Airline crisis could kill Ivanpah airport

Maybe that airport in Ivanpah is not such a must-have after all

June 27, 2008 - Recently, speculation has been that McCarran International Airport will exceed capacity years before the overflow airport at Ivanpah is built.

The recent surge in fuel costs, coupled with an economic downturn, have many airlines focused on more immediate concerns - such as how to stay in business.

As a result, panelists at this week's Nevada Tourism Alliance's "air crisis briefing" suggested a restructuring in the airline industry could skew those projected traffic increases at McCarran and maybe even scuttle plans for the overflow airport.

The group, which included Maurice Gallagher, president and chief executive of Allegiant Airlines, and Scott Kirby, president of US Airways, agreed that drastic changes, including a reduction in the number of seats available, are necessary if the industry is to return to profitability.

Fewer seats means fewer flights, which potentially means fewer visitors to Las Vegas.

On the other hand, Las Vegas is in the midst of a growth spurt that should add about 32,000 hotel rooms in the next five years.

There has always been a direct correlation between added hotel rooms and increased airport traffic, so Las Vegas could be less affected by restructuring than some other cities.

Besides, if all of those new hotel rooms don't fill on a regular basis, the local tourism-based economy is going to have bigger problems than whether a new airport is needed.

An overflow airport has seemed to be a sure thing for a long time and any shift in that thinking, however slight, suggests a potentially major crisis in the airline industry may be looming.

Clark County Aviation Director Randy Walker, a panelist, acknowledged the county will have a tough decision to make, probably by 2011, about whether to go forward with the Ivanpah airport.

"I've said all along that we will only build it if the demand is there," Walker said.

He has also, for the past few years, been telling anyone who would listen that the demand will be there very soon.

Walker is the chairman of the Airports Council International-North America and one of the most respected voices in the industry. His stance on the issue demonstrates, as much as anything, the uncertain future of the airline industry.

Other participants included former Nevada Gov. Bob Miller, a Nevada Tourism Alliance co-chairman who hosted the event; Terry Jicinsky, Las Vegas Convention and Visitors Authority senior vice president of marketing; and Jeremy Aguero, principal of research firm Applied Analysis, who moderated the discussion.

The airline industry has been struggling for several years, with many major carriers restructuring under Chapter 11 bankruptcy protection to keep flying. The recent surge in fuel costs, however, has turned a difficult situation into a potential industrywide crisis with no immediate solution.

"The impact of oil prices today is worse on the industry than the impact of 9/11 was," Kirby said. "One thing is different about this cycle is that (before Sept. 11, 2001) airlines had better balance sheets, so they were more prepared to weather the storm. We had a massive government response to help airlines through what was a crisis at that time."

This time around, Kirby said, airlines don't have the amount of cash on hand that they did before and the crisis has come on so fast that there has not been time to react.

Last year, the airline industry earned about $2 billion, according to Kirby. This year, fuel prices alone are up $18 billion in a year-to-year comparison, which amounts to a $16 billion hole that needs to be filled.

"Absent things changing, (that's something) we simply can't do, which gets to the point about transition," Kirby said. "This is an industry that's changing. It's going to be painful and it's going to involve a lot fewer seats flying around. There's simply too many seats to be able to charge customers what it costs to fly the airplanes today with fuel at the levels that it is."