**CHAPTER I**

**EXECUTIVE SUMMARY**

**A DISASTROUS YEAR**

**AND AN**

**UNCERTAIN FUTURE**

**FOR AVIATION**

Even before the terrible events of September 11^th^, aviation was
already in a weakened state and headed toward one of its worst years in
over a decade. Domestic passenger demand began to decline in February
while international traffic turned negative in July, largely in response
to the slowing of the U.S. economy. Air carrier finances turned negative
in the January-March quarter, due, in large part, to a combination of
the collapse of high yield business traffic and rapidly escalating labor
costs. Although the general aviation industry continued to report
increased billings through the third quarter of the year, the industry
also reported its first decline in aircraft shipments in nearly 7 years.

While the events of September 11^th^ did negatively impact traffic and
financial results in fiscal year (FY) 2001, by far the greatest impact
is expected to occur during the fourth quarter of calendar year 2001
(the first quarter of FY 2002). Normally, the difference between
calendar and fiscal year results and growth rates vary only slightly.
However, there will be relatively large differences between the fiscal
and calendar year growth rates reported in both 2001 and 2002.
Therefore, where appropriate, statistics and growth rates for these 2
years will be noted on both a fiscal and calendar year basis.[^1]

**AN END OF**

**THE BOOM TIMES:**

**A REVIEW OF 2001**

One of the longest running boom times in aviation history came to an
abrupt halt in 2001. During the 7-year period between 1994 and 2000, the
U.S. and world commercial and civil aviation community achieved
unprecedented growth in both the demand for aviation services and
profitability. While the terrorist events of September 11^th^ are
responsible for a large part of the declines witnessed in 2001, other
factors, most notably the slowdown in U.S. and world economic activity,
had already set the stage for an end to the growth cycle. The events of
September 11^th^ were merely the catalyst that pushed aviation over the
edge, turning an already bad year into a disastrous year.

UNITED STATES

AND WORLD

ECONOMIC ACTIVITY

On November 26, the National Bureau of Economic Research officially
announced that the U.S. economy had entered its 10^th^ recession since
the end of World War II in March. This ended the longest running
economic expansion period (10 years) in U.S. history. The U.S. economy
slowed considerably during the April-June quarter (up only 0.3 percent),
but did not decline until the July-September quarter (down 1.1 percent).
U.S. Gross Domestic Product (GDP) growth, which had averaged 3.3 percent
during the 10-year expansion period, grew by only 1.8 percent in FY
2001\--up an estimated 1.0 percent in CY 2001.

The current economic downturn appears to be the first attributable to
financial markets since the 1930s. The collapse of the high-tech
information industries and subsequent decline in market equity values,
in effect, eroded much of the "wealth effect" that had previously
generated a large part of the growth in the U.S. economy over the past
several years. The loss of household wealth dampened consumer confidence
and sharply reduced consumer spending. The September 11^th^ attacks
accelerated the downturn in consumer confidence and spending on consumer
goods and services and, in particular, spending on air travel.

U.S. inflation (as measured by the consumer price index) averaged
3.2 percent in FY 2001. The relatively high inflation rate is due, in
part, to a 5.6 percent increase in energy prices. Energy prices have
risen almost 37.0 percent over the past 2 years.

Globally, economic gains have averaged about a half percentage point
less (GDP up 2.8 percent) than those of the United States during the
past economic expansion. World GDP growth also slowed considerably
during 2001, averaging only an estimated 1.4 percent in CY 2001. The
slowdown in 2001 is due, in large part, to the growing dependency of
many world economies on export trade with the United States.

On a calendar year basis, the economies of Canada and Europe/Middle
East/Africa are expected to grow slightly faster than the United States
in 2001, expanding by 1.6 and 1.7 percent, respectively. The economies
of the Latin American countries, although weakened by the financial
crisis in Argentina (down 1.5 percent), is expected to increase by
1.9 percent in 2001. The economies of the Asian/Far East countries also
weakened in 2001 (GDP up 1.1 percent), due, in large part, to the
economic recession in Japan (GDP down 1.2 percent). However, Japan's
weakness is partially offset by China's relatively strong economic
activity (up 7.2 percent).

![](media/image1.wmf){width="3.24375in" height="2.3381944444444445in"}

COMMERCIAL AVIATION

Although the terrorist events of September 11^th^ were aimed mainly at
the United States and, in particular, its aviation industry, the
repercussions were felt worldwide. Commercial passenger and cargo
flights to and from the United States were halted for several days. In
the aftermath of the attacks and the subsequent U.S. declaration of war
against the terrorists responsible, the demand for air travel to and
from the United States declined significantly, forcing both U.S. and
foreign flag carriers to drastically cut scheduled flights. However, the
impact was not confined to just U.S. markets, air travel demand and
schedules were impacted worldwide.

World Travel Demand

The relatively strong growth in both U.S. and world GDP prior to 2001
was largely responsible for the strong demand for world aviation
services exhibited since 1993. Worldwide passenger demand, as measured
by revenue passenger kilometers (RPKs), expanded by an average of
6.4 percent over the 1994-2000 time period. During this same period, the
number of passengers carried worldwide increased at an average annual
rate of 5.4 percent, growing from 1.1 billion in 1993 to over
1.6 billion in 2000.

Traffic figures are not available for worldwide traffic in 2001.
However, preliminary traffic figures from around the world suggest that
the ripple effect from the events of September 11^th^ will result in a
decline in worldwide demand in 2001. Air Transport World estimates that
world RPKs will decline by 8.0 percent while the number of passengers
carried declines by 6.0 percent.[^2] The International Air
Transportation Association (IATA) estimates that worldwide traffic could
decline in the neighborhood of 5.0 percent in 2001. Statistics from the
Association of European Airlines (AEA) indicate a decline of 4.4 percent
in RPKs for the period January through November. The Association of
Asian Pacific Airlines (AAPA) reports a decline of 3.4 percent in RPKs
(down 22.1 and 22.6 percent, respectively in October and November) for
the 11 months ending November 2001.

![](media/image2.wmf){width="3.240972222222222in"
height="2.3131944444444446in"}

In CY 2001, it is estimated that U.S. and foreign flag carriers combined
transported a total of 131.0 million passengers between the United
States and the rest of the world, a decline of 6.9 percent from 2000.
Passenger traffic volume is expected to decline in all four world travel
regions in 2001: Atlantic markets, 47.9 million (down 9.6 percent);
Latin American markets, 39.6 million (down 2.9 percent); Asia/Pacific
markets, 24.1 million (down 7.3 percent); and Canadian transborder
markets, 19.5 million (down 7.2 percent).

Prior to 2001, air cargo demand had grown at a faster pace than
passenger demand, with worldwide freight tonnes growing at an average
annual rate of 8.6 percent over the 1994-2000 period. During this same
period, freight revenue ton kilometers (RTKs) grew at an annual rate of
8.0 percent. However, a slowing in U.S. economic activity and imports
from key world regions, combined with the collapse of the high-tech
industry and the demand for information technology equipment, appears to
have resulted in significant declines in the demand for air cargo
services worldwide. Air Transport World estimates that RTKs will decline
by 8.4 percent in 2001.[^3] AEA statistics indicate a decline of
5.1 percent in RTKs for the 11 months ending November 2001. AAPA reports
a decline of 5.8 percent in RTKs for the 11 months ending November 2001.

![](media/image3.wmf){width="3.2416666666666667in"
height="2.640277777777778in"}

Expanding U.S. and world economic growth, combined with the strong
demand for both passenger and air cargo services, also resulted in
record profits for world airlines. Based on data compiled by the
International Civil Aviation Organization (ICAO), world air carriers
(including U.S. airlines) reported cumulative operating profits totaling
\$89.0 billion over the 7-year period ending in 2000. Net profits
totaled almost \$42.0 billion over the same time period. The events of
September 11^th^ have almost certainly guaranteed that the industry will
report record operating and net losses in 2001. Preliminary estimates by
Air Transport World indicate that worldwide operating and net losses
could total \$5.8 and \$11.0 billion in 2001.

![](media/image4.wmf){width="3.247916666666667in"
height="2.4569444444444444in"}

U.S. Travel Demand

U.S. air carrier (sum of large air carriers and regionals/commuters)
system capacity (domestic plus international), as measured by available
seat miles (ASMs), increased by 1.3 percent in FY 2001, after growing at
an average annual rate of 3.0 percent during the 1994-2000 period. On a
calendar year basis, ASMs are estimated to decline 3.1 percent in 2001.

![](media/image5.wmf){width="3.247916666666667in" height="2.35in"}

U.S. air carrier system traffic, as measured by revenue passenger miles
(RPMs), grew at an annual rate of 5.1 during the 1994-2000 period.
During this same 7-year period, the number of passengers enplaned on
U.S. airlines increased at an average annual rate of 4.4 percent,
growing from 515.6 million in FY 1993 to 695.3 million in 2000. However,
both RPMs and enplanements declined in FY 2001, down 0.4 and 1.8
percent, respectively. On a calendar year basis, RPMs and enplanements
are estimated to decline 5.9 and 7.0 percent, respectively, in 2001.

![](media/image6.wmf){width="3.247916666666667in" height="2.35in"}

U.S. air carriers achieved a load factor of 70.6 percent in 2001, a
decline of 1.3 percentage points from the all-time high of 71.9 percent
recorded in 2000. However, this is still considerably higher than the
load factor of 62.6 percent achieved in 1993.

Large Air Carriers

In FY 2001, the large U.S. air carriers' system ASMs (the sum of
domestic and international services) increased by 1.5 percent while
passenger demand (RPMs and enplanements) declined 0.4 and 1.6 percent,
respectively. As a result of faster capacity growth relative to the
decline in traffic, the system-wide load factor declined 1.3 percentage
points to 70.9 percent.

September was a disastrous month for U.S. airlines, both domestically
and internationally, wiping out most of the gains recorded during the
previous 11 months. Domestic capacity (50 states, Puerto Rico, and the
U.S. Virgin Islands) was down 19.0 percent in September but up
0.9 percent for the entire year. On a calendar year basis, domestic ASMs
are predicted to decline 3.2 percent in 2001.

September was even worse in terms of passenger traffic. Domestic RPMs
were down 31.9 percent while passenger enplanements fell 33.7 percent.
For the entire year, domestic RPMs and enplanements declined 0.8 and
1.8 percent, respectively, in 2001. On a calendar year basis, domestic
RPMs and enplanements are estimated to decline by 6.0 and 7.2 percent,
respectively.

![](media/image7.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Domestic load factor fell 10.6 percentage points in September to 55.7
percent. For the entire year, domestic load factor averaged
69.7 percent, a decline of 1.2 percentage points from 2000. On a
calendar year basis, domestic load factor is expected to average 69.0
percent in 2001.

International ASMs were up 3.0 percent in 2001, despite a decline of
16.4 percent in September. Capacity increased in all three world travel
regions in 2001\--up 3.2 percent in Latin American and Pacific markets
and up 2.7 percent in Atlantic markets. On a calendar year basis,
international capacity is expected to decline 2.9 percent in 2001.

International RPMs fell 29.6 percent in September but were up 0.8
percent for the entire year. RPMs were up 3.4 and 1.8 percent,
respectively, in Latin American and Pacific markets, but declined 1.0
percent in Atlantic markets. On a calendar year basis, international
RPMs are predicted to decline 7.1 percent in 2001.

![](media/image8.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

International passenger enplanements grew by only 0.4 percent in 2001,
due largely to a 28.1 percent decline in September. In 2001,
enplanements to Latin American and Pacific markets grew by 2.2 and 1.6
percent, respectively, while Atlantic market enplanements fell 2.1
percent. On a calendar year basis, international enplanements are
expected to decline 6.4 percent in 2001.

International load factors averaged 66.1 percent in September, a decline
of 12.5 percentage points from the previous year. For the entire year,
international load factors averaged 74.4 percent, a decline of 1.6
percentage points from the all-time high of 76.0 percent achieved in
2000. On a calendar year basis, load factors are forecast to average
72.7 percent in 2001.

U.S. air carriers' air cargo traffic declined 5.3 percent in 2001, with
domestic RTMs down 5.2 percent and international RTMs down 5.4 percent.
U.S. cargo activity had been in decline for most of the year and may, in
fact, have been one of the leading indicators of the current economic
recession. Some industry analysts blame the downturn in air cargo demand
on the recent collapse in investment in the high-tech and telecom
industries. Their collapse resulted in large declines in the demand for
information technology equipment which, for the most part, are shipped
by air.

Domestic freight/express RTMs declined 3.1 percent while international
freight/express was down 5.4 percent from 2000 levels. While some of the
loss can be attributed to the September 11^th^ attacks (domestic and
international RTMs down 10.2 and 30.6 percent, respectively, in
September), airfreight demand had incurred declines throughout much of
the year.

![](media/image9.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

In 2001, domestic and international mail RTMs decreased 15.2 and 4.7
percent, respectively. The large decline in domestic mail was due in
part to efforts by the U.S. Postal Service to shift the delivery of mail
from air to ground for distances of up to 1,000 miles. In September,
mail RTMs declined significantly with domestic RTMs down 67.6 percent
and international mail RTMs down 45.1 percent.

![](media/image10.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

In the aftermath of the September 11^th^ attacks, the FAA issued a new
security directive to strengthen security standards for transporting
cargo on passenger flights. This directive will have a significant
impact on air cargo activity in the future.

Regionals/Commuters

Despite the events of September 11^th^ and a lengthy 98-day strike
(March 26-July 1) that shut down operations at Comair, regional/commuter
capacity and traffic continued to grow in 2001. Capacity (ASMs) grew by
9.0 percent while RPMs increased by 9.5 percent. The regionals/
commuters achieved a load factor of 58.6 percent in 2001, up
0.3 percentage points over the 2000 load factor. On a calendar year
basis, it is estimated that regional/commuter ASMs and RPMs grew by 6.7
and 5.8 percent, respectively, in 2001.

Regionals/commuters enplaned a total of 79.7 million passengers in FY
2001, an increase of only 0.8 percent over 2000. The large disparity in
growth relative to passenger miles is due to an increase of 23.9 miles
in the passenger trip length. This large increase in passenger trip
length is due not only to the increased numbers of regional jets in the
fleet, but also to the fact that the larger airlines continued to
transfer many medium to short-haul routes to their regional partners. On
a calendar year basis, it is estimated that regional/commuter passengers
will decline by 2.3 percent in 2001.

![](media/image11.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

U.S. Air Carrier Financial Results

Prior to the January-March quarter, commercial air carriers had strung
together 24 consecutive profitable quarters---1^st^ quarter 1995 to
4^th^ quarter 2000. During the previous 7 years (1994-2000), U.S. air
carriers reported cumulative operating and net profits that totaled
\$47.6 and 23.6 billion, respectively. This all came to an abrupt halt
when the industry reported operating and net losses in each of the last
3 quarters of FY 2001 (January-September), culminating in an operating
loss of \$3.2 billion in the July-September quarter. For the entire
year, the industry incurred operating and net losses totaling \$4.3 and
\$4.4 billion, respectively. This represents a deterioration of \$12.2
billion in operating profits and \$7.9 billion in net profits from 2000.
Losses in 2001 would have been higher had not the Federal government
approved a \$5.0 billion emergency aid package for U.S. airlines, which
is included in most air carrier's financial statements for the
July-September quarter.

![](media/image12.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Operating revenues were down 2.7 percent in 2001, due, in part, to the
traffic losses incurred as a result of the terrorist attacks of
September 11^th^. However, the losses incurred prior to September were
the direct result of a weakening U.S. economy and the loss of the higher
fare business traveler. The shift in the mix of traffic from business to
personal/pleasure travel resulted in unprecedented and devastating
declines in passenger yields.

![](media/image13.wmf){width="3.2416666666666667in"
height="2.6638888888888888in"}

On the other hand, operating expenses were up 7.3 percent in FY 2001,
due to a combination of increased fuel and labor costs.

In 2001, only 5 of the 15 majors[^4] reported a profit, with operating
and net losses for the group totaling \$4.2 and \$4.2 billion,
respectively. Operating results for the majors ranged from a profit of
\$844.3 million (Southwest) to a loss of \$3.0 billion (United). The
three cargo carriers reported combined operating profits of \$567.2
million while the 12 passenger airlines reported combined operating
losses of almost \$4.8 billion. Four carriers\--American, Northwest,
United and US Airways\--accounted for nearly all of the passenger
carriers' total losses.

The financial results of many of the smaller nationals[^5] and
regionals[^6] also worsened in 2001, with 26 of the 52 reporting
carriers incurring operating losses. The combined group of nationals and
regionals reported an operating loss of \$96.5 million in 2001, with
earnings ranging from an operating profit of \$98.3 million (Continental
Micronesia) to an operating loss of nearly \$107 million (Comair).

Although the record among the low-cost, low-fare, new entrant carriers
was mixed in 2001, several of the stronger carriers reported profitable
operations in 2001. The combined operating profits of AirTran, Frontier,
and JetBlue, totaled over \$150 million.

Generally, it is believed that the infusion of \$5.0 billion in federal
emergency funds averted a number of other bankruptcy filings. The Air
Transport Association estimated that its members went through \$4.7
billion in cash between September 11 and September 30 (\$340 million per
day during the 4-day shutdown and \$210 million on each of the 16 days
thereafter). Despite capacity reductions of 20 percent immediately
following the events of September 11^th^, most airlines were unable to
cut costs as quickly or as deeply as the revenue impact from the lost
traffic.

The regional/commuter airline industry posted an operating loss of
\$347.1 million in 2001, a deterioration of \$977.5  million less from
the \$630.4 million profit recorded in 2000. The nine Form 41 carriers
(operating at least one aircraft with more than 60 seats) reported
operating losses totaling \$269.9 million while 77 Form 298-C carriers
(operating only aircraft with 60 seats or less) posted losses of
\$77.2 million. The losses reflect both the impact of the Comair strike
as well as the events of September 11^th^.

U.S. Commercial Air Carrier Fleets

In the aftermath of the terrorist attacks, many of the larger airlines
grounded large numbers of older less efficient aircraft and deferred
delivery of many of the new aircraft scheduled for delivery over the
next several years. As such, the number of commercial aircraft in the
U.S. commercial fleet (including regionals/ commuters) is estimated to
decline by a total of 269 aircraft in CY 2001. Most of the decline is
occurs among the larger air carrier jet fleet (over 70 seats), which
falls by 413 aircraft to a total of 4,069 in 2001. The cargo large jet
fleet declines by 15 aircraft in 2001, from 1,054 to 1,039 aircraft.
Only the regional/commuter fleet increases in 2001, up 159 aircraft to a
total of 2,427. However, the regional/commuter turboprop fleet falls by
31 aircraft in 2001.

Orders for commercial jet aircraft totaled only 851 during the first 3
quarters of 2001, a 40.6 percent decline from the same period in
2000.[^7] The smaller regional jets (37 to 70 seats) accounted for 38.7
percent of the orders (329 aircraft) during 2001, a 50.1 percent decline
from the 659 aircraft ordered during the first 9 months of 2000.
Although regional jet orders were down from the previous year, the 2,301
orders over the past 19 quarters show that this will continue to be the
fastest growing segments of the industry over the next several years.

A total of 865 commercial jet aircraft were delivered during the first 3
quarters of 2001, a 9.8 percent increase over the same period in 2000.
This included delivery of 249 regional jets, a 14.2 percent increase
over deliveries during the same period in 2000.

GENERAL AVIATION

The turnaround in the general aviation industry that began with the
passage of the General Aviation Revitalization Act in 1994 appears to
have slowed considerably in 2001. While the slowdown in U.S. economic
activity can be partially blamed for the slowing of demand for general
aviation products and services, the events of September 11^th^ and their
aftermath are expected to have the greatest and longest impact on the
general aviation industry. Many of the "no-fly zone" and other
restrictions placed on the operation of general aviation aircraft
immediately after the terrorist attacks remain in effect today, closing
many airports to VFR flying and idling thousands of general aviation
aircraft.

The slowing demand for general aviation products was confirmed when the
General Aviation Manufacturers Association (GAMA) released its report on
the industry's 3^rd ^quarter billings and shipments. The report showed
that aircraft shipments were down 13.4 percent for the 3^rd^ quarter and
6.2 percent year-to-date. Billings were still running slightly ahead of
2000, thanks in large part to the continued strong market for the higher
priced jet aircraft. Based on projections by the Aerospace Industries
Association of America (AIAA), general aviation aircraft shipments are
expected to decline for the first time since 1994 (down 8.8 percent to
2,556). AIAA projects that industry billings will increase 4.0 percent
to \$8.4 billion in 2001, a new all-time high.[^8]

![](media/image14.wmf){width="3.247916666666667in"
height="2.4569444444444444in"}

General aviation activity counts at FAA air traffic facilities were down
significantly during most of 2001. Operations at combined FAA and
contract towers were down 5.7 percent, with itinerant operations down
6.2 percent and local operations down 5.0 percent from 2000 activity
levels. In September, general aviation activity at FAA combined towers
fell 28.1 percent.

The number of general aviation IFR aircraft handled at FAA en route
centers also declined during most of 2001. For the year as a whole, en
route center activity was down 7.2 percent, down 24.4 percent in the
month of September. Despite recording negative counts for much of the
year, the restrictions placed on VFR flying resulted in an increase in
general aviation en route activity during the last 2 weeks of September.

The FAA's 2000 General Aviation and Air Taxi Activity and Avionics
Survey also reported declining general aviation activity levels. The
general aviation active fleet and hours flown declined 0.9 and 2.5
percent, respectively in 2000, the first reported declines after
5 consecutive years of reported growth. Based on the results of the 2000
Survey, the active general aviation fleet totaled 217,533 and flew an
estimated 31.0 million hours. Based on reported general aviation
activity counts at FAA air traffic facilities in 2001, the active fleet
and hours flown are forecast to decline an additional 0.6 and 6.4
percent, respectively, in 2001. Most of the decline is expected to occur
among the piston aircraft fleet and is due, in part, to the impact of
the September 11^th^ attacks.

The one bright spot for general aviation is in the business/corporate
segment of the industry where increased growth in fractional ownership
companies and corporate flying has continued to expand the market for
jet aircraft. Although shipments of jet aircraft also declined during
the 3^rd ^quarter (from 145 to 133 aircraft), the fallout from September
appears to have spurred the interest in fractional or corporate aircraft
ownership. It also appears to have provided new growth opportunities for
the on-demand charter industry.

Except for business/corporate flying, most of the statistics relating to
general aviation activity are discouraging. The number of student
pilots, key to the future of general aviation, declined by 6.6 percent
in 2001, the 3^rd^ consecutive year of decline. In addition,
restrictions were placed on flight schools and student pilot training in
the aftermath of September 11^th^, particularly with regard to foreign
students. The industry, over the past several years, instituted a number
of industry-wide programs, which are designed to attract new pilots to
general aviation. Support for the programs appear to be waning among
some segments of the industry, especially as contributions for these
programs compete with other programs during periods of declining demand
and reduced budgets. The future direction of the general aviation
industry will depend, in large part, on how successful the industry is
in continuing to rebuild and stimulate new interest in these programs.

FAA WORKLOAD

An expanding U.S. economy, in combination with strong demand for both
the commercial and general aviation services, significantly expanded the
demand for services at FAA air traffic facilities during the 1997-2000
time period---up 2.6 percent a year at combined FAA and contract towers
and 3.3 percent at en route centers. It is this growth that gave rise to
the delays that plagued aviation at many U.S. commercial airports in
2000 and 2001. However, delays ceased to be a major problem on September
11^th^. Activity at combined FAA and contract towered airports and en
route centers were down 28.1  and 16.4 percent, respectively, in
September.

Notwithstanding the terrorist acts, a slowing U.S. economy, combined
with weakening demand in both the commercial and civil aviation sectors,
had already slowed activity growth at FAA facilities. During 2001, total
activity at combined FAA and contract tower airports (66.2 million),
including instrument activity (50.9 million), declined by 3.7 percent.
The number of IFR aircraft operations at en route centers (45.2 million)
was down 1.7 percent.

![](media/image15.wmf){width="3.247916666666667in" height="2.3625in"}

Most of the pre-September 11^th^ decline in activity occurred among
general aviation aircraft---down 2.9 percent during the first 11 months
of the FY 2001 and 5.7 percent for the entire year. Commercial activity
also slowed during 2001 but most of the weakness occurred among the
larger air carriers. Commuter/air taxi activity continued to exhibit
sustained growth throughout most of the year.

![](media/image16.wmf){width="3.247916666666667in" height="2.3625in"}

Following the terrorist attacks and the shutdown of the entire FAA air
traffic control system for several days, a number of restrictions were
placed on the operation of aircraft in and around the New York and
Washington area airports, as well as in other security areas around the
country. These restrictions, in effect, banned the operation of all VFR
flights in these areas, forcing most potential flights to file flight
plans and fly by IFR. One of the results of the new restrictions has
been an increase in general aviation activity at en route centers.

The number of traditional (non-automated) services provided at FAA
Flight Service Stations (FSS) totaled 29.0 million in 2001, a 4.9
percent decline from 2000 levels. All categories of flight services
declined in 2001: pilot briefings, down 4.4 percent; flight plans
originated, down 4.7 percent; and aircraft contacted, down 8.0 percent.

**FAA**

**AEROSPACE FORECASTS**

**FISCAL YEARS 2002 - 2013**

The challenges in developing this year's aviation forecasts have been
numerous, especially for predicting aviation demand over the next
several years. Nothing in the past has prepared aviation forecasters to
predict the future direction of aviation demand with any degree of
certainty. Nevertheless, the FAA has developed a set of assumptions and
forecasts that we believe to be consistent with the trends we have
witnessed in the days, weeks, and months following the September 11^th^
terrorist attacks.

This year's aviation forecasts and assumptions have been developed
around three distinct time periods. Each period is defined by the type
and scope of activity it contains. While strategies and levels of
success may differ, forecasts and assumptions have been developed for
each of the three major user groups---air carriers, regionals/commuters,
and general aviation---based on these three time periods. The three time
periods are as follows:

Fiscal Year 2002---This is basically a period of contraction as each of
the user groups attempts to redefine itself in light of the new post-
September 11^th^ operating environment and declining U.S. and world
economic activity. It is a period of characterized by downsizing and
cost cutting, during which each user group attempts to bring its costs
in line with significantly reduced levels of demand for aviation
products and services. It is also a period of minor adjustments to
supply as each user group responds to improvements in the outlook for
its products and services during the second half of the year.

Fiscal Year 2003---During this period, both the U.S. and world economies
are at the acme of a very strong economic recovery, which, in turn,
increases the demand for aviation products and services. Having attained
some level of equilibrium between expenses and revenues, it is also
during this time that each user group begins to develop strategies to
not only take advantage of current demand levels but to also assure
sustained long-term growth and profitability.

Fiscal Years 2004 -- 2013---This period is distinguished by a return to
more normal levels of growth in the demand for aviation products and
services. This does not imply a return to previous levels of demand,
only that growth in aviation demand over this 10-year period should
approximate previous long-term growth rates.

The first and foremost assumption in this year's forecasts is that there
will be no further successful terrorist incidents against U.S. aviation
and that the public confidence in the safety of the U.S. aviation system
is restored. FAA economists studied and analyzed the impacts of and
passenger reactions to previous terrorist incidents and have, where
appropriate, assumed similar trends in modeling the expected strength
and duration of the recovery period from the September 11^th^ attacks.

It was decided early on that it would be impossible to use current
econometric models to predict aviation demand for the next several
years---2002 and 2003. However, a major assumption in this year's
forecasts is that the long-term relationships inherent in the current
forecast models have not changed substantially. Therefore, the forecasts
for the years 2004 to 2013 have been derived from the growth rates
predicted by the current forecast models.

The starting point for the commercial aviation forecasts (air carriers
and regionals/commuters) was the one-year out schedules published in the
Official Airline Guide (OAG). FAA forecasters have had access to four
updates of the 12-month schedules---beginning with the October 2001
schedule and ending with the January 2002 schedule. Each update was
compared with previously published schedules to determine the accuracy
of the published schedule relative to what was actually being flown by
the carriers. As a general rule, it was assumed that the 3 to 6-month
out schedules were fairly accurate. Beyond the 3 to 6-month period,
adjustments were made based on discussions with schedule planners and/or
forecast staff at individual airlines. The use of monthly schedules has
allowed FAA forecasters to develop forecasts on either a monthly (large
air carrier) or quarterly (regionals/commuters) basis for the years 2002
and 2003.

Generally, the lag in obtaining usable actual data (3-4 months on
average) would have been a major obstacle to assessing the near-term
impact of the events of September 11^th^ on passenger demand. Thanks to
the staff at the Air Transportation Association (ATA), the FAA was able
to obtain, on a next-day basis, daily traffic results as reported by its
member airlines. Additionally, FAA economists were able to access
internal FAA daily operation counts, also on a next-day basis, for the
22 en route centers and 55 select airports. These databases were
immensely helpful in assessing post-September 11^th^ traffic and
aircraft activity trends.

In addition to the OAG and ATA data, FAA forecasters also scoured
aviation publications and web sites to obtain as much post-September
11^th^ actual traffic and operational data as possible. Numerous
discussions were held with individual carriers, aircraft and engine
manufacturers, aviation associations, and other industry experts to
obtain their insight into current trends. As a final step in finalizing
this year's forecast, the forecasts and assumptions were presented to
numerous industry staff and aviation associations who were asked to
comment on the reasonableness of the forecasts. Their comments have been
incorporated into the forecasts that are contained herein.

The assumptions used in predicting demand for the various user groups
are discussed in great detail in the respective chapters that follow.

**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
uses the U.S. macro economic projections of the Congressional Budget
Office (CBO) as well as those of DRI-WEFA, Inc., a commercial
forecasting service. The 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 DRI-WEFA to forecast
the demand for international aviation services.

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 1997-98 Southeast Asia financial
crisis, the 1998 Northwest Airlines' strike, or the September 11^th^
terrorist attacks cannot be predicted.

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 of the
hard-copy version of the forecast document. Web 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 web Tables 1 through
5.

United States Economy

While there is basic agreement among the three economic projections used
by the FAA as to the general direction of the U.S. economy---a recession
followed by a strong recovery beginning in 2002---there is disagreement
regarding the length and depth of the recession. There are also
significant differences with regard to future energy prices,
particularly in 2002.

The OMB economic forecasts anticipate a deep 2-quarter recession
(declining by 2.5 percent[^9] in the October-December 2001 quarter),
ending during the January-March 2002 quarter (GDP up 0.5 percent). The
economy then picks up steam throughout the remainder of the year,
growing at annual rates of 2.6 and 3.9 percent, respectively, over the
last 2 quarters of the fiscal year.

On the other hand, CBO and DRI-WEFA both forecast a 3-quarter recession,
ending during the April-June quarter. Both CBO and DRI-WEFA assume a
milder recession than OMB. The CBO forecast has the economy declining at
rates of 1.5 and 0.5 percent, respectively, during the first 2 quarters
of FY 2002. DRI-WEFA assumes that the economy will decline by 1.7 and
0.5 percent, respectively, during the same time period. However,
DRI-WEFA's recovery is significantly weaker than either OMB or CBO. The
CBO forecasts growth of 2.5 and 3.8 percent, respectively, over the last
2 quarters of the fiscal year. DRI-WEFA assumes growth of only 2.1 and
3.2 percent, respectively, over the same period.

![](media/image17.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

On an annual basis, OMB projects U.S. real GDP to decline by 0.1 percent
in FY 2002, then grow by 3.5 and 3.8 percent, respectively, in 2003 and
2004. Thereafter, U.S. economic activity is expected to expand at an
average annual rate of 3.2 percent over the remainder of the forecast
period.

![](media/image18.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

OMB projects that energy prices (as measured by the oil and gas
deflator), which were up 29.6 percent in 2000 and 5.6 percent in 2001,
will decline by 29.2 percent in 2002, then increase at an average annual
rate of 3.4 percent over the remainder of forecast period. Both CBO and
DRI-WEFA forecast significantly smaller declines of 10.7 and
13.6 percent, respectively, in 2002. However, CBO and DRI-WEFA expect
oil prices to increase at average annual rates of only 2.5 and
2.3 percent, respectively, over 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.

![](media/image19.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

OMB projects that changes in consumer prices (as measured by the
Consumer Price Index) will remain at relatively low rates throughout the
forecast period, averaging 2.3 percent annually. CBO and DRI-WEFA assume
average annual rates of 2.4 and 2.7 percent, respectively, over the
12-year forecast period.

World Economy

Worldwide economic growth is expected to remain sluggish in 2002 (up 1.8
percent), then expand by 3.8 and 3.5 percent, respectively, in 2003 and
2004. Over the entire 12-year forecast period, worldwide economic growth
is expected to exceed that of the United States by approximately
0.3 percentage points annually, increasing at an average annual rate of
3.3 percent. Economic growth is forecast to be greatest in the
Asia/Pacific and Latin America regions, expanding at annual rates of
4.1  and 3.9 percent, respectively. Economic growth in the
Europe/Africa/Middle East countries and Canada are expected to average
2.7 and 2.8 percent, respectively, over the forecast period.

**AVIATION TRAFFIC AND**

**ACTIVITY FORECASTS**

The large commercial air carrier traffic and activity forecasts are
summarized in web Table I-2 and the forecast assumptions in web Table
I-3. A detailed discussion of the forecasts and underlying assumptions
can be found in Chapter III of the hard-copy version of the forecast
document. Year-to-year historical data and forecasts can be found in web
Tables 6 through 15, 19, 21 and 22.

The regional/commuter forecasts and assumptions are summarized in web
Table I-4. A detailed discussion of the forecasts and assumptions can be
found in Chapter IV of the hard-copy version of the forecast document.
Year-to-year historical and forecast data can be found in web Tables 23
through 26.

Air cargo forecasts are summarized in web Table I-5. A detailed
discussion of the forecasts and assumptions can be found in Chapter III
(pages III-46 to III-54) of the hard-copy version of the forecast
document. Year-to-year historical and forecast data can be found in web
Tables 16 through 18 and 20.

The general aviation forecasts are summarized in web Table I-5. Detailed
discussions of the forecasts and assumptions can be found in Chapter V
of the hard-copy version of the forecast document. Year-to-year
historical data and forecasts can be found in web Tables 27 through 31.

Commercial Aviation

Domestic Air Carrier

Passenger Traffic

In the aftermath of the September 11^th^ terrorist attack, U.S. air
carriers immediately reduced domestic capacity by approximately 20
percent across the board. It is assumed that domestic capacity will
gradually return to the pre-September 11^th^ capacity levels over a
3-year period. Domestic capacity is forecast to decline by 10.1 percent
in 2002, then increase by 7.3 percent in 2003 and 4.6 percent in 2004.
Thereafter, capacity is expected to increase at an average annual rate
of 4.1 percent over the final 9 years of the forecast period.

![](media/image20.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Domestic air carrier RPMs and passenger enplanements are forecast to
increase at average annual rates of 3.5 and 3.1 percent, respectively,
over the 12-year forecast period. Domestic RPMs and enplanements are
forecast to decline by 12.0 and 13.4 percent, respectively, in 2002,
then grow by 14.0 and 14.8 percent, respectively, in 2003. U.S. carriers
are expected to return to normal growth trends beginning in 2004, with
RPMs and enplanements averaging 4.2 and 3.8 percent, respectively, over
the remainder of the forecast period.

After declining for 2 consecutive years (to 68.2 percent in 2002),
domestic load factors are expected to increase to 72.5 percent in both
2003 and 2004. Load factors are then expected to increase gradually over
the remainder of the forecast period, averaging 73.2 percent in 2013.

![](media/image21.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Domestic passenger yields, which declined by 3.5 percent in 2001, are
expected to decline an additional 3.4 percent in 2002. Yields are
forecast to increase by 7.9 percent in 2003 and then grow at an average
annual rate of 1.2 percent (down 1.2 percent in real terms) over the
remaining 10 years of the forecast period. The relatively large increase
in 2003 is due, in large part, to anticipated strong demand from both
leisure and business travelers such that the resultant traffic mix more
closely approximates the levels achieved prior to the start of the 2001
recession.

The decline in real yields over the latter years of the forecast is
based on the assumption that competitive pressures will continue to
exert pressure on carriers to hold the line on fare increases.
Competition in domestic markets will come from established low-fare
carriers such as Southwest, as well as from smaller low-cost carriers
such as AirTran, Frontier, and JetBlue.

Air carrier aircraft operations are forecast to decline by 10.8 percent
in 2002 then increase by 7.8 percent in 2003. Thereafter, air carrier
operations are forecast to grow at an average annual rate of 2.6 percent
over the remaining 10 years of the forecast period. However, air carrier
operations are not expected to return to pre-September 11^th^ activity
levels until 2005. The slower growth in activity at FAA air traffic
facilities relative to expected traffic increases (1.8 versus
3.1 percent growth in domestic enplanements) reflects increased
efficiencies in three operational measures. The domestic average
aircraft size is forecast to increase 0.8 seats annually, from 136.5
seats in 2001 to 146.0 seats in 2013. The average domestic passenger
trip length increases from 839.3 to 883.3 miles over the 12-year
forecast period, an increase of 3.7 miles annually. Domestic load
factors are expected to increase from 69.7 percent in 2001 to 73.2
percent in 2013.

International Air Carrier

Passenger Traffic

Forecasts of total passenger traffic (sum of U.S. and foreign flag
carriers) are provided for travel between the United States and three
world travel areas\--Atlantic, Latin America (including Mexico and the
Caribbean), and Asia/Pacific\--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
(INS) and Transport Canada and on regional world historical data and
economic projections obtained from DRI-WEFA.

Total passenger traffic between the United States and the rest of the
world is estimated at 131.0 million in CY 2001, a decline of 6.9 percent
from 2000 passenger levels. Passenger traffic is expected to increase by
0.2 percent in 2002 and by 6.8 in 2003 as the U.S. and world economies
recover strongly from the 2001-02 economic recession. The downturn in
passenger traffic in the 2001-02 time period is expected to be deepest
in the Canadian transborder and Pacific markets, with passengers down
12.8 and 9.9 percent, respectively, over the 2-year period. Passengers
traveling to/from Atlantic and Latin American destinations are forecast
to decline by 9.6 and 2.9 percent, respectively, in 2001. However,
passenger volumes are expected to be positive in both of these markets
in 2002---up 3.6 percent in Latin American markets and up 1.3 percent in
Atlantic markets.

Growth in passengers is expected to average 4.9 percent over the
remaining 10 years of the forecast period, reaching a total of
225.7 million passengers in 2013. Over the entire forecast period,
demand is expected to be strongest in Latin American markets, growing at
an annual rate of 5.7 percent. Passenger traffic is projected to grow
4.9 percent annually in Pacific markets, 4.0 percent annually in
Atlantic markets, and 3.3 percent a year in Canadian transborder
markets.

In the aftermath of the September 11^th^ terrorist attack, U.S. air
carriers, over a period of several weeks, reduced international capacity
by approximately 17 percent. Capacity is expected to return to the
pre-September 11^th^ levels in 2004. International capacity is forecast
to decline by 9.7 percent in 2002, then increase by 7.8 percent in 2003
and 6.5 percent in 2004. Thereafter, capacity growth begins to exhibit
more normal levels, increasing at average annual rates of 5.6 percent
over the last 9 years of the forecast period. Capacity cuts are forecast
to be deepest in Pacific (down 15.2 percent) and Atlantic (down 9.9
percent) markets. Capacity to Latin American destinations is expected to
decline by 2.9 percent in 2002.

![](media/image22.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

International RPMs and enplanements are forecast to decline by 11.4 and
9.1 percent, respectively, in 2002, then grow by 11.7 and 10.3 percent,
respectively, in 2003. U.S. carriers are expected to return to normal
growth trends beginning in 2004, with RPMs and enplanements averaging
5.8 and 5.6 percent growth, respectively, over the remainder of the
forecast period. The downturn in traffic in 2002 is expected to be most
severe in the Pacific and Atlantic markets, with RPMs down 17.2 and
9.9 percent, respectively. Latin American RPMs are forecast to decline
by 5.5 percent in 2003.

![](media/image23.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

The forecasts of international demand assume that U.S. air carriers will
benefit from the strong economic recovery expected to take place in late
2002 in both the United States and world markets. International air
carrier RPMs and passenger enplanements are both forecast to increase at
average annual rates of 4.7 percent 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
American markets---up 7.0 percent in RPMs and 5.8 percent in passengers.

International load factors are forecast to decline 3.0 percentage points
between 2000 and 2002 (from 76.0 to 73.0 percent) but are expected to
increase to 75.6 percent in 2003. International load factors then
gradually increase to 76.6 percent in 2006 and remain at this
approximate level throughout the remainder of the forecast period.

International passenger yields are expected to decline 5.0 percent in
2002 and then increase by 4.2 percent in 2003. The increase in 2003 is
due to expanding U.S. and world economic activity and the expected
return of the higher fare business traveler. Yields are expected to
increase at an average annual rate of 1.9 percent (down 0.5 percent in
real terms) over the final 10 years of the forecast period. The decline
in real yields is based on the assumption that competitive pressures
will continue to exert pressure on carriers to hold the line on fare
increases. In international markets, this will take the form of expanded
open sky agreements and new and existing global alliances.

Regionals/Commuters

Passenger Traffic

It appears that many regionals/commuters were able to maintain their
pre-September 11^th^ flight schedules and, in some instances, have
increased their schedules in response to the transfer of additional
routes from their larger code-share partners. Based on schedules
contained in the Official Airline Guide and projected additions to the
fleet, regional/ commuter capacity is estimated to increase by
9.9 percent in 2002 and by 8.0 percent in 2003. Much of the capacity
growth forecast in 2002 occurs during the latter half of the year (up
14.6 percent) and reflects not only growth over depressed September 2001
levels but also over reduced capacity levels owing to the lengthy Comair
strike in 2001. Over the 12-year forecast period, regional/commuter
capacity is expected to increase at an average annual rate of
6.5 percent.

![](media/image24.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Regional/commuter airlines RPMs are expected to increase by 7.1 percent
annually over the 12-year forecast period. Traffic is projected to
increase by 8.7 percent in 2002 and 9.7 percent in 2003, then increase
at an average annual rate of 6.7 percent over the last 10 years of the
forecast period. Again, the growth in 2002 is distorted somewhat by the
Comair strike in 2001.

Regional/commuter load factors decline slightly in 2002 (from 58.6 to
57.9 percent then increase to 58.8 percent in 2003. Thereafter, load
factors increase gradually over the remainder of the forecast period,
reaching 63.0 percent in 2013.

![](media/image25.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Passenger growth is expected to be somewhat less than that for RPMs,
growing by only 3.7 percent in 2002 and 8.7 percent in 2003. Over the
12-year forecast period, regional/commuter passengers are expected to
increase at an average annual rate of 5.5 percent, from 79.7 million in
2001 to 151.5 million in 2013. In 2013, regionals/commuters are expected
to transport 16.6 percent of all passengers in scheduled domestic air
service, up from 12.7 percent in 2001.

![](media/image26.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Regional/commuter aircraft operations at FAA air traffic facilities are
forecast to increase by only 1.0 percent in 2002 and by 4.1 percent in
2003. Thereafter, regional/commuter operations are forecast to grow at
an average annual rate of 2.5 percent over the remaining 10 years of the
forecast period. The slower growth in activity at FAA air traffic
facilities relative to ASMs (2.5 versus 6.5 percent) and passengers
relative to and RPMs (5.5 versus 7.1 percent) is largely the result of
relatively large increases in the average passenger trip length.

Over the 12-year forecast, the average passenger trip length is forecast
to increase from 301.3 miles in 2001 to 361.6 miles in 2013. However,
much of the growth occurs in 2002 (up 14.7 miles) and is the result of
the transfer of large numbers of routes from their larger code-share
partners[^10] in the aftermath of the

September 11^th^ terrorist attacks. Thereafter, the passenger trip
length increases by 4.1 miles annually over the remainder of the
forecast period. Much of the growth in trip length after 2002 is due to
the continued integration of large numbers of regional jets (2,198 over
the 12-year forecast period) into the regional/commuter fleets.

The greater use of regional jets results in the average seating capacity
of the regional fleet increasing from 39.9 seats in 2001 to 48.4 seats
in 2013.

Air Cargo

Air cargo traffic on U.S. commercial air carriers is expected to grow at
annual rates similar to those forecast for passenger traffic. System
RTMs are forecast to grow at an annual rate of 4.4 percent (compared to
3.9 percent for system RPMs) over the 12-year forecast period, with
domestic RTMs increasing 3.4 percent (versus 3.2 percent) and
international RTMs increasing 5.3  percent (versus 4.7 percent).

Cargo freight/express RTMs are forecast to decline by 2.2 percent in
2002 and then expand by 4.4 percent in 2003. Thereafter, growth averages
5.5 percent over the final 10 years of the forecast period. The strong
recovery in the global economy and expected resumption of growth in
information technology equipment is expected to stimulate the demand for
the rapid movement of goods and products by air, both in domestic and
international markets.

Domestic freight/express RTMs are forecast to decline by 2.1 percent in
2002 as a result of continued weakness in the economy and acceleration
in the modal shift from air to ground due to increased air
transportation costs to meet new FAA security restrictions. Domestic
freight/ express RTMs are forecast to increase 3.0 percent in 2003 based
on a continuation of the modal shift and economic recovery. Growth in
domestic freight/express is expected to average 4.6 percent annually
over the 2004-13 period.

International freight/express RTMs are also projected to decline in 2002
(down 2.3 percent) due to weakness in the world economy and reduced
schedules for passenger carriers. Based on projected world GDP,
international freight/express is expected to recovery strongly, growing
by 5.5 percent in 2003 and 7.1 percent in 2004. Thereafter, growth
averages 6.1 percent over the remaining 9 years of the forecast period.

All-cargo carriers are expected to account for 66.6 percent of
freight/express RTMs in 2013 (up from 65.2 percent in 2001)---83.0
percent of domestic RTMs and 55.0 percent of international RTMs. The
increase in all-cargo share will result from the new security
restrictions for transporting cargo on passenger aircraft and from
increased demand for expedited service.

![](media/image27.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

Significantly slower growth is forecast for mail RTMs due to new
security restrictions on the transport of mail on passenger aircraft and
a continued modal shift from air to ground by the U.S. Postal Service.
In addition, it appears that the "anthrax scare" will accelerate the
move to electronic alternatives (fax, email, direct bill payment, etc.)
and significantly cut into the volume of mail moved by air. Domestic
mail RTMs are projected to decline by 23.8 percent in 2002 and an
additional 5.0 percent in 2003. This is on top of the 15.2 percent
decline in 2001. Domestic mail RTMs are expected to resume growth in
2004, increasing at an average annual rate of 2.7 percent over the
remainder of the forecast period. However, it should be noted that
domestic mail RTMs do not return to 2001 levels during the entire
12-year forecast period.

International mail RTMs are predicted to decline by 3.3 percent in 2002
then grow by 2.0 percent in 2003. Over the 12-year forecast period,
international mail is expected to grow at an average annual rate of 2.5
percent based on projected world GDP.

![](media/image28.wmf){width="3.2416666666666667in"
height="2.4854166666666666in"}

All-cargo carriers are expected to account for 28.7 percent of mail RTMs
in 2013, up from 20.4 percent in 2001. All-cargo carriers' share of
domestic mail increases from 24.0 percent in 2001 to 37.0 percent in
2002. This is due to the increased use of these carriers by the U.S.
Postal Service as a means to improve delivery and to meet the new FAA
security directive. All-cargo carriers' share of international mail
increases from 5.2 percent in 2001 to 10.0 percent by 2004 due to
increased use of the U.S. Postal Service as a means to provide
time-sensitive delivery of mail.

Commercial Aircraft

The number of commercial aircraft is forecast to grow from 7,535 in 2001
to 11,622 in 2013, an average annual increase of 3.7 percent. Most of
the growth occurs over the last 10 years of the forecast, with the fleet
expected to grow only 1.5 percent in 2002 and 2.8 percent in 2003.

![](media/image29.wmf){width="3.2416666666666667in"
height="2.4555555555555557in"}

In the aftermath of the terrorist attacks of September 11^th^, many of
the larger air carriers grounded large number of their older less
efficient aircraft and deferred delivery of new aircraft scheduled for
delivery in 2002 and 2003. As such, the number of large passenger jets
(over 70 seats) is forecast to decline by 13 aircraft (down 0.3 percent)
in 2002 and increase by only 24 aircraft (up 0.6 percent) in 2003. Over
the 12-year forecast period, the number of large passenger jet aircraft
increase from 4,069 in 2001 to 5,606 in 2013, an average increase of 2.7
percent (128 aircraft) annually. The narrowbody fleet is forecast to
grow by 107 aircraft annually, the widebody fleet by 21 aircraft a year.

The regional/commuter passenger fleet is forecast to increase at an
average annual rate of 5.2 percent over the forecast period, from 2,427
in 2001 to 4,457 aircraft in 2013. The number of regional jets (up to
70 seats) in regional/ commuter service is projected to grow from 696 in
2001 to 2,894 in 2013, an average annual increase of 12.6 percent.
However, the turboprop fleet is expected to decline from 1,731 in 2001
to 1,563 in 2013. Turboprop aircraft are expected to account for only
35.1 percent of the regional fleet in 2013, down from a 71.3 percent
share in 2001.

Cargo large jet aircraft are forecast to increase from 1,039 in 2001 to
1559 in 2013, an average increase of 3.4 percent (43 aircraft) a year.
The narrowbody jet fleet is projected to decline by a total of 39
aircraft over the 12-year forecast period. The widebody jet fleet is
projected to increase by 46 aircraft annually.

General Aviation

The general aviation industry was particularly negatively impacted by
the events of September 11^th^. Thousands of general aviation aircraft
were grounded for weeks due to FAA "no-fly zone" restrictions imposed on
the operation of aircraft in particularly security sensitive areas
around the country, effectively closing much of the airspace to VFR
traffic. Many flight schools curtailed pilot training as new
restrictions were imposed on the training of pilots from foreign
countries. Even 3 months later, some U.S. airports in and around
Washington, DC and New York City remain closed to VFR traffic.[^11]
These new security restrictions have taken their toll on the general
aviation community.

The question is how general aviation, especially pleasure/sport flying,
will deal with the double impact caused by restrictions on flying and
the current U.S. economic recession. In addition, there remain many
uncertainties regarding the future of pilot training. However, the
business/ corporate side of general aviation appears well situated to
benefit from the stringent security restrictions imposed on flying by
commercial aircraft. Safety concerns for corporate staff, combined with
increased check-in and security clearance times at many U.S. airports
appear to have increased the interest in fractional or corporate
aircraft ownership as well as in on-demand charter flights.

The current forecast assumes that business use of general aviation
aircraft will expand much more rapidly than personal/sport use. This is
due largely to the expected continued rapid growth in fractional
ownership and is reflected in the changing composition of the general
aviation fleet mix.

The active general aviation fleet is projected to increase at an average
annual rate of only 0.3 percent over the 12-year forecast period,
growing from 216,150 to 225,260 aircraft in 2013. The more expensive and
sophisticated turbine-powered fleet (including rotorcraft) is projected
to grow at an average annual rate of 1.8 percent over the 12-year
forecast period. However, the jet fleet is responsible for most of this
growth. The number of jet aircraft is projected to increase from 7,150
in 2001 to 10,850 in 2013, an average annual increase of 3.5 percent.

The number of piston powered aircraft (including rotorcraft) are
projected to increase from 171,700 in 2001 to 175,640 in 2013, an
average increase of only 0.2 percent annually. This slow growth is due,
in large part, to declining numbers during the 2002-2004 time period as
pleasure/sport flying recovers from the impact of high avgas prices, the
U.S. economic recession, and the aftermath of the terrorist attacks.
After 2004, the piston fleet is forecast to increase at an average
annual rate of 0.4 percent.

The number of general aviation hours flown is projected to decline by
2.2 percent in 2002 and increase by only 0.4 percent in 2003, largely
the result of declining U.S. economic activity and the lingering effects
of the terrorist attacks. However, hours flown are expected to increase
at an average annual rate of 1.5 percent during the last 10 years of the
forecast period. Much of the increase over this latter period reflects
increased flying by business/corporate aircraft and increases in the
utilization of other general aviation aircraft.

The hours flown by turbine aircraft (including rotorcraft) increase at
an average annual rate of 2.2 percent over the forecast period, compared
to only 0.7 percent for piston powered aircraft. Jet aircraft account
for the majority of the increase, expanding at an average annual rate of
4.1 percent. The large increases in jet hours 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 380 hours for all
business jets.

The number of active general aviation pilots (excluding air transport
pilots) are projected to total 556,715 in 2013, an increase of almost
54,000 (up 0.8 percent annually) over the forecast period. Most of the
expected growth is projected to occur in the private and commercial
categories, reflecting the expected increase in the demand for pilots
among fractional ownership companies and business corporations. The
number of private pilots are projected to increase by almost 30,000 (up
0.9 percent annually), totaling 291,000 in 2013. Commercial pilots are
forecast to increase from 137,636 in 2001 to 158,100 in 2013, an average
annual increase of 1.2 percent.

The disturbing news for general aviation is that the number of student
pilots is projected to decline by 4.5 percent in 2002 and an additional
1.2 percent in 2003. These declines reflect the uncertainties
surrounding the restrictions imposed on flight school and pilot
training. It has been estimated that as many as 20 percent of student
pilots are foreign nationals and are now subject to increased scrutiny
and lengthy background checks. Losses of this magnitude could result in
the closure of many flight schools.

Despite these concerns, the number of student pilots are assumed to
increase at an average annual rate of 1.0 percent after 2004. However,
the projected number of student pilots in 2013 (90,000) is less than the
number recorded in 2000 (93,064).

FAA Workload Forecasts

There were a total of 472 towered airports at the end of September, 266
FAA towers and 206 contract towers. While the number of FAA towers will
remain constant at 266 in 2002, the number of FAA contract towered
airports is expected to increase by 24 to 230. In 2001, it is estimated
that total aircraft activity at these 24 airports totaled 2.1 million
operations, with general aviation accounting for the vast majority of
the activity---1.8 million operations or 87.1 percent of total activity
at the 24 airports. Additions of this magnitude will skew the growth
rates at FAA combined towers in 2002 and 2003.

Since 1993, a total of 179 FAA towers have assumed contract tower
status. To overcome 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 web Table I-6. Summary forecasts of
activity at FAA facilities [only]{.underline}, including FAA towers, en
route centers, and flight service stations, can be found in web Table
I-7. More detailed forecasts and discussion of aircraft activity at FAA
and contract facilities can be found in Chapter VII of the hard-copy
version of the forecast document. and in web Tables 32 through 49..

FAA and Contract Towers

Activity at the combined FAA and contract towers totaled 66.2 million
operations in 2001. Activity is expected to decline by 2.6 percent in
2002, largely the result of the large schedule reductions taken by the
larger air carriers and the restrictions imposed on the operation of
many general aviation aircraft. Activity is expected to rebound sharply
in 2003, increasing by 7.1 percent. Without the addition of the 24 new
contract towers, combined activity would decline by 4.1 percent in 2002
and increase by 4.1 percent in 2003. Activity at combined FAA/contract
towers is expected to increase at an average annual rate of 1.7 percent
over the remaining 10 years of the forecast period, reaching
81.7 million operations in 2013. A large part of the growth after 2003
is the result of increased commercial aircraft activity (up 2.5 percent
annually).

General aviation activity is forecast to decline by 1.0 percent in 2002,
then increase by 7.8 percent in 2003. Thereafter, general aviation
activity increases at an average annual rate of 1.2 percent over the
remainder of the forecast period, reaching 45.5 million operations in
2013. Without the addition of the 24 new contract towers, general
aviation activity would decline by 3.2 percent in 2002 and increase by
3.4 percent in 2003.

Military activity increases during both 2002 and 2003, due in part to
added fights for security surveillance as well as from added activity at
the 24 new contract towers. Military activity is then held constant at
the 2003 activity level throughout the remainder of the forecast period.

Combined instrument operations counts at FAA and contract towered
airports decline by 4.2 percent in 2002, then increase by 4.6 percent in
2003. Thereafter, instrument operations increase at an average annual
rate of 2.0 percent over the remainder of the forecast period, totaling
62.1 million operations in 2013. Commercial aircraft instrument
operations are forecast to increase at a significantly faster rate than
are general aviation instrument operations, up 2.5 and 1.4 percent,
respectively, over the last 10 years of the forecast period. Military
activity is expected to grow by 2.0 percent in 2002, then remain
constant at that level of activity through 2013.

En Route Centers

The workload at FAA en route traffic control centers is forecast to
decline by 4.4 percent in 2002, due entirely to a 10.8 percent decline
in air carrier activity. Commuter/air taxi and general aviation activity
increases 6.5  and 1.0 percent, respectively in 2002. The positive
numbers for these two user groups are in response to increased for-hire
charter operations as well as to more IFR flying as a result of the
restrictions placed on VFR flights.

Center activity is expected to grow by 5.0 percent in 2003 and then
increase by 2.2 percent annually over the last 10 years of the forecast
period. A total of 56.6 million IFR aircraft are expected to be handled
by the 22 FAA en route centers in 2013, compared to 45.2 million in
2001.

The number of commercial aircraft handled is projected to increase
2.6 percent annually while the number of general aviation aircraft
handled increases 1.7 percent a year over the last 10 years of the
forecast period. Military activity is forecast to increase by
2.0 percent in 2002, then hold constant at this activity level for the
remainder of the forecast period.

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---73.5
versus 38.8 percent at towered airports in 2001. 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 traditional FAA flight service
stations (non-automated) are forecast to increase from 29.0 million in
2001 to 30.2 million in 2013, an average annual rate of growth of 0.3
percent. However, all of the growth is expected to occur in 2002 (up
7.7 percent) and appears, at this time, to be the result of the
restrictions placed on VFR flying in the aftermath of the September
11^th^ terrorist attacks.

During the first 3 months of FY 2002 (October-December), IFR and VFR
flight plans were up 18.3  and 11.5 percent, respectively, over the same
3 months in FY 2001. In addition, pilot briefings were up 8.3 percent
over the same time period. However, based on historical flight service
station trends, it has been assumed that these relatively large growth
rates are a short-term phenomenon and that growth at flight service
stations will resume normal growth trends starting in 2003. As such,
total services provided at flight service stations are projected to
decline at an average annual rate of 0.3 percent over the final 11 years
of the forecast period

Of the services provided by the FAA, only flight plans originated is
projected to increase over the 12-year forecast period, growing from
5.6 million in 2001 to 6.6 million in 2013. Both pilot briefings and the
number of aircraft contacted are forecast to decline over the next
12 years, down 0.7 and 1.5 percent annually.

The number of DUATS services are projected to grow at an average annual
rate of 2.1 percent over the forecast period, from 16.2 million in 2001
to 20.8 million in 2013. Combined FSS and DUATS services are expected to
total 51.0 million in 2013, an annual increase of 1.0 percent.

**FORECAST RISKS**

The risks inherent in this year's forecasts are numerous and largely on
the negative side. The aviation industry finds itself in uncharted
waters where nothing that has gone before has prepared anyone to predict
with any certainty what the future has in store for aviation. Prominent
in everyone's predictions of future aviation demand is the assumption
that there will be no more terrorist attacks aimed at U.S. aviation. Yet
aviation, because of its high visibility and global reach, has been and
will continue to be a target for international terrorism. We assume that
the highest levels of security and continuous vigilance will protect the
flying public from future acts of terrorism. Aviation cannot expect to
return to normalcy until the flying public's confidence in the integrity
of our aviation security systems has been fully restored.

The forecasts prepared by the FAA have assumed, as have many other
industry forecasters, that aviation demand will follow a similar path to
recovery as noted in previous terrorist or war related incidents, i.e.,
Pan American's flight 103 in December 1988 and Iraq's invasion of Kuwait
in August 1990. In each instance, traffic and revenue growth resumed
within a year. However, there are significant differences with the
terrorist attacks of September 11^th^ and, as such, presents a major
risk to achieving the forecasts discussed herein.

Previous terrorist incidents have generally been singular or isolated in
nature and directed against aircraft in international flight or on
foreign soil. The impact from previous attacks, though sizable in terms
of decreased demand, has generally been regional or route specific in
nature. In addition, the overall impact was relatively short in
duration, generally lasting less than one year. The difference is that
for the first time, terrorists used aircraft as weapons of mass
destruction against civilian targets in two of the most important and
recognizable cities in the free world. In addition, the capturing of the
September 11^th^ terrorist attacks on video and their incessant replay
on national and world television has created images among the world
populace that will not be soon forgotten. And herein lies the major
difference between previous terrorist attacks and the events of
September 11^th^. The impact to aviation has not been confined to a
single market or region; it has affected traffic worldwide. The widely
held view appears to be that if terrorists could carry out such attacks
on American soil, then no one anywhere is immune to terrorist attacks.
And the impact on aviation has been devastating, both in the U.S. and
worldwide.

Following previous terrorist attacks, airlines generally continued to
operate the same or slightly reduced schedules. This time, U.S. airlines
immediately cut capacity by almost 20 percent. Foreign flag carriers
also adjusted schedules to meet drastically reduced passenger demand.
Additional restrictions and "no-fly zones" were implemented on the
operation of aircraft within the United States, affecting both civilian
and commercial aircraft. Heightened security measures and procedures
were implemented at U.S. airports, doubling or tripling the time
required for check-in and security clearance. All of these actions will
have an impact on future aviation activity.

The forecasts also assume that the long-term relationships inherent in
the models used to predict aviation demand have not changed. But what if
the traveling public's propensity to fly has changed? What effects will
the increased times required for check-in and security checks have on
future travel plans, in particular, those trips of less than 300 miles
in distance? If the long-term growth in demand is less than the current
forecasts predict, what does this portend for the financial viability of
individual carriers and the aviation industry in general?

Inherent in the current forecasts is the assumption that the commercial
aviation industry returns to profitability in 2003. A large part of the
profitability equation is based on the assumption that the mix of
full-fare business traffic relative to personal travel recovers to
previous profitable levels. Concerns for the safety of corporate
employees has already led some companies to switch to fractional
ownership, corporate aircraft, or on-demand charter flights. Even before
September 11^th^, United Airlines had established a separate
entity---Avolar\--to cater to on-demand business travel utilizing
smaller business/corporate aircraft. With 309 aircraft on firm order or
option, Avolar plans to be open for business in 2002. The U.S. airline
financial crisis in 2001 started as a result of the change in the
passenger mix from business to personal. What if business demand does
not return or only partially returns to 2001 levels?

There are some positive signs that point toward a strong recovery in
both the commercial and general aviation industries. Chief among them is
the projected strong recovery and growth in both the U.S. and worldwide
economies and declining real fuel prices throughout the forecast period.
However, all economic forecasts contain a number of uncertainties that
could cause projected growth to be less than that projected. DRI-WEFA
has assumed a probability of 30.0 percent that the recession will be
longer and the recovery longer than predicted. A 15.0 percent
probability is assumed for its higher growth scenario.

The economic forecasts used to develop this year's aviation forecasts
assume a very strong "V shaped" recovery starting in late 2002. OMB's
U.S. GDP forecast assumes seasonally adjusted annual quarterly growth of
3.9 percent for 5 consecutive quarters starting with the 4^th ^quarter
in FY 2002. What if the U.S. economic rebound takes on the properties of
a "W shaped" or "U shaped" recovery? Slower economic growth would not
only slow the recovery in the demand for aviation services but would
also slow the industry's return to profitability.

Internationally, the Japanese economy, currently in recession, continues
to send mixed signals and a prolonged recession or slow growth could
negatively impact the entire region. Argentina's current financial and
political crises, already plagued by debt defaults and currency
devaluation, could worsen and spread to other regional economies.
Additionally, if the economic recovery in the U.S. is less than
forecast, this could also negatively impact those Asian and Latin
American countries whose economies are dependent on export trade with
the United States. The current forecasts assume strong passenger growth
for travel between the United States and these regions. Any slowing of
demand could seriously inhibit the growth in passenger demand for these
two travel areas.

The political climate regarding proposed mergers and alliances changed
dramatically on September 11^th^. The commercial industry's current
financial condition, combined with what appears to be a more favorable
climate for consolidation, could witness a spate of proposed mergers
and/or alliances over the next several years. While consolidation may
improve the financial health of individual carriers and the industry,
the fear is that consolidation would lessen competition in many markets.
Less competition could mean higher fares to the flying public and lower
travel demand.

As feared, a tenuous general aviation industry recovery was vulnerable
to the economic slowdown and recession, although not as vulnerable as it
would have been several years ago. How quickly the industry can recover
from both the economic recession and the aftermath of the events of
September 11^th^ is open to conjecture. The business/corporate side of
the industry appears to be in much better position to take advantage of
the projected economic rebound than does pleasure/sport flying. Security
concerns arising out of the events of September 11^th^ could
significantly increase the demand for corporate jets and fractional and
on-demand charter services. This segment of the industry could greatly
exceed our forecasts.

On the other side, the January 6 incident involving the flight of a
light aircraft into a Tampa building could lead to additional
restrictions on the operation of light general aviation aircraft and
pilot training. This has the potential to seriously constrain growth in
personal flying for years to come. Regardless of any new restrictions,
how quickly this flying segment responds to the economic rebound will go
a long way in determining whether our predicted increases in the demand
for general aviation products and services are achieved.

Increased flight delays, which had become a major problem for the
airlines, the traveling public, and the FAA, ceased to be a major
problem on September 11^th^. Although the current forecasts do not have
commercial activity (the sum of air carrier and regionals/commuters)
returning to pre-September levels until 2004, delays will become a
critical limiting factor to growth within this forecasting period. How
Government and industry planners use the next several years to develop
comprehensive plans to head off the inevitable future delays will be
critical to fulfilling this forecast.

If the economic scenarios presented in this document---a strong recovery
and 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,
after 2002, continue to expand throughout the forecast period.

**FORECAST SUMMARY**

Highlights of the current FAA aviation forecasts for the 2002 to 2013
time period include:

-   The U.S. and world economies recover strongly from the current
    recession in late 2002 and 2003 and achieve moderate sustained
    growth throughout the remainder of the forecast period, with the
    U.S. expected to grow slightly less than that of worldwide economic
    activity (3.0 versus 3.3 percent annually). Most of world economic
    growth is expected to take place in the Asia/Pacific (4.1  percent
    annually) and Latin American (3.9 percent annually) regions.

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-   Commercial and general aviation demand plummet in 2002, with U.S.
    air carrier passengers down 13.0 percent and general aviation hours
    flown down 2.2 percent.

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-   U.S. carrier domestic and international passenger traffic recovers
    strongly in 2003 (up 14.4 percent), with international markets
    forecast to grow significantly faster than domestic markets (5.6
    versus 3.8 percent annually) over the last 10 years of the forecast
    period. Most of the growth in international travel over this 10-year
    period is expected to occur in Latin American and Pacific markets,
    up 6.7 and 5.6 percent, respectively.

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-   Regional/commuter passenger traffic (up 8.7 percent in 2003) will
    continue to grow at a faster rate than their larger domestic
    counterparts (5.5 versus 3.8 percent annually) over 2004-2103 time
    period. Stronger growth results from the establishment of new
    markets utilizing the new regional jets and from further route
    rationalization by their larger code-share partners.

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-   Air cargo traffic (up 3.8 percent in 2003) is expected to grow at
    rates similar to those predicted for passenger traffic, with
    domestic and international RTMs increasing at annual rates of 4.4
    and 6.1 percent, respectively, over the final 10 years of the
    forecast period.

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-   After 2004, general aviation is expected to achieve low to moderate
    increases in the active fleet (0.5 percent annually) and hours flown
    (1.5 percent annually), with most of the growth occurring in
    business/corporate flying.

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-   Combined aviation activity at FAA and contract facilities (up 6.9
    percent in 2003) is expected to grow at annual rates of 1.7 percent
    annually after 2004, with commercial activity (up 2.5 percent
    annually) increasing at significant higher rates than those
    predicted for general aviation (1.3 percent annually).

The major uncertainties that have the potential to impact the demand for
U.S. and international aviation services include:

-   The economic forecasts used to develop this year's aviation
    forecasts assume a 2-quarter recession with a very strong recovery
    starting in late 2002. Should the recession be longer and deeper and
    the recovery weaker, it could push out the recovery in travel demand
    for an additional year. DRI-WEFA assigns a probability of 30 percent
    that the recession will be deeper and longer than predicted.

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-   One of the major assumptions regarding the recovery of the
    commercial aviation sector, both in terms of traffic and
    profitability, is a return of the full-fare business traveler to the
    levels achieved prior to the start of the current economic
    recession. The return of business travel is directly dependent on
    the recovery and strength of future U.S. and world economic
    activity.

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-   The current forecast projects a rapid decline in fuel prices in
    2002, with only moderate increases forecast over the remainder of
    the forecast period. If U.S. and world economic activity grows as
    predicted, energy prices could be considerably higher than forecast.
    Should this occur, the potential impact on U.S. and world economic
    growth and air travel could be considerable.

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-   The strong economic recovery forecast in Asia/Pacific and Latin
    American countries appears to be overly optimistic. The economy of
    Japan continues to send mixed signals and Argentina's economy is in
    dire straits. If the internal economic problems plaguing their
    economies are not resolved, the potential for recessions to spread
    to other Asia and South America countries remains a very distinct
    possibility. This could significantly slow the traffic recovery
    forecast in these regions.

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-   Heightened security measures at U.S. airports have significantly
    increased the times required for check-in and security clearance. If
    these lengthy check-in times are allowed to continue, much of the
    short-distance scheduled air travel could be shifted to other
    transportation modes or travel alternatives such as teleconferences.
    The loss of this traffic, mostly high price business travel, would
    be devastating to the profitability of U.S. commercial airlines.

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]: All stated years and quarters for U.S. economic and U.S. air
    carrier traffic, and financial data and forecasts are fiscal years
    (October 1 through September 30); all stated years and quarters for
    international economic and world traffic and financial data and
    forecasts are calendar years (CY), unless otherwise denoted.

[^2]: *Air Transport World*, January 2002.

[^3]: *Air Transport World*, January 2002

[^4]: Defined by the U.S. DOT as carriers with annual operating revenues
    greater than \$1 billion.

[^5]: Defined by the U.S. DOT as carriers with annual operating revenues
    between \$100 million and \$1 billion.

[^6]: Defined by the U.S. DOT as carriers with annual operating revenues
    less than \$100 million.

[^7]: Boeing announced commercial aircraft orders totaling 335 in
    calendar year 2001, a decline of 45 percent from 608 in 2000.
    (*Aviation Daily*, January 10, 2002)

[^8]: *2001 Year-end Review and 2002 Forecast---An Analysis*, Aerospace
    Industries Association of America, December 2001.

[^9]: Quarterly growth is expressed in seasonably adjusted annual rates.

[^10]: Back Aviation Solutions compared OAG schedules in January 2001
    and 2002 and found 109 nonstop markets that had previously been
    operated solely by six majors in January 2001 were being flown
    solely by these carriers' regional partners in January 2002.
    (*Aviation Daily*, January 7, 2002)

[^11]: On December 19, the FAA announced that it had eased restrictions
    on the airspace available to private aircraft, but are keeping a
    protective "no-fly" zone around Washington National Airport.