Nick Calio, the head of Airlines for America, talks operational readiness for the summer travel season, Air Traffic Control modernization, and why flying today is better value than ever.
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Rush Transcript
Karen Walker:
Hello everyone and thank you for joining us for Window Seat at Aviation Week Air Transport Podcast. I'm Air Transport World and Aviation Week Network, Air Transport Editor-in-Chief, Karen Walker. Welcome on board. This week I'm absolutely delighted to be joined by the president and CEO at Airlines for America or A4A, Nick Calio. Nick, a very warm welcome to Window Seat.
Nick Calio:
Thank you very much, Karen. Appreciate the opportunity to talk.
Karen Walker:
Now, A4A is a trade association based in Washington, DC and it represents and advocates for its passenger and cargo airline members on common areas of interest such as safety, customer service, and environmental responsibility. Under Nick's leadership, A4A rebranded and honed its focus on being an influential voice in helping to shape legislative and regulatory policies and priorities that improve air travel for everyone.
Nick, I think it's fair statement to say that you are a consensus builder and you believe in working collaboratively across airlines, labor unions, Congress, the administration in that advocacy for the industry. So I'm really looking forward to hearing from you now about some of the areas that are top of your focus list and how they're being addressed. And I'd like to start with talking about how things are looking in terms of demand for air travel as we go into the all important summer season. Are the US airlines looking forward to a busy schedule? And operationally, are they ready for that?
Nick Calio:
We are, Karen, looking at a very busy schedule. Demand is up and it keeps going up. We are trying to do everything we can to be ready. As you know, we've been hiring aggressively for almost two years now. Currently, our industry has more employees than it has had since 2000, and that's very necessary for a variety of reasons. We were able, through the payroll support program, to keep many of our employees on payroll and ready because in our industry, as you know, everybody needs to be certified and trained pretty much. And once they fall off, they need to be re-certified and retrained. We've been very aggressive about the hiring because post pandemic we found that we need more employees per flight to make sure that we have the flexibility in the system to get the flights off the ground.
A couple of different things are happening however, including a staffing shortage on the FAA side, on the air traffic control side. So what we've been doing is reducing the number of flights that we are flying. We've been trying to upscale those flights by providing larger aircraft so we can try to meet the demand. Inevitably, we will not be able to meet the full demand, but we're trying to make the schedules comply with what is going to be reality for the summer, which is shortage of controllers, and as we all know, summer weather. We always feel... People think you don't have to talk about it. The biggest reason that flights get canceled or delayed is the weather, and we won't fly if it's not safe.
Karen Walker:
Absolutely. So yes, of course we've seen some of the headlines about delays and cancellations. But as you say, as you point out, in many cases that's a result of situations outside of the airline's control. But a situation of operational reliability, if you like, and everybody wants that, everybody wants to know that they're going to arrive on time is a really cross industry issue, isn't it? It's about getting all the stakeholders involved, particularly as you say on the ATC side, the airport side, security. What's the conversation there that you're having?
Nick Calio:
We're talking and we always do. We talk with the FAA every day. We talk with the airports every day obviously with TSA and with customs and border control because we're all part of a piece and that's what has to be recognized. We're one big large cloth that's very tightly woven and if one part of that fabric tears, we face cancellations and delays that we shouldn't. So everybody needs to own up to their end of it. We try to do that when it's our fault. We have to realize we operate every day to make sure that nothing is delayed or canceled from our end that otherwise shouldn't be. There's no incentive for that. All we care about is having a good flight for our passengers and our cargo and getting things and people on time.
Karen Walker:
I would argue that the motivation for that after the pandemic is even higher among the airlines. Everybody on the airline side wanted to see travel come back. There was a lot of talk that a lot of people were skeptical, weren't they? They were cynical. They were saying, people particularly on the work side, they won't fly anymore, they'll work virtually. There was a lot of cynicism. So it must be fantastic from the airline industry side to see that demand has come back very strong, yes?
Nick Calio:
Yes, it is as fantastic as it is daunting. And it has come back including business travel, including international travel, particularly to Europe. What we're finding, again, another post pandemic changes. Because the workplace has changed during the pandemic, many people are combining business and leisure trips together, which means that the schedules have had to be adjusted to handle that. And certain peak days are no longer the peak days. People don't fly on Wednesday, come back on Friday after a business trip. They will often spend the weekend and maybe even Monday in another location on leisure and then fly back.
Karen Walker:
Yeah, again, a lot of adjustments that the airline have had to make. Now there also I understand a lot of people are booking later, booking their travel later. And that is another thing that the airlines are having to adjust to in terms of planning their schedules. So a lot to think about there.
Let's just dig a little deeper really on that sort of operational side and in particular on FAA. FAA of course is a huge part of this whole aviation system puzzle if you like. They're now at point again where they're looking to appoint an administrator. The current acting administrator, Billy Nolen, is stepping down. I think it's in September that their five-year funding will run out and yet they're under the, so again, lots of pressure to do more and more. Air traffic control modernization being one of the most important. What's your key points from an A4A perspective and your members about what needs to be happening at FAA?
Nick Calio:
FAA needs to continue its work, period, regardless of whether there's an administrator or not, but we do need leadership. Billy Nolen has done an admirable job as the acting administrator. We have a potentially difficult summer coming up. We have FAA reauthorization moving forward without a permanent administrator. Both the house and the Senate plan to get bills off of their respective chambers, or out of their respective chambers before the August recess. We have a number of priorities there.
There's a big focus in certain areas on consumer issues. We think that demand suggests that consumers are more or less satisfied or very satisfied if you look at the numbers. And they are important issues, but we work at those issues every day. We think there ought to be a focus at the FAA that's more on substantive issues like air traffic control, modernization of the airspace, inclusion of new entrants than on things like family seating, which I'm going to tell you, it's a great political issue to be really indiscreet, but it's not the most important thing in terms of the number of complaints and it's something that the airlines work at every day.
Meanwhile, we do have to handle the bookings. People are booking closer to the time of their trip. That can be very disruptive. And then you have to realize you might not get a seat, you might not be able to get your family seated together if you're booking a day before a flight because other people have booked ahead of time. So long story short, this is a big opportunity. In the past, FAA reauthorization bills have been extended, so we need the funding to be certain. There are all sorts of critical issues like funding the FAA appropriately, feeding the pipeline for air traffic controllers, and then looking at all these modernization issues that frankly have been around for a long time and have not made a lot of progress. And there needs to be accountability there.
Karen Walker:
Things like NextGen. For as long as I can remember, people have been talking about NextGen, "Yes, it's coming. It's going to do wonderful things." It's almost unbelievable really. I mean, yes, it's not that there's been no progress, but if you think what could have been achieved by now, and every year that it isn't done, they get further behind it seems to me because traffic is back into growth mode again. What are the key things that are still missing for the US to really say it has a truly modern ATC system?
Nick Calio:
A lot. First of all, we needed an appropriate number of air traffic controllers staffing the system. We have facilities that are out of date and outmoded all across the country. The infrastructure is breaking down. Someone who is very knowledgeable just recently said, "It probably is not going to get itself fixed until we face the crisis of increasing demand that can't be met and everything that comes with that in terms of how airlines drive and air travel and shipping drive economic value." So we've got to take a look at those. These are difficult issues to own up to. Paper strips being used to guide flights is the least of our worries. There's data communications, there's use of GPS. Some of these projects have taken so long that if they come to fruition to start to provide any benefits, they're really going to be outmoded already. We need somebody who's got to roll up their sleeves and take a crack at that. And that should be the job of the DOT and the new administrator.
So talking about these things is not that politically popular because they're very difficult to understand. I'll confess that on the technological side, I struggle to remember which is which and what's what, but I know that they're important. And again, with increasing demand coming in the future, we need to find ways to move our airspace. And we're not the only ones here. This happens in Europe as well. It happens in China and other places as well. But we've got to get on the stick here.
Karen Walker:
Let's just move on a little bit to the broader US regulatory environment. You've just touched on that. You mentioned about the family seating. There's this DOT proposal, if you like, the NPRM that's looking at different aspects such as the ancillary fees that pretty much every airline uses that model to some extent these days. It's a very important model. To my mind, me personally, it gives the customer a lot more choice. You can actually sort of say what I'm willing to pay for and what I'm not, which in the old system pre deregulation in 1978, you didn't have that choice and the fares were a lot higher. Where do things stand on that? And again, what's A4A message to the lawmakers?
Nick Calio:
The A4A message is pretty simple, don't muck up a good thing. Ted Kennedy, I always use his name because he was a friend of mine, a personal friend of mine, but everybody thinks he was this big liberal. He was responsible for deregulation. Deregulation has lowered fares. You include ancillary fees, everything else that's currently on the table and fares are substantially lower, remarkably lower than they were 10 years ago, five years ago, two years ago and certainly 40 years ago. It has democratized flying.
Karen, you've heard me say I grew up in Cleveland, Ohio. Nobody in my neighborhood ever got on an airplane. Why? Because we could not afford it. Now everybody thinks it's almost like a utility. Almost everybody can get on an airplane. Most people in this country, 90% of the people in this country have flown on an airplane. 50% have flown on an airplane before they're 16. That is a remarkable success story. What I always say in congressional hearings, facts matter. You can say that airfares are up or that we have to do this. Consumers have choices. They are making choices. They're voting with their feet and their wallets. So don't ruin it. There are things to focus on that really matter and could make flying better for consumers across the board, and so you need to be measured in what you do. Regulation for regulation's sake, searching for problems. It should be based on data and science and the benefits provided.
Karen Walker:
Absolutely, and-
Nick Calio:
I feel fairly passionate about that.
Karen Walker:
I could tell that. Again, interesting point that you've raised that. In some ways, I think one US airline CEO has described this as a sort of solution looking for a problem. But it's even bigger than that. What the message seems to be getting missed is that from a consumer perspective, from the traveler perspective, it's people poorer end if you like, the lower income increment that are going to be most hurt because they're the ones that are traveling now in big numbers that didn't do that before 1978.
Nick Calio:
They couldn't do that before. Again, we have democratized flying. And the people who will be affected most by regulations that end up raising prices, because that's what will happen and that's in the marketplace demand supply thing, it's going to be consumers at the lower end of the spectrum financially that will be the most affected. There was a recent article by a man named Ben Chavis about people of color will be disproportionately affected, and it's a fact of life. So if you want to talk about competition, which is as you know cutthroat in our industry, I watch my board members talk. They all like each other, but they all want each other's customers. They all want each other's packages. And that's how they operate every day to produce a product that will get them there. And again, it's a matter of, to use an English phrase, not mucking up a good thing.
Karen Walker:
Do you get any sense of that message getting through to DOT, to the administration? How optimistic are you that things like the ancillary fees issue, some common sense can come in there?
Nick Calio:
We are watching it carefully and we're hopeful. And that's where the phrase facts matter comes in when overall prices are down, including ancillary fees. And I guess I have to say this too, Karen, why is it okay for every other industry? I'm not damning any other industry, but you check into a hotel and you get a resort fee. You want one room, you pay for it. You want a different room, you pay a different price for it. You go to the baseball stadium, you pay a different price for different seats. You pay for what you want. It's not like hot dogs are free or the beer is free. And then you go to a theater, you pay different prices for different seats. You want to talk about seat size? Go to Broadway and then come and talk to me about how seat size matters. So again, this is just, what are we doing here? There are certain people... I'm going to stop there because it's a self-justification.
Karen Walker:
I'm 100% with you. My favorite bugbear is the hotel resort fee, but that's an ancillary fee, can't opt into it. They call it an optional fee, but it's not. It's a resort fee and usually for things that you can't actually use.
Nick Calio:
But everybody's paying for those who do, which is the same thing. You want to check bags? [inaudible 00:15:40]. There are many ways to get out of paying for a check bag. There's a lot of ways on the ancillary fees to get around them, but if you want your choice... You know how tall I am, I will pay extra for more legroom just like I will pay for a box seat at a Washington Nationals game.
Karen Walker:
So another big topic, just a big topic for the whole of the industry of course is sustainability. Being able to fly obviously safely but also responsibly these days. It's a big thing. It's become a big thing now in the US. Some of the US airlines have now become real leaders in that sustainability drive. Can you just tell me a little bit about what's A4A's role in the sustainability drive and what are the key things there that, again, if you look across the whole system, across all the stakeholders, what are the key things that are needed environmentally for this industry?
Nick Calio:
A4A's role as always is we are orchestrators and facilitators. I think that airlines have done a remarkable job over the last 30 years plus about lowering our environmental footprint. There is always more that needs to be done. A4A's members made a commitment to net-zero by 2050. Before we were asked to, we did it in March of 2021. There's a lot to be done though. It's a matter of sustainable aviation fuels, which is the thing that is most needed to create a bridge between now and 2050. We have now been working closely with the administration who has been pushing a very good agenda to try to help get sustainable aviation fuels. We've got to get Congress to do more, both we and the administration we're working on that.
Our members are investing in startups in consortia that are trying to increase the production. Because if there's no production there... Our government's taking a very good approach to it I have to say. They're going carrot instead of stick. Europe is going stick instead of carrot. It's great to have the stick, but there's no fuel available because nobody's making a market in it. And that's the key thing that has to be done. We have to make a market, we have to make it financially attractive for energy producers to make a market and sustainable aviation fuel. And then we have to look at airframes and engines, which the OEMs are all doing, because the lighter we fly, the more efficiently we fly, the less fuel we use and it's better for the customer, right?
So there's a lot of incentive, but this is a major long-term project. Pulling it all together is a difficult slog of a process, but it has to go on every day. The sense of urgency needs to truly be there such that people act every day to do it. You can go down A4A's members and look at what they've done over the last two years. They feel the sense of urgency. This is not idled chatter on their part. They want results.
Karen Walker:
Yes. It is interesting. I mean when look at... I think I've got these figures right. Because of the effect of the pandemic, US airlines, the collective debt was at about $150 billion last year, correct? And costs are generally higher, a lot higher, fuel's higher. You would think that in those circumstances airlines would be really watching what their investment, their output. Again, it looks like the US airlines will be investing all time highs this year, some $23 billion in sort of improvements and things. A lot of that money is going into sustainability initiatives. This doesn't come free, does it?
Nick Calio:
No, it doesn't. And you make a very good point because I think that US airlines are matured to the point where they realize even carrying that post pandemic debt... We made money 10 years in a row, reduced a lot of the debt, we're investing a lot in our product and in our people, and then the pandemic happened. I think there's a very realistic view on the part of US airlines that we can't not invest today because that will impact tomorrow. So you kind of just coin a phrase, have to suck it up and husband your resources very well so that you keep making investments while you keep reducing that debt, because having that debt impinges on your ability to keep investing.
Karen Walker:
Absolutely. Nick, thank you so much for your time today. Always good chatting with you. Here's just wishing everyone at A4A and across your member airlines a great summer of travel.
Nick Calio:
Thank you, Karen. It's always great to talk with you. And again, I appreciate the opportunity. Always available to you.
Karen Walker:
Thank you very much indeed. Thank you also to our producer Michael Johnson. And of course a big thank you to our listeners. Make sure you don't miss us each week by subscribing to the Window Seat Podcast on Apple Podcasts or wherever you listen. Until next week, this is Karen Walker disembarking from Window Seat.
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