1
Date:
16
August
2004
To:
James
Covington,
EPA
From:
Cal
Franz
and
Maureen
F.
Kaplan,
ERG
Subject:
Airport
Industrial
Discharges
 
Industry
Profile
1.
Summary
The
economic
analysis
of
increased
pollution
control
costs
 
primarily
for
deicing
effluents
 
will
need
a
focus
on
secondary
impacts
not
typical
for
other
industries.
The
reason
for
this
is
that
airports
have
a
distinctive
financial
structure.
They
are
frequently
organized
on
a
residual­
cost
basis
which
means
that
they
are
legally
required
to
recover
all
costs.
Thus,
airports
do
not
operate
in
a
traditional
market
economy.
They
might
be
envisioned
as
"
transparent"
where
the
costs
move
through
the
airport
to
those
which
will
ultimately
pay
those
costs.
The
economic
analysis,
therefore,
needs
to
focus
on
who
will
bear
the
increased
costs.
While
airports
might
have
several
options
to
recover
costs
(
e.
g.,
increased
concessionaire
fees,
increased
passenger
fees,
and/
or
increased
fees
on
airlines),
under
a
residual­
cost
arrangement,
the
airlines
ultimately
assume
the
increased
costs
not
otherwise
paid
by
alternative
revenue
sources.
The
financial
condition
of
the
U.
S.
airline
industry
has
deteriorated
sharply
since
September
11,
2001.
There
are
no
obvious
signs
of
a
rapid
turnaround,
particularly
for
large
commercial
airlines
(
see
Section
6).
An
economic
analysis
of
added
costs
for
controlling
airport
industrial
discharges
will
need
to
include
an
analysis
of
the
current
financial
state
of
the
airline
industry
as
well
as
the
airports.

2.
Introduction
Airport
industrial
discharges
was
identified
as
an
industry
sector
currently
not
regulated
by
effluent
guidelines
through
stakeholders'
suggestions
for
the
2003/
2004
effluent
guidelines
program
plan.
EPA
examined
discharges
for
this
industry
in
the
Toxics
Release
Inventory
(
TRI)
and
Permit
Compliance
System
(
PCS)
databases
and
decided
that
additional
data
collection
was
needed
before
the
Agency
could
determine
whether
there
are
non­
trivial
discharges
from
this
industry
(
USEPA,
2003).

This
memorandum
provides
an
initial
industry
profile.
Section
3
describes
the
subset
of
the
airport
industry
of
interest,
provides
preliminary
facility
counts
and
the
number
of
airports
belonging
to
small
entities.
Section
4
reviews
airport
financing
and
the
implications
for
the
economic
analysis
should
EPA
select
this
industry
for
an
effluent
guideline.
Section
5
reviews
options
for
airport
capital
expenditure
financing,
changed
uses
for
AIP
grants
since
September
2001,
and
the
impact
of
airline
bankruptcies
on
airport
financing.
Section
6
provides
a
brief
overview
of
the
recent
financial
condition
of
the
airline
industry.
2
3.
Facility
Counts,
Ownership,
and
Small
Entities
The
discharges
of
interest
are
associated
with
deicing
and
anti­
icing
aircraft.
EPA
identified
211
airports
with
the
potential
for
significant
deicing
operations
based
on
the
number
of
operations
(

10,000
operations
per
year)
and
snowfall
(

1
inch
per
year),
see
ERG,
2000.
ERG
downloaded
the
Federal
Aviation
Administration
(
FAA)
Airport
Data
(
5010)
and
Contact
Information
data
file
for
National
Flight
Data
Center
(
NFDC)
facilities
(
FAA,
2004a).
The
data
exports
are
for
effective
date
August
5,
2004.

ERG
matched
the
211
airports
of
interest
to
their
owners
and
whether
the
owner
was
public
or
private
by
the
airport
code,
city,
and
state.
Airport
ownership
is
composed
of:

#
Stewart
International
Airport
which
is
owned
National
Express
Group,
PLC.

#
University
of
Illinois
#
Andrews
Air
Force
Base,
owned
by
the
Federal
Government.

#
States
#
Counties
#
Cities
#
Multipurpose
Port
Authorities
or
Airport
Authorities
The
Regulatory
Flexibility
Act
(
5
USC
Section
601)
defines
three
types
of
small
entities:

#
small
business
 
defined
by
Small
Business
Administration
size
standards
#
small
organizations
 
defined
as
any
not­
for­
profit
enterprise
which
is
independently
owned
and
operated
and
is
not
dominant
in
its
field.

#
small
governmental
jurisdictions
 
defined
as
governments
of
cities,
counties,
towns,
townships,
villages,
school
districts,
or
special
districts,
with
a
population
of
less
than
50,000.

ERG,
2004
provides
details
on
the
data
sources
used
to
identify
facilities
belonging
to
small
entities.
Of
the
211
airports
with
the
potential
for
non­
trivial
deicing
operations,
14
belong
to
small
entities.

4.
Airport
Financial
Management
and
Accounting
4.1
Overview
Airport
financial
management
is
fundamentally
different
from
most
other
business
enterprises.
This
is
because
many
airports,
including
the
majority
of
large
commercial
airports,
have
traditionally
used
a
residual­
cost
approach
to
finances.
Under
a
residual­
cost
approach,
the
airlines
as
a
group
assume
the
financial
risk
for
the
airport
by
agreeing
to
pay
any
costs
of
running
the
airport
not
paid
by
other
nonairline
users.

Under
the
alternative
compensatory
approach,
the
airport
assumes
the
financial
risk
of
running
the
airport;
airlines
pay
rates
set
equal
to
their
estimated
cost
of
using
the
facility.
Using
the
compensatory
approach
there
is
no
guarantee
the
airport
will
cover
costs,
however,
the
airport
can
keep
any
surplus
of
1
Except
in
specific
legal
agreements
signed
prior
to
the
1982
law
prohibiting
such
practices.
Therefore
a
few
airport
owners,
such
as
the
Port
Authority
of
New
York,
still
legally
use
airport
revenues
to
subsidize
non­
airport
activities.
Periodic
questions
of
"
revenue
diversion"
do
arise,
the
most
notorious
being
the
claim
by
the
City
of
Los
Angeles
that
it
was
owed
almost
$
90
million
by
the
Los
Angeles
Department
of
Airports
for
alleged
unreimbursed
capital
and
operating
expenses
and
relating
to
the
sale
of
airport
property
(
DOT,
1997).

3
revenues
over
cost
and
accumulate
capital
for
future
development.
Many
airports
may
use
a
mixture
of
the
two
approaches
(
Wells,
1996).

Airport
financial
statements
are
difficult
to
compare
between
airports
and
with
other
businesses
due
to
differences
in
the
size
and
objective
of
different
airports,
the
type
of
airport
ownership
(
e.
g.,
private
or
public),
the
existence
of
these
two
fundamentally
different
financial
approaches
to
operations,
and
legal
restrictions
on
airport
finances.
For
example,
because
most
airports
use
a
residual­
cost
approach,
they
are
assured
of
sufficient
revenues
from
airlines
to
pay
the
cost
of
capital
investment
and
are
unlikely
to
account
for
depreciation
on
assets
in
a
manner
similar
to
most
business
enterprises.
Also,
airports
are
legally
prevented
from
using
their
revenues
for
non­
airport
purposes.
1
Airport
financial
statements
thus
do
not
meet
the
standards
of
Generally
Accepted
Accounting
Principals
(
GAAP),
and
an
airport's
revenue
surplus
or
loss
is
not
equivalent
to
profit
or
loss
(
ERG,
1998a).

Typical
airport
operating
statements
can
be
divided
into
the
following
categories
(
Wells,
1996):

#
Operating
revenues
and
operating
expenditures
on
key
"
cost
centers:"
 
airfield
area
(
e.
g.,
runways,
taxiways,
aprons)
 
terminal
area
concessions
(
e.
g.,
food
and
beverage
services,
travel
services
such
as
car
rentals,
specialty
shops,
personal
services,
amusements,
advertising,
outside
concessions
such
as
terminal
parking,
ground
transportation,
and
hotels)
 
airline
leased
areas
(
e.
g.,
ground
equipment
rentals,
offices,
ticket
counters,
cargo
terminals,
hangers,
operations
and
maintenance
areas)
 
other
leased
areas
(
e.
g.,
FBOs,
freight
forwarders,
government
offices,
businesses
in
airport
industrial
parks,
equipment
and
cargo
terminals
rented
by
non­
airline
users)
 
other
operating
revenues
and
expenditures
#
Non­
operating
revenues
(
e.
g.,
grants­
in­
aid
(
AIP),
interest
on
investments,
subsidies
by
government,
leasing
of
properties
not
related
to
operations)

#
General
and
administrative
expenses
(
e.
g.,
expenses
of
overhead
services:
accounting,
legal,
planning,
public
relations);
at
some
airports
(
such
as
small
municipal
airports),
these
expenses,
including
policing
and
firefighting
expenses,
may
appear
in
the
governing
authority's
budget,
not
the
airport
budget
#
Non­
operating
expenses
(
e.
g.,
interest
on
outstanding
debt,
contributions
to
government)

#
Depreciation
2
Wells
(
1996)
claims
that
airports
such
as
Los
Angeles
and
Honolulu
have
approached
"
negative"
landing
fees
in
recent
years
due
to
overall
operating
surpluses.

4
Under
a
residual­
cost
approach,
the
airport
determines
costs
and
revenues
from
each
general
operational
area
above,
and
airlines
fees
are
set
by
the
anticipated
revenue
short­
fall.
Any
surplus
is
returned
to
airlines
in
the
form
of
lower
fees
the
following
year;
any
loss
would
be
made
up
in
higher
fees
the
following
year.
Both
terminal
and
landing
fees
may
be
adjusted
by
the
airport,
or
landing
fees
only
may
be
adjusted.
2
The
compensatory
approach
may
determine
fees
according
to
the
actual
cost
of
running
the
airport,
or
by
market
value.
The
latter
is
especially
common
for
terminal
concessions.
A
growing
trend
has
been
for
airports
to
use
a
mix
of
the
residual­
cost
and
compensatory
approach.
For
example,
terminal
concessions
may
be
operated
on
a
compensatory
approach
permitting
the
airport
to
keep
surpluses
from
concession
rents
and
fees,
while
air­
side
operations
are
run
under
the
residual
cost
approach.

The
financial
and
operational
relationship
between
airlines
and
airport
is
defined
in
the
airport
use
agreement.
This
document
specifies
how
the
risks
and
responsibilities
of
running
the
airport
will
be
shared,
the
methods
used
for
calculating
rates
for
use
of
facilities
and
services,
and
how
frequently
these
rates
and
fees
may
be
adjusted.

4.2
Airport
to
Airline
Cost
Pass
Through
A
significant
question
concerning
airport
finances
also
cannot
be
answered
through
the
information
provided
in
the
FAA
files:
what
percentage
of
cost
increases
are
typically
passed­
through
to
airlines
in
the
form
of
higher
fees?
At
residual­
cost
airports,
the
airline
is
legally
responsible
to
cover
the
costs
of
the
airport;
this
suggests
that
airports
pass
through
100
percent
of
costs.
To
whom
the
costs
are
passed
might
differ
by
airport.
Options
include
concessions,
passenger
facility
charges
(
PFCs),
property
leases,
and
landing
fees.
Airline
representatives
have
stated
that
costs
on
airports,
FBOs,
and
the
FAA
are
all
passed
through
to
the
airlines.
Furthermore,
according
to
the
industry,
landing
fees
 
the
most
likely
vehicle
for
passing
through
airport
costs
 
are
a
significant
factor
in
determining
airline
service
provided
to
cities;
an
increase
in
landing
fees
can
cause
an
airline
to
reduce
or
halt
service
to
the
airport
(
ATA,
1998).
Thus,
two
airports
in
close
proximity
to
each
other
might
increase
concession
fees
rather
than
landing
fees
lest
one
airport
lose
business
to
the
other
airport.
But
landing
fees
remain
the
most
likely
vehicle
for
most
airports
to
recover
costs.

Landing
fees
account
for
roughly
2
to
3
percent
of
overall
airline
operating
costs
(
Wells,
1996).
ATA
comments
that
although
landing
fees
are
a
relatively
small
percentage
of
airline
operating
costs,
airport
costs,
including
landing
fees,
are
one
of
the
most
rapidly
rising
components
of
costs.
According
to
ATA,
any
cost
component
is
of
great
concern
to
the
industry
if
it
is
rising,
regardless
of
the
level
of
the
cost
(
ATA,
1998).
Furthermore,
many
airline
operating
costs
are
difficult
for
airlines
to
exercise
direct
control
over
in
the
short­
run.
Jet
fuel
prices
are
determined
by
market
forces
and
airlines
have
little
ability
to
cut
those
costs
in
the
short­
run.
Similarly,
labor
costs
are
generally
determined
through
multi­
year
union
contracts.
Airlines
therefore
have
incentive
to
aggressively
pursue
cost
containment
strategies
for
any
component
of
operating
cost
over
which
they
have
leverage,
including
landing
fees
(
ERG,
1998b).
Although
landing
fees
comprise
a
relatively
small
percentage
of
overall
operating
costs,
a
substantial
increase
in
landing
fees
can
significantly
impact
airline
operating
costs.
If,
for
example,
Boston's
Logan
5
Airport
increased
its
landing
fees
by
$
0.50
per
1,000
lbs
(
a
22
percent
increase),
the
landing
fees
paid
by
USAirways
 
Logan's
most
frequent
user
 
would
increase
by
approximately
$
1.6
million
per
year
(
AAAE,
1999;
FAA,
1998;
DOT,
1998).

USEPA,
2000
reports
the
findings
from
visits
to
several
airports.
What
was
clear
was
that
while
each
airport
might
decide
differently
on
the
mix
of
groups
to
which
the
increased
costs
were
passed
(
landing
fee,
concessions,
other
leased
areas,
etc.),
the
airports
either
required
or
highly
likely
to
pass
through
most,
if
not
all,
increased
costs.
The
economic
impacts
for
this
effluent
guideline,
then,
will
be
the
secondary
impacts
rather
than
those
for
the
airports.
This
is
discussed
further
in
Section
6
below.

5.
Airport
Capital
Financing
5.1
Options
In
general,
airports
rely
on
the
following
sources
of
funds
to
finance
capital
improvements:

#
Federal
funding
through
the
FAA
Airport
Improvement
Program
(
AIP).

#
FAA
authorized
Passenger
Facility
Charges
(
PFCs):
FAA
authorizes
commercial
airports
to
impose
PFCs
for
funding
certain
types
of
capital
improvements
similar
to
those
eligible
for
AIP
funds.
Airports
may
charge
up
to
$
4.50
per
enplaned
passenger
and
passengers
may
be
charged
PFCs
no
more
than
twice
on
each
leg
of
a
round­
trip
journey.

#
State
funding:
this
varies
widely
by
state;
Alaska
and
Hawaii
provide
considerable
assistance
while
other
states
provide
minimal
assistance
(
e.
g.,
New
Hampshire).

#
Bond
market:
although
some
city
and
states
may
fund
airport
expansion
with
general
obligation
bonds,
or
self­
liquidating
general
obligation
bonds,
more
typically
airports
use
tax­
exempt
general
revenue
bonds.
Typically
airport
revenue
bonds
have
25­
30
year
terms.

#
Airport
revenues:
capital
improvements
funded
directly
from
airport
revenue
streams,
whether
airside
or
landside.

#
The
airport
may
lease
airport­
owned
land
to
private
individual
or
company
who
finances
improvements
(
e.
g.,
airlines
that
build
their
own
terminal
on
airport
property
out
of
airline
funds
.

Table
1
summarizes
the
sources
of
airport
funding
for
capital
development
during
1999­
2001.
Federal
funds
make
up
one­
fifth
of
the
revenues
for
capital
investment.
6
Table
1
Sources
of
Airport
Financing,
1999­
2001
($
Billions,
2001
Dollars)

Funding
Source
1999­
2001
Average
Annual
Funding
($
Billions)
Percent
of
Total
Source
of
Funds
Airport
Bonds
$
6.90
59%
Usually,
state
and
local
governments
or
airport
authorities
issue
tax­
exempt
debt.
Funds
also
include
notes.

Airport
Improvement
Program
(
AIP)
grants
$
2.42
21%
Congress
makes
funds
available
from
the
Airport
and
Airway
Trust
Fund
which
receives
revenue
from
various
aviationrelated
taxes.

Passenger
Facility
Charges
(
PFC)
$
1.59
13%
Funds
come
from
passenger
fees
of
up
to
$
4.50
per
trip
segment
at
commercial
airports.

State
and
Local
Contributions
$
0.44
4%
Funds
include
state
and
local
grants,
loans,
and
matching
funds
for
AIP
grants.

Airport
Revenue
$
0.42
4%
airside
or
landside
revenues
Total
$
11.78
100%

Source:
Dillingham,
2003.

5.2
AIP
Grants
Funds
and
Purposes
As
noted
in
Section
5.1,
AIP
grants
form
an
important
source
of
capital
funding
for
airports.
However,
since
September
11,
2001,
the
purposes
to
which
the
funds
have
been
put
have
changed
dramatically.
Table
2
summarizes
the
difference
between
2001
and
2002
AIP
funding
by
category.
That
is,
although
total
funding
remained
level
($
3.2
to
$
3.3
billion),
funding
for
security
measures
increased
tenfold
to
$
561
million
with
subsequent
declines
in
all
other
categories.

The
percent
allocated
to
environmental
purposes
decreased
from
12.7
percent
to
9.9
percent.
However,
environmental
purposes
include
noise
mitigation
measures
and
installation
of
noise­
monitoring
equipment
(
GAO,
2002).
Thus,
only
a
small
portion
of
the
environmental
expenditures
might
be
relevant
to
stormwater
and
de­
icing
controls.
3The
same
table
also
listed
seven
airports
whose
revenue
bonds
were
upgraded
during
the
same
period.

7
Table
2
Distribution
of
AIP
Grant
Funds,
2001
and
2002
Grant
Award
Amounts
($
Millions)
Percentage
of
Budget
Development
Category
2001
2002
2001
2002
Capacity
$
517.9
$
477.6
15.8%
14.8%

Environment
$
417.0
$
319.8
12.7%
9.9%

Planning
$
55.5
$
53.5
1.7%
1.7%

Reconstruction
$
740.7
$
592.7
22.6%
18.4%

Safety
$
203.7
$
137.5
6.2%
4.3%

Security
$
56.6
$
561.0
1.7%
17.4%

Standards
$
968.4
$
812.4
29.5%
25.2%

Other
$
323.7
$
266.8
9.9%
8.3%

Totals
$
3,283
$
3,222
100%
100%

Source:
GAO,
2002.

5.3
Impacts
on
Airports
from
Recent
Airline
Financial
Status
DOT,
2003
notes
that
airports
are
in
relatively
sound
financial
health;
no
airport
has
defaulted
on
its
general
airport
revenues
bonds
since
the
industry
was
deregulated
in
1978.
In
contrast,
more
than
130
airlines
filed
for
bankruptcy
during
the
same
period.
Bankruptcy
laws
provide
a
carrier
in
Chapter
11
reorganization
with
a
substantial
amount
of
leverage
over
leased
airport
facilities
in
order
to
allow
the
carrier
to
emerge
as
a
viable
economic
entity.
That
is,
a
carrier
can
reject
its
airport
leases
and
pay
only
a
small
amount
in
damages
to
the
airport.

Financial
institutions
are
re­
evaluating
the
ability
of
an
airport
to
repay
debt
in
light
of
the
overall
decline
in
air
travel
since
September
2001
and
whether
it
is
dominated
by
a
single
carrier.
The
perception
that
some
airports
are
riskier
investments
than
others
leads
to
lower
bond
ratings
and
thus
higher
debt
costs.
Exhibit
1
in
DOT
2003
lists
12
airports
whose
revenue
bonds
have
been
downgraded
since
September
2001
and
three
airports
whose
PFC
and
special
facility
bonds
have
been
downgraded.
3
8
6.
Financial
Status
of
the
Airlines
6.1
Current
State
The
Air
Transport
Association
(
ATA)
provides
an
annual
economic
report
on
the
industry
(
ATA,
2003).
Its
members
represent
approximately
95
percent
of
the
passenger
and
cargo
traffic
carried
by
U.
S.
Scheduled
airlines.
Table
3
presents
key
financial
results
and
other
data
from
1998
through
2002.
Although
an
erosion
in
the
operating
profit
margin
and
rate
of
return
on
investment
from
1998,
the
losses
in
the
industry
have
been
massive
since
September
2001,
e.
g.,
$
11.3
billion
in
2002.
Employment
dropped
from
by
70,000
jobs
between
2001
and
2002.
Preliminary
estimates
for
2003
show
a
continuing
loss
of
$
3.6
billion
dollars
(
ATA,
2004a).

Table
3
Key
Financial
Parameters
for
U.
S.
Airlines,
1998­
2002
Financial
Millions
of
Dollars
Parameter
1998
1999
2000
2001
2002
Total
Revenue
$
113,810
$
119,455
$
130,839
$
115,526
$
106,881
­
Passenger
Revenue
$
81,052
$
84,383
$
93,622
$
80,947
$
73,238
­
Freight
and
Express
Revenue
$
10,697
$
11,415
$
12,486
$
12,066
$
12,662
­
Mail
Revenue
$
1,708
$
1,739
$
1,970
$
1,063
$
658
­
Charter
Revenue
$
4,059
$
4,284
$
4,913
$
4,449
$
4,456
­
Other
Revenue
$
16,294
$
17,634
$
17,848
$
17,000
$
15,825
Total
Operating
Expenses
$
104,528
$
111,119
$
123,840
$
125,852
$
115,450
Operating
Profit
(
Loss)
$
9,283
$
8,337
$
6,999
($
10,326)
($
8,569)

Interest
Income
(
Expense)
($
1,753)
($
1,833)
($
2,193)
($
2,506)
($
3,262)

Other
Income
(
Expense)
($
2,682)
($
1,226)
($
2,320)
$
4,557
$
536
Net
Profit
(
Loss)
$
4,847
$
5,277
$
2,486
($
8,275)
($
11,295)

Operating
Profit
Margin
(%)
8.2%
7.0%
5.3%
­
8.9%
­
8.0%

Net
Profit
Margin
(%)
4.3%
4.4%
1.9%
­
7.2%
­
10.6%

Rate
of
Return
on
Investment
(%)
12.0%
11.1%
6.4%
­
6.5%
­
9.6%

Employment
(
Full­
Time
Equivalents)
621,064
646,410
679,967
671,969
601,356
Source:
ATA,
2003.
9
From
1998
 
i.
e.,
the
same
period
covered
in
Table
3
 
there
have
been
22
cases
of
an
airline
declaring
bankruptcy
(
some
more
than
once).
These
are
summarized
in
Table
4.
The
number
and
size
of
insolvent
carriers
is
a
cause
for
concern,
particularly
for
the
airports
that
rely
on
the
airlines
for
income
(
see
Section
5.3).

Table
4
Recent
Airline
Bankruptcies
Date
Carrier
Date
Carrier
2/
1998
Pan
American
World
Airways
1/
2001
Trans
World
Airlines
7/
1998
Euram
Flight
Centre
8/
2001
Midway
Airlines
3/
1999
Kiwi
International
Airlines
1/
2002
Sun
Country
Airlines
6/
1999
Sunjet
International/
Myrtle
Beach
Jet
Express
7/
2002
Vanguard
Airlines
9/
1999
Eastwind
Airlines
8/
2002
US
Airways
11/
1999
Access
Air
12/
2002
United
Airlines
2/
2000
Tower
Air
3/
2003
Hawaiian
Airlines
5/
2000
Kitty
Hawk
10/
2003
Midway
Airlines
9/
2000
Pro
Air
1/
2004
Great
Plains
Airlines
9/
2000
Fine
Air
Services
1/
2004
Atlas
Air/
Polar
Air
Cargo
12/
2000
Legend
Airlines
12/
2000
National
Airlines
Source:
ATA,
2004b.

6.2
Projections
FAA
published
an
aerospace
forecast
for
fiscal
years
2004­
2015
(
FAA,
2004b).
The
Administration
projects
that
passenger
demand
will
return
to
pre­
September
2001
levels
by
2005
with
moderate
growth
(
e.
g.,
an
annual
rate
of
4.3
percent
over
the
forecast
period).
FAA
considers
the
effects
of
the
Severe
Acute
Respiratory
Syndrome
(
SARS)
epidemic
as
well
as
worries
about
terrorism
to
indicate
how
sensitized
global
air
travel
has
become
to
any
extraordinary
event.

FAA
notes
three
trends
that
have
emerged
after
September
2001
in
the
commercial
aviation
market.
First,
large
and
what
FAA
calls
"
legacy"
airlines
are
undergoing
a
major
restructuring
and
downsizing
(
see
Tables
3
and
4).
Second,
low­
cost
carriers
are
showing
rapid
growth,
particularly
in
nontraditional
long
distance
markets.
Third
is
the
marked
growth
in
regional/
commuter
carriers
due,
in
part,
to
10
downsizing
among
the
legacy
carriers.
These
market
changes
indicated
a
need
for
a
study
on
the
possible
impacts
of
airline
bankruptcies
and
financial
conditions
on
airports,
i.
e.,
DOT,
2003.

Regional/
commuter
airlines
step
into
the
role
vacated
by
the
large
commercial
airlines
as
they
cut
back
on
short­
haul
routes.
Part
of
the
reason
for
the
growth
in
regional/
commuter
airlines
is
an
increase
in
the
number
of
code­
sharing
agreements
with
the
major
carriers.
It
is
now
difficult
for
a
regional/
commuter
airline
to
compete
without
such
agreements.
FAA
projects
that
low­
cost
carriers
and
regional/
commuters
could
account
for
more
than
half
the
domestic
passengers
by
2015
(
FAA,
2004b).

None
of
this
appears
to
bode
well
for
the
large
commercial
carriers
usually
associated
with
being
primary
customers
at
hub
airports.
FAA
projections
might
be
optimistic
because
they
rest
on
a
short­
term
forecast
that
oil
and
gas
prices
decline
throughout
2004
and
2005
(
see
FAA,
Table
1).
At
the
moment,
however,
oil
prices
are
reaching
new
heights
of
$
45/
bbl
(
WSJ,
2004).

7.
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