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Aviation industry won’t feel an immediate impact if the U.S. falls off the fiscal cliff

Dec 27, 2012 12:14 am

Skift Take

It’ll be a long fall from the fiscal cliff as employees won’t know their fate amidst job cuts and furloughs until several months out as the FAA and other agencies take time to reorganize their budgets.

— Samantha Shankman

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American Airlines 767 pushing back from the gate in LAX Airport. Simon Clancy / Flickr.com


The U.S. aviation industry won’t face immediate disruptions if political leaders can’t reach a deal to avert automatic budget cuts due to start Jan. 2, a senior Transportation Department official told employees.

The Federal Aviation Administration and other agencies under the department would have the remainder of the fiscal year that ends Sept. 30 to adjust to budget decreases, John Porcari, DOT’s deputy secretary, said in an e-mail obtained by Bloomberg.

“This means that we will not be executing any immediate personnel actions, such as furloughs,” Porcari said.

The FAA would have to reduce its budget of $15.9 billion by $1.04 billion, or 6.5 percent, if lawmakers don’t come to terms on a tax and spending package, according to an Office of Management and Budget report.

The effect of the automatic budget cuts and tax increases known as the fiscal cliff — a phrase used by Federal Reserve Chairman Ben S. Bernanke in testimony to Congress in February — is a different situation from the partial FAA shutdown in 2011 after Congress failed to reauthorize funding for the agency, Porcari said. That action forced the FAA to halt payments for airport construction and furlough about 4,000 employees for 16 days.

Aviation groups have predicted that automatic budget cuts may force thousands of furloughs that could lead to flight delays and billions of dollars in economic losses.

Dire forecasts

“Cuts of this magnitude cannot be implemented without a significant impact in operations and capacity,” the National Air Traffic Controllers Association, the union representing about 15,000 controllers, said in a report earlier this month.

FAA Administrator Michael Huerta said in a speech Sept. 24 that the cuts, known as sequestration, would cause a “drastic” reduction in agency services.

The agency would be forced to reduce air-traffic staffing, slow technology upgrades and disrupt certification of new aircraft, Huerta said in a transcript of the speech.

“They would result in significantly less efficient and less convenient air travel service for the American traveling public,” he said.

Porcari didn’t rule out job cuts in his e-mail. “Should we have to operate under reduced funding levels for an extended period of time, we may have to consider furloughs or other actions in the future,” he said.

The agency hasn’t taken any of the steps required before beginning job cuts, Kori Blalock Keller, spokeswoman for the Professional Aviation Safety Specialists union, said in an e- mail. The union, representing FAA technicians, must be notified before furloughs, Keller said.

Cuts possible

A study funded by the Aerospace Industries Association, an Arlington, Virginia-based, trade association, predicted airline and cargo flight reductions of as much as 10 percent or cuts to air-traffic technology projects that could trigger flight delays for decades.

As many as 132,000 jobs could be lost across the U.S. and economic losses could reach $40 billion a year by 2021, according to the study.

Even a short period in which the FAA reduced air-traffic service would cause difficulties for airlines and cargo haulers and trigger ripple effects, Stephen Mullin, senior vice president at Econsult Corp., a Philadelphia economic research firm, said in an interview.

No guidance

“You could have some potentially tough disruptions for some segments,” he said of such a scenario. Mullin was the lead author of the aerospace industry group’s report.

Even without the most dire outcomes, the threat of cuts will take a toll, Louis Dupart, executive director of the FAA Managers Association, which represents 1,600 employees, said in an interview.

“We will manage with the resources given to us, but the current significant uncertainty will manifest itself in delayed personnel actions and contracting,” Dupart said.

So far, the FAA hasn’t given the industry a clear idea of where it would cut and what effect that would have, Debbie McElroy, an executive vice president with the Airports Council International-North America, a Washington-based trade group, said.

“It’s hard to make any assessment,” McElroy said in an interview.

“We understand that day-to-day operations won’t change dramatically on Jan. 2, but we remain concerned about the potential impact on airports and passengers,” she said.

Editors: Bernard Kohn and Mark Rohner. To contact the reporter on this story: Alan Levin in Washington at alevin24@bloomberg.net. To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net.

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