Airlines Face Stricter Safety Rules, Bad Publicity, and Cut in Profits
THE crash of two American Eagle commuter planes within the past six weeks has heightened safety concerns from Washington, D.C., to Main Street, USA.Skip to next paragraph
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The United States Department of Transportation this week stepped up the timetable for imposing stricter safety rules on commuter airplanes and, at the same time, ordered a safety audit of all the nation's airlines.
The move came the day after an American Eagle commuter plane, owned and operated by American Airlines, crashed near North Carolina's Raleigh-Durham International Airport, killing 15 of the 20 people aboard. On Oct. 31, a larger American Eagle commuter plane crashed in Indiana, with 68 fatalities.
The publicity surrounding these accidents will have an economic effect on the airline industry, financial analysts believe.
Kevin Murphy, an airline analyst with Morgan Stanley & Co. in New York, estimates the greatest economic impact will be a reduction in the number of passengers flying commuter airlines. All totaled, he estimates, it could cost the industry from $50 million to $100 million in lost revenue.
That will eat into the profits of a commuter industry that, just like larger carriers, has been forced into several years of consolidation because of a continuing financial squeeze. Of the 130 commuter airlines currently operating in the United States, 47 have developed some kind of relationship with larger carriers. The relationship extends from outright ownership, as in American Airlines' ownership of American Eagle, to a marketing pact in which the commuter coordinates flight schedules so it can feed the larger carrier.
These relationships make it very difficult to determine the profitability of these commuter airlines. ``Some are profitable, some are not,'' says one Wall Street analyst who requested anonymity. American Eagle, he notes, is not very profitable. ``Some commuters are making money only because they are getting a bigger split than they are entitled to,'' he says.
It is too early to tell whether larger carriers will make dramatic adjustments in their commuter relationships because of public concern and the higher costs that the new federal safety regulations will impose. The new rules would essentially bring commuter planes with 30 and fewer passengers in line with the rules covering larger carriers.
These new rules are expected to include more training and fewer flying hours for commuter pilots, as well as a requirement that a young pilot be teamed with a more senior flyer in the cockpit. Transportation Secretary Federico Pena said Wednesday the new rules would be completed within 100 days, but gave no deadline when they would actually take effect.
Any public perception that commuter planes are dangerous is overblown, say many safety experts. ``The commuters are a very safe industry,'' says Bob Vandel, director of technical projects for the Flight Safety Foundation, an industry-funded nonprofit safety group based in Washington.
The number of accidents per departure is about five per 1 million, which is higher than the larger carriers' record of 2 per 1 million departures, but still very safe, he says. The number of accidents per departure has been on a generally declining path in recent years, even for the smallest planes that carry fewer than 30 passengers.
NEVERTHELESS, this year may turn out to be an exception, with more fatalities - 88 - since has seen the highest number of fatalities from commuter airlines than any year since at least 1982. Three-quarters of those came from the single American Eagle accident in October.
Ironically, that plane was already covered by the stricter Federal Aviation Administration regulations for larger carriers. Last May, the Regional Airline Association, which represents most commuter airline carriers, voted to have a single set of regulations covering both the 30 passenger and under category and larger planes.
Historically, regulators made a distinction between smaller and larger aircraft because the smaller planes were considered simpler. Yet, Mr. Vandel points out, commuter pilots have to make far more departures and landings than their jet-plane colleagues and also operate in airports that do not have the most up-to-date technology.