A gentle landing
With discussions in progress regarding the fate of our little airport on the hill, we feel it is appropriate to mention the unmentionable: Maybe it’s high time that we simply let it go.
We are now in the final half-year of the city’s contract with Massport to manage the facility, which expires in June. A $2.3 million budget offset by a relatively paltry amount of revenue translates into a significant operating deficit, of which Massport has been absorbing a declining amount. The city manager is already engaged in negotiations regarding the future of the agreement.
With discussions in progress regarding the fate of our little airport on the hill, we feel it is appropriate to mention the unmentionable: Maybe it’s high time that we simply let it go.
We are now in the final half-year of the city’s contract with Massport to manage the facility, which expires in June. A $2.3 million budget offset by a relatively paltry amount of revenue translates into a significant operating deficit, of which Massport has been absorbing a declining amount. The city manager is already engaged in negotiations regarding the future of the agreement.
Everyone is familiar with the story. We are blessed/saddled with a once-quaint little facility whose remoteness from anywhere outside the city limits handicaps its attractiveness to commercial carriers. While Massport can spin in principle the importance of maintaining a regional network of facilities in which Worcester can take its rightful place, that is of little comfort to a city due to shoulder the full deficit come June. Cocktail party conversations about a wind farm are provocative but fail to address the fact that there are still bonds to be paid off for past improvements there. It is destined to continue to be an airport — simply not a profitable one.
The latest of a series of studies — $400,000, this time — is apparently poised to contribute relatively little to what amounts to the same old conversation: Maybe there’s a little money in niche markets and this thing called “general aviation,” but there’s no ready cure-all to the commercial carrier dilemma. Our facility is destined to be only marginally attractive to airlines during the best of times; and the rest of the time it won’t be able to pull its own weight. This has simply been proven by the sheer, heroic and ongoing efforts to make a go of it.
What to do? The city had an analogous situation on its hands a decade ago when it dealt with the fates of City Hospital and the Belmont Home. Both facilities were venerable artifacts of an age when it made sense for municipalities to maintain such facilities for its citizens. Their sustainability was compromised by the rising costs and changing pictures of health and nursing care, yet arguments for their closure were compromised by issues that were essentially related to municipal pride: Shouldn’t a mature and vigorous city be able to provide such services?
The answer was a decreasingly gentle “no,” and eventually the city got itself out of the health care business. It’s easy enough to lament the skyrocketing cost of health care, but it does not follow that the city was obligated to foot the bill. Nobody, to our knowledge, has seriously regretted those decisions of a decade ago. We have all moved on.
We believe that it is time, once and for all, for the city to get out of the airport business. It’s too big a drag on the municipal budget. Since the airport is apparently important to Massport’s portfolio of facilities, and since Massport has the mass, expertise and connections to actually manage it, let’s strike the deal to put it into their hands. Certain safeguards have to be made regarding use of the 1,300 acres, of course, but it’s simply time to do it. A decade from now we’ll have no second thoughts. And, for what it’s worth, we’ll still have an airport. o
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http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/05/8399152/index.htm?postversion=2007012510
Branson's Virgin America gets grounded
Using a 1926 law, old-school U.S. airlines have halted the Virgin founder's bid to launch a domestic carrier. Here's how the British billionaire plans to win the dogfight. Fortune's Peter Elkind reports.
By Peter Elkind, Fortune editor-at-large
January 25 2007: 10:18 AM EST
(Fortune Magazine) -- With a business empire ranging from cola to cell phones to condoms, Richard Branson was once dismissed by the jolly old British business establishment as a brash, attention-grabbing American-style entrepreneur. Crikey, he even had a CEO reality show, just like Donald Trump.
But in his latest venture, Branson's problem is that he simply isn't American enough. His dream of launching Virgin America, a low-fare U.S. airline, has run into a xenophobic buzz saw - a 1926 federal law that bars foreigners from controlling domestic carriers - and a furious onslaught from the airline's would-be competitors.
Based in San Francisco, Virgin America has $177 million in financing, seasoned management, plans to fly coast to coast, and nine Airbus jets, to be equipped with comfy leather seats and personal video screens featuring live satellite TV, movies and games.
What it doesn't have is permission from the U.S. Department of Transportation to take off. In fact, on Dec. 27, the DOT "tentatively" rejected its application, finding that Virgin America, in which Branson holds only a minority stake, remains under the Brit's "actual control."
The Air Commerce Act of 1926 requires that all domestic airlines remain under the control of U.S. citizens. And 1938's Civil Aeronautics Act stipulates further that no more than 25 percent of the voting shares be in foreign hands.
The laws were conceived in the early days of commercial aviation, when the thought of foreign planes over U.S. skies was more troubling than ownership of Chrysler by a German automaker like Daimler is today.
Virgin argued that it met the standards, but the DOT ruling against it cited offshore partnerships helping finance Virgin, a restrictive contract for use of the Virgin brand, and Branson's role in launching the airline with the help of his own Virgin Group, which operates the international carrier Virgin Atlantic.
Virgin America responded on Jan. 17 with a restructured 233-page proposal aimed at making itself acceptably American: The company reduced foreign investment, loosened restrictions in its branding agreement and removed Branson's veto authority over key business decisions.
CEO Fred Reid, a former Delta Airlines president, even agreed to step down if the DOT concludes that his hiring by Branson represents a fatal taint. While this addresses the DOT's specific objections, it will probably take months for the agency to rule on whether it believes Branson continues to "control" the carrier.
That, of course, has all along been the claim of Virgin's opponents: a combination of the big "legacy" airlines, led by Continental (Charts), American and Delta (Charts), and a pair of pilots' unions.
Find this article at:
http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/05/8399152/index.htm?postversion=2007012510
Branson's Virgin America gets grounded
Using a 1926 law, old-school U.S. airlines have halted the Virgin founder's bid to launch a domestic carrier. Here's how the British billionaire plans to win the dogfight. Fortune's Peter Elkind reports.
By Peter Elkind, Fortune editor-at-large
January 25 2007: 10:18 AM EST
(Fortune Magazine) -- With a business empire ranging from cola to cell phones to condoms, Richard Branson was once dismissed by the jolly old British business establishment as a brash, attention-grabbing American-style entrepreneur. Crikey, he even had a CEO reality show, just like Donald Trump.
But in his latest venture, Branson's problem is that he simply isn't American enough. His dream of launching Virgin America, a low-fare U.S. airline, has run into a xenophobic buzz saw - a 1926 federal law that bars foreigners from controlling domestic carriers - and a furious onslaught from the airline's would-be competitors.
Based in San Francisco, Virgin America has $177 million in financing, seasoned management, plans to fly coast to coast, and nine Airbus jets, to be equipped with comfy leather seats and personal video screens featuring live satellite TV, movies and games.
What it doesn't have is permission from the U.S. Department of Transportation to take off. In fact, on Dec. 27, the DOT "tentatively" rejected its application, finding that Virgin America, in which Branson holds only a minority stake, remains under the Brit's "actual control."
The Air Commerce Act of 1926 requires that all domestic airlines remain under the control of U.S. citizens. And 1938's Civil Aeronautics Act stipulates further that no more than 25 percent of the voting shares be in foreign hands.
The laws were conceived in the early days of commercial aviation, when the thought of foreign planes over U.S. skies was more troubling than ownership of Chrysler by a German automaker like Daimler is today.
Virgin argued that it met the standards, but the DOT ruling against it cited offshore partnerships helping finance Virgin, a restrictive contract for use of the Virgin brand, and Branson's role in launching the airline with the help of his own Virgin Group, which operates the international carrier Virgin Atlantic.
Virgin America responded on Jan. 17 with a restructured 233-page proposal aimed at making itself acceptably American: The company reduced foreign investment, loosened restrictions in its branding agreement and removed Branson's veto authority over key business decisions.
CEO Fred Reid, a former Delta Airlines president, even agreed to step down if the DOT concludes that his hiring by Branson represents a fatal taint. While this addresses the DOT's specific objections, it will probably take months for the agency to rule on whether it believes Branson continues to "control" the carrier.
That, of course, has all along been the claim of Virgin's opponents: a combination of the big "legacy" airlines, led by Continental (Charts), American and Delta (Charts), and a pair of pilots' unions.
The airlines, which see Branson's well-manicured hand behind every move Virgin America makes, pulled out all the stops. In one filing, Continental even likened the financial structure supporting Virgin to the shady web of partnerships behind Enron.
The resistance is perhaps understandable: With fuel prices falling and the number of full flights rising, the industry is set to make a solid profit in 2007 after hemorrhaging money for years. The last thing it needs is another low-cost rival.
Reid says the big carriers are employing protectionist arguments to keep a potent new competitor on the ground. Promising lower fares, better service, and more than 1,000 new jobs, Virgin America has won widespread support in California, ranging from Governor Arnold Schwarzenegger to the San Francisco Giants.
"In the old school of airlines, we're everybody's nightmare," says Reid. "They want to kill a powerful new airline in its infancy. Maybe they need to pay attention to what their customers are saying about their level of service."
Continental spokesman David Messing responds that his airline is merely seeking to require Virgin to comply with existing laws lest it gain an unfair advantage by having unlimited access to foreign capital. "Putative low-fare carriers come and go," says Messing. "We compete with them quite well. There have been many of them that haven't had the same issue of foreign ownership and control, and the welcome mat is out."
In fact, Congress is the real bogeyman in blocking Virgin America's path. Arguing that it would increase the flow of capital to a troubled industry, the DOT has been trying for years to relax the industry's antiquated foreign-ownership rules, only to face a bipartisan political outcry warning that any change poses a threat to national security and U.S. jobs.
Complaining that bureaucrats were usurping congressional authority, lawmakers - in the time-honored way of Washington - threatened to cut department funding. Struck on the head with this two-by-four, the DOT officials late last year withdrew a proposal to allow more involvement by foreign investors whose countries signed "open skies" agreements giving American carriers better access to their own markets.
Nonetheless, with his revised proposal, Reid believes Virgin America's uphill battle for DOT approval is winnable. "I cannot conceive of a reason to deny this application," he says. Just in case, he's trying to turn up the heat with a populist outcry. The airline's Web page is collecting online petition signatures and offering coffee mugs, stickers and T-shirts bearing the slogan LET VA FLY. But for the time being, Virgin America remains locked in a bureaucratic holding pattern.
Harry Tembenis
Worcester,MA
On Jim Kramer's Mad Money last night Allegiant stock was featured as going nowhere but up.
BUY BUY BUY--BOO-YAH
It's nice to see that all a Worc editorialist has to do is read and then paraphrase this blog to print their weekly column.
It is good to see the publicity.
However, he did not his info re: the closing of City Hospital from this blog. City Hospital closed closer to 2 decades ago and not a a decade ago. It should have closed 3 decades ago but Levy had too many hacks friends on the payroll who didnt have their pension time in yet. The same Levy who proclaims on the air that he NEVER helped anyone get a City job.
I thought the editorial was pretty good, except the line "heroic" efforts???
As I mentioned before Congressman McGovern I believe single-handedly got ORH $455,000 from the DOT for Small Community Air Service. This was a straight grant to help ORH recruit and retain commercial air service. The monies were clearly mispent and in the words one of their own commissioners "it is difficult to tell how the monies were spent".
I would not call hiring consultants and waiting around for their reports to be "heroic". Especially considering the salaries paid, I would consider any efforts to be "part of their job", not "heroic".
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