"Thank God we had a beachhead established," said Neal Meehan, president of New York Air, weighing the effects of the eight-month-old air traffic controllers' strike on the airline industry.
Meehan had hosted a party to celebrate New York Air's first birthday in December, using invitations that informed guests that the event was "subject to FAA approval," a somewhat light-hearted reference to the delayed Federal Aviation Administration approval New York Air received for getting off the ground.
"Subject to FAA approval," however, is a phrase that has become even more important--especially to the group of new airlines that has been created since the advent of deregulation in 1978 and to paper airlines with plans and hopes to get started soon.
Because of the continuing constraints resulting from the strike and firings of the 11,500 controllers, the FAA's approval now must be sought by airlines to operate any flights from the nation's 22 major restricted airports or that will pass through air space controlled by the affected en route traffic control centers. As a practical matter, that includes nearly everything.
Meehan's plans for expanding New York Air's services at some of the nation's major airports have been squelched, and its services at others have been cut back or even eliminated.
"The strike has stifled the whole thrust of deregulation," he said. "Just look at Columbia Air and Air Chicago."
Columbia Air, with plans to operate services between Baltimore/Washington International and three major cities initially, and Air Chicago, which plans flights to and from Chicago's Midway to four major cities, were granted the required Civil Aeronautics Board authority to get started last summer. But both have been delayed in getting off the ground because of a lack of capital, believed in good part a consequence of the effects of the constrained air traffic control system.
Sources say new airlines are having more trouble getting financial backing now because of investors' fears that they might not have enough operating authority and flexibility now to become successful. The situation is made worse by the recession and accompanying fall-off in passenger traffic.
Even Midway Airlines, the first to start up and a deregulation success story--bringing travelers low fares and starting to chalk up profits for its shareholders--has begun to feel the effects of flight restrictions. Although its center of operations--Chicago's Midway--is not technically a controlled airport, the traffic control center through which its flights must flow is severely restricted. So Midway can't expand flights at Midway Airport.
As a result, Midway President Gordon Linkon last week announced that the airline would end its hub-and-spoke route system and start flights next week to Topeka, Kan., and Lincoln, Neb., through cities already served, collecting passengers there for flights to Chicago.
"With the shortage of take-off and landing slots in Chicago, we decided it best to serve these two newest cities through Kansas City and Omaha, at least for the time being," Linkon said.
Pacific Express, a new West Coast airline that started service Jan. 22, initially wanted to begin frequent, low-fare service between Los Angeles and San Francisco, later fanning out from there to other medium-sized cities within a 90-minute flight area. But the FAA gave the airline only two arrivals in Los Angeles and eight at San Francisco, not enough for its planned service. So instead, Pacific Express, using four BAC-111s, has had to try to make a go of it with flights from Palm Springs to San Francisco, Oakland, and San Jose; San Francisco to Chico and Portland, Ore.; and flights from Portland to Medford, Ore., and Boise, Idaho.
"We're moving to a Portland hub because it's not impacted," says Terry Ashton, president of Pacific Express. "We just had to shift our emphasis."
Muse Air, started by a father-and-son team, had the bad timing--in hindsight--to start frequent low-fare service between Dallas and Houston on July 15, barely three weeks before the strike. Extensive flight delays at the start of the strike forced a lot of customers back to their cars, according to the Muses.
Muse sought and failed to get permission for the second operational phase it had planned--daily roundtrips between Houston, Atlanta, and Chicago's Midway Airport. "The FAA approved half of the pattern," Muse President Michael Muse said. "It's absurd." Although Muse uses two "uncontrolled" airports--Dallas Love Field and Houston Hobby--the centers their flights must use are restricted.
The airline is ready to expand; by the summer, it will have a total of six new 155-passenger, fuel-efficient, quiet--and expensive--DC9-80s. "I don't know where in the hell we're going to use them," Muse told a recent Oppenheimer & Co. seminar on new airlines. "Mr. J. Lynn Helms the FAA administrator will have to tell you that," Muse said.
Some airline officials complain privately about the FAA's intrusion into "economic" regulation but are reluctant to criticize publicly the agency that has so much control over their economic futures. Muse Chairman M. Lamar Muse, Michael's father, who started the successful Southwest Airlines a decade ago, doesn't share his colleagues' inhibitions. "I'm very disturbed that we now have regulation all over again of the very worst form that could possibly be conceived," he said. "The CAB never told a carrier how many trips to operate between A and B or what time to fly.
"The FAA is now the master of the industry . . . and these bureaucrats are thoroughly enjoying the power they are amassing," he said. Meanwhile, "the big are getting bigger and the smaller are getting squeezed out," he said.
Muse, Midway, Pacific Express, New York Air and two other new airlines banded together last week to suggest to the FAA that it alter its airport slot allocation system to encourage the entry of new airlines--a key element of the national policy of deregulation, warning that without it, the low-fare and new-service benefits of deregulation will disappear.
Under the Airline Deregulation Act of 1978, an airline theoretically needs no federal authority to begin a new route. Entry to new routes is supposed to provide a damper on excessive fares by allowing other airlines to come in and introduce new services at lower fares when a market opportunity is seen. The concomitant exit authority gives an airline the flexibility to drop flights that don't work out and put those planes on different routes.
Although the FAA says it will give some priority to new entrants in doling out new airport slots as they become available, the FAA considers as new only those airlines that weren't operating by Feb. 17. So New York Air, Midway, Muse and Pacific aren't "new entrants."
The FAA also agreed to give airlines a chance to swap slots at the 22 major airports to improve their schedules or route systems--and more than 200 exchanges were made recently. But only those holding slots at the 22 airports could participate. Muse, for instance, has no assigned slots at those airports so had nothing to trade. The older airlines, with extensive routes and aircraft fleets, operate many flights at the controlled airports and had more flexibility to move flights around under the swap, their officials admitted.
In their petition to the FAA, the six airlines said they would like to see the airlines assigned a small percentage of slots now used by the private-flying sector, whose corporate and pleasure flights haven't been affected as much as the commercial sector. "Were only one bridge left across the Potomac, would there be any question that buses and car pools would be given an absolute priority over single-person cars?" they asked.
There is sentiment on Capitol Hill that the FAA should try to allow entry to new routes--by new airlines and incumbents. "In the current situation, FAA is preventing carriers of all types from providing new service they would like to provide," House aviation subcommittee Chairman Norman Y. Mineta (D-Calif.) said in a letter to United Airlines.
Although there is grumbling that the FAA likes its expanded regulatory role, FAA Associate Administrator for Policy and International Affairs Donald Segner denies it, and points to a handmade sign on his door that says "Slot allocation is a short-term process . . . the shorter, the better." He says the FAA isn't capable or desirous of making economic decisions. "My only obligation is to keep a given number of airplanes flying through a given place at a given time.
"I mean it," he says. "We're getting out of this business as soon as we can."