The Brookings institute has just come out with a new report about air travel trends in the US. Key findings show – no surprise – that the economic recession has had a big effect on air travel. Here are the main points: 

• Air passenger travel in the United States experienced its first annualized drop in September 2008 since the tragedy of September 11, 2001, and the decline has continued through March 2009. Strong economic growth helped American airports increase their passenger and flight levels by over 60 percent from 1990 to 2008, tripling population growth. However, residents are traveling less since the current economic downturn, producing sustained reductions in passengers and flights since September 2008 and June 2008, respectively.
• Nearly 99 percent of all U.S. air passengers arrive or depart from one of the 100 largest metropolitan areas, with the vast majority of travel concentrated in 26 metropolitan hubs. Between April 2008 and March 2009, 26 metropolitan areas captured nearly three-quarters of all domestic travelers, while 20 of these metros landed 94 percent of all international passengers. These extreme shares make these metropolitan hubs the critical links in the nation’s aviation system and reinforce their role as major centers of tourism and commerce.
• Half of the country’s flights are routes of less than 500 miles, and the busiest corridors travel between the metropolitan hubs. Corridors of no more than 500 miles constituted half of all flights and carried 30 percent of all passengers in the most recent twelve month period starting April 2008. In fact, the metro Los Angeles/San Francisco corridor, stretching 347 miles, is the second busiest corridor in the country. Meanwhile, the most popular corridors operated between the 26 metropolitan hubs.
• The 26 metropolitan hubs and other large metropolitan areas host a concentration of national delays—and the situation is worsening over time. The concentration within the 100 largest metropolitan areas was especially troubling with congestion-related delays as well as those lasting over two hours. Within the 26 domestic hubs, six experienced worse-than-average delays for both arrivals and departures: New York, Chicago, Philadelphia, Miami, Atlanta, and San Francisco.

So basically, people are flying less often on shorter distances, and almost all of them (99% !) utilize only 26 major airports making delays worse and the flight experience more frustrating.

This is all a direct result of air-carrier route-cutting.

However, beyond congestion, the story here is that it has also left thousands of communities in limbo. This new air-travel model is here to stay for a while – at least until a meaningful recovery, with less-volatile fuel prices is to be found.

One of the missions of FlyMiwok is to build a network of FAA-certified operators who can help you avoid the massive congestion (in the air or on the ground) that only gets exacerbated in the current situation.

Also – through our operators – we are here to serve communities that have lost air service or whose service has gone to just 1 or 2 flights per day.

De-congesting metropolitan areas and re-connecting the rest – just one of the many advantages of on-demand air travel.

Gad Barnea – CEO – FlyMiwok, Inc.

As a follow up to its parroting of airline anti-GA talking points, USA Today posted an article 4 days ago sensationally named “low-priority projects get stimulus funds”. The article starts with: 

About $270 million in federal stimulus money awarded by the Federal Aviation Administration has gone to more than 90 airport projects that received low-priority ratings by the FAA, according to data by Subsidyscope, an initiative of The Pew Charitable Trusts.

So just who is Subsidyscope – the entity behind this research?

According to its website, Subsidyscope is supposed to “raise public awareness about the role of federal subsidies in the economy” – sounds innocent enough.

According to the research, they have compiled a database that they describe as:

Derived in part from a Freedom of Information Act request, the database includes information on enplanements—the number of paying passengers who board scheduled airlines or charter planes—to give users a sense of the level of commercial activity at a particular airport. To provide a more complete picture, it also includes data on operations—takeoffs and landings of air carrier, air taxi, general aviation and military aircraft—when such numbers are available

The bias starts to show in the next paragraph:

The AIP, a $3.5 billion program in FY 2008, funds work that enhances safety, protects the environment or otherwise improves the nation’s aviation system. AIP grants support runway construction, taxiway rehabilitation and many other types of projects. By design, the program results in cross-subsidies. For instance, many projects at non-commercial airports are partially financed using tax revenue from commercial passenger tickets.

OK – so the cards are shown early in the text. It goes downhill from there..

Just so you can follow the data distortions with me, here is the actual data from the FAA.

And here’s what Subsidyscope had to say:

FAA data for fiscal year 2005, the most recent year available, show that U.S. passenger airlines accounted for 64 percent of the tax revenue that went into the Airport and Airway Trust Fund, compared with 3 percent for general aviation. Large and medium hubs, on the other hand, received only 33 percent of AIP funding in fiscal year 2007. Small commercial and general aviation airports received 64 percent. In a statement to Subsidyscope, the FAA said that general aviation "accounts for more than 90 percent of the roughly 240,000 civil aircraft registered in the United States. The general aviation airports included in the FAA’s National Plan of Integrated Airport Systems provide the closest source of air transportation for about 19 percent of the population and are particularly important to rural areas."

First, a minor detail, the document came out in 2005 for fiscal year 2004 – not fiscal year 2005.

Second, that 64% number sounds like a whole lot, but you can see for yourself that only half of the 64% came from passenger tax which was Subsidyscope’s main point.

Third, GA – as classified by the FAA in its report – accounted for 5%, not 3% of AATF tax revenues.

Fourth, what does the number of civil aircraft registered in the US have to do with anything? We’re talking about flight operations, not aircraft registrations.

However, an even more glaring omission on the part of the Subsidyscope is the lack of understanding of how GA is taxed. GA is mostly taxed at the pump through fuel tax. When you look at that figure GA paid $158 million in 2004 compared to $377 million for the totality of commercial airlines. However, in 2004 airlines consumed over 13.5 billion gallons of fuel compared to just over 1.5 billion gallons consumed by GA (total: avGas+Jet A). So on average commercial airlines paid $0.028 tax per gallon compared to $0.105 paid by GA.

GA paid about 4 times as much taxes per gallon as airlines did!

Another severe distortion of fact – when looking at the usefulness of airports across the country is to just look at the FAA report’s classification of GA without looking at other operations such as freight operations, which often use secondary and tertiary airports – especially in remote locations, and do not get into the “paying passenger” calculation. Together with freight, tax revenues from non commercial passenger-carriers comes to over 10% of total.

Now, back to the headline, and the stimulus. Subsidyscope says:

Within the past five years, the FAA funded 3,139 projects (out of a total of 18,771) with NPRs below 41, cited by the agency as the threshold for discretionary AIP grants (no threshold is set for formula-driven entitlement grants, although the FAA says it considers how an airport uses entitlement money in deciding whether to award discretionary funds). Of the nearly $2 billion obligated for these low-priority projects, 30 percent came in the form of discretionary funding, 65 percent in entitlement funding and 5 percent in stimulus funding.

So, only $100 million of the $2 billion came from stimulus.

In short, Subsidyscope’s “research” show a clear bias for anti-GA sensationalism and a lack of honest and thoughtful research enough to make one wonder where the subsidy for its “research” comes from… USA Today and other groups citing this "research” to make their points can only end up hurting their own credibility – or what’s left of it.

Gad Barnea –CEO –FlyMiwok, Inc.

New data from a recent and very serious study by Oxford Economics shows that an overwhelming majority of business executives believe that face-to-face meetings are more effective than video conferencing:

“Certainly, web meetings and teleconferencing offer opportunities for cost savings as technologies continue to advance. Yet 85% of corporate executives perceive web meetings and teleconferences to be less effective than in-person meetings with prospective customers while 63% believe virtual meetings to be less effective than in-person meetings with current customers.” [page 20 of the report]

Even for internal company meetings, the value of in-person meetings was still higher or equal to video-conferencing.

We have mentioned this study before – when data only started coming out, but the new information only serves to strengthen our conviction that business travel is critical.

Here are the main findings from the report:

•  For every dollar invested in business travel companies realize $12.50 in incremental revenue.
•  Curbing business travel can reduce a company’s profits for years. The average business in the U.S. would forfeit 17% of its profits in the first year of eliminating business travel. It would take more than three years for profits to recover.
•  Both executives and business travelers estimate that 28% of current business would be lost without in-person meetings
•  Both executives and business travelers estimate that roughly 40% of their prospective customers are converted to new customers with an in-person meeting compared to 16% without such a meeting.
•  More than half of business travelers stated that 5-20% of their company’s new customers were the result of trade show participation.
•  Executives stated that in order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5%.
•  An increase in government travel spending of $1 million will increase government worker productivity and therefore output by between $4.6 million and $6.2 million.

Hey, we do this at FlyMiwok too.. although we’re a lean, penny-pinching startup – we almost never use video conferencing, we believe in building relationships – and for that you have to travel.

Gad Barnea – CEO – FlyMiwok, Inc.

A new study by IHS Global Insight released yesterday showed in clear numbers, dollars an cents that businesses are potentially losing out on nearly $200 billion in 2009 in additional gross profits because they are not optimizing their investments in strategic business travel.

According to John Larson, Managing Director of Decision Analytics and Economic Impact Analysis at IHS Global Insight

“Face-to-face client meetings and trade shows remain the primary tools for increasing sales, yet many companies view business travel as an expense to be cut rather than the rewarding investment it is”

The study examines 10 years of data for 15 industry sectors covering the U.S. economy, analyzing industry-level data on business travel, business expenses, revenues and profitability in order to establish a link between business travel and corporate profits.

Among the study’s key findings:

Business Travel Contributes to Sales: A significant and measurable relationship exists between business travel expenditures and sales volumes.

Sizeable Returns on Investment: An average return on business travel investment of 15-to-1.

Returns on Investment Vary by Industry: Returns on investment vary across each of the 15 industry segments in the study.

$193 billion in Profits at Stake: Companies within most industry segments are not operating at optimal travel expenditure levels and collectively could realize $193 billion in additional profits.

Massive Stimulative Effect on the U.S. Economy: Increasing travel expenditures to optimal levels could create 5.1 million new jobs, generating more than $101 billion in tax revenue.

This study is remarkable because it is the first to actually quantify and put a real number on the ROI of optimizing strategic business travel. In fact, it actually encourages businesses to think about business travel strategically as an investment rather as an expense.

Gad Barnea – CEO – FlyMiwok, Inc.

Right now it powers your margaritas. Soon it might power the airplane you’re flying.

According to an article in “The Australian”, an international team of bio-energy scientists and entrepreneurs is looking to produce bio-fuels from blue-green Agave Tequiliana plants in Queensland’s Burdekin region and other dry-climate locations around the globe. After convincing the Mexican authorities that the Agave-growing operation will not result in an “Australian tequila” competitor, they finally got the permission to plant, last July, 2500 Agave in Burdekin soil.

According to Don Chambers of Ausagave.

"We had to convince the Mexican government that we wouldn’t be going in opposition by growing the plant for tequila. It’s their ‘noble plant’. It took us a long time to gain their trust."

Joe Holtum – one of the scientists behind the project explains the uniqueness of the Agave as:

"They take up CO2 in the dark, when it’s cool, and so they don’t lose much water by evaporation. But, of course, the metabolic battery doesn’t have enough power to convert all the CO2 to sugars, so what they do is store it as malic acid in their succulent cells.

"In the daytime, when it’s hot, they close the little holes in their leaves, the stomata, so they’re not losing much water, and they break down the malic acid inside the leaves. They do photosynthesis under very high CO2 concentrations, so it’s really efficient."

Here’s Don Chambers take on the project:

…now just add a splash of lime and serve your biofuel on the rocks!

Gad Barnea – CEO – FlyMiwok, Inc.

Inrix has just released a scorecard of the nation’s most congested metropolitan areas and unsurprisingly, LA was – again – ranked at the very top. LA’s congestion actually got worse by 4% since last year. In fact, in terms of travel time rankings, LA jumped from #2 last year to #1 to a Travel Time Index (TTI) of 1.34(*). For comparison, the national TTI average is 1.09.

The Hollywood Fwy SB/Vermont Ave took the cake with 80 congested hours/week at an average speed of 15 MPH.

The same is true for most other metropolitan areas as well – congestion is getting worse all over.

Inrix attributes the increase in congestion to lower fuel prices, signs of economic recovery and the initial rollouts of highway/infrastructure projects funded by the federal stimulus package. Congestion would be substantially worse if it weren’t for the high unemployment rate.

The company analyses speed data from GPS-equipped “probe vehicles” (taxis, airport shuttles, service delivery vans and trucks as well as consumer vehicles) on freeways and other controlled-access routes.

(*) TTI: The ratio of actual to uncongested travel time. A TTI of 1.34 means 34% additional trip time due to congestion.

British consultancy Oxford Economics is currently conducting a study to demonstrate the ROI of business travel. This study will be published on Sept. 15th and will:

[..] underscore that a dollar spent on business travel has a clear and direct return on investment for the company

The study was announced by Roger Dow – president and CEO of “U.S. Travel” – a Washington, D.C., advocacy group in Atlanta in late July.

The group has also launched a campaign called “Meetings mean Business” which spotlights the advantages of business travel and demonstrates the overall effects business travel has on the overall economy.

Some interesting stats from a survey of key executives at companies with more than $50 million in annual sales:

This is in line with what we wrote on this blog last month – based on a study by the Harvard Business Review that face-to-face is still undoubtedly the most valued form of communications for business.

After all if all your competitors look and behave like a video screen – traveling and meeting the client in person will give you an edge unlike any other.

Gad Barnea – CEO – FlyMiwok, Inc.

Algae could be powering the aircraft you’re flying pretty soon. There are currently over 50 companies focusing hundreds of millions of dollar on research (and presumably deodorant) harvesting the power in algae.

An CNN article recently discussed how a company called Synthetic Genomics is pursuing an approach called ‘tweaked metabolic pathways’ in algae (others have done similar work with engineered E.Coli and other sources). The company has received investment from ExxonMobil of up to $600 million last month to collaborate on R&D – and investment which, many believe, takes algae research to ‘prime time’.

As we’ve written here, algae was used in both JAL and Continental’s test flights earlier this year. Both times the tests were very successful.

There are still plenty of obstacles to overcome before biofuels – from algae or anything else – are a true alternative to the fuels currently running our aircraft engines – but the engine of innovation is definitely moving ahead full speed.

Gad Barnea – CEO – FlyMiwok, Inc.

We have discussed the decline in business travel several times here. According to the IHS Global Insight report, the sector is projected to decline by about 15% this year. But the full version of the same report also mentions that 2010 will see a slow and modest recovery in business travel – to the tune of 1.1 percent CAGR.  

Focusing on the US portion of the report, business travel represented 2.3% of total materials and service costs across all U.S. industries (including government) in 2008. That’s down from 3.18% a decade ago. Business travel as a share of profits was 5.18 percent last year, down from 7.14 percent 10 years earlier.

Beyond the economic considerations of the current recession, the decline comes from better efficiency in travel and better choices for the business traveler. The report concludes that business travel will look for more and more innovative solutions to make travel even more efficient, so our assumption is that whatever growth will be, it will be mostly focused on new travel alternatives that cater best to the needs of the business traveler.

Gad Barnea – CEO – FlyMiwok, Inc.

Three days ago, the ASTM approved a Synthetic Jet Fuel Standard in a major step forward towards allowing turbine-powered aircraft access to environmentally friendly, cleaner, less price-volatile (but possibly more expensive) fuel. We join the rest of the aviation community and applaud this very exciting development that could potentially have deep ramifications for aviation and ties to the work Pratt & Whitney and other do in the area.