keep lead-in times between leases to an absolute minimum. Ideally, we like to have a new customer lined up for an aircraft before it even comes off lease with the previous operator. In an ideal world you would look to find a customer who wants the aircraft in its current configuration, but that isn’t always possible.

Legal
From a legal perspective an aircraft needs to be placed with airlines that aren’t surrounded by red-tape. Certain jurisdictions are typically avoided, as the red-tape to get the aircraft on lease and out at the end of the lease is too onerous and costly. For example, sometimes you see airlines across the world operating aircraft that are on the Irish register (EI-XXX), as their own national registers might be a nightmare to deal with.

The airline industry is unpredictable by its nature and despite all these checks, sometimes leases do not work out. The lessee might not maintain your aircraft as agreed, or simply not pay. If this happens you could negotiate with the airline for an early return, or if the relationship becomes hostile, you can use national/international authorities to seize the aircraft in a friendly jurisdiction who will be receptive to your plight. This could be done by an airport authority or someone like Eurocontrol, who may also be owed fees for the use of the same aircraft. It is typically easier to negotiate a compromise as seizing aircraft can get litigious and can restrict the use of the plane until it is all settled. A country’s aviation authority might not take kindly to you barging in and taking planes back, hence they could make your life hell trying to get the aircraft off the local register or drag you through the local courts.

In the future, it will become more likely that the planes you fly on will be leased as this area of the aviation world grows. Next time you fly, consider for a moment that you could potentially be on board a hired aircraft.

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David Soffe is a self-professed aviation nerd- he blames this on both his parents who worked in the airline industry. He is a Business and Law graduate from UCD Dublin. Currently he is working as a legal intern in an international aircraft leasing firm in Dublin. You can find him on Twitter @davidwilliamp.