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How the CARES Act airport grant program could affect your travel

How the CARES Act airport grant program could affect your travel
Posted at 1:00 PM, Apr 19, 2020
and last updated 2020-04-20 19:53:29-04

Less people are traveling, and for good reason. According to the Transportation Security Administration (TSA), 106,385 people passed through TSA checkpoints in U.S. airports on April 17th, and 95,085 people passed through checkpoints on April 16th. On those same dates in 2019, those numbers were 2,457,133 (April 17) and 2,616,158 (April 16).

With travel numbers down around the country and the world, some airlines are adjusting their prices in an attempt to fill planes.

When airlines can’t fill planes, they start to offer fewer trips from place to place, which leads to less overall revenue for the airlines, which hurts the airports, which goes back to the consumer, and so on and so forth.

As Great Falls International Airport Director John Faulkner explained, everything is connected in the world of air travel.

“The biggest impact for most airports is the loss of the passenger revenues, which are the day-to-day revenues from parking and food sales and all the things that the passengers do; rental cars and those types of things,” said Faulkner. “For most airports, that’s your primary revenue source. In addition, you’ve got fewer flights, so the airlines aren’t paying as much in rent, and so these dollars will really help us restructure some of our costs. We’re going to use them to do some restructuring on our long-term debt, and to help fill in for those lost revenues and stabilize our cost environment. The way most airports work is the airlines pay for everything that we can’t recover from passenger revenues or from rent and development. Obviously, as those activities have gone down, that increases the airline rate, so we really want to step forward and help our terminal tenants by stabilizing those costs and ensuring that we’re offering rates that are on the economic side of the industry.”

Earlier this week, the United States Department of Transportation announced that it would be awarding $10 billion to U.S. airports, including over $73 million to airports in Montana.

The exact amount of funding for each airport was decided based on the number of passengers that board aircraft there, the amount of debt the airport has, and the amount of money the airport has in reserve.

The press release from the U.S. DOT states that the funding will support continuing operations and replace revenue lost from the decline in passenger traffic and other airport business due to the Coronavirus pandemic.

Bigger airports like Hartsfield-Jackson International Airport in Atlanta received larger amounts, while many small airports received the minimum of $1,000. For those bigger airports, and even smaller ones that still received over one million dollars, like Great Falls International Airport, that money plays a clear role in replacing lost revenue from lack of passenger traffic.

For smaller airports like Choteau Airport ($20,000) and Glasgow Valley County Airport ($30,000), it’s not quite as clear where exactly that money will go. MTN reached out to several airports in Montana that received funding under $50,000, but our request for comment was not returned.

Now for the question of what does this mean for the consumer.

As previously mentioned, some airlines have resorted to lowering their ticket prices to try and fill more flights.

We won’t speculate on exactly how this grant money will affect the future of the travel industry and the market for plane tickets, but some experts have predicted that when the Coronavirus situation clears up, the demand for those tickets could skyrocket, and leave airlines scrambling to have enough planes and flights to satisfy that demand, which could be difficult with so many flights and planes currently not operating.

An economic model would predict that higher demand with lower supply could lead to those prices skyrocketing before things fall back to normal.

At any rate, this grant program is an attempt to stabilize the travel industry and the airport economy, and prevent ticket prices and the rates for other travel amenities from fluctuating too drastically during or after the Coronavirus pandemic.