Passenger Air Service Development Techniques (2009) / Chapter Skim
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Overview of Air Service Development P A R T I
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In fact, with market forces compelling air carriers to continually trim service and capacity, simply retaining existing service can be a significant priority. Yet air service development (ASD)
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• Next, airports and their stakeholders should focus on exactly what their air service goals ought to be. These are likely to differ depending on whether the focus is incumbent carriers (e.g., preserving service, re-timing operations, or perhaps upgrading aircraft)
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The study team began with an extensive literature review of topics related to air service development. (Major related articles are summarized in the annotated bibliography included in the appendix.)
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20 Passenger Air Service Development Techniques State of North Carolina MOB IPT LIT STS FAT PSP BFL IDA RFD HDN HVN GNV ABY PAH AZO FAR YNG ITH LNK RDM TYS LAW TYR VCT RUT ALW CAK BTV COS GRR MDT LBB PNS SRQ HSV DIK DAB TRI BTR Figure 1.1.
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That being said, there are strategic, proven ways to approach the issue of attracting new service -- or simply retaining existing service. This guidebook is intended to help airport and community representatives build and execute an ASD strategy.
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And it includes understanding how to evaluate ASD efforts and revise them as needed. Why is air service development important?
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Because of the intense competition among small communities for limited airline resources, small communities likely need to offer some form of financial incentives to attract targeted airlines to the community. Participation by community leadership in air service development initiatives establishes the credibility of the financial incentives offered to target airlines.
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A high percentage of new traffic allows carriers to build brand loyalty. 24 Passenger Air Service Development Techniques A carrier's air service decisions are based on weighing the revenue that it can generate in a market versus the cost of providing service to that market.
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Air Carriers' Costs On the cost side, airline costs fall into two broad categories: direct operating costs (e.g., salaries and fuel) and airport costs.
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Higher than usual airport costs can make the difference between a profitable route and an unprofitable one. 26 Passenger Air Service Development Techniques $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 ERJ140 ERJ145 CRJ100/200 CRJ700 CRJ900 A319 Notes: Block hours are a common measure of aircraft usage and generally are measured from the time that an aircraft pushes off a departure gate until it parks at its arrival gate.
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First, the airport can make every effort to control the local costs associated with starting and operating new service. Even more importantly, the community and the airport can influence the carriers' decisions by providing information on the Understanding the Role of Air Service Development 27 Additional explanation of importance of containing airport costs Myrtle Beach (South Carolina)
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28 Passenger Air Service Development Techniques Explanatory discussion on involving local stakeholders Palm Springs International Airport (PSP) serves eight resort cities in the California desert -- Cathedral City, Desert Hot Springs, Indian Wells, Indio, La Quinta, Palm Desert, Palm Springs, and Rancho Mirage.
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Understanding the Role of Air Service Development 29 Stakeholders' willingness to support an ASD program will depend on whether they believe it will generate a positive return on investment or meets key business objectives.
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• Communities should draw on all available local resources for data and support, especially major employers and local economic development authorities. 30 Passenger Air Service Development Techniques Identify Available Resources Assess Existing Service; Identify Deficiencies Identify Major Stakeholders Establish and Validate Goals Select ASD Strategy and Techniques Evaluate Present a Compelling Case to Airlines Figure 2.3.
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SkyWest Airlines provides this service as a Delta Connection with 50-seat regional jets. Passengers in that market also have 31 C H A P T E R 3 Understanding the Context for Air Service Development
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ExpressJet returned to flying as a regional affiliate only in September 2008. 32 Passenger Air Service Development Techniques Figure 3.1.
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LCCs do not operate hubs per se, although they offer connecting opportunities for many passengers through "focus" airports like Baltimore/Washington International Thurgood Marshall, Hartsfield-Jackson Atlanta, or Dallas Love Field. Understanding the Context for Air Service Development 33 Figure 3.2.
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Airlines have consistently labored to control their costs while generating enough revenue to earn a return on investment. According to the Air Transport 34 Passenger Air Service Development Techniques LCCs tend not to serve smaller communities.
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. As shown in Figure 3.4, the total amount of capacity offered by commercial airlines and the total number of passenger enplanements have risen relatively constantly, except Understanding the Context for Air Service Development 35 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 (000s)
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. 36 Passenger Air Service Development Techniques -14.0 -9.0 -4.0 1.0 6.0 $ Millions Reagan fires air traffic controllers Gulf War "Dot.com" bust Sept.
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Understanding the Context for Air Service Development 37 0.50 0.51 0.54 0.57 0.60 0.64 0.66 0.69 0.27 0.26 0.23 0.22 0.21 0.19 0.18 0.16 0.23 0.23 0.23 0.21 0.19 0.17 0.16 0.15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2007 Q1 2006 2005 2004 2003 2002 2001 2000 Regional Low Fare Mainline Source: Bombardier Corp. Figure 3.6.
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Consumers have almost perfect information for price comparisons -- the Internet can hunt the cheapest fare 38 Passenger Air Service Development Techniques 0 2 4 6 8 10 12 14 16 Yield (cents) Nominal Dollars Constant Dollars Source: InterVISTAS analysis of U.S.DOT data.
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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Percent of operating costs Fuel/Oil Labor Figure 3.9. Fuel costs now exceed labor.
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40 Passenger Air Service Development Techniques U.S. network airlines have moved toward using regional partners' smaller aircraft, because of cost reasons.
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Understanding the Context for Air Service Development 41 -30% -20% -10% 0% 10% 20% 30% 40% Narrowbodies Regional Jets Turboprops Source: InterVISTAS analysis of DOT data. Figure 3.10.
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DayJet Corporation operated a fleet of Eclipse 500 aircraft in the U.S. Southeast, connecting 42 Passenger Air Service Development Techniques Company Aircraft Type Average Seats Number in Service Total Seats Bombardier CRJ 100 / 200 50 748 37,400 Embraer EMB 145 50 524 26,200 Bombardier CRJ 700 70 230 16,100 Embraer EMB 135 37 157 5,809 Embraer ERJ 170 70 137 9,590 Saab Saab 340 35 135 4,725 Bombardier DHC-8 100 / 200 37 125 4,625 Bombardier CRJ 900 86 110 9,460 Raytheon Beech 1900 19 79 1,501 Embraer EMB 120 30 68 2,040 Bombardier DHC-8Q-400 74 58 4,292 ATR ATR 72 60 51 3,060 Cessna Cessna 402*
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0% 2% 4% 6% 8% 10% 12% 14% United American Continental Delta Northwest US Airways Airtran Decreases in Available Seat Capacity Figure 3.12. Announced airline capacity reductions, fourth quarter 2008.
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The U.S.DOT regulates who may operate commercial airlines in the United States. To provide interstate or foreign passenger and/or cargo service, carriers must obtain a "certificate of public convenience and necessity" from the Office 44 Passenger Air Service Development Techniques Source: Image courtesy of Eclipse Aviation Figure 3.13.
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to commuter airlines that had scheduled passenger operations and/or used aircraft seating 10 to 30 passengers or propelled by turbojets. These stricter standards imposed new requirements on commuter air carriers relating to airplane performance and flight crew training and qualifications such that small carriers' operating costs increased.
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46 Passenger Air Service Development Techniques
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Research has statistically quantified the differences in air service accounted for by differences in these key variables. For example, a 2002 federal government study of how air service at small communities changed following the events of September 11, 2001, discussed the basic economic principles that affected commercial air service (8)
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They may make that decision because they perceive that the fares are cheaper or because the other airport has service from a different airline, which may fly nonstop to a desired destination. 48 Passenger Air Service Development Techniques 0 20 40 60 80 100 120 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average daily high temperature Average daily departures Figure 4.1.
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As shown in Figure 4.4, for example, Colorado Springs, Colorado, is less than 90 miles away from United's hub at Denver International. As a result, passenger traffic that the airport might otherwise Understanding the Key Challenges to Viable Air Service at Smaller Communities 49 Smaller community airports usually have difficulty with passenger leakage, because most are within 100 miles of a large hub airport or another airport served by an LCC.
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Figure 4.4. Colorado Springs is less than 100 miles from United's hub at Denver International.
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Attracting additional service to these locations can be challenging because carriers realize that passenger leakage to the hub will be difficult to reverse. What reasons do passengers give for using another airport?
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As shown in Figure 4.6, passengers flying to or from the northern coast of the Gulf of Mexico have multiple choices among nearby airports. 52 Passenger Air Service Development Techniques Figure 4.6.
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. Understanding the Key Challenges to Viable Air Service at Smaller Communities 53 Major Competitive Challenge Communities Proximity to legacy network hub Logan, UT Kalamazoo, MI Toledo, OH Rockford, IL Harrisburg, PA Colorado Springs, CO Proximity to airport with LCC service Huntington, WV Daytona Beach, FL Santa Rosa, CA Mobile, AL Rockford, IL Harrisburg, PA Small, isolated communities Butte, MT Marquette, MI Idaho Falls, ID Victoria, TX Dickinson, ND Fragmented market Greenville, NC Ithaca, NY Mobile, AL Lawton, OK Florence, SC Stewart (Newburgh)
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These categories include the following: – Proximity to a legacy network carrier's hub – Proximity to another airport served by an LCC – Geographic isolation coupled with relatively small population bases – Passenger market fragmentation among multiple nearby airports – Predominantly inbound traffic 54 Passenger Air Service Development Techniques
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