Vegas air tour operators seek help from Asian-American businesses

David Strow

Thursday, July 29, 1999 | 11:23 a.m.

The Federal Aviation Administration's proposed cap on tourist flights over the Grand Canyon could have an economic impact of more than $100 million a year on Southern Nevada, according to the association representing the airlines conducting those flights.

That number, claimed by the Grand Canyon Air Tour Council, is far larger than the economic pain that will be absorbed by the airlines alone. It includes indirect benefits -- the amount of business Las Vegas could lose from tourists who wouldn't come to the area without easily available Grand Canyon flights.

"The demand will diminish, and the market will dry up," said Jim Petty, president of Air Vegas Airlines, at a Tuesday meeting of the Japan-America Society of Nevada. "If there's not enough (supply), people will say, 'Gee, what else can I do?' Maybe they won't come to Las Vegas.

"If you limit the growth of any industry, you doom that industry to extinction."

The industry supplies a $380 million annual economic impact to Southern Nevada, according to a 1996 UNLV study. With the cap, many of the 25 air tour companies in Nevada and Arizona will be driven out of business, Petty said.

An estimated 800,000 tourists fly over the Grand Canyon each year. Up to 500,000 of those tourists fly out of Southern Nevada.

To provide ammunition against the FAA, the council is funding a second UNLV study, outlining the potential impact of the flight cap on southern Nevada and rebutting economic impact figures provided by the FAA in its proposal. The study is expected to be complete by Aug. 19, the day the FAA will hold hearings on its proposal in Las Vegas.

In its July 9 proposal, the FAA admitted that the cap "would have a significant impact on a substantial number of small entities," but estimated that impact to be no more than $17.7 million per year. Moreover, the FAA claimed that much of the revenue shortfalls could be made up merely by raising ticket prices.

Petty, a past president of the council, brought its concerns to the Japan-America Society because of the disproportionate impact Japanese tourists have on the Grand Canyon flight tourism market.

Of the 400,000 to 500,000 passengers that Las Vegas airlines carry to the Grand Canyon each year, about 300,000 are Japanese tourists, Petty said. That's about 60 percent of all Japanese tourists visiting Las Vegas in one year.

International tourists make up the vast majority of those taking air tours of the Canyon because of flight constraints, Petty said. Many American tourists have the time to drive over to the Canyon, or figure they will be able to catch it another time. Many international tourists, however, may not have another chance for quite some time, and only have a limited amount of time to make the trip.

A substantial cut in the number of available flight seats would have a dramatic impact on those who sell tourist packages to the Japanese market, Petty said. He pointed to the 1996 UNLV study, which claimed that 134,000 international tourists a year would not come to Las Vegas without the flights. That represents about 30 percent of the 442,000 international tourists that took the flight from Las Vegas in 1995.

"The Grand Canyon is a beautiful place, but it's a money-driven tour," Petty said. "We need every one of you to stand up and be counted."

The FAA proposal calls for issuing an annual allocation of flights to the Canyon operators based on the number of flights they ran from May 1997 to April 1998. Flights would be capped at this level for two years, while the National Park Service studied the resulting reductions in ground noise. The FAA would then decide whether to lift the cap, restrict flights further, or adjust the cap to higher levels.

The FAA plans to set the cap at 88,000 flights per year.

Today 32 percent of the park is free from aircraft noise 75 percent of the time or more. The FAA says its proposal will increase that area to 41 percent of the park.

The FAA says it is acting in compliance with a 1987 federal statute that stated "noise associated with aircraft overflights at Grand Canyon National Park (was) causing a significant adverse effect on the natural quiet and experience of the park."

"Today we build on the success of our past actions to further enhance the park's natural serenity while ensuring that the park remains accessible to all," U.S. Transportation Secretary Rodney Slater said in announcing the proposal.

In fact, the FAA claims that the northern Arizona economy is suffering from lost economic opportunity because of the flights.

In support of its proposal, the FAA cited a 1993 survey of Grand Canyon visitors. In that survey, 30.5 percent of back country hikers, 28 percent of river users and 9 percent of all other Canyon tourists said that noise from aircraft "very much" or "extremely" interfered with their enjoyment of the park. Fifty-nine percent of hikers, 55 percent of river users and 24 percent of all other tourists cited some annoyance at the flight noise.

In 1998, this resulted in the loss of $34.5 million in economic benefits for the Canyon community, the FAA claimed. If the cap is instituted, the FAA believes it will result in economic benefits of $7.3 million per year over the next 10 years, as more visitors come to a quieter park.

Air operators point out, however, that only a few dozen of the 5 million visitors the park gets annually lodge complaints about the noise from aircraft.

As far as the Canyon flight operators are concerned, the FAA couldn't have selected a worse year than 1997-98. At that time, the Japanese recession was hitting its worst levels, driving the Canyon air tour business to its worst year in recent memory.

But Petty claims his allotment doesn't even reach those meager levels. The FAA's proposed 20-flight-per-day allotment for Air Vegas is 20 percent below his 1997-98 numbers and 50 percent below the flights he's running now.

It isn't enough for Air Vegas to cover its overhead costs, he said -- and the same will be true for many other operators, especially those still making payments on aircraft.

"At 30 flights a day, we start to make a little money," Petty said. "We start to lose significant amounts of money at 20.

"If you have 10 airplanes, five will be sitting on the ground. But the fixed costs will stay the same. You just can't generate enough revenue to stay viable."

That's drawing the attention of the Small Business Administration. Petty said the SBA is casting a close eye on the battle being waged with the FAA, concerned that many small businesses could be put out of business by the regulations.

"The SBA, in a preliminary look, said they have real concerns," Petty said. "If it gets down the road to a legal fight, the SBA will be right there with us."

The spokesman in the SBA's Office of Advocacy could not be reached for comment.