## The Impact Of Airline Mergers And 

## Consolidation On Consumers And The Aviation Industry



## Advisory Committee For Aviation Consumer Protection Washington, DC

Deborah McElroy Executive Vice President October 29, 2014

## Who We Are

• Airports Council International

– North America (ACI

- NA) represents local, regional and state governing bodies that 

## own and operate commercial airports in the United States and Canada.

• ACI

- NA’s 207 airport m embers operate 360 airports

, enplaning more than 95 percent of the domestic and virtually all the international airline passenger and cargo traffic in North America.

## Who We Are, Continued

• The mission of ACI

- NA is to advocate policies and provide services that strengthen the ability of commercial airports 

## to serve their passengers, customers and communities.

• ACI

- NA works in collaboration with Airports Council International (ACI) to advocate for airport issues before the International Civil Aviation Organization.

## Recent U.S. Mergers and Acquisitions

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

• Republic Airways / Shuttle America

• US Airways / America West

• Skywest / Atlantic Southeast Airlines • Pinnacle Airlines / Colgan Air • Delta

Airlines / Northwe st Airlines • Republic Airlines

/ Midwest Airlines

• Republic Airlines / Frontier Airlines • United Airlines / Continental Airlines

• Pinnacle Airlines / Mesaba Airlines

• Skywest / Atlantic Southeast Airlines / ExpressJet Airlines

• TransStates Airlines / Compass Airlines

• Southwest Airlines / AirTran Airways • US Airways / American Airlines

• Pinnacle Airlines / Delta Air Lines

• Delta Air Lines Acquires 49% Stake in Virgin Atlantic

Source: Respective Airline SEC filings 

## In the last few years, the United States has led the world in airline mergers and acquisitions.

## Flight Capacity by Hub Sizes



## 2008 to 2014

- % Change Year Over Year

- 2.9%

- 5.1% 0.6% 0.4%

- 0.7% 0.0%

- 0.6%

- 6.5%

- 11.6% - 3.8% - 2.5%

- 5.2% - 2.3%

- 3.7%

- 4.7%

- 7.8% - 0.7%

- 2.3%

- 3.8% - 2.9%

- 3.9%

- 4.7%

- 8.1% 1.3%

- 2.8%

- 3.4% - 1.0%

- 4.2%

- 3.9%

- 6.8% - 0.5%

- 0.8%

- 1.8% - 0.9%

- 2.0%

-14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0%

2008 2009 2010 2011 2012 2013 2014

Large Medium Small None TOTAL
While airports benefit from a healthy, successful airline industry, recent mergers and the resulting consolidated airline industry has significantly impacted airports of all sizes throughout the United States through reduced service and higher fares

.

## Airport Hubs: Traffic Trends

-12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0%

Flights Seats

- 1.3% 3.5%

- 10.8% - 4.2%

- 10.3% - 4.2%

- 8.4% - 3.1% 

### 2014 versus 2011

Large Medium Small Non-Hub All airports have seen reductions in flights over the last three years. Airports are focused on adding new service but are limited in the incentives that can be offered to airlines.

Source: Diio Mi

## Airport Priorities



## In a recent survey, ACI

- NA asked U.S. airport directors to identify their most significant challenges. Nearly 45 percent indicated air service development was the single biggest challenge facing their airports right now because of airline consolidation.

We also asked airport directors to look five years into the 

## future. Nearly 40 percent again identified providing price and service competition for their communities as the single biggest challenge they expect to face over the next five years.

## Airport Priorities, Continued



## An adjusted Passenger Facility Charge local user fee adjusted from $4.50 to $8.50 and indexed for inflation will assist airports in modernizing their facilities to accommodate increased competition.

DOT may also want to consider modernizing the regulations on air service incentives.

## Growing International Air Service

The consolidated U.S. airline industry is growing its international network. U.S. airports 

## are working with both domestic and foreign airlines for additional international flights. However, there have been a number of 

## instances where staffing issues and CBP funding constraints resulted in the new service being denied by CBP.

Additionally inadequate CBP staffing has led to delays in processing arriving international passengers, inconveniencing consumers.

## Growing International Air Service, Continued

Airports and airlines are installing Automated Passport Control (APC) to more efficiently process arriving international 

## p assengers. Additionally, ACI

- NA and Airside Mobile developed the Mobile Passport Control (MPC) which is now being piloted in Atlanta

. Additionally, some airports have signed agreements with CBP to pay for overtime expenses.

However, given increasing international travel, increasing CBP staffing is an important consumer issue that should be

a ddressed.