FAA forecasts early end to airlines' hard times

February 23, 1991|By New York Times News Service

WASHINGTON -- The Federal Aviation Administration predicted yesterday that the airline industry will recover quickly from its costly recession as fuel prices stabilize once the war ends in the Middle East.

But James B. Busey, the agency's head, said the weakest airlines might face linering difficulties.

"Until we are totally out of the woods -- until the recession is over, until the price and availability of oil clearly stabilize, and until airlines bring under control their debt and high labor costs -- tough times may continue for portions of our industry," he said in a speech to a conference where the agency's long-term aviation forecast was presented.

Mr. Busey said, however, that the government would not agree to recent requests by some industry officials for government financial assistance. The only steps the agency would take, he said, would be to seek cost savings through more efficient air traffic control, which can cut fuel consumption.

The leading domestic airlines lost about $2 billion last year. Three of them are in bankruptcy.

In general, the agency's detailed forecasts for the industry were optimistic.

"It is very difficult to predict future air traffic with all the uncertainties about the national economy and world events," said William E. Jackman, a spokesman for the Air Transport Association, which represents the major domestic airlines. "But we sure hope they are right," he said when asked to comment on the FAA forecast.

In a separate forecast scheduled to be issued Monday, the Boeing Co., the world's biggest producer of passenger jets, reached much the same conclusion: Fuel prices will decline and then stabilize, the economy will recover and air travel will rebound quickly after the end of the war.

Over the next 15 years, Boeing projected a 5.2 percent annual rate of growth in air travel worldwide -- enough to double the total passenger-miles, which would reach 89 billion by 2005.

Boeing said the world demand for new jets would be nearly 9,000 planes over 15 years, worth $617 billion in 1991 dollars.

The FAA forecast, which assumes the recession will last only six months and might well have already ended, did not include projections of industry profitability. It predicts only the growth in passenger traffic.

"In summary, we think the worst is probably over, even as I speak," said John M. Rodgers, director of the agency's office of policy and plans, who presented the annual forecast.

The forecast called for a decline in passenger flying miles of 1 percent this year because of the lingering recession, higher ticket prices and fears of terrorism.

Next year, however, traffic is expected to rise 4 percent, and the increase is expected to average 5 percent a year for the next 10 years. (For the last 12 years traffic went up 8 percent annually.)

The key factor in the forecast is jet fuel prices, one of the biggest costs paid by airlines. Jet fuel has dropped from a November peak of $1.40 a gallon to 70 cents. In July, before the invasion of Kuwait, it was about 55 cents.

Fuel prices "should moderate even more in the second half of 1991 and decline further in 1992," Mr. Rodgers said.

"For the balance of the forecast period, we expect plentiful and affordable fuel," he said.

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