1

 MEMORANDUM

Eastern Research Group, Inc. 

110 Hartwell Avenue

Lexington, MA 02421

Date: February 8, 2012 

To: James Covington, EPA 

From: Jeff Cantin and Cal Franz, ERG 

Re: Airport Deicing Operations ELG Economic Analysis: Economic Profile Update 

1. Introduction 

This is an update to the 2006 economic profile prepared as part of EPA’s Economic Analysis for 

Proposed Effluent Limitation Guidelines and Standards for the Airport Deicing Category. The update 

covers the period 2007 through 2010, although most data is available only through the end of 2009. The 

2006 profile established that demand for deicing services is derived from the demand for airline travel, 

which in turn is derived from the demand for travel for business purposes, vacation, and other leisure 

activities. Therefore, this update examines changes in underlying economic factors during the 2007-2010 

period and how such changes affected travel demand and airline and airport operational performance. 

2. Economic Climate 

The major event impacting the U.S. aviation industry during the update period is the U.S. (and global) 

recession. Officially, the recession began in December 2007 (NBER, 2008). This slowdown in economic 

activity produced slower growth (1.9 percent GDP increase) in 2008 and a decline (-2.9 percent in GDP) 

in 2009 (BEA, 2010). The recession was triggered by a housing market collapse, which affected the 

values of securities tied to real estate pricing. The resulting losses at financial institutions led to a 

confidence and liquidity crisis that required massive government intervention (IMF, 2009). Through 

Fiscal Year 2009, job losses totaled 6.9 million, with the unemployment rate rising to 10.6 percent by 

January 2010, the highest rate recorded since 1983 (BLS, 2010). 
2

The impacts of the recession, while widespread, were nevertheless uneven across the U.S. The figure 

below shows that despite a national average unemployment rate of 9.3 percent, jobless rates in 2009 

remained below 4 percent in several Midwestern states and were below 7 percent in another dozen states. 

Michigan (13.6 percent), Nevada (11.8 percent), and South Carolina (11.7 percent) topped the list of 

states with the highest unemployment rate. On a year to year basis, Michigan (+5.3 percent), Nevada 

(+5.1 percent), Alabama (+4.9 percent), and South Carolina (+4.8 percent) recorded the highest 

percentage increases in unemployment rate from 2008 to 2009. 

Another important factor impacting the performance of the airline industry during the update period is the 

oil price shock that began in 2007 and continued into 2008. Jet fuel prices, which had already climbed to 

$1.91 per gallon by 2006, reached a peak of over $4.00 per gallon in September 2008 (EIA, 2010). As 

will be shown below, airlines were already cutting capacity in response to the recession and this resulted 

in a sharp decline in demand. Prices began a steady fall through mid 2009, reaching a low of $1.10 per 

gallon in March. Throughout 2010, prices hovered around the $2.00 mark. 

U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB (Dollars per 

Gallon)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2004

2005

2006

2007

2008

2009

2010

Sept '08
3

3. Additional Factors or Events 

In addition to the recession and the oil price shock, several other events or factors impacted the airline 

industry during the update period and are noteworthy. 

H1N1 outbreak 

In 2009, a new strain of influenza known as H1N1 was identified. Unlike previous strains, H1N1 does not 

disproportionately affect older people or people with compromised immune systems or other underlying 

medical conditions, and otherwise healthy individuals were found to be equally susceptible (WHO, 2009). 

An outbreak in Veracruz, Mexico prompted Mexican authorities to close many public and private 

facilities in an attempt to limit the spread, but by June 2009 the Centers for Disease Control declared the 

outbreak to be a pandemic. 

Although no travel restrictions or advisories were imposed by health authorities, and no special 

precautions were taken by U.S. airlines (Jacobs, 2009), the outbreak is believed to have affected travel 

demand. Mexico’s resort regions in the southeast, where the pandemic originated, were particularly hard 

hit. The Cancun region reported that occupancy rates dropped from 75 percent in April to 20 percent in 

May and early June, and 22 hotels were forced to suspend operations (SourceMex, 2009). Regional 

airport authorities reported a 50 percent decline in traffic in May compared to 2008. 

Volcanic ash disruption 

In March 2010, a violent eruption of the Eyjafjallajökull volcano in Iceland began ejecting ash into the 

air. The resulting ash clouds reached a height of 30,000 feet, sufficient to cause concern among 

authorities over possible damage to aircraft traveling through the cloud. On the basis of this concern, a 

number of European countries closed their airspace resulting in widespread air traffic disruption. Much of 

Northern Europe’s airspace was closed from April 15 to April 23, and intermittently for several weeks 

afterwards as the ash cloud was tracked (The Telegraph, 2010). 

On April 16 it was reported that 16,000 of Europe's usual 28,000 daily scheduled passenger flights were 

cancelled and by April 21 an estimated 95,000 flights had been cancelled (CBS News, 2010). In total, 

some eight million passengers were estimated to have been stranded. 

During the closure period, the Airline Transport Association reports that U.S. carriers operated 

approximately 337 daily departures and arrivals between Europe and the U.S. As shown in the table 

below, over 60 percent of scheduled flights were cancelled during this period. The impacts of the closure 

extend beyond the loss of passengers on these flights, as not all inbound international passengers have 

gateway U.S. cities as their final destination. Some passengers were also forced to cancel their connecting 

or continuing domestic flights within the U.S. According to the Boyd Group consultancy, the losses 

associated with the first four days of cancellations totaled $80 million, with Delta and United suffering 

the highest losses (Boyd, 2010). 
4

Impact of 2010 Iceland Volcano Eruption on U.S. Inbound and Outbound Flights 

Date Number of flights cancelled Percent of total 

April 15, 2010 165 49.0 

April 16, 2010 280 83.1 

April 17, 2010 282 83.7 

April 18, 2010 310 92.0 

April 19, 2010 297 88.1 

April 20, 2010 270 80.1 

April 21, 2010 75 22.3 

Total 1,679 62.3 

Source: ATA, Impact of Icelandic Volcanic Eruption on U.S. Carriers. Available at 

http://www.airlines.org/News/Releases/Pages/news_4-22-10volcano.aspx 

 

4. Airports 

The 2006 profile reported the number of airports in the U.S., based on 2004 data reported in the Federal 

Aviation Administration’s (FAA’s) National Plan of Integrated Airports System (NPAIS). A comparison 

with the most recent NPAIS shows that since 2004 there were no changes in the number of primary hubs, 

but 14 nonprimary airports have closed (FAA, 2010). No other changes to the number of commercial 

service airports were reported, although one additional primary airport has been proposed. 

Close inspection of the table shows a small but noticeable decline in the share of enplanements and 

aircraft accounted for by NPIAS airports. In 2004 non-NPIAS airports accounted for only 0.1 percent of 

enplanements and 10.2 percent of based aircraft. In 2008 these shares had risen to 0.9 percent for 

enplanements and 25.2 percent of based aircraft. 
5

Changes in Number of Airports, Enplanements, and Aircraft Based at NPIAS Airports 

Airport Type 

Number of 

Airports 

Percentage of 

Enplanements 

Percentage of Based 

Aircraft 

2004 2008 2004 2008 2004a 2008b

Commercial Service Large Hub 30 29 68.7% 68.0% 1.1% 0.7% 

Commercial Service Medium Hub 37 37 20.0% 20.0% 3.0% 2.1% 

Commercial Service Small Hub 72 72 8.1% 8.0% 4.7% 4.0% 

Commercial Service Nonhub 243 244 3.0% 3.0% 10.6% 10.1% 

Non-primary Commercial Service 135 121 0.1% 0.1% 2.4% 1.6% 

General Aviation Relievers 274 269 0.0% 0.0% 28.8% 21.9% 

General Aviation 2,573 2,560 0.0% 0.0% 41.2% 34.4% 

Existing NPIAS Airports 3,364 3,332 99.9% 99.1% 91.8% 74.8% 

Non-NPIAS Airports 16,459 16,402 0.1% 0.9% 10.2% 25.2% 

a Based on active fleet of 214,591 aircraft in 2005.

b Based on active fleet of 228,668 aircraft in 2008. 

Source: FAA, 2006 and FAA, 2010. 

The figure below shows the number of departures (scheduled and unscheduled) by year and airport class. 

As shown, 2006 represented a down year for the industry, but departures rebounded somewhat in 2007, 

increasing by 145,000 (1.4 percent) across all airport classes. Departures then fell by 450,000 (-4.3 

percent) in 2008 and by another 745,000 (-7.4 percent) in 2009. The declines felt by medium and small 

hubs in 2009 were actually twice as steep as the declines experienced by large hubs. 

Number of Departures by Airport Class (2000 - 2009)

5.57 5.44 5.48

6.18

6.57 6.65

6.48 6.52

6.27

5.91

1.62 1.63 1.65

1.94 2.02 2.05 2.02 2.09 1.97

1.77

0.72 0.70 0.72

0.88 0.93 0.94 0.90 0.92 0.88 0.78

0.53 0.50 0.61

1.00 1.02 1.01 0.97 0.99 0.93 0.84

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

millions

Large Hub Medium Hub Small Hub Nonhub

Source: EPA analysis of BTS T-100 database. 
6

The two figures below show the number of U.S. passenger and cargo departures, indexed to 2006. 

Although the passenger data shows a decline since 2006, the totals are still consistent with more recent 

(2000 forward) performance. Looking at cargo-only departures, however, there appears to be a steady 

decline in domestic departures since 2003. Indeed, since 2003 domestic cargo departures have fallen 27 

percent, from 650,000 to 470,000 annually. One possible explanation for some of the decline in cargo 

departures is that with fewer passengers checking bags (in response to checked bag fees) there is more 

room for cargo space on passenger flights. 

Domestic and International Passenger Departures (2006=100)

97.7

102.9 103.5

101.4

86.0

92.3

98.3

100.0

101.5 96.6

90.4

92.9

99.4

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

2003 2004 2005 2006 2007 2008 2009

Domestic International

A similar pattern for the number of enplanements. Enplanements rose 3.5 percent to 871 million in 2007 

but these gains were erased by declines the following year. From 2008 to 2009, enplanements fell by 

another 46 million (from 841 million to 795 million), representing a further 5.5 percent drop. 
7

Domestic and International Cargo Departures (2006=100)

104.0

102.2 101.5

100.0

85.6

93.3

96.2

99.4

95.6

88.0

75.0

90.5

97.9

70.0

75.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0

2003 2004 2005 2006 2007 2008 2009

Domestic International

Number of U.S. Enplanements by Year (millions)

752

733

803

872

795

740

841 841

842

650

700

750

800

850

900

2001 2002 2003 2004 2005 2006 2007 2008 2009

Note: Totals represent hub and nonhub airports only. 

Source: EPA analysis of BTS T-100 database. 
8

5. Airlines 

The 2006 economic profile documented the continued fragile state of the U.S. airline industry. Beginning 

with the events of September 11, 2001, a series of setbacks have interrupted the industry’s return to 

profitability. These included the war in Iraq and the SARS outbreak, which affected international travel 

demand, and more recently the spike in fuel prices described above. 

Quarterly airline profit and loss data reported to the Department of Transportation show that the 

industry’s downturn in 2008 erased all of the profits recorded in 2007. Losses in 2008 totaled a record 

$5.7 billion. The decline continued into the first quarter of 2009 before the industry returned to modest 

profitability in the second quarter. Profits through 2009 were a modest $448 million but soared in the first 

quarter of 2010 to more than $3 billion as fuel prices fell, the airlines capacity adjustments took effect, 

and the economic recovery solidified. 

Virtually all of the losses recorded through 2008 and 2009 occurred among the network carriers. Low cost 

and regional carriers remained modestly profitable throughout the entire period shown. Likewise, network 

carriers benefited the most from the recent turnaround, accounting for more than $2.4 billion of the $3.0 

billion profits in the first quarter of 2010. 

Passenger Airline System Quarterly Operating Profit/Loss ($millions)

-$2,000

-$1,500

-$1,000

-$500

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2007 2008 2009 2010

Network Low-Cost Regional

The downturn triggered another wave of consolidation in the industry, most notably the acquisition in 

2009 of Northwest (by Delta) and the 2010 announcement of the merger of Continental and United as 

well as Southwest’s acquisition of AirTran. The table below is based on unofficial data maintained by 

ATA on its Web site and shows completed mergers and acquisitions since 2006. 
9

U.S. Airlines Mergers and Acquisitions 

Airlines Announced Closed Resulting entity 

Delta / Northwest 4/14/08 12/31/09 Delta Air Lines 

Republic / Midwest 6/23/09 7/31/09 Republic Airways 

Republic / Frontier 8/14/09 19/1/09 Republic Airways 

United / Continental 5/3/10 10/1/10 United Airlines 

SkyWest / Atlantic 

Southeast / ExpressJet 

8/4/10 11/15/10 Skywest / ASA 

Southwest / AirTran 9/27/10 Southwest Airlines 

Source: Air Transportation Association, 2010. Available at 

http://www.airlines.org/Economics/DataAnalysis/Pages/USAirlineMergersandAcquisitions.aspx. 

Accessed November 30, 2010. 

U.S. Airlines are continuing to adjust the number of aircraft they are maintaining in their fleets. The table 

below shows that between 2006 and 2010 the overall size of the U.S. fleet has declined by 554 planes, a 

decline of 7.2 percent. Noticeably, the decline in the U.S. cargo fleet has been steeper than that for 

passenger aircraft, with the cargo fleet falling by more than 15 percent over this period. 

Change in Size and Composition of U.S. Airline Fleet 

Aircraft 

Type 

Number of aircraft, by year 

2002 2003 2004 2005 2006 2007 2008 2009 2010

Mainline 4,118 4,022 4,024 3,906 3,898 3,983 3,795 3,666 3,666

Regional 2,499 2,549 2,747 2,830 2,784 2,787 2,700 2,612 2,620

Cargo 1,056 993 993 1,001 1,012 974 960 854 854

Total 7,673 7,564 7,764 7,737 7,694 7,744 7,455 7,132 7,140

Year to year change in number of aircraft 

Mainline -96 2 -118 -8 85 -188 -129 0

Regional 50 198 83 -46 3 -87 -88 8

Cargo -63 0 8 11 -38 -14 -106 0

Total -109 200 -27 -43 50 -289 -323 8

Source: Source: FAA Aerospace Forecast, 2010-2030. 

6. Airline costs 

The operating cost structure of U.S. airlines over the update period was affected by two factors: an 

upswing in fuel costs which peaked in the third quarter of 2008 and a continued decline in the number of 

employees. 

As noted previously, fuel prices throughout 2006 hovered around $2.00 per gallon but these began rising 

in 2007, and by September 2008 spot fuel prices had broken the $4.00 per gallon mark. Shortly after, 

prices dropped dramatically as airlines cut capacity and the recession began impacting travel demand. 

Since late 2009, prices have more or less stabilized at the $2.00 per gallon level. The chart below shows 

fuel costs as a share of operating costs rising from below 25 percent in 2006 to as high as 35 percent in 

the peak third quarter of 2008. The margin between fuel cost and labor cost (historically the largest 

contributor to airline cost) grew steadily over 2007-2008. 
10

U.S. Airline Operating Costs - Share of Total Costs

0%

5%

10%

15%

20%

25%

30%

35%

40%

2003

2004

2005

2006

2007

2008

2009

2010

Fuel Labor

Transport related expenses Aircraft rents and ow nership

Other

Source: Air Transport Association, Quarterly Cost Index, U.S. Passenger Airlines. 

Available at http://airlines.org/Economics/DataAnalysis/Pages/QuarterlyCostIndex.aspx. 

As documented in the 2006 economic profile, employment and labor costs have been declining as a result 

of long term structural changes in the industry. Market share is shifting from legacy airlines with more 

experienced (and higher priced) crew operating under union work rules to low-cost carriers with younger 

crews, more flexible work rules, and leaner overall operations. This has allowed the airlines to reduce 

total employment from 546,000 in 2000 to 404,000 in 2006, a decline of 26 percent. Since 2006, 

employment has fallen another 4.5 percent, to 385,000. This trend can be seen in the labor share of total 

costs (see Figure above), which declines steadily from 2003 to late 2008. The increase from 2008 to 2009 

predominantly reflects a relative change in labor’s share of total cost, although the ATA data do show an 

increase in absolute labor cost from 2008 to 2009, despite a decrease in industry-wide employment. 
11

7. Additional Factors/Issues 

This section reviews a number of other factors underlying U.S. airline and airport performance during the 

update period. Some of these are internal to the industry while others are external. 

Reducing fuel consumption 

In the face of rising fuel costs, and in particular the record increases they faced in 2008, airlines have 

become aggressive in their efforts to reduce fuel consumption. Most observers agree there is no single 

strategy that can be relied on to reduce costs but that the cumulative effect of a broad-based plan can be 

successful. Some of the tactics being used are shown in the text box below. 

In addition, airlines are benefiting from improvements in airport operations that will reduce their time 

spent taxiing and waiting for runway clearance. While these improvements are intended to reduce 

congestion and avoid tarmac delays, they will also decrease aircraft idling time and fuel consumption. 

(FAA, 2010). 

Passenger Surcharges 

Faced with lower operating margins, airlines have moved in recent years to introduce new or increased 

fees and charges. Most notably, these include charges for checked baggage, which were nonexistent in 

2007 but yielded airlines close to $2 billion in 2009 (GAO, 2010). At least one airline has introduced fees 

for carry on bags, charging as much as $30 to board with a bag that will only fit in the overhead 

compartment (Negroni, 2010). According to SITA (an air transportation consultancy), the proportion of 

passengers checking baggage dropped from 82 percent in 2007 and 2008 to 76 percent in 2009 (SITA, 

2010). Fewer checked bags translates to reduced need for baggage handlers and reduced workers 

compensation claims, although the latter may be offset by increased claims among cabin crew. In 2009, 

SITA estimates there were 24 percent fewer lost or mishandled bags which translated to $94 million in 

reduced lost or damaged claims (SITA, 2010). 

Airlines are employing a variety of tactics to reduce fuel burn 

Lightening cabin interiors 

 Removing unused ovens, magazine racks, and trash compactors 

 Replacing paper cockpit manuals and logbooks with electronic ones 

 Replacing silverware with lighter metals or plastic 

 Replacing meal serving carts with lighter ones made primarily from plastic 

 Removing phones from seat backs and stripping out unneeded wiring 

 Eliminating glassware for soda and juice or replacing it with plastic 

 Replacing carpet with lighter products 

 Carrying less water 

Changing operational practices 

 Towing aircraft to take-off areas 

 More frequent washing of planes and engines 

 Plugging planes into ground power as soon as the plane lands 

 Stripping old paint before re-spraying 

Sources: Kahn, 2008; Clarke, 2008. 
12

In addition to bag check fees, airlines have introduced new or increased fees for a variety of services, such 

as early boarding, seat selection and upgrades, ticket cancellations, and onboard meals and snacks (GAO, 

2010). U.S. airlines have also added and dropped fuel surcharges in response to periods of high fuel price. 

One website that tracks fares shows that in September, 2008 (the peak of the fuel price spike) most U.S. 

carriers had fuel surcharges in place that ranged from $13 to $146 (FareCompare, 2008). These 

surcharges tend to be reduced or dropped when fuel prices stabilize. 

Marketing of airline tickets 

The percentage of travelers booking airline tickets online continues to grow. Survey data from market 

research firm J.D. Power indicate the percentage of travel reservations booked online reached 71 percent 

in 2008, up from 56 percent in 2007 (J.D. Power, 2008). Increasingly, consumers have access to tools that 

allow them to compare prices and select the lowest price. Such price transparency should in theory 

promote greater competition among airlines serving the same markets. At the same time, however, 

concerns have been raised over the information being presented to consumers, particularly with respect to 

fees and taxes. GAO reports that while information on fees and taxes is generally available on airlines’ 

own Web Sites, that same information is not available through online and traditional travel agencies 

(GAO, 2010). It has been speculated that this strategy is designed to steer consumers to the airline’s web 

sites and away from sites that allow cross-airline fare comparisons. This concern prompted the 

Department of Transportation to propose new rules in June, 2010, to mandate greater transparency for 

consumers (DOT, 2010). 
13

8. References 

BEA, 2010. U.S. Economy at a Glance: Perspective from the BEA Accounts. 

http://www.bea.gov/newsreleases/glance.htm. Accessed November 29, 2010. 

BLS, 2010. BLS-Historical Unemployment Rate Table". Data.bls.gov. 

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet. Accessed November 29, 2010. 

Boyd, 2010. Iceland Volcano Cuts Domestic Enplanements. April 19, 2010. Available at: 

http://www.aviationplanning.com/Update.htm#Boyd_Group_International_Analysis:_Iceland_Volcano_

Cuts_Domestic_Enplanements. 

CBS News, 2010. U.K. Airports See Trans-Atlantic Flights Return. April 20, 2010. Available at 

http://www.cbsnews.com/stories/2010/04/20/world/main6413416.shtml. 

Clarke, 2008. Emma Clarke. Airlines battle to survive soaring oil prices. CNN. June 17, 2008. Available 

at http://www.cnn.com/2008/BUSINESS/06/17/airline.oilprices/index.html. Accessed November 30, 

2010. 

DOT, 2010. Department of Transportation. DOT Proposes Additional Consumer Protections for Air 

Travelers. June 2, 2010. Available at: http://www.dot.gov/affairs/2010/dot11010.html. Accessed 

November 30, 2010. 

EIA, 2010. U.S. Energy Information Administration. Petroleum Navigator. 

FAA 2006. Report to Congress: National Plan of Integrated Airport Systems (NPIAS) 2007-2011. 

Available at http://www.faa.gov/airports_airtraffic/airports/planning_capacity/npias/reports. Accessed 

September 2, 2008. 

FAA, 2010. Report to Congress: National Plan of Integrated Airport Systems (NPIAS) 2011-2015. 

Available at http://www.faa.gov/airports/planning_capacity/npias/reports. Accessed November 29, 2010. 

FareCompare, 2010. U.S. Domestic Airline Ticket Fuel Surcharge Report. September 18, 2008. Available 

at: http://rickseaney.com/2008/09/18/us-domestic-airline-ticket-fuel-surcharge-report. Accessed 

November 30, 2010. 

GAO, 2010. United States Government Accountability Office. Commercial Aviation: Better Information 

about Airline-Imposed Fees and the Refundability of Government-Imposed Taxes and Fees Could Benefit 

Consumers. Testimony Before the Subcommittee on Aviation, Committee on Transportation and 

Infrastructure, House of Representatives. Statement of Gerald L. Dillingham, Ph.D. Director, Physical 

Infrastructure Team. July 14, 2010. 

IMF 2009. World economic outlook : a survey by the staff of the International Monetary Fund. 

Washington, DC : International Monetary Fund. Available at: 

http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf. 

Kahn, 2008. Chris Kahn. Airlines lighten up to cut fuel costs. USA Today. March 29, 2008. Accessed 

November 30, 2010. 

Negroni, 2010. Christine Negroni. Less baggage, big savings to airlines. New York Times, April 6, 2010. 
14

SITA, 2010. Baggage Report 2010. Available at http://www.sita.aero/content/baggage-report-2010. 

Accessed November 30, 2010. 

SourceMex, 2009. Negative Impact On Mexican Tourism Continues From April Outbreak Of Swine Flu. 

SourceMex Economic News & Analysis on Mexico. August 5 2009. Available at 

http://www.allbusiness.com/travel-hospitality-tourism/lodging-lodging-industry/12616969-1.html. 

The Telegraph, 2010. Iceland volcano: latest travel news. May 17, 2010. Available at 

http://www.telegraph.co.uk/travel/travelnews/7605660/Iceland-volcano-latest-travel-news.html. 

WHO, 2009. World Health Organization. Clinical features of severe cases of pandemic influenza 

Pandemic (H1N1). 2009 briefing note 13. Available at 

http://www.who.int/csr/disease/swineflu/notes/h1n1_clinical_features_20091016/en/index.html.