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July 16, 2013

Host: Ted Simons

Arizona Tourism Update

  |   Video
  • New numbers have been released on tourism in Arizona. The Arizona Office of Tourism reports that 38.1 million people visited Arizona in 2012, with $19.3 Billion in direct spending. Sherry Henry, Director of the office of tourism, will talk about the numbers and more.
  • Sherry Henry - Director, Arizona Office of Tourism
Category: Business/Economy   |   Keywords: arizona, tourism, update, report,

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Ted Simons: Arizona's office of tourism is out with new numbers that show among other things, that 38 million people visited the state last year, making for $19 billion in direct spending. Joining us now is Sherry Henry, director of the Arizona office of tourism. Good to see you again.

Sherry Henry: It’s nice to be back. Thank you.

Ted Simons: What is the state of tourism in Arizona?

Sherry Henry: It is fabulous. We are finally beginning to climb out of what has been a very deep valley. I think we all know over the last four years, and the 19.3 billion dollars the visitors spend is the largest visitors spend we've ever seen in Arizona.

Ted Simons: So climbing out and then some.

Sherry Henry: Climbing out and then some, right.

Ted Simons: Who are these visitors?

Sherry Henry: 80% of them are probably leisure visitors. 20% still fall into the business group market. But the leisure visitors, they're the ones that keep coming. And they're Canadians, they're from Mexico, they're from all across the country. They're even coming from China, they're coming from Brazil, they're coming from the U.K. So we've got a nice mixture going of the domestic and the international.

Ted Simons: As far as business and leisure, I'm hearing the Phoenix convention center, conventions are down there. What's going on with that?

Sherry Henry: It's really a shame. I think that unfortunately that group market really got caught in sort of that ultimate perfect storm. Do you back in time three years ago, we had swine flu, then we had the recession, you had the legislation issue, then you had the government wasn't going to travel anymore, so you put all those things together and on top of everything else you had all of these other cities out in our part of the world opening their own beautiful big million square feet convention centers. So unfortunately that got caught up in that cyclone, and what's happened is these things take time. These conventions book way, way out in advance. So I think what we're seeing is just sort of the result of what happened three years ago, but this beginning to show that climb, it's beginning to come up, the leisure market is actually been stronger throughout this whole three-year period.

Ted Simons: Why do you think that is?

Sherry Henry: I think people still wanted to take vacations. So we did some things on a marketing side that really encouraged particularly the regional visitor, as well as our strong international visitors. And those leisure people, they came, and people started taking those shorter vacations closer to home, so we really went after that market. We didn't have the funding in those years, you kind of look back and go, why do certain things happen. We didn't have the funding in those years to be on the national scene, to be in the international consumer Mother Nature kinetic so we hit target cities and went regional.

Ted Simons: Do we have the funding now?

Sherry Henry: We do, thanks to our governor and the legislature, they allocated money last year for fiscal near '13, that enabled us to be back on the national scene, to get into the international market, to do some exploration for the international mayor kinetic as well.

Ted Simons: How does that compare to what the tourism industry saw years ago.

Sherry Henry: When you go back to the middle 2000s, looking at about , that money began to taper off, and it got really low obviously, '09, ‘10 , '11, and even '12. Now in '13 we have enough money to be back on the national scene to begin to make things happen.

Ted Simons: Does that mean people in Michigan are seeing how swell Arizona?

Sherry Henry: Yes. Finally those Michigan people are seeing Arizona. Yes. On "USA Today," "Wall Street Journal," the Travel Channel. Architectural digest, radio, TV, you name it, we're there.

Ted Simons: You mentioned China and Brazil, that's a focus for marketing correct?

Sherry Henry: It is. That was a request of our governor; we had made the recommendation if we could have additional funding what would we do? Those two international markets absolutely sit at the top of the most traveling of the international markets, and we're also in partnership with brand USA, which is the new marketing organization for the entire United States. And that enabled to us leverage those dollars, let us do some exploration in those two markets. They are predicted to be the number two markets for international travelers coming into this country.

Ted Simons: Isn't that something? What about Arizona tourism needs to be emphasized? When those folks in Michigan are watching commercials about us, what are they seeing?

Sherry Henry: I think there's the misnomers about Arizona, and I think the big surprise about Arizona is diversity. And I think that's a story that we need to keep telling. Obviously we have the Grand Canyon, we have the fabulous weather. We have these iconic images, but what we need to do is make sure the people in Michigan and the rest of the country and the rest of the world know that you can do anything in Arizona. I can ski, you can water board. You can play golf, you can go to the spa. You can see great iconic images, you can go hiking. In other words, the diversity is almost so big it's hard to tell the whole story.

Ted Simons: Bottom line, it sounds like morale in the tourism industry is up. Accurate?

Sherry Henry: Fabulous, yes. We just came off our annual governor's conference. I have been coming to this conference for more years than I'll tell you about, but believe me, this was one of the greatest positive energy conferences I can remember. Because all of a sudden there is this movement of positivity, and this high energy. And it was so apparent with the 450 people all from the tourism industry that were there.

Ted Simons: That's good news, it's good to hear things are on the rebound. It's good on to have you here.

Sherry Henry: Always a pleasure.

Immigration Reform Report

  |   Video
  • Arizona State University’s Morrison Institute will be unveiling a new report on comprehensive immigration reform. Mike Slaven, who is writing the report for Morrison, will discuss the findings.
  • Mike Slaven - Morrison Institute, ASU
Category: Immigration   |   Keywords: ASU, immigration, reform, report,

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Ted Simons: Border security is a major factor in the debate over comprehensive immigration reform. But what does border security mean, and how specific can that definition be? ASU's Morrison Institute is researching a new study on security's place in immigration reform. Mike Slaven is writing the report and he joins us now. Good to see you again.

Mike Slaven: Thanks very much.

Ted Simons: Every time we talk about immigration reform we hear about secure border. We must have a secure border first. I always ask, define secure border. This report is basically based on something like that.

Mike Slaven: Right. Obviously it's an important question. Especially in comprehensive immigration reform. Have you a lot of people especially Republicans saying, well, we have to secure the border first before we can move on with the other elements of immigration reform, especially legalization for the people who don't have status right now in the U.S. The question is obviously, OK, what does that mean? And the senate took one specific approach to it and the debate goes to the house, they might revisit it, and it will come up again and be important as to whether something passes the house.

Ted Simons: Is consensus -- First of all, why has there not been consensus on what a secure border means, and is it even possible on something like this?

Mike Slaven: Security in general is a very subjective question. You may look at all the evidence that's going on at the border and say, OK, according to all the measurements that have usually been used, it's already more secure than it's been in a long time. But some people may say that's still not secure enough. Others may say it is secure enough. So there's a lot of subjectivity and debate. Also there are a whole vast array of border security questions. Like what are you talking about, are you talking about terrorists, are you talking about labor migrants crossing the border? And there hasn't over the last 15 years been consistent consensus on which one of those issues is really important, most important to address. Obviously they're all important in some way, but as for -- As to whether consensus is possible, it's going to have to be somewhat possible. If the border is to be secured, so to speak, before the other parts of immigration reform can occur, which has been how a lot of people have been talking about the issue for several years, then clearly there's going to have to be some kind of consensus developed, and I'm relatively optimistic that people for the purposes of this bill can come together if enough effort is given into it.

Ted Simons: As far as the border being more secure than it's been in decades, we've heard former secretary Napolitano make that statement, we've seen reports and studies that border patrol apprehensions, they're up crime levels are down, drug seizures are up. Manpower, technology, spending, the whole nine yards. But can you say that it's as safe as it's been in decade and not make it -- Seems like it's a political statement the minute it leaves your mouth.

Mike Slaven: It is. And that's kind of what it comes down to. You have a lot of politicians who take a certain stance on border security, and it's not necessarily always more what's actually occurring at the border. You heard a lot of people a few years ago say that the border is really perilously insecure, but when you looked at the apprehensions, they were pointing to illegal traffic going down, which is pretty much what you want to see. So what they'll have to do and what they did in the senate, they agreed on a certain other metrics that are more sophisticated to measure how effective the enforcement is being. Not just the overall levels of traffic, but what is the effectiveness rate. There's some relatively crude measurements that exist for that and they decided to use those as goals take the levels of resources which have greatly extended already and use those as the triggers so to speak when -- When other parts of the legislation can be enacted.

Ted Simons: Things like effectiveness rate, are they viable?

Mike Slaven: The effectiveness rate is probably better than what's been pointed to as evidence of good border security. The effectiveness rate measures basically the border patrol's estimates of how many people have gotten away versus how many have been apprehended and turned back. That's better than pointing to a number of apprehensions, because it gives you a better idea exactly who is being caught among how many people. So it is viable in that extent it's better, but what the senate has continued to do, what might be continued to occur is to use basically the amount of resources at the border, counting border patrol agents and counting technology and surveillance as evidence of, OK, is the border security, but obviously not everybody agrees on that approach.

Ted Simons: I know your report is released tomorrow. But I got a sneak peek, thank you very much. Among the suggestions, get real in defining secure border. Can you get real?

Mike Slaven: Well, enough politicians have spent enough time in Arizona on border security that they should probably have a pretty good idea of what they are talking about. So one thing that's really important is going to happen, is that people will have to say, OK this, is what we're talking about. These are the exact types of goals we're speaking about, these are the resources we want. Up to this point, the debate, that hasn't always happened. But it's going to have to occur if there's movement on this issue no matter what approach they take.

Ted Simons: If you can't be specific, you can't be taken seriously?

Mike Slaven: If you can't be specific, then nobody can judge whether your demands are reasonable. And that's important, because the goals of immigration reform overall, three goals, which is expanding legal channels, regularizing the population that is here without status, and increase border security, all of those have public support. And they have very enduring public support in Arizona and nationwide. If your position is we need to secure the border first, you should probably say exactly when the border would be secure enough to move on with the other things because there are public priorities.

Ted Simons: Another suggestion is to balance accountability and realism. What are we talking about here?

Mike Slaven: One thing a lot of people in Congress have said is, OK, we have to hold the department of homeland security, the government accountable for the results of border enforcement. So they look at this as one reason why the effectiveness rate has come up. If you're going to use the effectiveness rate as a trigger in terms of whether other things can happen in the legislation, you have to ask, OK, are we going to define it extremely specifically or are we going to say, well, what could happen is the economy could improve, draw more labor migrants from Mexico and Central America, and we have a lot bigger problem than we do right now. So you need to be realistic about what the causes of immigration and unauthorized crossing is, and then you can work that into whatever standards you have.

Ted Simons: And that brings up the idea of flexibility, which is another suggestion from your report. Balancing clarity and flexibility. Flexibility, another politically charged word when you're talking about border security.

Mike Slaven: Everything is politically charged when you're talking about border security. It's important that if Congress is going to be serious about legalization for the unauthorized population, that they're going to have to be actually attainable goals. And they've been discussing 90% effectiveness rate in all sectors. Some of the sectors in Texas get very little traffic, for instance. A dozen people can make a difference between 1 percentage and another, so you're going to hold up really important parts of legislation based on a couple of dozen crossers in a year. So the legislation has to be designed with that kind of stuff in mind.

Ted Simons: Why did the Morrison Institute decide to do this particular study?

Mike Slaven: The Morrison Institute has been interested in a long time in terms of kind of separating myth and reality in terms of immigration. It's a very charged issue. It's sometimes really difficult to get objective information on what's going on at the border, and to have that affect them -- The policy debate. So this is I think fits in with the larger goal of the Morrison Institute to kind of say, OK, here's the situation, and the report goes over that in terms of what the situation is at the border, gets into some particulars about how it's been define in the senate bill. And looks forward to how the house might decide to approach the issue, what kind of changes they might want to make.

Ted Simons: That's pretty much what you want folks to take from this study?

Mike Slaven: Yeah. What folks should take from this study is that border secure has been -- Security has been talked about for so long, but we do have to have a precise discussion about when it's secure. Without that it's difficult to get anywhere on the issue.

Ted Simons: Alright. Very good. Mike, congratulations on the study. We look forward to seeing it released tomorrow.

U.S. Airways/American Airlines merger

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  • U.S. Airways shareholders gave their stamp of approval to a merger between their airline and American Airlines. That pushes the merger closer to finalization. Robert Mittelstaedt, former dean of the Arizona State University W.P. Carey School of Business and an airline expert, will talk about what the latest move means to the upcoming merger.
  • Robert Mittelstaedt - Former Dean, Arizona State University W.P. Carey School of Business
Category: Business/Economy   |   Keywords: airline, flight, update, merge,

View Transcript
Ted Simons: Good evening, and welcome to "Arizona Horizon." I'm Ted Simons. Shareholders of the Tempe-based U.S. Airways approved a merger last week with American Airlines. Here to tell us what's next in the merger process aviation expert Robert Mittelstaedt, dean emeritus of ASU's W.P. Carey School of Business. Good to see you again. Was this at all a surprise, this overwhelming approval?

Robert Mittelstaedt: No, it looks like it's going as scripted now. We're well past the point where there's any serious impediments to this happening. We still have the details to be worked out, largely because of department of justice reviews, and there's some various lawsuits people are filing, but for the most part it looks like a scripted activity.

Ted Simons: What is the Department of Justice be looking at?

Robert Mittelstadedt: Whether this will be a competitive in terms of having excessive concentration in some Market or another, and you see some what I would call a nuisance lawsuit for instance from some individuals in San Francisco, for instances, that are suing because they think they're going to dominate the market there, which is kind of a joke since United is sort of already dominates the market there. But the deposit of justice is looking at it from an antitrust standpoint.

Ted Simons: I had read it seemed like this merger would mean a whole lot of flights at D.C. national. Is -- Reagan national.

Robert Mittelstaedt: The allegation is that U.S. Airways would have 67% of -- The new American Airlines would have 67% of the departures, what the company has said is that would be only 50% of the passengers there. I presume that is because many of the U.S. air feeder routes into there now are short-haul commuter kinds of routes that don't carry so people. In all of these mergers, when you were talking about the previous big ones with United-Continental, with Delta-Northwest, every one of those places has a hub somewhere that they seem to dominate. And they have similar market shares. So United and Chicago, Delta in Atlanta, the old Northwest Minneapolis, so it's not uncommon to see some hubs like that, but it will be interesting to play out especially since all the politicians care how they get to and from the office.

Ted Simons: Would you be surprised if justices cut back a few flights here and there?

Robert Mittelstaedt: There's almost always some give and take in these things, where they have to dispensary vest some routes or give up slots at an airport somewhere. But when you look at these two companies, they don't overlap all that much in terms of complete overlap. But there may somebody places they'll have to adjust.

Ted Simons: What about creditors, American Airlines creditors. Talk about that.

Robert Mittelstaedt: This is a very unusual bankruptcy. First of all, American was not bankrupt in the sense that they were running out of cash or anything else. When they went bankrupt, they had something like five or $6 billion in cash on the balance sheet, or equivalent. The reason they declared bankruptcy was because they had obligations around pension funds and health care costs that extended far into the future which meant that their liabilities exceeded their assets. So -- And they declared bankruptcy to try to get their balance sheet cleaned up. It wasn't that they were going under in that sense. So the net result because of the fact that company, it had problems, but it was in reasonably good shape compared to what happens in many bankruptcies, and U.S. Air comes into this in good shape. The deal going to leave the creditors essentially recovering 100% of their debt, it looks like. And in fact they'll recover well enough that the original shareholders of American Airlines will actually get a small amount of money back for the stock that they hold.

Ted Simons: So the balance sheet will balance and then some?

Robert Mittelstaedt: It will balance and then some.

Ted Simons: So the creditors should haven't too much trouble.

Robert Mittelstaedt: No. The creditors are likely quite happy. They're still working on the details, but the creditors become significant owners of the new get their debt paid off and become owners in some cases of the new airline.

Ted Simons: With that in mind, a judge overseeing the bankruptcy proceedings, any sticking points there?

Robert Mittelstaedt: It appears it's going to move pretty smoothly because you've had advanced agreement from the unions as we heard about in the news last spring, especially, and before that as rumors, and you've got -- It looks like you've got agreement from the creditors and the American -- The U.S. Airways shareholders voted 99% last Friday to accept this. And this constituted a new board, so all these things have to be approved by the courts, but the company is saying they hope this will be done this quarter, by the end of September.

Ted Simons: Technically until the court says yes the merger can't officially happen.

Robert Mittelstaedt: Correct. The court and -- Has to sign off, the department of justice has to sign off.

Ted Simons: How will this merger change the airline industry?

Robert Mittelstaedt: It's something that Doug Parker has argued for a long time, had to happen, because the industry consolidated in other areas, and I would agree with that, U.S. Airways was doing a great job as a smaller airline, but the long-term future was that you had to be one of the big boys or you're not going to get to play. So the industry has changed to the point we have three major carriers. It changes in terms of some people might say it changes in terms of choice, you may not have six or seven choices, but most places you'll still have three, four choice and you've got other smaller ones still. So it changes in the sense that there is a consolidation. I would hope it gives us more financially viable carriers that will be there when we want them to be, it may give us locally better route structures and might be good for Phoenix in that regard. And there's arguments obviously people worry about will they have more price controls. But I don't think control over price, I'm not sure that's the case.

Ted Simons: With the Delta merger with Northwest and United and Continental, critics were saying the same things less competition means higher prices and it will change the entire landscape of the airline industry. What did we see after those mergers?

Robert Mittelstaedt: What you've seen is airline prices are still a good deal. Why? Because there's still competition between the airlines. So Southwest and U.S. Air or American still compete. And you also have sort of what I would say somewhat analogous to gnats, the gnats that are the small specialty routes, like from Mesa Gateway. It's easier to get in the airline business than people imagine. It's difficult to be big. But you can buy a used airplane and start a route between two obscure cities that does haven't service now relatively easy. So -- And some of those people fly into routes where they compete. So you see different prices on different routes, but in most cases there's still significant competition.

Ted Simons: Could this be a situation where the big boys have to get even bigger? We saw what happened to U.S. Airways after these mergers, they said we got to get bigger or we can't compete. How does big have to get?

Robert Mittelstaedt: I think big in today's world means you have to be multinational big. So Southwest is a great example of a company that has been traditionally been almost totally domestic. They do have some flights now in Latin America and Caribbean, but for the most part they've gotten as big as they can get domestically. The other guys want to have feeder routes to other cities, and we are global travelers now in ways that we weren't in the past. So big means you've got to be big on a global scale. Even -- And they compete against -- Outside the U.S., we limit competition at the borders. We let in other airlines up to our borders, we let them fly into our cities, but we don't let them fly in the U.S. once they get here. Some of that goes on the other way in other places. So yes, they have to be bigger I think.

Ted Simons: Combining work force, combining fleets, computer system, frequent flyer programs. That will all be a big picnic, won't it?

Robert Mittelsaedt: It could be. Anything from smooth to a disaster. We'll see what happens.

Ted Simons: Alright. Good to see you again.

Robert Mittelstaedt: Good to see you, Ted.