FOR IMMEDIATE RELEASE: September 28, 2005
Schumer Issues New Report On Upstate Air Travel – Discusses Impact Of Mergers, Bankruptcies And High Jet Fuel Prices
As USAirways-America West Join, Senator To Urge Newly-Merged Airline to Expand Service In Upstate New York Markets
As pending mergers and bankruptcies stand to shakeup the airline industry, U.S. Senator Charles E. Schumer, today unveiled a new report showing unprecedented passenger growth at upstate New York airports, including Buffalo, Syracuse, Rochester, Albany, and Stewart. Schumer’s report also shows a dramatic rise in low-cost airlines’ market share and the fall of average fares from each major airport. Schumer’s report includes an airport-by-airport analysis showing how service in upstate New York could expand now that US Airways and America West merged, opening-up new markets, especially for Binghamton, Elmira, and Ithaca. Schumer will also be introducing legislation to increase funding by $110 million for Essential Air Service, which would increase federal funding for air service to and from small airports like Massena, Watertown, Jamestown, and Ogdensburg and funding for Small Community Air Service Development Grants.
“We know that low-cost airfare is the engine of economic growth, and that’s why we will continue to push so hard to expand service throughout upstate New York,” Schumer said. “We’ve come a long way, but there’s still a lot of work to be done. The price tags on most flights to upstate New York have historically been sky-high, but we’re bringing them back down to earth and this can only mean more jobs, more service, and more economic growth for all of New York.”
Schumer’s study showed dramatic passenger growth, substantial fare decline, and an increase in market share of low cost airlines for Buffalo Niagara International Airport, Greater Rochester International Airport, Syracuse International Hancock Airport, Albany International Airport, and Stewart International Airport. At all of these major airports, the market share of low cost airlines, including JetBlue, Southwest Airlines, Airtran, and Independence Air, has risen from 4% in 1999 to 30% in 2004. Between, 1999-2004 passenger counts have grown 40%, 36%, 30%, 60%, 37% in Buffalo, Rochester, Syracuse, Albany, Stewart respectively.
Schumer said that bringing low cost carriers in to the market not only lowers fares and fosters growth, but it also protects a market if a larger carrier were to go out of business. Ten years ago, when large carriers dominated the market, a bankruptcy or liquidation would have been disastrous and left many markets with out any air service. Low cost carriers have brought diversity to the market and are now in many regions the dominant carrier. For example, in Buffalo, Delta dropped from 14% of the market share in 1999 to 9% in 2005. If a legacy carrier were to go out of business, the shock to the market would now be significantly less. In the past 6 years, Delta and Northwest combined market share dropped from 35% to 23% in Syracuse and 33% to 21% in Albany.
The Department of Energy has reported US Gulf Coast kerosene type jet fuel climbed from $1.18 to $1.84 from August 2004 to August 2005. That’s a 56% increase in one year and does not even shown the dramatic increases for September. In total, U.S. passenger and cargo airlines are projected to consume 19 billion gallons of jet fuel in worldwide operations in 2005. That means that for every penny increase in the price of a gallon of jet fuel drives an additional $190 million in annual fuel costs for U.S. airlines. If the price is a dollar more a year, then that’s a $19 billion. So if prices stayed at August’s price, the airlines are looking at a $12.5 billion increase in expenses. Jet fuel averaged $0.57 cents over the between 1985 and 2003, now it’s $1.85. As of September 7, the price of jet fuel was $2.08 per gallon or $87.51 per barrel, which is more than the approximately $65 for jet fuel. The price of jet fuel hit $100 a barrel during the second week of September because of Hurricane Katrina refinery closures. It averaged $25 a barrel from 1994 to 2004.
Schumer today took steps to examine ways to provide relief for airlines struggling with the high cost of jet fuel. First, Schumer wrote to the International Energy Agency (IEA), to ensure that ongoing releases of finished petroleum products from the strategic reserves of IEA member nations include enough jet fuel to avert supply disruptions. The increased refinery crunch caused by Hurricane Katrina temporarily eliminated 13% of daily domestic jet fuel production.
Second, Schumer called on the Federal Trade Commission (FTC) to extend its price gouging investigation the airline industry. Earlier this month, Schumer joined a bipartisan group of Senators urging the FTC to launch a top-to-bottom investigation to make sure that oil companies and gas station owners and the pipeline in between them are operating ethically and within the law. Schumer called for the immediate formation of a task force to promptly identify the many cases of price gouging being reported across the country, and asked that the task force formulate a process by which price gougers are swiftly prosecuted. Today’s Schumer is asking the FTC to use the same task force examining price gouging between the oil industry and consumers to investigate price gouging between the oil industry and the airlines.
Schumer’s study also analyzed Greater Binghamton Airport, Elmira Corning Regional Airport, and Ithaca Tompkins Regional Airport. Schumer’s report demonstrated that because USAirways is the major carrier for each of these regions, dozens of destinations – both domestic and international – will now be available from Binghamton, Elmira, and Ithaca since the USAirways-America West merger is finalized.
The merger of US Airways and America West, originally announced in May and approved by the bankruptcy court last week, was finalized yesterday, creating the nation’s fifth largest airline and bringing US Airways formally out of bankruptcy after more than a year. The newly merged airline will continue to operate under the US Airways name and will service more than 225 destinations worldwide, including Europe, the Caribbean, Mexico, Canada and eventually Hawaii. A full list of new and potential destinations is included in today’s report.
Schumer today wrote to Bruce Lakefield, President and CEO of US Airways, and Doug Parker, America West Chairman, President and CEO, urging them to make upstate New York air service a priority and to ensure service is expanded, not contracted as they formulate their new destination maps. Schumer touted recent passenger growth, airport improvements, and community needs as incentives to pay particular attention to these markets in New York’s Southern Tier.
Schumer today announced his is introducing bipartisan legislation to double funding for the EAS program. Right now, the Senate Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies spending bill includes $110 million for the program, more than doubling the President’s budget request of $50 million. Schumer’s proposal would bring total funding for the program up to $220 million. By providing more funding for EAS nationally, the Department of Transportation will be able to offer airlines more lucrative contracts to fly to EAS communities in New York, which would mean more service options in Western New York and the North Country.
In July, after an intense lobbying effort from Schumer, the Senate Appropriations Committee reversed the Administration’s proposed cuts to EAS. This prevented EAS funding cuts for Jamestown, Massena, Ogdensburg, Plattsburgh, Saranac Lake, and Watertown airports. Overall, the Administration proposed cutting EAS funding by $52 million, from $102 million in 2005 to $50 million in 2006. Communities would have lost funding based on how far away they were located from a major airport.
Since 1999, New York airports have received more than $9,826,147 in federal funds through this program, allocated directly to the airlines that serve the Jamestown, Massena, Ogdensburg, Watertown, Plattsburgh, Saranac Lake, and Utica communities. EAS ensures residents and businesses in these communities have air travel options by providing funding to airlines and airports to keep their flights running With five EAS communities, New York ranks fifth in number of EAS communities among all states. EAS enabled Colgan Air to service Chautauqua County Airport providing affordable airfare from Jamestown to Pittsburgh.
Schumer is sending his report to the management of all of the legacy carriers and low-cost airlines in order to encourage them to expand service in upstate New York markets. In an effort to remind site-selectors of the benefits of moving businesses to upstate New York, Schumer is also sending them today’s report, drawing their attention to the decline in fares and the potential for economic growth in each region.
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