phluser wrote:
No sir. Isn't it funny how this site rips apart journalists for their inability to understand the industry until they find something that confirms their understanding of the world? (Note UA 747-400 in old livery in article and the caption implying UA still has 744 service from IAD.)
I actually give this reporter some credit. He got it closer to right than most . . . but still so far away
From the article:
"Airlines – and hence their passengers – pay higher fees at Dulles than at Reagan National or Baltimore-Washington International (BWI) Thurgood Marshall airports because operating costs at Dulles include debt service for a slew of recent capital improvements.
As part of their lease agreements with MWAA, airlines cover their share of operating expenses at Dulles and Reagan National airports. Airlines divide those expenses by the number of people boarding their airplanes to come up with a “cost per enplanement” figure."
Let's take it by clause.
"Airlines – and hence their passengers – pay higher fees,"
ABSOLUTELY WRONG. Passengers pay airfares (which are set by the airline), federal excise tax, 9/11 security fee tax, USCIS user fees, and the passenger facility charge (or PFC). The only fee that the airport has control over is the PFC. The PFC is the exact same at IAD as it is at BWI and DCA. I really wish people on this site would understand that, not just for IAD, BWI, or DCA, but this idea that airports can create air service by reducing fees, which aren't arbitrary and are restricted by federal law, and don't make a damned bit of difference anyway when it comes to air service.
And before the next clause, it is worth noting that it is absolutely illegal for any airport operator in the country to recover from airlines more than what they incur in costs. This is a condition of receiving federal grants. The business terms of how those costs are recovered vary by airport because they are negotiated between the airline and the airport operator, just like a company negotiates with landlord. Any surplus must be reinvested in airport facilities. There are only a handful of airports that don't have negotiated agreements with airlines, but setting rates and charges for the use of those facilities is a matter of federal law and must use cost recovery principles. If you want to put yourself to sleep, you can read the federal regulations that apply to airport operators who cannot reach agreement with airlines:
https://www.faa.gov/airports/airport_compliance/ (click link for Policy and Procedures Concerning the Use of Airport Revenue)
"because operating costs at Dulles include debt service for a slew of recent capital improvements."
Partially true. IAD's costs have grown because during UA's bankruptcy MWAA proceeded with improvements for another runway (which I think had UA's support) and the AeroTrain. But if you were a manager of Dulles 10 years ago and had the inveterate complaining of people who couldn't be bothered to ride a mobile lounge or didn't have a Metro connection, what would you do? You're criticizing them now for what you think are bad decisions, but what would you do? Give the airlines the use of the terminal and airfield for free? It's AGAINST FEDERAL LAW.
You should also remember that when these decisions were made IAD was UA's fastest growing and most profitable hub through the 1990s.
"As part of their lease agreements with MWAA, airlines cover their share of operating expenses at Dulles and Reagan National airports. Airlines divide those expenses by the number of people boarding their airplanes to come up with a “cost per enplanement” figure."
First clause is correct, second clause isn't. Airlines have signed up for long-term leases that prescribe how their landing fees and terminal rents will be calculated. Those leases use cost accounting methodologies to carve up costs between cost centers. But the costs are the costs. Divide $100 million by 5 million passengers and it's $20. Divide it by 20 million and it's $5. But the costs are still $100 million. United can add a flight to Latrobe and there are no marginal airport costs.
CPE is used in the airport industry to provide a benchmark of operating costs among airports. It is NOT a fee that is charged by airports. It is calculated by dividing the total payments by airlines by the number of passengers that are enplaned. And CPE can vary widely by airline at an airport, from $5 to $20 as in the example above. But, at a hub airport, costs are fixed for the hub airline. And those costs need to be weighed against revenue potential. The problem is local IAD market doesn't have much revenue potential at a sustainable size, so it becomes death by a thousand cuts. What's the saying? Go big or go home. Decide to compete or not. But opening a flight to Shreveport and Mobile isn't going to change anything.
(None of the above should be taken as an endorsement of UA's operations at IAD. But saying that UA will incur more fees to connect people from ALB to CHS is absolutely ridiculous. The problems are not that simple . . . that's why they are problems.)
Some how I doubt the demand is there to support a flight to IAD, they are finally getting one flight to MSP, I think in March.
