... amidst a financing environment which can be described as cautious at best. Surprisingly, it’s been well attended, which likely reflects the role these folks play in keeping these complex facilities financially sound. The Airport Economics & Finance Conference is hosted by Airports Council International-North America.
The ‘sense’ that one gets is that attendees are here to get a grasp on the reality of the economic climate – the state of shock from the turn of events over the past year has turned to an attitude of, what do we need to do as we move forward? As with most things these days, it’s all about the economics. For airports, it’s also about becoming more and more focused on reducing costs; finding new efficiencies; rethinking capital development programs; and the like. A few of the highlights …
Like many, the industry segment has been hard hit by the paralysis that has occurred within the banking community over the past six months. David Spirakis, managing director for public finance with Bank of America, a leading airport financing player, says there is much uncertainty about which companies will still be players in the airport arena once the dust settles from the economic fallout. There is no longer a “huge oversupply” of banks interested in backing municipal bonds; in fact, the role of banks has been substantially diminished and Spirakis expects that only the top (and diversified) banks will remain in the fray.
David Wyss, a chief economist at Standard & Poor’s, predicts that the current downward spiral of the stock market is coming to an end. However, he explains that historically long bull market cycles are followed by long-term bear markets, and he suggests that we may be headed into such a situation today. He says his “best guess” is that the economy will slowly come out of the recession within six months, with the caveat that a longer recession is a definite possibility.
William Swelbar, a research engineer at the Massachusetts Institute of Technology, says of the U.S. airline industry, “We have too many seats at too high a cost” for the airlines. Barriers to new entrants are being erected, he says – unstable oil prices; the credit markets; and, a decreased demand which is expected to continue. Swelbar says that the time is here for the airlines to rethink their business model. “The credit issue is going to force the change,” he comments. Efforts in the past year by carriers to cut capacity and increase unit revenues were working, he adds, until recently – evidenced by new fare wars being waged.
The complete conference report will be featured in the upcoming issue of AIRPORT BUSINESS magazine.
Thanks for reading. jfi