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16 that report very high growth in one year often show the lowest while smaller airports experienced relatively larger variations growth in following years. in activity. In the second epoch, after 1997, the smallest air- Exhibit I-19 shows the same type of information regarding ports (the non-hubs) showed the highest coefficients of vari- changes in air service for non-hub airports. Here the variation ations, followed by the small and medium hub airports, in air service is very wide with some airports growing off a very respectively. small base by more than a factor in a single year. Some airports in this group also have lost air service entirely over the analy- 2.4 Changes in Development sis period. Again, the same airports are repeated as both show- Programs and Budgets ing maximum and minimum growth as carriers experiment at Specific Airports with new air services at non-hub airports. Exhibit I-20 makes clear that there have been really two Exhibit I-21 summarizes recent announced changes in cap- epochs in the last 20 years. In the first, comprising the period ital programs and budget reductions at airports of all sizes up to about 1997, the large hub airports reported the great- resulting from the current recession and recent fuel spike. A est variation in changes in air service as measured by the short perusal of the exhibit shows that airports of all sizes have coefficient of variation (defined as the standard deviation of been affected, sometimes dramatically so, by the economic a sample divided by its mean). In this first epoch, legacy car- environment. Even the very large hub airports like Atlanta, riers were completing the buildup of their connecting hubs Orlando, and Fort Lauderdale show substantial cuts in discre- and there was a substantial amount of consolidation within tionary programs and/or budgets. Changes in levels of air the industry. As a result, these large hub airports reported service generally are more dramatic at smaller airports and very substantial change in air service from year to year. Once seem to have larger impacts on capital programs and budgets. the large hubs were established, the variation in air service The dramatic changes in air service would be expected because from year to year became relatively stable at these airports smaller airports have less air service as measured both in the Exhibit I-19. Percentage change in seat offers at non-hub airports. 2,200 * 700 600 Percentage Change in Seat Offers 500 400 300 200 100 0 -100 -200 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 Year max min avg 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 max OXR EFD PIE LAF VGT BFI TTN BFI PDT MKL ORH UIN IFP LGB IPT APF RDD TTN ROW ALW min STC BED LAF BFI ALW LGB SCK BED SMX VGT VGT PIR STS SOP ORH EFD BED BFI HGR APF avg 5 12 5 2 -4 6 -2 -2 -1 5 1 -4 -12 -4 0 5 -5 6 -1 -11 airports that have been max and min

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17 Exhibit I-20. Variability among airports in change in seat offers within hub type. 70.0 Ratio Std Dev to Mean Change in 60.0 50.0 Seat Departures 40.0 30.0 20.0 10.0 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year large medium small non-hub Exhibit I-21. Airport capital development projects and operating budgets 20082009. FAA Hub Budget Change in Seat Offers Airport Project Action Category Change 2008 2009 -$225M; may Atlanta L Capital program Budget cut -1% -2% cut $50M more Additional runway lighting ($2.5M) Delayed Terminal renovation to increase energy efficiency Butte N Delayed -30% -7% -61% ($5-7M) Overall capital projects Budget cut L Terminal replacement ($2B) Halted -3% -7% Dulles Int'l Car rental center ($400M) Halted Ft. Lauderdale Int'l L Discretionary projects Delayed 1% -13% S Parking lot and exit road expansion ($2.2M) Canceled -1% -23% Green Bay Overall capital projects Budget cut -11.6% Kansas City M Overall capital projects Budget cut -6.3% -4% -15% Louisville Int'l S Some capital projects Delayed 1% -13% Capital improvement plan ($3.7B) Budget cut Runway reconstruction; new signage, baggage Delayed McCarran Int'l L -9.7% -1% -15% handling upgrade ($215M) Escalator expansion at baggage claim Canceled Missoula Int'l N Small capital projects not funded by AIP Delayed -3% -26% (Montana) M Overall capital projects Budget cut -5.5% -12% -24% Oakland Build third terminal, cargo and passenger airline Canceled tenant support centers, pavement rehabilitation ($1B) Orlando Int'l L Expansion including ticket lobby overhaul Delayed -1% -15% Pensacola S New gates and boarding bridges Delayed 0% -15% Reno-Tahoe S Capital projects Budget cut -6% -21% Richmond S Capital program Budget cut -4% -2% San Luis Obispo N Capital projects Delayed -4% -34% Overall capital projects Budget cut Sioux City N Terminal renovation ($1.8M) Delayed -5% 75% -34% Runway reconstruction ($12M) Delayed Toledo N Overall capital projects Budget cut -12.5% -11% -54% S Overall capital projects Budget cut -0.4% 6% -23% Tucson Gate expansion Canceled Sources: Trade and General Press Reports

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18 absolute number of seat offers and also in the diversity of Many airports evidence wide swings in annual service in service in city pairs. some years showing the highest level of growth followed by To summarize this chapter: years with the lowest performance in their hub group, as carriers seek to establish new services at these airports with The recent fuel spike really began in 2004 and reached varying levels of success. unprecedented levels relative to unit revenues in 2008. While changes in air service are likely to be affected by fuel The other large fuel spike in the analysis period was in 1991 spikes and recessions, there are many local factors that also and coincided with the Gulf War and a recession. affect changes in air services. There is a wide variation in air service, with recent history Airport capital development programs were adversely showing that the size of annual changes is inversely related affected by the severe recession and fuel spike. to airport size. Airlines appear to react to fuel spikes and recessions with a The discussion now turns to the development of models lag, as they are unable to adjust their fixed schedules and and software to assess the risk of fuel and economic uncer- fleets instantly. tainty in air service forecasting.