Sunday, March 31, 2013

Sequestration, tower closings and the maturation of the aviation industry -By Mary F. Schiavo

By Mary F. Schiavo  

When I was a Professor of Aviation at the Ohio State University, the Chairman of our department was an Aviation Economist, probably the best. He even understood the airline seat pricing buckets and marginal pricing of airline add-ons. I was skeptical about only one thing he predicted, and that prediction has come true—aviation  is now a mature industry, and the number of airlines with excess capacity (empty seats) in the industry has diminished. We have fewer airlines, fewer flights, fewer empty seats and fuller planes. We also have far more fare categories as airlines learn to capture every additional marginal dollar we are willing to spend.

Today, the Federal Aviation Administration (FAA) released its 30-year forecast for the industry and confirmed everything my former Department Chairman predicted. We have just nine major carriers, down from hundreds of carriers in bygone eras.

What the FAA forecast reveals is instructive. While all of Washington, D.C., fights over sequestration, this document reveals that some belt tightening is in order because demand for governmental services, at least those of the FAA, has dropped as much as 30 percent in some categories.   

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