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Travel Questions For a Second Term
Charles Leocha · November 8, 2004

How will a second Bush administration affect the travel industry?

We have just finished with a fascinating presidential election. The focus was on terrorism, the war in Iraq and the economy. Virtually nothing was said about the travel industry. Surely, it will be affected by another George W. Bush term.

The effect of Bush II on the travel industry has nothing to do with red and blue states. It has nothing to do with moral values.

However, the question of conservative versus liberal comes into play - government intervention versus "let the industry struggle" is a factor. Privacy concerns come into consideration. And costs certainly will come under scrutiny.

What can we expect? It's hard to say. But there are important factors that will play out across the industry - airline financials, Amtrak subsidies, homeland security rules, TSA privatization, air marshal rules, fuel costs and pension reform.

These are my ruminations based on voracious reading of blogs, newspapers and magazines and attendance at conferences. I don't claim to have any prescient insight. Look at this commentary as a place to start thinking about what the future will bring.

How will Bush II affect the airlines? This is a difficult question. The administration offered the airlines $10 billion in loan guarantees and $5 billion in emergency funding. But much of the loan guarantee monies were never passed through to the airlines. The stabilization board proved to be a tough lender.

This tightfisted approach was demanded since it was deemed difficult to support one private company at the expense of another. Plus, these were loans. Hence, the airlines that benefited from the $10 billion pool can be counted on one hand.

Bush II is not expected to change this at all. Airlines will be accountable for their own survival.

How will Bush II affect airline pensions? Here is a question that will rapidly come to the forefront. Once one of the large major airlines reneges on its pension obligations, it will be Katy bar the door for a group rush towards the Pension Guarantee Corporation.

Such a massive failure of pension programs will require massive funding of the Federal pension safety net. The maneuvering of the administration can already be seen as it has worked through Congress to ease the industry's pension burden. Initiatives have already been introduced that allow businesses to pay less into their workers' retirement plans. Plus, a special bill was passed that gives the airlines a two-year reprieve that let them only pay 20 percent of what they are currently required to contribute.

Bush II wants to ensure that bloated pension programs are not foisted onto the government's back. They will do all possible to allow the airline industry to grow their way out of this crisis.

What happens to the price of oil? This is one of the million dollar questions. I'm not betting on the administration dipping into the Strategic Petroleum Reserve. That won't be a route to lower prices. Even if the war in Iraq goes well, there are other problems besides the crimp on oil supplies. The rise of the middle class in India and China has created rapidly rising demand for oil across the world. The USA will face increasing competition for a dwindling supply of oil. I don't see oil prices dropping much below $45 a barrel for the foreseeable future.

That said, prices for air travel are going to increase. Right now hedging has allowed some airlines to continue to fly with fuel costs that are stabilized at artificial levels. Once these hedges expire, those airlines that had the capital to take advantage of hedging will be forced to raise their airfares.

How will TSA change? A new passenger-screening program will be introduced. However, there must be some kind of review system set up so that those travelers who find themselves on a "no fly" list or another list for additional screening can have a chance to defend themselves. There has to be a system to clear your name, otherwise the screening programs will fail with the public.

What about the inspectors who rifle through your bags and x-ray your carry-ons? They should and will be re-privatized. The costs to the government of the present system, both immediate and long-range, are staggering. As machinery and technology improve, the manpower costs will decrease and I believe we will see more private screeners now that it has been determined that screeners whether private or federal produce similar results.

What happens to Amtrak? I think Bush II will move to cut Amtrak's budget. That's a shame. In my humble opinion, such a cut is shortsighted. Finding a way to improve mass transit especially through the urban corridors should be a federal goal.

When the government pours funds into the Interstate Highway system and the air traffic systems, but ignore the railroads, the country suffers.

Better train service will mean far less spent on gasoline, less time lost in traffic jams (been on the New Jersey Turnpike lately?), less stress, less pollution, lower costs for road repairs and construction and fewer aircraft needed in the sky.

A functional rail system through the heavily populated regions of the country will improve property values and improve the quality of life for everyone, whether living in the city or in supported suburbs. Just like our national investment in the Interstate System, money invested modernizing our rails is money that will deliver far more than shortsighted politicians can conceive.

One of the marvels of Europe is their fantastic rail network. The Swiss and German systems have always been excellent. France has stayed at the forefront of speed. Italy and Spain have come from the dark ages in rail travel to the future in less than two decades.

When a viable rail system links Boston, New York, Philadelphia, Baltimore, DC and Richmond, life will change dramatically for those in that region.

Time will tell.

Politics is a funny game. When it played with major industries, it either promotes change - or inhibits it. Hopefully, Bush II will see more positive than negative movements.

Charles Leocha is a commentator based in Boston.