POSTED ON JUNE 6, 2012:
The T-Town Fly-World Tax
Conjuring up an aerospace leapfrog strategy
In his 2011 book Split Second Persuasion, neuroscientist Kenneth Dutton tells a little story. He was witness to an encounter between the great American fighter Mohammed Ali and a fearless stewardess who queried the iconic athlete about his failure to buckle up on a commercial flight as take off neared. Ali's response was that "Superman don't need no seatbelt." The stewardess, in response said, "Superman don't need no airplane. ..."
In Green Country, we need both the seatbelt and the airplane. More specifically, we need to continue to have a viable aerospace segment and the tens of thousands of jobs, and millions of dollars of contracts we have come to rely on in T-Town.
As UTW readers know, the region is in the midst of a deep crisis occasioned by American Airlines (AA) bankruptcy declaration in November of last year. The Firm has lost billions over the course of the last decade, as have many (but not all) of its competitors. AA's problems stem from enormous volatility in the price of fuel, its Neolithic cost structure, labor alienation and passenger discontent with an archaic hub system. AA's problems are also "example A" of the failure of large parts of the industry to innovate aggressively and fully embrace energy conservation and alt engine/design technologies -- and about a dismal failure to fully empower an agile, imaginative workforce that might help boost productivity and lead the firm to additional opportunities.
American Airlines: This Song Is Not About You. As this is being written, news is coming in that the U.S. economy remains very fragile and that the Euro Zone is moving in a decidedly grimmer direction. And it looks like some kind of Chinese economic slowdown is afoot as well. But a cadre of stellar economists, including Nobel-winner Paul Krugman, still claim that the American economy, while in the greatest slump since the Great Depression, is fundamentally stout and has dynamic, mid-run prospects.
So Tulsa still has to fashion a developmental future for itself -- one that has the potential to deliver on our entrepreneurial and imaginative founder heritage. And one that can give us a strong identity and sharp competitive edge.
Part of the way forward for T-Town is actively managing the American Airlines bankruptcy crisis. It seems clear that AA is going to work out a "solution" via bankruptcy court -- it seems very clear as well that we will see a substantial contraction in AA jobs and contract opportunities in Green Country almost independent of the shape of the bankruptcy settlement.
And Tulsa's fate will not be a high item on AA's agenda as the agreement is completed. It is also likely that AA will be acquired by a healthier player in the aviation sector -- a development that might be a very good thing indeed for Tulsa aerospace workers, our very capable and increasingly agile contractor/vendors and ordinary people who derive even a small part of their income from aerospace in the region. But even then, Green Country folks should use the AA "bust" event as a real opportunity to craft a regional strategy -- a stellar one for doing aerospace and making us a potent player in the mid run trajectory of one of America's most dynamic industries.
Props a many. As UTW readers may know, there are four proposals at this point to deal with aerospace futures in Green Country. All feature using tax dollars in some way to facilitate a dramatic upgrade of our competitive prospects.
The first proposal is designed by Metro Tulsa Chamber Chief Mike Neal and his very able strategy and economic development executive James Fram. The proposal calls for using more than $250 million to dramatically upgrade city-owned hangers, some related facilities/assets and large-scale hardware on the airport campus. Fram and Neal claim rightly that the initiative is essential because the existing facilities are vintage WWII "assets" and can't accommodate new carrier aircraft from Boeing and Airbus.
Neal and Fram claim that their proposal doesn't entail putting a nickel in the coffers of American Airlines or any other firm -- they say all the funds would go to public and cooperative assets that would stay in place independent of the behaviour of private players including AA or a successor firm. This has the marking of a fair deal.
The second proposal, from Tulsa City Councilors Bynum and Ewing, would offer $90 million in 2014 to do something like the Chamber prop on a much smaller scale -- a scale that may or may not bear any relationship to the magnitude of the problem. Bynum/Ewing are also arguing that aerospace is not Tulsa's only priority -- they say that helping one sector (aerospace) at the apparent expense of others, may be problematic. My own view is that aerospace is tightly tethered, maybe uniquely linked to many other vital high-yield, high-value parts of the green country economy.
Another prop would use revenue bonds, together with unspecified new rates and fees at the airport, to cover some of the improvement needs at the airport campus -- this proposal, by ex-City Councilor Bill Christianson, would use the capital garnering powers of the Airport Authority -- another instance where a "magic box process" with a barely accountable entity (i.e. at the airport authority) is used without what many think is adequate democratic/voter oversight.
There will, no doubt, be other alternatives as the summer gets under way. There is a need for an immediate strategy of some kind -- and anybody who is honest knows that some tax dollars will be involved. There is a question about the political acceptability of any tax based strategy -- although people seem to forget that Tulsans have approved billions for streets, other capital improvements (as my old colleague Pat Connelly at City Hall righteously pointed out to me and UTW readers some weeks back), the Vision 2025 program and other initiatives.
Maybe a vibrant question now is how can we use public dollars to directly attract big, new additional private dollars for aerospace in Tulsa -- how could we induce private capital to help us do something really unusual. Something that might put us on a path to exploit not only the middle run future of commercial aviation, big gains employment and high value opportunities but maybe also link us to the fast emerging and very exciting commercial space prospects that I outlined last week for UTW readers.
A Lindbergh Breakout. Some readers may know that Charles Lindbergh's 1927 virgin voyage across the Atlantic was sparked by a celebrated contest -- a trans-continental competition crafted by a small group of American businessman. By offering a relatively modest sum ($25,000 or nearly 340,000 in 2012 dollars) the people who crafted the Lindbergh gambit surely sped up and profoundly altered the path of US commercial aviation and the fate of towns like Tulsa.
A small army of tech historians have argued, convincingly in my view, that "Lucky Lindy" and his team not only electrified the public, but also galvanized America's business and political communities and vastly accelerated the evolution of commercial aviation.
Recently the $10 million dollar Ansari prize, won by a group led by aeronautical designer Burt Rattan, is already changing the shape of manned space craft flight and economics. And Elon Musk's SpaceX is doing something very much along these lines as well.
Tulsa could have an audacious aerospace futures competition with a big inducement offering. In all likelihood we would get dozens of proposals -- some local, some local-national, some from commercial carriers, some from space outfits, maybe some from adventurous local union/company combines. Some of the offerings would surely lead to powerful strategies that might boost Tulsa's competitive prospect on the world aviation scene, provide millions of dollars in new private capital for aerospace and work as a kick ass calling card for the region.
In weeks to come: more on the airport initiates.
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