**CHAPTER I**

**EXECUTIVE SUMMARY**

**THE 1990s:**

**A VERY GOOD DECADE FOR AVIATION!**

Amid the soon to be longest post-war U.S. economic expansion, aviation
enjoyed one of its best, if not the best, decade ever. The U.S.
commercial aviation industry ended the 1990s by recording its sixth
consecutive year of traffic growth, while the general aviation industry
continued its turnaround by recording yet another record year in terms
of aircraft billings.

To a large extent, growth in both domestic and international aviation
was driven by the continued economic expansion in the U.S and most world
economies, as well as by declining fares. The current U.S. economic
expan­sion is well into its ninth year (34 quarters, dating from 1991:3),
and, baring any unforeseen event, will become the longest expansion in
post-war history early next year. The longest post-war expansion dates
from 1961:1 to 1969:3 (35 quarters). Real GDP growth has averaged
3.5 percent over the current expansion and 3.0 percent during the decade
of the 1990s.

![](media/image1.wmf){width="3.2472222222222222in" height="2.14375in"}

In addition, U.S. inflation (as measured by the consumer price index)
averaged less than 3.0 percent during the decade. The low rate is due,
in large part, to only a 1.1 percent annual increase in fuel prices
during the period. However, a 8.5 percent decline in fuel prices in 1998
was largely responsible for the relatively slow growth in fuel prices
over the decade.

![](media/image2.wmf){width="3.2444444444444445in"
height="2.0548611111111112in"}

Globally, economic gains have averaged about a half percent less (GDP up
2.6percent) than those of the United States during the decade of the
1990s. However, the slower rate of world economic growth reflects, to
some extent, the impact of the Southeast Asian financial crisis in 1998,
when GDP expanded by just over 2.0 percent.

![](media/image3.wmf){width="3.2472222222222222in"
height="2.152083333333333in"}

The relatively strong growth in both U.S. and world GDP is largely
responsible for the strong demand for aviation services over the past
decade. However, three events\--the 1991 Iraqi War, worldwide passenger
air carrier financial restructuring in 1993, and the 1998 Southeast Asia
financial crisis\--negatively impacted both worldwide and U.S. air
carrier passenger demand during these years, thus reducing overall
growth for the 10-year period.

![](media/image4.wmf){width="3.2493055555555554in"
height="2.077777777777778in"}

Worldwide passenger demand, as measured by revenue passenger kilometers,
expanded by an average of 4.5 percent over the 1990-1998 time period.
Discounting the negative or slow traffic growth in 1991, 1993, and 1998,
worldwide traffic growth averaged 6.7 percent a year during the period.
Although traffic figures are not available for worldwide traffic in
1999, it appears that growth should be in the 5.0 to 6.0 percent range.

U.S. air carrier (large air carriers and regionals/ commuters) traffic,
as measured by revenue passenger miles (RPMs), averaged 4.3 percent
during the 1990s, 5.7 percent if the three negative/slow growth years
are removed from the results. While traffic during the decades of the
1970s and the 1980s grew at faster annual rates, 7.5 and 5.3 percent,
respectively, than it did during the 1990s, the highest absolute gains
in traffic were achieved during the decade of the 1990s. The actual
increase in RPMs during the 1990s totaled 223 billion, compared to an
increase of 174 billion during the 1980s, and 132 billion during the
1970s.

U.S. air carrier domestic traffic expanded at an annual rate of 3.9
percent during the 1990s. A large part of this growth is attributed to
the smaller regional/commuter carriers, who grew at an average annual
rate of 12.5 compared to 3.7 percent for the larger air carriers.

![](media/image5.wmf){width="3.2444444444444445in"
height="2.104861111111111in"}

Internationally, traffic growth averaged 5.3 per­cent annually, the
higher growth fueled, in large part, by the 8.8 percent annual increase
in Latin American markets. Traffic in the Atlantic (impacted by the
Iraqi War in 1991) and Pacific (impacted by the Asia financial crisis in
1998 and 1999) markets grew at annual rates of 4.9 and 4.3 percent,
respectively, over the same period.

![](media/image6.wmf){width="3.2444444444444445in"
height="2.104861111111111in"}

Air cargo demand grew at a somewhat faster pace than passenger demand
during the 1990s, with worldwide freight ton-kilometers increasing at an
annual rate of 6.7 percent over the 1990-1998 period. U.S. air carrier
freight revenue ton-miles (RTMs) grew by 5.7 percent annually over the
10-year period, 4.6 percent in domestic markets and 6.9 percent in
international markets.

![](media/image7.wmf){width="3.2472222222222222in"
height="2.0659722222222223in"}

The Iraqi War and the Southeast Asian financial crisis also negatively
impacted air cargo demand in 1991, 1998, and 1999. Discounting these
slow or negative growth periods, worldwide air cargo demand grew at an
average annual rate of 8.9 percent while U.S. air cargo demand increased
at an annual rate of 7.7 percent. U.S air carrier RTMs growth averaged
6.3 percent annually in domestic markets and 9.3 percent in
international markets over the 7-year period.

Expanding U.S. and world economic growth, combined with the strong
demand for both passenger and air cargo services, led to record profits
for both world and U.S. air carriers. Based on data compiled by the
International Civil Aviation Organization (ICAO), world air carriers
(including U.S. airlines) reported cumulative operating profits totaling
\$64.8 billion and cumulative net profits totaling \$6.9 billion during
the 9-year period ending in 1998. U.S. air carriers' cumulative
operating and net profits totaled \$34.6 and \$8.6 billion,
respectively, during the 10-year period ending in 1999. For U.S.
carriers, this is nearly double the combined reported profits of both
the decade of the 1970s (\$5.8 billion operating and \$3.4 billion net
profits) and the decade of 1980s (\$11.6 billion operating and \$2.6
billion net profits).

![](media/image8.wmf){width="3.2444444444444445in"
height="2.0548611111111112in"}

The turnaround in the general aviation industry can be attributed to a
combination of two events\--the current U.S. economic expansion that
began in 1993 and the passage of the General Aviation Revitalization Act
in 1994. General aviation aircraft shipments are expected to record a
fifth consecutive year of increase in 1999 while industry billings are
almost certain to surpass the all-time high record billings of \$5.8
billion in 1998. General aviation shipments and billing have both more
than doubled since 1994.

The FAA's General Aviation and Air Taxi Activity Survey also reports
increases in both the general aviation active fleet and hours flown for
a fourth consecutive year. In addition, general aviation activity at FAA
air traffic facilities, both itinerant and local operations, continues
to grow at above expected levels.

![](media/image9.wmf){width="3.2493055555555554in"
height="2.0701388888888888in"}

Despite the strong growth by both the commercial and general aviation
industries during the 1990s, the increase in activity at FAA air traffic
facilities has been relatively small. During the decade of the 1990s,
activity growth at combined FAA and contract tower airports averaged
0.9 percent (IFR up 1.3 percent) annually, while activity at en route
centers grew at an annual rate of 2.0 percent. However, most of this
growth has occurred in just the last 3 years. Since 1997, activity at
towered airports has increased at an annual rate of 3.2 percent (IFR up
3.1 percent), while activity at en route centers grew by 3.4 percent
annually. It is the growth over the past 3 years that may portend
serious problems for the future.

![](media/image10.wmf){width="3.248611111111111in"
height="2.104861111111111in"}

Certainly, the 1990s have indeed been a very good decade for both the
commercial and general aviation industries. The extremely positive
results of the latter half of the decade have assuredly positioned the
aviation industry to enter the new millennium with high expectations for
continued growth and prosperity.

**REVIEW OF 1999**

UNITED STATES AND WORLD ECONOMIC ACTIVITY

The U.S. economy expanded by 4.1 percent in 1999, the third consecutive
increase of 4.0 percent or better. Inflation remained at relatively low
historical levels (up 1.9 percent), the second consecutive year below
2.0 percent. The last time that this occurred was in 1964-65. The
relatively low inflation over the past 2 years is due, in large part, to
a 9.4 percent decline in fuel prices during this period---down
8.5 percent in 1998 and 0.9 per­cent in 1999.

Worldwide economic growth averaged only 2.7 percent in 1999, the lower
growth due largely to negative growth in Latin American economies (down
0.4 percent) and relatively slow growth in European/Middle Eastern
countries (up 2.0 percent). The economies of Asian/Far East countries
are expected to expand by 3.2 percent in 1999, showing that the recovery
from the 1997-98 financial crisis is well underway. The Canadian economy
grew by 3.5 percent in 1999.

COMMERCIAL AVIATION

In 1999, the large U.S. air carriers' system capacity (ASMs or available
seat miles) increased by 4.6 percent, the largest annual increase since
1990. Passenger demand (RPMs and enplanements) grew by 4.6 and
3.5 percent, respectively. As a result of slightly faster capacity
growth relative to growth in traffic, the system-wide load factor
(including domestic and international services) declined marginally to
70.8 percent, the first recorded decline in load factors since 1993.
However, it should be noted that the 1999 load factor is still the
second highest ever recorded, second only to the 70.9 percent load
factor achieved in 1998.

Domestic capacity (50 states, Puerto Rico, and the U.S. Virgin Islands)
increased by 5.2 percent in 1999, also the largest capacity increase
since 1990. RPMs and passenger enplanements grew by 4.8 and 3.8 percent,
respectively, the result being a 0.3 point decline in load factor to
69.8 percent. This is also the first decline in domestic load factors
since 1993, a period during which domestic load factors increased by
8.5 percentage points.

Regional/commuter airline traffic continued to grow at rates
significantly higher than traffic of the larger air carriers, with RPMs
and passengers up 19.7 and 12.0 percent, respectively.
Regionals/commuters capacity increased by 17.5 percent in 1999, the
result being a 1.1 point increase in load factor to 57.6 percent---a new
all-time high.

In 1999, it is estimated that U.S. and foreign flag carriers combined
transported a total of 132 million passengers between the United States
and the rest of the world, an increase of 4.2 percent over 1998. This
traffic volume is distributed among the four world travel markets as
follows: 48.9 million (up 5.0 per­cent) in Atlantic markets; 39.2 million
(up 4.2 per­cent) in Latin American markets; 24.1 million (up
3.0 percent) in Pacific/Far East markets; and 19.8 million (up
3.7 percent) between the United States and Canada.

On the other hand, international enplanements on U.S. flag carriers
alone grew by only 0.3 percent in 1999, significantly less than the
estimated growth in total international traffic to and from the United
States. U.S. carrier passenger enplane­ments were up 6.0 percent in
Atlantic markets and 4.2 percent in Latin American markets. However, the
number of passenger enplanements in Pacific/Far East markets declined
12.8 per­cent in 1999, the second consecutive double-digit decline in
these markets. The declines during 1998 and 1999 (22.1 percent) reflect
the impact of the financial crisis in Southeast Asia, the Northwest
Airlines pilot strike (August 28 to September 15, 1998), as well as
individual carrier marketing, scheduling, and fleet strategies on the
affected routes. U.S. carrier capacity on the Pacific/Far East routes
was reduced by 8.6 percent over the past 2 years, with much of the
capacity shifted to other international and domestic markets.

U.S. air carriers' air cargo traffic declined 1.4 percent in 1999; the
first recorded decline since 1985. Domestic RTMs were up 0.3 percent
while international RTMs declined 3.0 percent, the latter change largely
due to declining freight movements between the U.S. and Latin American
and Asian markets. Domestic freight/express RTMs (11.5 billion) declined
by 0.6 percent while domestic mail RTMs (2.4 billion) were up 4.8
percent over 1998 levels. International freight/express (13.6 billion)
and mail (508.9 million) RTMs were down 3.0 and 3.9 percent
respectively, in 1999.

Although U.S. air carriers achieved higher growth in overall traffic
levels in 1999 (4.6 versus 2.5 percent in 1998), a 2.0 percent decline
in system passenger yields resulted in a \$702 million decline in
industry profits. Industry profits in 1999 totaled \$8.5 billion, second
only to the \$9.3 billion earned in 1998---an all-time record high. Net
profits totaled \$5.3 billion in 1999, down slightly from the 1998
reported figure. It should be noted that the industry was the
beneficiary of a 15.7 percent decline in the cost of jet fuel in 1998,
the net result being a \$1.9 billion reduction in operating expenses.
Although the *average cost of jet fuel* was again lower in 1999 (49.7
versus 54.7 cents per gallon), fuel prices were up 30.0 percent over the
last 6 months of fiscal 1999, rising from 44.58 cents per gallon in
March to 57.8 cents a gallon in September. These higher fuel prices are
one of the contributing factors to higher operating expenses and lower
operating profits in 1999.

Despite the relatively large gains reported in both industry traffic and
profits over the last several years, considerable disparity continues to
exist among the individual U.S. carriers. In 1999, all but one of the 13
majors reported positive earnings, with operating and net profits for
the group totaling \$7.6 and \$4.9 billion, respectively. Operating
results for the majors ranged from a high of \$1.6 billion (Delta) to a
low of a \$143.8 million loss (Trans World). Three carriers (American,
Delta, and United) accounted for over half (52.4 percent) of the group's
total earnings.

The financial results of many of the smaller nationals (carriers with
operating revenues between \$100 million and \$1 billion) and regionals
(carriers with operating revenue less than \$100 million) improved
considerably in 1999, with only 11 of the 54 reporting carriers
reporting operating losses. The combined operating profits of the
reporting nationals and regionals totaled just under \$1.2 billion in
1999, with earnings ranging from an operating profit of \$219 million
(Alaska Airlines) to an operating loss of nearly \$14 million (Challenge
Air Cargo). The record for the low cost, low-fare, new entrant carriers
was mixed in 1999, with several of the carriers continuing to post large
operating losses.

The regional/commuter airline industry posted an operating profit of
\$696 million in 1999, 15.5 percent higher than the \$603 million
recorded in 1998. The eight Form 41 carriers (operating at least one
aircraft with more than 60 seats) reported operating profits of
\$369 million while 85 Form 298-C carriers (operating only aircraft with
60 seats or less) posted profits of \$327 million.

Orders for commercial jet aircraft totaled 981 during the first 3
quarters of 1999, a 21.1 decline from the same period in 1998. The
decline in 1999 is due, in large part, to the large number of orders in
the two prior years, 1,369 in 1998 and 1,346 in 1997---the two all-time
record highs for the industry. The smaller regional jets (30 to
75 seats) accounted for almost half of the orders (481 aircraft) during
1999, a 44.4 percent increase over orders in 1998. While the number of
regional jets in the U.S. regional/commuter fleet totaled only 203 in
1999, the 920 orders over the past 7 quarters show that this will
continue to be the fastest growing segment of the industry over the next
several years.

A total of 815 commercial jet aircraft were delivered during the first 3
quarters of 1999, a 30.8 percent increase over the same 1998 period. The
relatively large increase in new aircraft deliveries in 1999 and the
previous 2 years (678 in 1997 and 951 in 1998) reflects the large
numbers of orders during the 1996 to 1998 period. A total of 133
regional jets were delivered during the first 9 months of 1999, a 66.3
percent increase over deliveries during the same 1998 period.

GENERAL AVIATION

By any measure, 1999 was a very good year for general aviation. Unit
shipments of general aviation aircraft are well on their way to
recording a fifth consecutive year of increase. General aviation
manufacturers' shipments increased from 928 aircraft in 1994 to
2,220 aircraft in 1998 (up 139.2 percent) and were up an additional
13.4 percent (1,692 units) during the first 3 quarters of 1999. Of
particular importance is the renewed interest in piston powered
aircraft. Shipments of piston powered aircraft have more than tripled
between 1994 and 1998 (from 499 to 1,534) and were up an additional 10.8
percent (1,164 units) during the first 9 months of 1999.

Shipments of jet aircraft have increased in each of the past 6 years
(from 171 in 1992 to 415 in 1998) and are headed toward a seventh
consecutive year of increase (352 units, up 26.2 percent) through the
first 3 quarters of 1999. The increased sales of jet aircraft reflects,
to a large extent, the relative importance of the rapidly growing
fractional ownership programs to the industry's current turnaround and
its future growth. While shipments of turboprop aircraft have not fared
as well as the other two aircraft categories, shipments totaled 176 (up
8.6 percent) during the first 9 months of 1999.

Billings for general aviation aircraft totaled almost \$5.9 billion in
1998, an all-time record high. During the first 9 months of 1999, the
industry reported billings of almost \$5.5 billion, up 41.0 percent over
the same time period in 1998. The large increase in billings relative to
shipments reflects increased shipments of the higher unit-priced
turbojet aircraft. Export billings and aircraft shipments also increased
in 1999, up 73.5 and 12.1 percent, respectively, during the first
3 quarters of the year.

Based on the results of the 1998 General Aviation and Air Taxi Activity
Survey, the active general aviation aircraft fleet and hours flown both
increased for a fourth consecutive year, up 6.4 and 1.4 percent,
respectively. According to the 1998 survey, the active general aviation
fleet totaled 204,711 and flew an estimated 28.1 million hours.

General aviation activity counts were up at both FAA and contract towers
as well as at en route centers in 1999. Operations at combined FAA and
contract towers were up 5.2 percent, with itinerant and local operations
up 4.3 and 6.5 per­cent, respectively. This marks the third consecutive
increase in general aviation activity at FAA and contract towered
airports and represents a 13.4 percent increase in activity over this
3-year period. Instrument operations at the combined towered airports
also increased for a third consecutive year, up 4.9 percent in 1999 and
15.5 percent over the last 3 years.

General aviation activity at FAA en route centers increased for a eighth
consecutive year\--up 1.9 percent in 1999 and 12.1 percent over the past
3 years. Sustained positive trends in instrument operations and center
activity probably reflect continuing growth in business and corporate
flying. Additionally, the increase in local operations (generally
touch-and-go activity) at FAA and contract towered airports over the
past 3 years (up 17.4 percent) shows that the long awaited turnaround in
recreational and instructional flying is also well underway.

Following 7 consecutive years of decline, the total number of active
pilots increased for a second consecutive year in 1999, totaling
640,113. All four of the major pilot categories showed
increases\--student, private commercial, and airline transport\--in
1999. The number of instrument rated pilots was up nearly 9,000 to
308,951, the second consecutive year of increased numbers.

Of major importance to the general aviation community are the positive
statistics regarding student pilots. The number of active student pilots
increased for a third consecutive year in 1999 (up 4.4 percent),
totaling an estimated 102,000. In addition, preliminary estimates show
that the FAA [processed]{.underline} a total of 47,091 student pilot
certificates (both new and renewals) during the first 8 months of 1999,
a 12.6 percent increase over 1998. Preliminary estimates also show that
the FAA [issued]{.underline} 39,963 original student pilot certificates
during the first 8 months of 1999, an increase of 16.9 percent over the
same 1998 time period.

Although all of the statistics relating to general aviation activity are
encouraging, it is the estimated increase in student pilots, one of the
key factors impacting the future of the general aviation industry, that
should be good news for the general aviation industry. The industry has,
over the past several years, instituted a number of industry-wide
programs, including "BE A PILOT," which are designed to attract new
pilots to general aviation. The positive statistics for student pilot
certificates processed or issued by the FAA in both 1998 and 1999 shows
that these programs are having an impact.

FAA WORKLOAD

At the end of fiscal year 1999, there were a total of 454 towered
airports\--288 FAA towers and 166 FAA contract towers. This compares to
402 FAA towers and 33 contract towers in 1994, the point at which the
FAA began extensive conversions of Level 1 towers. A lawsuit filed
against the FAA by the National Air Traffic Controllers Association
placed additional conversions under the FAA Contract Program on hold for
most of 1998 and 1999.

In 1999, FAA contract towers accounted for 19.2 percent of total
combined activity at the 454 towers, up from only 3.0 percent in 1994.
As in 1994, the majority of traffic activity at the contract towers is
being performed by general aviation, 83.3 percent in 1999 compared to
82.8 percent in 1984.

FAA and Contract Towers

The combined activity counts at FAA and contract towers totaled
68.2 million in 1999, an increase of 4.4 percent over 1998. The increase
in the tower counts was, in large part, due to the growth in both
general aviation and military activity. General aviation operations were
up 5.2 percent while military expanded by 6.1 percent. Commercial
operations (the sum of air carrier and commuter/air taxi) totaled
25.2 million, an increase of 3.0 percent. Air carrier operations grew by
2.3 percent while commuter/air taxi operations increased by 4.0 percent.
Operations at FAA air traffic control towers totaled 55.1 million in
1999, up 3.9 percent over 1998 activity levels. Operations at contract
towers totaled 13.1 million, an increase of 6.6 percent.

Instrument operations at the combined FAA and contract towers totaled
51.8 million in 1999, an increase of 3.7 percent. General aviation
activity was up 4.9 percent, while military activity grew by
2.6 percent. Commercial activity expanded by 3.0 percent in 1999.
Instrument operations at FAA towered airports (98.6 percent of total
combined operations) were also up 3.7 percent in 1999, while instrument
operations at contract towers increased 1.7 percent.

FAA En Route Centers

The number of Instrument Flight Rule (IFR) aircraft handled at FAA's en
route air traffic control centers totaled 44.7 million in 1999, an
increase of 3.4 percent over 1998. The number of commercial and general
aviation aircraft handled were up 4.7 and 1.9 percent, respectively.
Military activity declined 2.9 percent in 1999.

FAA Flight Service Stations

The number of traditional (non-automated) services provided at FAA
Flight Service Stations (FSS) totaled 32.4 million in 1999, a 4.4
percent decline from 1998 levels. All categories of flight services
declined in 1999: pilot briefings, down 5.0 percent; aircraft contacted,
down 4.3 percent; and flight plans originated, down 3.7 percent.

The number of flight plans originated is generally thought to be an
indicator of general aviation activity. The turnaround in the number of
flight plans originated in 1997 (up 1.5 percent) did presage the
turnaround in general aviation activity at FAA facilities (up
4.3 percent). However, while general aviation activity at FAA facilities
continued its turnaround in 1998 and 1999 (up 8.7 percent), the number
of flight plans originated failed to follow suit, declining 7.0 percent
over the 2-year period.

The Direct User Access Terminal System (DUATS) provides an automated
alternative to the FSS for obtaining pilot briefing information and
filing flight plans. The number of weighted DUATS services totaled
13.4 million (up 4.0 per­cent) in 1999. Combined FSS and DUATS services
totaled 45.8 million in 1999, a decline of 2.1 percent from the number
of combined transactions recorded in 1998.

**FAA**

**AEROSPACE FORECASTS**

**FISCAL YEARS 2000 - 2011**

This year's FAA aviation forecast document contains several additions
and format changes which were not included in last year's publication.
The FAA/Transportation Research Board's (TRB) 11^th^ International
Workshop on Future Aviation Activities, held on September 15-17, 1999,
recommended that the FAA expand on the air cargo forecasts developed and
published in the 1999 forecast document.[^1] In response, the FAA has
expanded its forecasts of domestic and international air cargo demand
(freight/express and mail revenue ton miles) to include a breakout of
air cargo demand carried by all-cargo carriers utilizing dedicated cargo
aircraft (freighters) as well as cargo demand moved in the belly of
passenger aircraft. These forecasts are discussed in Chapter III [^2]
and are contained in Tables 16-18.

A number of changes have also been made in our handing and reporting of
the U.S. commercial air carriers and regional/commuter airline fleets.
For the first time, this document contains separate forecasts and tables
of passenger and cargo jet aircraft. In addition, the regional/commuter
aircraft seat-size categories have been changed to include aircraft with
seating capacity greater than 60 seats. This was done to more accurately
reflect the changing nature of this fast growing industry. A discussion
of the air carrier passenger and cargo fleets can be found in Chapter
III, the fleet data in Tables 19 and 20. A discussion of the new
regional/ commuter seat-size categories can be found in Chapter IV, the
fleet forecast in Table 25.

The format of Chapter III, *Commercial Air Carriers*, has been
reformatted to facilitate and enhance the flow and presentation of the
information discussed. The new format now includes four distinct
sections: (1) a review of 1999 traffic and financial results; (2)
domestic passenger assumptions and forecasts; (3) international
passenger assumptions and forecasts, and (4) air cargo assumptions and
forecasts.

For a second year, the document contains a chapter on commercial space
transportation prepared in conjunction with the staff of the FAA's
Commercial Space Transportation Office. This chapter is intended to
provide an overview of the state of the space transportation and
includes forecasts of expected commercial launches over the next several
years. The forecasts and discussion can be found in Chapter IX.

The document also contains a special one-time report on "Aviation
Scenarios of the Future." This report summarizes the findings from a
FAA/industry workshop that assessed the outlook of aviation against four
futuristic scenarios---Global Prosperity, Western Hemisphere, Aging
America, and Global Climate Change. The report can be found in Appendix
A.

**ECONOMIC**

**FORECASTS**

The economic forecasts used by the FAA to project domestic aviation
demand are provided by the Executive Office of the President, Office of
Management and Budget (OMB). In addition to the OMB forecasts, the FAA
also uses the U.S. macro economic projections of two commercial
forecasting services\--DRI/McGraw Hill (DRI) and WEFA, Inc. (WEFA).
These alternative forecasts provide the FAA with a range of economic
forecasts with which to gauge the risk associated with variations from
the OMB projections. The FAA uses the world and individual country
economic projections provided by WEFA to forecast the demand for
inter­national aviation services.

Readers of this document should be aware that effective October 28,
1999, the Bureau of Economic Analysis, U.S. Department of Commerce,
changed the reference year for calculating price indexes and chained
dollar estimates of GDP from 1992 to 1996. In addition, a number of
definitional and classification improvements have been made which
results in an upward revision to the historical growth rate of real
GDP---from 2.8 percent on average since 1984 to 3.2 percent. The changes
also result in an upward revision in the historical growth rate of world
GDP---approximately 0.1 percent annually. A more detailed discussion of
these changes is presented in Chapter II.

In any given year there are likely to be variations around the long-term
trend. None of the current economic models used by the FAA are
sufficiently precise to predict interim business cycles. In addition,
unanticipated developments, such as the recent Southeast Asia financial
crisis or the 1998 Northwest Airlines' strike cannot be predicted.

In addition to the economic forecasts prepared by OMB and the economic
forecasting services, the FAA incorporates many of the relevant
assumptions developed at the FAA/TRB 11^th ^Annual International
Workshop. Although the FAA makes use of the recommendations and
assumptions developed by all nine industry panels, it relies heavily on
the assumptions and forecasts prepared by the three industry panels on
general aviation\--Light General Aviation, Business Aviation, and
Vertical Flight\--in preparing its general aviation and helicopter
forecasts.

The projected growth of aviation demand discussed in this and subsequent
chapters is consistent with the national short- and long-term economic
growth forecasts discussed in greater detail in Chapter II. Table I-1
summarizes the key U.S. and world economic assumptions used in
developing the domestic and international aviation demand forecasts.
Annual historical data and economic forecasts are presented in tabular
form in Tables 1 through 5.

United States Economy

While there is agreement among most economic forecasters as to the
general direction of the U.S. economy\--sustained growth\--there are
differences among the economic projections supplied by OMB, DRI, and
WEFA as to the expected growth in individual years of the forecast
period. The two forecasting services bracket OMB's projected growth in
2000, with expected U.S. economic growth ranging from 3.4 to 3.8
percent. However, OMB is generally more pessimistic than either
forecasting service over the remainder of the forecast period. While
both OMB and the two forecasting services expect the U.S. economy to
slow during the 2001 to 2004 period, the OMB slowdown is more pronounced
than that of either WEFA or DRI.

The OMB economic forecasts anticipate moderate growth throughout the
forecast period. In the short-term, U.S. real GDP is projected to
increase by 3.5 percent in 2000, slowing to average growth of
2.6 percent over the next 4 years. GDP is forecast to increase at an
average annual growth rate of 2.8 percent over the entire 12-year
forecast period. The consumer price index is projected to remain in the
moderate range throughout the 12-year forecast period, increasing at an
average annual rate of 2.6 percent.

The oil and gas deflator is expected to increase by 23.8 percent in
2000, then decline by 15.7 percent in 2001. The relatively large
increase in fuel prices in 2000 reflects two factors: the increased
worldwide demand for oil resulting from the recovery of Southeast Asia
economies; and the ability of OPEC members to maintain production
quotas. Fuel prices are forecast to increase at an average annual growth
rate of 2.1 percent over the entire 12-year forecast period, the result
being a 0.5 percent annual decline in real fuel prices. An increase in
real fuel prices occurs only in the year 2000. Real fuel prices decline
throughout the remaining 11 years of the forecast period.

No major disruptions in the price or availability of oil have been
assumed during the 12 year forecast period.

World Economy

Worldwide economic growth is expected to exceed that of the United
States by approximately 0.5 percent annually over the 12-year forecast
period, increasing at an average annual rate of 3.3 percent. Economic
growth is forecast to be greatest in Latin America and the Far East/
Pacific, expanding at annual rates of 4.4  and 4.3 percent,
respectively. These high rates of growth assume that the two regions
will experience slower growth in 2000 as their respective economies
continue to recover from the impacts of Southeast Asian and Brazilian
financial crises, then resume strong growth over the remainder of the
forecast period. Economic growth in Europe/Africa/Middle East countries
and Canada is expected to average 2.8 and 2.5 percent, respectively,
over the forecast period.

**AVIATION TRAFFIC AND ACTIVITY FORECASTS**

The large commercial air carrier traffic and activity forecasts are
summarized in Table I-2. A detailed discussion of the forecasts and
underlying assumptions can be found in Chapter III. Year-to-year
historical data and forecasts can be found in Tables 6 through 22.

The regional/commuter and general aviation forecasts are summarized in
Table I-3. Detailed discussions of the forecasts and underlying
assumptions for the regionals/commuters and general aviation can be
found in Chapter's IV and V, respectively. Year-to-year historical data
and forecasts can be found in Tables 23 through 25 for
regionals/commuters and Tables 26 through 30 for general aviation.

Commercial Aviation

Domestic Air Carrier

Passenger Traffic

Domestic air carrier RPMs and passenger enplanements are forecast to
increase at annual rates of 4.1 and 3.6 percent, respectively, over the
12-year forecast period. The forecast assumes that domestic RPMs and
enplanements will grow by 4.0 and 3.2 percent, respectively, in 2000,
then slow during the 2001 to 2003 period in response to a slowing of
U.S. economic activity. During this 3-year period, RPMs and enplanements
are expected to average only 3.5 and 2.9 percent growth, respectively.
However, a quickening in U.S. economic activity beginning in 2004,
results in relatively strong demand throughout the remainder of the
forecast period. Domestic RPMs and enplanements increase at average
annual rates of 4.4 and 3.9 percent, respectively, over the last 8 years
of the forecast period.

Declining real yields also impact domestic traffic demand in the
short-term. Real yields are expected to decline by 3.2 percent annually
during the 2000 to 2003 time period. This relatively large decline in
real yields over the early years of the forecast is based on the
assumption that air carriers will hold the line on fare increases to
counteract the slowing of demand that results from the slowing of the
U.S. economy. Thereafter, real yields are expected to decline by an
average of 0.3 percent annually over the remainder of the forecast
period. Real yields decline by an average of 1.3 percent annually over
the entire 12-year forecast period.

The decline in real yields reflects the expected continuation of strong
competitive forces (both domestically and internationally) throughout
the forecast period. Competition in domestic markets will come from
second-tier carriers such as Delta Express, United Express, and MetroJet
(USAirways); established low-fare carriers such as Southwest; as well as
from new low-fare start-ups such as JetBlue Airways. Internationally,
increased competition will come from expanded open skies agreements and
new and existing global alliances.

Air carrier aircraft operations are forecast to increase at an annual
rate of 2.8 percent during the 12-year forecast period. The slower
growth in activity at FAA air traffic facilities relative to expected
traffic increases (3.6 percent growth in domestic enplanements) reflects
the efficiencies which result from the assumed increases in both
domestic average aircraft size (up 0.6 seats annually) and the passenger
trip length (up 4.2 miles annually). However, no gains are expected to
be achieved from increased domestic passenger load factors. The current
forecast assumes that load factors will reach 70.0 percent in 2006 (up
from 69.8 percent in 1999) and remain at this level through 2011.

International Air Carrier

Passenger Traffic

Forecasts of total passenger traffic (U.S. and foreign flag carriers)
are provided between the United States and three world travel
areas\--Atlantic, Latin America (including Mexico and the Caribbean),
and the Pacific/Far East\--as well as for U.S./Canadian transborder
traffic. These forecasts are based on historical passenger statistics
obtained from the United States Immigration and Naturalization Services
and Transport Canada and on regional world historical data and economic
projections obtained from WEFA.

Total passenger traffic between the United States and the rest of the
world is expected to grow from 132.0 million in 1999 to 239.4 million in
2011, an average annual growth rate of 5.1 percent. Passenger traffic is
expected to be strongest in Latin American and Pacific markets, growing
at annual rates of 6.1 and 6.0 percent, respectively, over the forecast
period. Passenger traffic is projected to grow 4.3 percent annually in
Atlantic markets and 3.6 percent a year in Canadian markets.

U.S. air carrier international RPMs and passenger enplanements are
forecast to increase at average annual rates of 5.8 and 5.5 percent
respectively, over the 12-year forecast period. The stronger growth in
international travel relative to domestic markets is being driven by the
strong passenger demand projected in the Latin America and Pacific/Far
East markets---both up 6.1 percent. Passenger enplanements in the
Pacific/Far East markets are forecast to increase by only 3.6 and 4.7
percent during the first two years of the forecast as the region
continues to recover from its current financial crisis. However,
passenger demand in the Pacific/Far East is expected to increase at an
average annual rate of 6.5 percent over the remaining 10 years of the
forecast period. Passenger enplanements in the Atlantic

markets are projected to grow by 4.4 percent annually over the 12-year
forecast period.

The air carrier forecasts assume that commercial air carriers will
continue to benefit from the moderate to strong economic growth expected
to take place both within the United States and worldwide. It is also
assumed that electronic technology improvements, along with a
continuation of cost containment efforts, will benefit the overall
financial performance of both U.S. and foreign flag carriers. In
addition, the operation of a fleet consisting entirely of more
fuel-efficient stage-3 aircraft (or retrofitted/ reengined aircraft)
should result in further cost savings and increased industry
productivity. These productivity improvements should strengthen the
industry\'s overall financial performance.

Regionals/Commuters

Passenger Traffic

The regional/commuter industry consists of carriers that report on DOT
Form 298-C (85 carriers in 1999) and DOT Form-41 (8 carriers in 1999).
For reporting purposes, the designation is based on aircraft
size\--carriers operating aircraft with more than 60 seats report all
traffic, whether transported on larger or smaller aircraft, on DOT Form
41. All other carriers report on DOT Form 298-C.

In 1999, the regional/commuter airlines enplaned 72.4 million
passengers, 11.8 percent of all passenger traffic in scheduled domestic
air service. By the year 2011, these carriers are expected to carry
137.5 million passengers (5.5 percent annual growth) and to account for
14.6 percent of all domestic passenger enplane­ments.

Regional/commuter airlines RPMs are expected to increase by 7.4 percent
annually over the forecast period, growing from 18.8 billion in 1999 to
44.6 billion in 2011. Most of the growth in regional/commuter traffic is
expected to occur among the Form 41 carriers (RPMs and enplanements up
7.9 and 5.7 percent, respec­tively) or the larger Form 298-C carriers who
operate the new regional jets.

The significantly higher growth in RPMs relative to enplanements is the
result of expected large increases in the average passenger trip length
for regional/commuter carriers, increasing from 260.2 miles in 1999 to
324.1 miles in 2011. This increase in trip length is due to the
continued integration of large numbers of regional jets (1,203 over the
12-year forecast period) and high-speed turboprops into the
regional/commuter fleets. These aircraft, with ranges of up to
1,000 miles, are expected to open up new opportunities for growth in
non­traditional regional/commuter markets. The increased use of regional
jets is also expected to lead to further route rationalization by the
larger commercial air carriers, including markets in the 400 to 500 mile
range and beyond. This phenomenon is expected to be one of the drivers
of growth for the regional/commuter carriers during the first half of
the forecast period.

The move to greater use of regional jets and larger propeller-driven
aircraft results in the average seating capacity of the regional fleet
increasing from 36.0 seats in 1999 to 44.3 seats in 2011. Most of the
growth in aircraft seat size occurs among the larger Form 41 carriers
whose average aircraft seat size increases to 50.5 seats in 2011, up
from 42.8 seats in 1999. Form 298-C carriers' average aircraft seat size
increases from 31.3 seats in 1999 to 39.2 seats in 2011. The number of
regional jets in U.S. regional/ commuter service is projected to grow
from 343 in 1999 to 1,546 in 2011.

Air Cargo

Air cargo demand by U.S. commercial air carriers is expected to grow at
annual rates that are about 1.0 percent higher than those forecast for
passenger demand. System RTMs are forecast to grow at an annual rate of
5.9 percent (compared to 4.6 percent for system RPMs) over the 12-year
forecast period, with domestic and international RTMs increasing 5.2 and
6.6 percent, respectively.

Cargo freight/express RTMs are forecast to more than double over the
forecast period as a strong global economy stimulates the demand for the
rapid movement of goods and products by air, both domestically and
internationally. Domestic freight/express RTMs are forecast to increase
from 11.5 billion tons in 1999 to 21.6 billion tons in 2011, an increase
of 5.4 percent annually. International freight/express RTMs, owing to
stronger worldwide economic growth, are projected to increase at an
average annual rate of 6.7 percent over the forecast period, from 13.6
to 29.5 billion.

Most of the growth in freight/express RTMs is expected to come from the
all-cargo carriers operating dedicated cargo aircraft. All-cargo
domestic and international freight/express RTMs increase at annual rates
of 6.4 and 8.3 percent, respectively, over the 12-year forecast period.
The percent of domestic freight moved by all-cargo carriers increases
from 78.2 percent in 1999 to 87.7 percent in 2011, international
freight/express from 53.6 to 64.4 percent.

Significantly slower growth is forecast for mail RTMs as electronic
alternatives (fax, email, direct bill payment, etc.) cut into the volume
of mail moved by air. Domestic and international mail RTMs are projected
to increase at annual rates of 3.8 and 3.1 percent over the forecast
period, with domestic mail increasing from 2.4 to 3.8 billion RTMs and
international mail from 509 to 736 million RTMs in 2011.

All-cargo carriers account for 29.7 percent of mail RTMs in 2011, up
from 25.0 percent in 1999. The disparity in all-cargo carrier's share of
mail RTMs relative to its share of freight/express traffic (74.2 percent
in 2011) reflects the fact that passenger carriers operate flights
throughout the day while the majority of all-cargo carrier operations
occur at night. Despite this scheduling disadvantage, all-cargo carrier
mail RTMs increase by 5.2 percent annually over the forecast period
compared to annual growth of only 3.1 percent for the passenger
carriers.

GENERAL AVIATION

The general aviation active fleet is projected to total 230,995 in 2011,
an increase of just over 24,000 aircraft or 0.9 percent annual growth
over the 12-year forecast period. In 2011, piston powered fixed-wing
aircraft are expected to account for the majority of the fleet, 76.7
percent compared to 79.4 percent in 1999. However, the turbine powered
fixed wing fleet is expected to make the biggest inroads in the general
aviation active fleet, increasing its share from 6.1 percent in 1999 to
8.0 percent in 2011. In 2011, experimental aircraft account for
8.6 percent (up from 8.1 percent in 1999) of the fleet while rotorcraft
comprise 3.9 percent of the fleet (up from 3.7 percent in 1999).

The current forecast assumes that the business use of general aviation
aircraft will expand at a more rapid pace than personal use. This is
due, in large part, to the continued rapid growth in fractional
ownership and is reflected in the changing composition of the general
aviation fleet mix. The more expensive and sophisticated turbine-powered
fleet (including rotorcraft) is projected to grow at four-times the rate
forecast for the piston aircraft categories---2.8 compared to 0.7
percent. Turbine-powered fixed wing aircraft are projected to increase
at an average annual rate of 3.2 percent, totaling 18,535 in
2011---7,240 turboprops and 11,295 turbojets. The turbine rotorcraft
fleet is expected to increase at an annual rate of 1.6 percent over the
forecast period, totaling 6,010 in 2011.

The general aviation piston fleet is projected to increase by just under
14,000 aircraft over the

forecast period, totaling 180,180 aircraft in 2011. The single engine
fixed wing piston aircraft category increases at an average annual rate
of 0.7 percent\--from 145,250 aircraft in 1999 to 158,400 in 2011. The
number of piston powered rotorcraft increase by just over 400 aircraft,
totaling 3,030 in 2011. Multi-engine fixed wing piston aircraft are
expected to remain constant at 18,750 aircraft throughout the forecast
period.

Experimental aircraft are projected to increase by 1.5 percent annually,
reaching 19,910  aircraft in 2011. Aircraft in the "other" category
(gliders, lighter-than-air, etc) are expected to total 6,360 in 2011, up
from 5,640 in 1999.

General aviation hours flown is projected to increase at an average
annual rate of 2.2 percent over the 12-year forecast period, to 38.8
million hours in 2011. The larger increase in hours relative to aircraft
reflects expected increases in the utilization of the general aviation
fleet. In 2011, piston powered aircraft are projected to fly
26.6 million hours (up 1.5 percent annually) while turbine-powered
aircraft fly 10.5 million hours (up 4.5 percent annually). Most of the
increase in utilization occurs in turbojet aircraft, the fastest growing
category of general aviation aircraft---active fleet and hours up 4.8
and 7.3 percent annually, respectively. These large increases are due to
the expected increases in both the fractional ownership fleet and its
activity levels. Utilization of fractional ownership aircraft average
approximately 900 hours annually compared to only 325 hours for all
business jets.

The number of active pilots are forecast to total 824,490 in 2011, an
increase of over 184,000 (2.1 percent annually) over the 12-year
forecast period. Most of the expected growth is projected to occur in
the student and airline transport categories. The number of student
pilots are projected to increase by over 50,000 (3.4 percent annually),
totaling 152,500 in 2010. Airline transport pilots are forecast to
increase from 137,642 in 1999 to 198,100 in 2011, an average annual
increase of 3.1 percent. Projected growth among other types of pilot
certifications include: private pilot certificates, 1.4 percent annually
to 306,600; commercial pilot certificates, 1.4 percent annually to
147,300; and helicopter only pilots, 2.0 percent annually to 9,745.

**FAA WORKLOAD FORECASTS**

There were a total of 454 towered airports at the end of September, 288
FAA towers and 166 contract towers. The number of FAA contract towered
airports is expected to increase by a total of 22 during 2000. This
includes the conversion of 22 FAA towered airports, the addition of one
new contract tower, and the closing of one contract tower. Most of the
conversions are scheduled to take place during the first quarter of the
year.

Since 1993, a total of 114 FAA towers have assumed contract tower
status. To overcome any reporting inconsistencies caused by the tower
conversion program, the FAA has, since 1996, developed separate activity
forecasts for both FAA and contract towered airports. Activity at FAA
Air Route Traffic Control Centers and Flight Service Stations are not
affected by the contract tower conversions.

Summary forecasts of aircraft activity at combined FAA and contract
tower facilities can be found in Table I-4. Summary forecasts of
activity at FAA facilities [only]{.underline}, including FAA towers, en
route centers, and flight service stations, can be found in Table I-5.
More detailed forecasts and discussion of aircraft activity at FAA and
contract facilities can be found in Chapter VII and in Tables 31 through
48.

FAA and Contract Towers

Activity at the combined FAA and contract towers is projected to grow
from 68.2 million in 1999 to 86.9 million in 2011, an annual increase of
just over 2.0 percent. The majority of this growth is expected to result
from increased commercial aircraft activity. Between 1999 and 2011, air
carrier activity is forecast to increase 2.8 percent annually, while
commuter/air taxi activity is projected to increase 2.6 percent a year.

General aviation activity is projected to increase from 40.0 million
operations in 1999 to 49.2 million operations in 2011, an annual
increase of 1.7 percent. The FAA does not forecast military activity,
and so it is held constant at its 1999 activity level (3.0 million)
throughout the 12-year forecast period.

The projected large increase in the numbers of regional jets and general
aviation turbine aircraft is expected to result in instrument operations
increasing at faster rates than total tower operations. Combined
instrument operations counts at FAA and contract towered airports
increase from 51.8 million in 1999 to 67.6 million in 2011, an annual
increase of 2.2 percent.

Commercial aircraft instrument operations are forecast to increase at a
significantly faster rate than are general aviation instrument
operations, up 2.7 and 1.9 percent, respectively. Military activity is
expected to remain at 3.5 million operations through 2011.

En Route Centers

The workload at FAA en route traffic control centers is forecast to
increase at an average annual rate of 2.4 percent during the 12-year
forecast period. In 2011, FAA en route centers are expected to handle
59.4 million IFR aircraft, up from the 44.7 million in 1999

The number of commercial aircraft handled is projected to increase at an
annual rate of 2.7 percent while the number of general aviation aircraft
handled increases at an average annual rate of 2.0 percent. Military
activity at en route centers is held constant at its 1999 activity level
of 4.1 million.

The higher growth rate at FAA en route centers, relative to activity at
combined towered airports, reflects the fact that commercial activity
accounts for a significantly larger percentage of center activity---71.2
versus 37.0 percent at towered airports in 1999. Therefore, the
projected larger increases in commercial aircraft activity have a much
greater impact on total center traffic during the forecast period.

Flight Service Stations

Total flight services originating at FAA flight service stations are
forecast to decline from 32.4 million in 1999 to 31.4 million in 2011,
an average annual rate of decline of 0.3 percent. Of the services
provided by the FAA, only flight plans originated is projected to
increase over the forecast period, growing from 6.3 million in 1999 to
6.8 million in 2011. Both pilot briefings and the number of aircraft
contacted are forecast to decline over the next 12 years, down 0.7 and
1.7 percent annually.

The number of DUATS services are projected to grow at an average annual
rate of 2.8 percent over the forecast period, from 13.4 million in 1999
to 18.6 million in 2011. Combined FSS and DUATS services are expected to
total 50.0 million in 2011, an annual increase of 0.7 percent.

**FORECAST RISKS**

There are a number of positive signs that point toward a continuation of
moderate to strong growth in both the commercial and general aviation
industries, not the least of which is the projected strong growth in
both the U.S. and worldwide economies. However, there are also a number
of uncertainties that could cause the growth of the U.S. and world
economies to be less than that projected. Slower economic growth would,
ultimately, slow the demand for aviation services.

Much has been said about the strong economic recovery now taking place
in Southeast Asia---the scene of the devastating financial crisis in
1997 and 1998. The latest WEFA forecast (November 1999) for the region
includes real GDP growth of 3.2 percent in 1999 and 3.4 percent in 2000.
This strong recovery is predicated on the up-graded outlook for the
economies of South Korea, Singapore, Thailand, Malaysia, and Japan.
However, on December 6, the Japanese government reported that third
quarter GPD declined by one percent, after posting positive gains during
the two previous quarters. This raises uncertainty as to whether Japan
has finally shaken off its 8-year economic malaise. WEFA projected that
Japan's GDP will increase by 1.3 percent in 1999 and 1.4 percent in
2000. Failure of the Japanese economy to respond to government stimulus
could slow the expected recovery in air travel on routes to Japan and
the Far East.

WEFA also projects that Latin American real GDP will increase by 3.4
percent in 2000 and 4.1 percent in 2001. However, the region experienced
a 0.4 percent decline in economic activity in 1999 and only two major
countries---Peru and Mexico\--experienced growth over the past year. The
outlook for Latin America continues to depend on political actions
rather than economic fundamentals. The greatest risk to the expected
recovery comes from a failure of the Brazilian government to implement
necessary financial reforms. Additionally, the 2000 presidential
elections in Mexico could create uncertainty for investors, resulting in
a flight of investment capital and the collapse of the peso. If either
Brazil or Mexico fails to grow as predicted, growth of traffic on Latin
America routes could slow.

Although there appears to be unanimity among the economic forecasting
services and OMB regarding continued strong growth in U.S economic
activity, there are a number of factors that could slow or reverse this
optimistic outlook.

Over the past several years, the U.S. economy has benefited considerably
from the "wealth effect" created by the large increase in market equity
values. This has resulted in unprecedented increases in both consumer
spending and consumer sentiment\--the Conference Board's index of
consumer confidence for December was at its highest level in more than 3
decades. Any large sustained correction in the stock market equity
values, considered inevitable by many economists, could be followed by a
sharp decline in consumer spending for goods and services, including air
travel.

Additionally, the rising cost of fuel could present a major risk for all
segments of the economy, in particular aviation. The current OMB
forecast assumes a 23.8 percent increase in fuel prices in 2000,
followed by a 15.7 percent reduction in 2001. Sharply higher fuel prices
appear to be inevitable in the near-term and these higher costs will
almost certainly have an impact on the consumer's discretionary income
and spending patterns. If the projected scale back in fuel prices in
2001 doesn't materialize, the potential impact on U.S. and world
economic growth and air travel could be considerable.

Any slowing of U.S. economic growth will impact the earnings of
corporations and ultimately, travel budgets. In addition, much of
corporate America continues to be at odds with the U.S. commercial
airline industry over what it perceives as unreasonable and rapidly
increasing fares for business travelers. Business could implement a
number of measures to contain rising travel costs, including a cutback
in commercial air travel and/or a shift to travel by corporate jets or
fractional ownership companies.

The general aviation industry is also vulnerable to an economic slowdown
or recession, although not to the same extent it would have been several
years ago. The turnaround in the demand for general aviation products
and services since the passage of the General Aviation Revitalization
Act in 1994 has occurred during a period of unprecedented economic
growth. No one actually knows how the industry or its customers would
react to a protracted slowing of demand or an economic recession.

Increased flight delays are becoming a growing problem to the airlines,
the traveling public, and the FAA. Delays are not a recent phenomena,
but a fact of life for air transportation, be they weather, schedule, or
air traffic control related. However, delays are closely linked to
demand and increased delays are a potential risk to achieving the
aviation demand forecasts presented in this document.

Given the strong growth in aviation demand during the 1990s, the real
question is why delays did not become an issue until just recently.
Prior to 1997, a number of unrelated factors combined to constrain the
growth of activity at FAA air traffic facilities. As such, activity at
combined FAA/contract towers actually declined by 0.3 percent annually
during the 1990-96 time period. En route center activity increased at an
annual rate of 1.4 percent during the same 7-year period, the higher
growth due to its larger percentage of commercial activity as compared
to tower activity---71.2 versus 36.9 percent.

Air carrier passenger traffic grew by 4.1 percent annually during the
1990-96 time period. However, much of the growth was absorbed through
increased load factors (up 5.8 percentage points). During this same
period, regional/ commuter traffic increased at annual rate of
12.8 percent. Again, a large part of this growth was absorbed through
increased load factors (up 4.3 percentage points) and increased aircraft
size (up 5.3 seats). Additionally, both general aviation and military
activity at FAA facilities remained below pre-1990 levels, the latter
the result of declining military budgets.

However, it is the growth over the last 3 years that has given rise to
increased delays. During this period, activity at combined FAA and
contract towers and en route centers grew at average annual rates of 3.3
percent. The reasons behind these relatively large increases are as
follows:

-   Large air carrier load factors appear to be approaching their
    maximum levels. Also, based on known future aircraft orders and
    options, there will be little or no efficiency gains to be achieved
    through increased aircraft size. The industry has essentially
    decided to compete on schedule frequency. As such, future activity
    growth will closely mirror the rate of increase in traffic.

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-   A total of 243 new regional jet aircraft were delivered to U.S.
    regional/commuter air carriers over the past 2 years. Despite
    continued increases in load factors and aircraft seat size,
    regional/commuter ASMs grew by 23.3 percent during these 2 years
    while commuter/air taxi activity at FAA/contract towers increased
    5.4 percent. Regional/commuter activity at en route centers was up
    13.2 per­cent during the same 2-year period. A total of almost 700
    regional jets are scheduled to be delivered to the regional/commuter
    fleets over the next 5 years and more than 1,200 will be delivered
    over the entire forecast period.

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-   General aviation appears to be growing as demonstrated by the
    increased activity at FAA air traffic facilities over the past 3
    years. General aviation activity at FAA/contract towers was up
    13.5 percent, a large part of it business and corporate activity at
    the 29 large hub airports (up 8.5 percent). Activity at en route
    centers was up 12.1 percent. The large numbers of jet aircraft on
    order by fractional ownership companies point toward a continuation
    of strong business/corporate travel while the success of the
    industry's "learn to fly" programs assure continued growth in both
    instructional and personal flying.

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-   Military budgets appear to be on the increase and this has resulted
    in an increase in military flying. As such, military activity at
    FAA/contract towers was up 17.2 percent over the past 2 years;
    center traffic increased 4.4 percent. If future military budgets
    continue to increase or remain stable, we can expect military flying
    to continue to increase in future years.

A projected high level of growth among all four-user groups is a
phenomenon that has not been witnessed by the FAA since the late 1970s.
What these increased activity levels presage in terms of future air
traffic delays or constraints on future demand is something that should
be of concern to the FAA, aviation officials, and the flying public.

If the economic scenarios presented in this document\--sustained
moderate growth for both the U.S. and world economies\--are achieved,
there is every reason to believe that the demand for commercial and
general aviation products and services will continue to expand
throughout the forecast period. The real question is whether there will
be enough capacity (airside and landside) to accommodate the projected
growth.

**FORECAST SUMMARY**

Highlights of the current FAA aviation forecasts for the 2000 to 2011
time period include:

-   The U.S. economy is expected to grow at a rate about one-half
    percent less than that of worldwide economic activity (2.8 versus
    3.3 percent annually), with most of world economic growth taking
    place in the Latin American (4.4 percent annually) and the
    Pacific/Far East (4.3 percent annually).

-   International passenger traffic is forecast to grow significantly
    faster than U.S. domestic traffic (5.5 versus 3.6 percent annually),
    with most of the international growth occurring in Latin American
    and Pacific/Far East markets, both up 6.1 percent annually.

-   Regional/commuter passenger traffic will continue to grow at a
    faster rate than their larger domestic counterparts (5.5 versus
    3.6 percent annually). Growth in the industry is derived from the
    establishment of new markets utilizing the new regional jets and
    from further route rationalization by the larger commercial
    carriers.

-   Air cargo traffic is expected to grow at rates about one and a half
    percent higher than those predicted for passenger traffic, with
    domestic and international RTMs increasing at annual rates of 5.2
    and 6.6 percent, respectively.

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-   The growth being exhibited throughout the general aviation
    community, combined with industry-wide promotional programs, is
    expected to result in moderate sustained increases in the active
    fleet (0.9 percent annually), hours flown (2.2 percent annually),
    and student pilots (3.4 per­cent annually).

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-   Total aviation activity at FAA and contract facilities is expected
    to grow at annual rates of 2.0 to 2.4 percent annually, with
    commercial activity (up 2.7 per­cent annually) increasing at
    significant higher rates than those predicted for general aviation
    (1.7 to 2.0 percent annually).

Uncertainties which have the potential to limit the growth in the demand
for U.S. and international aviation services include:

-   The economic problems in Japan and Brazil pose significant risks to
    the economies of other countries in Asia and South America. If
    current internal economic problems are not resolved, there is
    potential for significant economic slowdowns or recessions in Asia
    and South America.

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-   The large fare increases experienced by business travelers could
    result in reduced future business travel and corporate travel
    budgets, and/or speed the introduction and/or

-   acceptance of alternatives to air travel, i.e., teleconferencing.

Nevertheless, air transportation is expected to continue to dominate all
other transportation modes in both long distance domestic inter-city
travel and in international passenger markets throughout the foreseeable
future.

[^1]: The cargo forecasts prepared in 1999, the first since 1983, were
    in response to recommendations made at the 1997 FAA/TRB Workshop.

[^2]: The chapters and appendices referenced in the internet version of
    the Executive Summary can be found in the hardcover edition of FAA
    Aerospace Forecasts Fiscal Years 2000-2011, March 2000. Copies can
    be obtained by contacting the FAA's Statistics and Forecast
    Branch\--phone (202) 267-3355 or FAX (202) 267-5370.