The effect on aviation is minimal thus far, U.S. airports are likely to manage the federal government shutdown well with it being more of an inconvenience rather than disruptive to passenger travel, according to Fitch Ratings.
However, financial impacts may vary from airport to airport, particularly on the issue of maintaining sufficient funding for the airport improvement program (AIP), which is vital for planning and capital development of commercial airports.
The federal government shutdown has led to furloughs of more than one-third (45,000 employees) of the Federal Aviation Administration (FAA), though essential functions related to airline safety were not impacted. Therefore, air traffic control and other activities to allow flights to proceed have not been halted in any material way. On the other hand, Transportation Security Administration is facing worker shortages at airports throughout the country. This can make the efficiency of the passenger screening function much more challenging.
At this time, data on traffic activities are limited since the shutdown began. Many of the leading domestic carriers have reported their December monthly traffic and operational results. The following table indicates that December, which is not a peak travel month, has been largely positive for passenger levels when compared to the same period in 2017.
- American: not yet reported;
- Alaska: -0.6%;
- Delta: +6.1%;
- JetBlue: +3.1%;
- Southwest: +2.1%;
- United: +6.0%.
Potentially in the crosshairs of the partial federal government shutdown include airports serving the Washington DC region seeing as they could see the greatest level of demand changes given the high federal employment concentration, which is a source of underlying air travel demand. Metropolitan Washington Airports Authority serves over 23 million annual enplanements from the two airports under its control: Reagan National and Dulles International. Both airports should be able to manage well during short term disruptions in government given the overall large size and diversity of the DC market. A diverse mix of domestic and international carriers provides air service throughout many U.S. and foreign destination.
On the finance side, the AIP has a long history of providing federal funding for airports and supported by various taxes deposited into the Airport and Airways Trust Fund. Tax collections are roughly $15 billion annually and over $3.3 billion in grants are awarded each year to those serving both large commercial airports and those operating small and general aviation airports. The FAA needs at least six months’ worth of money in order to run the AIP grant program. As such, AIP grant issuances would be affected as the shutdown continues. Many U.S. airports have solid levels of on-balance sheet cash reserves and can manage its operations even with some uncertainties on the grant receipts. However, long delays in grant funds could impair projects from starting or progressing and in some cases become a credit concern.