Airheads: An FAA Agreement, Sort Of

U.S. President Obama signed on Friday a deal to end a two-week partial shutdown of the Federal Aviation Administration caused by lack of funding. Some 4,000 furloughed FAA workers can begin returning to work Monday. Another 70,000 laid off construction workers, who were working on airport expansions and upgrades before the money ran out, can filter back to their jobs.

So, all is well, right?

Well, no. This latest temporary extension of funding for the crucial agency - the 21st of its kind - lasts only till mid-September, after Congress returns to Washington, D.C. Then the whole comic opera can begin again.

There is still no resolution of the labor dispute over airline union-certification elections - one cause of the partial shutdown. There is no long-term settlement of the subsidies given to small-market communities, which media reports say run $163 million USD a year. Uncle Sam has lost two and a half times that amount - about $400
million - in lost air fare tax revenue when the taxes could not be collected during the partial shutdown. Some savings.

Now, the Internal Revenue Service says there will be no IRS refunds to consumers who paid higher fares when airlines decided to raise fares during the tax holiday. To be fair, loss-making airlines need to make money. Still, once again, the long-suffering little guy has been left at the gate.

When this dysfunctional Congress, rent by partisan divides - some calculated and carried out with extreme recklessness by Republican freshmen in the House of Representatives - gets back to work in September, the political gridlock will leave the FAA scuffle looking like a day at the beach. It would be nice to think it gets better, but it's hard to see how.

Bright Intervals

If you've traveled in Britain you may have checked out forecasts for always-variable British weather. You know, the ones that call for "bright intervals of sunshine'' - forecasters' lingo for saying they don't quite know what to expect but figure some of it is bound to be be good.

I was reminded of this delightul expression by the travel-biz forecast at the recent San Francisco Convention and Visitor Bureau's Outlook conference, an annual event put on for and by industry-figures. The SFCVB and invited presenters crunch numbers globally, nationally, regionally and locally, to get a fix on what the year ahead will bring in travel and tourism.

Why should you care? Well, looking closely at the world of travel from one of the world's most popular urban destinations gives hints of prices to come in air travel, cruise ship packages, and hotels and resorts, as well as previews conditions travelers can expect to encounter when it comes to new rules and regulations, security matters, and other issues.

How popular is San Francisco? One pretty good indication: The California city has been voted most popular U.S. city in Conde Nast Traveler magazine's readers' survey 17 years in a row. Tourism is the city by the bay's largest source of revenue, and its travel business generates 70,000 jobs. Even in San Francisco, however, 2009 was a terrible year: the $7.8 billion USD spent by visitors fell 8.2 percent from 2008, not an especially strong year. The 15.4 million visitors dropped 6 percent from 2008. That's down 9 percent from the peak year 2000.

The hotel analysts, aviation-watchers, airport executives and travel-biz consultants who spoke at the 5-hour Outlook conference came to a rough consensus: 2010 will be better than 2009, but the recovery will continue to be gradual, even sluggish, especially for hotels. Airlines and airports will be more crowded than last year and thus their revenue should rise. But the global economic travails that began with the Wall Street meltdown in September 2008 have resulted in what American Express executive James Keen called "a new cost-conscious culture.'' For perhaps the next 25 years, pennny-pinching will be "the new normal,'' Keen said.

Of course, what is bad for travel providers can be good for travelers, chiefly in the form of lower prices. Mid-range U.S. hotels will drop their room rates from 1 to 3 percent this year, according to Keen. High-end hotels will slash their rates even more - 2 to 4 percent - to lure guests.

Good news for road warriors, right? Yes, kind of. We all like to save money. Then, too, hotels need to make money in order to stay in business. The owners of the hard-hit Four Seasons Hotel in San Francisco nearly defaulted recently, thanks to the grim business climate, and that's a good hotel. There is always a trade-off between buyer and seller, supply and demand; tip too far for too long in either direction, and the resulting imbalance spells trouble.

Spurred in part by relatively low fares, air travel has begun to recover, with surging passenger demand felt most strongly right now in the Asia-Pacific region and the Middle East, according to the Geneva-based airline trade organization the International Air Transport Association. In line with that, air fares are expected to keep rising this year. For example, Keen expects international, long-haul fares to rise 1 to 6 percent, while international economy-class fares should nudge up 1 to 3 percent.

Of course, travel, for leisure or business, won't strongly recover until world economic conditions get a whole lot more robust. New crises, like the debt and deficit squeeze in Greece, don't help.

But one economist at the Outlook conference was bullish. Tapan Munroe, former chief economist for the big California utility Pacific Gas & Electric Co., said he expects real growth in U.S. gross domestic product to rise 2.8 percent in 2010 - meaning the world's largest national economy could help lead a recovery from the Great Recession. He puts part of this down to U.S. innovation and entrepreneurship: "Silicon Valley is still the dominant innovation economy in the world,'' Munroe asserted.

So, what we have here is a good news, bad news situation. In short: bright intervals.