The True Cost of Flying

April 4, 2014

The spirit of aviation soared on April 3 as industry leaders met in Washington to discuss their recent successes while placing a spotlight on pervasive headwinds. 

The U.S. Chamber of Commerce Foundation held its 13th Annual Aviation Summit at the Walter E. Washington Convention Center, with hundreds of attendees getting the latest from the top executives of major airlines, manufacturers, and industry groups. 

There was talk of taxation, technology, regulation and revenues. But there was time to dream about trips to outer space and celebrate one of the aviation industry’s greatest success stories—Southwest Airlines. 

The conference’s theme was “Navigating the True Costs of Flying,” and indeed, the challenging nature of the aviation business ruled much of the day.

“The economics of aviation beg our focus,” said Carol Hallett, Of Counsel to the U.S. Chamber of Commerce, during her introductory remarks. “The growing cost of flying is a challenge that weighs heavily on companies and customers alike.”

Hallett’s thoughts were echoed by John McKernan, the president and CEO of the U.S. Chamber of Commerce Foundation.  

“The aviation industry is one that’s vital to the growth, competitiveness, and connectivity of this country,” McKernan said. “And it’s an industry that must continually advance and improve, adapt and innovate. That’s the only way it will survive the cost pressures and remain competitive in a global economy.”

Breaking Through Barriers

Throughout the day, Chamber and aviation industry leaders spoke of removing the barriers to further growth and innovation. Nearly all executives agreed that the United States has been hurt by the lack of a coherent national aviation policy, among other challenges. 

Modernization of systems — Executives agreed that air traffic control systems should be upgraded, and expressed frustration at the slow pace of adopting the Federal Aviation Administration’s NextGen plan. Leaders said privatization, or at least corporatization, would create efficiencies and save money. 

TaxationAirbus Chairman T. Allan McArtor claimed that for every $300 ticket, there are $63 in taxes. And executives said that taxes and fees are often not apparent to the customer.

“That little toss-out, like a $2 TSA fee, has a huge impact,” said Spirit Airlines CEO Ben Baldanza.

 A need for skilled workers and immigration reformDennis Muilenburg, Vice Chairman, President, and COO of The Boeing Company said there was an estimated demand for 35,000 new planes worldwide, and “we want as many of those planes as possible built in our factories here in the United States.

But Muilenburg said that there remains a shortage of workers with the necessary skills to fill many high-tech jobs. Immigration reform, he said, would help airlines fill those positions.

Fuel costs and energy policiesSouthwest Airlines CEO Gary Kelly noted that the high cost of fuel forced his airline to shift away from short-haul flights. He said a recent surge in energy production has helped, but that there must be a continued focus on finding new and inexpensive energy sources.

 The ongoing terror threat  —Gen. Michael Hayden, the former director of the NSA and  the CIA, and TSA Administrator John Pistole said that radical elements are still drawn to airlines as targets. The ever-changing strategies of terrorists require flexibility, they said. 

“We can’t have a one-size-fits-all approach,” Pistole added. 

Honoring a Legend

Aviation leaders took time to honor one of the most revolutionary people in the industry when they recognized Southwest Airlines founder Herbert Kelleher with the Carol B. Hallett Award. 

“His business model of developing a low-cost, low-frills airline with smaller airports became legendary,” said James Parker, executive vice president of FedEx, who introduced Kelleher and joined the Chamber’s Hallett in presenting the award to Kelleher. 

Kelleher was praised for consistent profitability and for building a corporate culture that has resulted in Southwest being named among the most admired companies. 

Kelleher deflected all the accolades and compliments directed toward him and said they belonged to Southwest’s employees. 

“This is for the many people at Southwest with the warrior spirit, warm hearts, and fun-loving personalities,” he said. 

Going to Orbit: A Knight and His Spacecraft

Afternoon sessions at the summit featured a chat with Sir Richard Branson, founder of Virgin Group and Virgin Airlines, and Delta Airlines CEO Richard Anderson. Both men touted the new partnership between the companies in which Delta now has a 49% stake in the Virgin-owned Singapore Airlines.  

Branson took time to give news on his latest bold venture involving outer space—Virgin Galactic, an eight-seated suborbital spacecraft that will launch later this year. Branson said that his ultimate goal is to see commercial orbital space flights that enable passengers to travel halfway around the world in less than an hour. 

“I believe most people will be able to afford space travel in their lifetimes,” Branson said. 

Improving Tracking

The day would not pass without some discussion of Malaysian Airlines Flight 370, which has yet to be found after going missing on March 8. Airline CEOs and pilot representatives said that in the wake of the mystery, technology advancements should enable flights to be tracked more thoroughly in real time. Executives said that it was time for such technologies to be deployed, despite the costs. 

“In this day and age, it’s totally unacceptable that we don’t know where they are,” said Capt. Lee Moak, president of the Air Lines Pilots Association. “When we’re flying a $300 million airplane, we should have a way of knowing where it is.” 

Airline executives noted that a situation like the one involving Flight 370 is so rare that it can be tempting to assume that some upgrades to technology and communications aren’t worth the cost.

However, said Brussels Airlines NV CEO Bernard Gustin, “At the end of the day, you’re talking about people.”