Happy New Year, Sky Talk readers!
As we start off another year (and a new presidential administration), there are seven aviation issues that we’ll be watching throughout the year.
Dallas Love Field gates - It’s been three months since the Fifth Circuit Court of Appeals heard oral arguments in the gate space case at Love Field. And there has been no ruling on the temporary injunction issued by a federal district judge in January that allows Delta Air Lines to continue to operating at the Dallas airport. Complicating the matter is Virgin America’s acquisition by Alaska Airlines. Alaska executives haven’t said what they plan to do with the two gates at Love Field that Virgin America currently uses. In the meantime, Delta and Southwest Airlines continue to share gate space and there appears to be no room for additional flights to be added at Love Field.
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American headquarters - We know American’s new headquarters campus will be named after former CEO Bob Crandall, but aside from that detail not much else is known. Over the summer, the carrier demolished the buildings on the 97-acre site on the west of Highway 360 and has cleared the site of debris while keeping many of the large trees on the property. Hopefully in 2017, employees (and the media) will see architecture plans of the new campus and construction beginning on the buildings.
Southwest love for Hawaii - Southwest Airlines is getting a new aircraft, the Boeing 737 MAX 8, next year and we’re keeping our fingers crossed that it will mean Southwest will finally announce service to Hawaii (my home state). The 737 MAX 8 can fly 300 to 500 miles farther than any other Boeing 737 that Southwest currently has in its fleet.
Will airline stocks continue to soar? - This was a bumpy year for airline stocks as several major carriers lost almost 30 percent of their value in the first half of 2016. But strong demand, particularly after the presidential election, sent airline stocks soaring, making 2016 a good year to be an airline investor. Even billionaire Warren Buffett, who has shunned airline investments for years, decided to reenter the industry by taking significant stakes in American, United, Delta and Southwest. Wall Street analysts predict solid earnings for airlines in the first half of 2017 but are wary of rising labor costs and fuel prices hurting profit margins.
Fighting with Middle East carriers - The three largest U.S. airlines have lobbied Congress and the Obama Administration about the growing presence of Persian Gulf carriers at U.S. airports but their efforts appear to have fallen on deaf ears. The airlines contend that the Gulf carriers have received government subsidies allowing the airlines to aggressively expand in the U.S., hurting U.S. carriers’ international business to Europe and Asia. With a new presidential administration, Open Skies treaties with the Middle East countries could be renegotiated or sanctions imposed on the Persian Gulf carriers.
Changes to trade agreements - Although U.S. airlines have complained about unfair subsidies for Persian Gulf carriers, they have benefited from Open Skies treaties and trade agreements that have made global trade easier. During the presidential campaign, Donald Trump has said he wants to renegotiate trade agreements that he says have been harmful to the U.S. “If you look at the exposure that every one of those network carriers has internationally, a trade policy that makes it difficult to do business overseas could be very damaging,” said aviation analyst Bob Mann.
Infrastructure funds for airports - For years, airports have tried to get Congress to approve an increase in the passenger facility charge that is assessed to every airplane ticket. Currently, PFCs are capped at $4.50 per flight segment with the maximum of four PFCs charged on a round trip. The airlines have fought an increase to PFCs, saying that consumers see it as a fare hike. However, Trump has suggested he wants to invest in infrastructure in the U.S. and airport executives are hoping that a PFC increase may finally get approved.