US Airways Exec Explains Government Role for Airlines: Do No Harm

Last Updated Apr 30, 2010 6:34 AM EDT

C.A. Howlett is a name you probably don't know, but for those in Washington, he's a staple. As SVP of Public Affairs for US Airways (and America West before that), Howlett has been the airline's face in Washington for more than 15 years. He has worked on the city level in Phoenix and on the national level in the Reagan White House. Simply, the man has done a great deal for US Airways and for the industry. So when he spoke at the US Airways media day on the state of the regulatory environment this week, I was eager to listene.

Howlett (shown above) started with the big picture: "There's a residual attitude that airline travel is more of a public good than a private industry." So how do you deal with that?

Our major goal in Washington right now is to have Washington do no harm. We need Washington to allow the industry to function as a private industry; that's how we really serve the communities.
That might sound like a bunch of bull, but fortunately Howlett went on to explain it more. He compares the US Airways footprint to that of the low cost carriers.
We are an airline that serves about 180 cities domestically; we are serving the small and medium size communities and connecting them to that hub and that network. Doug [Parker, CEO and Chairman of US Airways] this morning talked about the future world of 3 to 4 network carriers, and then the point to points, and there's a fundamental difference. The low cost carriers serve 65 cities or less while we serve more than double that. That's the power of the network.

We have to have the ability to function at a level at which we can be profitable. The low hanging fruit are the 60 cities that low cost carriers serve, but we are able to add service in Reagan [National] to small cities if we get our slot swap approved because as you get more slots or more operations at a hub, you start with your highest returning flights first and work down, build connections.

From there, Howlett detailed some of the biggest issues threatening the industry in greater detail.

Rising Taxes and Fees One of his big concerns is the threat of additional taxation, a perennial menace. According to Howlett, this is a threat on multiple fronts.

In the FAA reauthorization bill, there are things like passenger facility charge increases, firefighting facility changes, security fee increases, and more that will cost the airlines, and ultimately the passenger. But the threat isn't just from the national level. Airports are problematic as well.

There's always an attitude that bigger is better at airports. We've seen facilities built that really don't provide a return on investment. One of the issues we're facing with airports is the continual view that growth is going to be in the 3-4-5% range.

It's a mature industry domestically. The stimulation that occurs has largely been met. I'd say if we're looking at 1 to 2% growth over the next decade, that would be good, but most of the airports are looking at the 3-5% range.

The message? Embrace conservatism in terms of taxes, fees, and spending. The reason is that the airlines can't to pass along all these costs to the customer. When fares don't keep pace with costs, marginal flights get too expensive -- and eventually disappear.

Slot Swap Proposal The proposed slot swap between Delta and US Airways in New York and DC isn't an industry-wide issue, but it does show the challenges airlines face in their dealings with with the government.

We need approval from the FAA to transfer slots at [LaGuardia Airport] and international rights from DOT. It's 167 flights, there's no political opposition, there are consumer benefits, both airports support it. It's been a little mystical about the time frame; we are optimistic that we'll get approval on this by mid-May. It's been a major project for only 167 flights.
He summed it up well, and clearly as you'd expect. "If DOT denies this, there are no winners. Everybody loses."

FAA Reauthorization Bill and the DC Perimeter Rule The FAA should have been reauthorized by Congress in 2007, but here we are, still waiting for it to go through. A lot of projects hang in the balance, but it does appear that the bill is getting closer to passing.

We have a bill. The holdup as everybody knows is there's a colossal clash over a labor provision that impacts union representation election and the debate between UPS and FedEx. It has a number of provisions which are costly that we don't support

On the other hand, this is the underlying piece of legislation that US Airways needs to get changes to the DC perimeter rule. We have a proposal now that would allow us or any other airline to take existing flights and move beyond the perimeter. It protects service to small communities; we can only take flights out of major hubs and move them beyond the perimeter rule. We're very optimistic that we're going to get relief on this perimeter rule.

Halting Fuel Speculation Ever since fuel prices started going up, there has been discussion about whether or not speculation was involved in the run-up. Well, now that fuel is spiking again, the discussion has gotten more heated. Provisions to address those concerns have been worked into the financial reform bill, and as you can imagine, many in the industry support it:
There's a bill we support. It requires the Commodity Futures Trading Commission (CFTC) to put position limits on how much a trader can trade on their purchase of derivatives. It requires that it be opened up. Right now, nobody knows who is trading and how much is being traded. It requires that the regulations apply to the over the counter markets and not just the exchanges. This is a very arcane world they operate in, but our experts are very comfortable with this and think it will have a very significant impact on not only the price of fuel but also the volatility of fuel prices. It's critical legislation for the airline industry.
[Photo via Arizona Chamber of Commerce]