Turbulence ahead for regional airports: Albany International, others could see loss of flights, carriers as oil prices pinch airlines

COLONIE, Jun 25, 2008 (Albany Times Union - McClatchy-Tribune Information Services via COMTEX) -- AIN | Quote | Chart | News | PowerRating -- Albany International Airport and dozens of other airports nationwide are likely to see deep cuts in service if airlines don't find relief from $130-a-barrel oil, an organization representing business travelers warns.

The impact -- fewer flights, much higher fares -- could be felt as soon as this fall.

A study by the Business Travel Coalition, a Radnor, Pa.-based trade group, says airlines and passengers are facing their "darkest future" and that "fast-approaching airline liquidations will cripple the U.S. economy."

"The whole idea of deregulation has been a democratization of travel," said Kevin Mitchell, chairman of the group. That now is at risk.

Airports that depend on regional jets are particularly vulnerable, the coalition warns, because they've become the least profitable aircraft to operate. At Albany International Airport, 35 of the 70 daily departures are regional jets.

And airports such as Albany that are served by both Delta and Northwest airlines are likely to see service cutbacks as the two carriers merge and eliminate overlapping routes.

Even the presence of Southwest Airlines, which has kept overall fares here low, increases the likelihood of cutbacks by competitors who previously would have matched its fares.

"Those airports with a lot of low-cost presence are more vulnerable than others," Mitchell said. "Even Southwest said last week at a Merrill Lynch conference that it, at $130 a barrel, would have to cut hundreds of routes."

Southwest has long-term contracts that have kept its fuel prices well below $130, but those eventually will expire.

The Albany airport isn't alone on the coalition's list. In New York, airports in Rochester, Islip, Binghamton, Ithaca, Newburgh and White Plains also face deep cuts as fuel prices rise.

Also on the list are the airports in Manchester, N.H., Providence, R.I., and outside Hartford, Conn. The list was compiled for release today.

The coalition's study, "Beyond the Airlines' $2 Can of Coke: Catastrophic Impact on the U.S. Economy from Oil-price Trauma in the Airline Industry," warns airlines won't find relief in Chapter 11 bankruptcy protection because the credit crunch has dried up the financing they would need to reorganize.

Rather, the weakest carriers will face "outright and immediate extinction," the study says.

It also warns that, "given the precarious state of the domestic airline industry, multiple failures of major U.S. airlines are not a remote prospect."

Mitchell said carriers have announced cutbacks equal to about 13 percent of their service. But he said analysts estimate that, with $130-a-barrel oil, they'll need to cut 20 percent to 22 percent.

"Other, more difficult decisions are likely," he said.

Albany airport officials are developing other sources of revenue to help keep carriers' costs of operating here competitive, said Albany County Airport Authority spokesman Doug Myers.

"We understand the dynamics of the industry right now," he added. "There's going to be some give and take because the airlines are not profitable."

The airport has found tenants for vacant industrial land and attracted other businesses, including factory service centers for a new generation of so-called very light jets. The added revenue helps subsidize airport operations.

"You want to keep costs (of boarding a passenger) down for the airlines," Myers said.

At least one carrier, Continental, has begun replacing some of its regional jets with newer, larger turboprops that consume about half as much fuel. The Q400 aircraft, operated by Continental Connection carrier Colgan Air, are being maintained at Albany.

And while United and other carriers have announced cuts in flights systemwide, a small regional carrier, Cape Air, plans to begin service between Albany and three northern New York cities on Sept. 16 with the help of federal subsidies.

The airline will use nine-passenger propeller-driven planes.

Anderson can be reached at 454-5323 or by e-mail at eanderson@timesunion.com.

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