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From page 54...
... Best Practices for Air Service Development P A R T I I
From page 55...
... In this chapter, the techniques used to measure and analyze air service are discussed in order to provide insight into how best to define, address, and correct any deficiencies. What are the airport's current services and how are they performing?
From page 56...
... High load factors can be interpreted either as a sign that the market is performing relatively well for the carriers, or that loads are so high that passengers' choices may be limited, especially during peak times of the day, week, or year. In that manner, 58 Passenger Air Service Development Techniques Daily Each Way Rank PVD Market Passengers Revenues Average Fare Nonstop Service 1 BWI 731 $58,788 $80.39 Y 2 MCO 660 $75,965 $115.10 Y 3 PHL 421 $35,293 $83.87 Y 4 TPA 403 $46,146 $114.43 Y 5 FLL 267 $33,478 $125.24 Y 6 MDW 199 $23,411 $117.80 Y 7 ORD 189 $28,141 $148.98 Y 8 PHX 184 $27,081 $147.43 Y 9 LAS 169 $27,040 $160.30 Y 10 RSW 140 $17,059 $121.85 N 11 LAX 132 $22,034 $167.17 N 12 PBI 125 $14,097 $113.13 N 13 DCA 118 $29,864 $253.93 Y 14 DTW 115 $19,097 $165.88 Y 15 BNA 108 $14,927 $138.30 Y 16 CLE 108 $13,172 $122.50 Y 17 SAN 96 $17,835 $185.84 N 18 CLT 93 $18,310 $197.77 Y 19 RDU 93 $10,731 $115.99 N 20 JAX 87 $10,524 $121.55 N 21 PIT 85 $9,994 $117.91 N 22 ATL 74 $18,533 $252.15 Y 23 DEN 73 $12,474 $171.21 N 24 ORF 68 $8,311 $122.34 N 25 SFO 67 $12,379 $184.58 N Note: Data for year ending June 30, 2008.
From page 57...
... Point-to-point nonstop flights require substantial demand in the local market to justify such service. An airport's route deficiencies include those markets that could potentially support but currently lack nonstop service.
From page 58...
... 60 Passenger Air Service Development Techniques Figure 5.1. Backhauls from Walla Walla.
From page 59...
... . Excessive travel times can arise from infrequent nonstop service between a smaller airport and a hub, coupled with long layover times at that hub.
From page 60...
... Examining issues such as air carrier pricing, capacity, aircraft type, and reliability helps to identify and prioritize potential improvements in air service. First, however, the ASD team should consider the airlines servicing its airport within the context of the aviation industry, as discussed in Chapter 3.
From page 61...
... Many of Burlington's connecting hubs suffer from congestion and delay. Figure 5.3.
From page 62...
... 64 Passenger Air Service Development Techniques Consider: • What aircraft mix serves the market? • How has this mix changed over the past few years?
From page 63...
... Some carriers have traditionally been especially sensitive to these costs, and all carriers are Taking Stock of the Situation 65 0% 10% 20% 30% 40% 50% 60% 70% 80% Circuitous routings Turboprop rather than RJ Difficult connections Inadequate capacity Unreliable service No low-cost carrier Top destinations not served non-stop Fares too high Percent of airports surveyed Figure 5.4. Major air service problems at small community airports.
From page 64...
... The number of gates, the amount of tarmac space, the square footage of the terminal building, and a number of other factors influence passenger throughput. 66 Passenger Air Service Development Techniques Airports should carefully consider what steps can be taken to reduce airlines' cost of doing business there.
From page 65...
... To obtain a realistic perspective on the service at the airport being evaluated, its demographics, traffic, and operations are best compared with similar airports. Points of comparison may be nearby airports with which the facility competes for passenger traffic, or other airports or comTaking Stock of the Situation 67 CASE STUDY Physical limits constrain operations Tweed New Haven Regional Airport (HVN)
From page 66...
... . For example, Akron-Canton's catchment area grew substantially following the introduction of service by AirTran, whose low-fare pricing lured people 68 Passenger Air Service Development Techniques CASE STUDY Hayden, Colorado's operational advantage Yampa Valley Regional Airport (HDN)
From page 67...
... Conversely, the airport's catchment area can also be assessed by estimating its "passenger leakage," the extent to which it loses passenger traffic to nearby airports. Passenger Leakage Leakage is defined as the volume of passengers from the "natural" catchment area that are lost to other airports.
From page 68...
... 70 Passenger Air Service Development Techniques Detailed example of one airport's method to gather data on its catchment area In Daytona Beach, Florida, the airport authority wanted to develop better information about the origination of its traffic base. Similar to many other airports, Daytona Beach International Airport (DAB)
From page 69...
... Should a more in-depth benchmarking be needed, the ASD team may need to engage outside help either to analyze its own metrics or to get data on and analyze its airport's performance against other facilities. Summary • Before an airport's air service can be improved, the ASD team needs a complete picture of the air service currently being provided and how well it is meeting the needs of the traveling public.
From page 70...
... Airports have a number of different sources of potential revenue that could be used, at least in part, to improve their air service offerings. These sources include funds that would come from in-terminal revenue sources -- such as passengers; airlines; concessionaires; advertisers; and airline, airport, concessionaire, and government workers -- as well as non-terminal sources -- such as air freight companies, maintenance organizations, fixed-base operators, aircraft manufacturers, and land rentals.
From page 71...
... Corporations also can assist local ASD efforts by participating in task forces or providing information on the travel demands of their employees. Corporations often have the best knowledge regarding inbound and outbound business traffic in terms of numbers, destinations, average fares, seasonality of travel, and travel budgets.
From page 72...
... In other words, as participation from the private sector increased, so did a community's air service. 74 Passenger Air Service Development Techniques tnemmoCmetI/yrogetaC Airside fees Landing fees One of the principal sources of revenue for an airport.
From page 73...
... The City of Colorado Springs assisted in attracting Frontier to the airport with a tax-exempt special facility bond. Linked with the new maintenance facility, Frontier announced that it would commence nonstop service between Colorado Springs Airport and its hub at Denver International Airport, providing convenient, low-cost connections to cities across the country, as well as Mexico and Canada.
From page 74...
... States also may be able to assist more indirectly through various tax abatement programs, economic development grants, and job training programs. ASD teams should be aware that pursuing any of these programs to help with air service development will require long-term sustained effort and an ability to deal with administrative complexity in return for a very uncertain payback.
From page 75...
... Examples of how local airports have used the state's funding include: • Upgrade equipment or increase frequency with existing carriers, • Add new carriers and/or new hubs with Minimum Revenue Guarantees or risk sharing based on load factors, • Assist airports in upgrading from a CAT IV to a CAT III classification, and • Produce marketing and promotional endeavours for airlines providing new service to a Wyoming community. Another initiative made possible through the U.S.DOT's SCASDP was the state-wide "Fly Wyoming" marketing campaign that highlights the convenience of local airline service to increase passenger awareness and use of Wyoming's commercial airports.
From page 76...
... 78 Passenger Air Service Development Techniques Category of ASD Resources Hub size Airport "Core" Resources1 Airport "Extra" Resources2 Private Sector Contributions Federal Contributions Non-hubs $53,000 $100,000 $350,000 $500,000 Small hubs $125,000 $125,000 $250,000 $480,000 All hubs $70,500 $100,000 $325,000 $500,000 1 "Core" resources are financial resources devoted to ASD-related salaries, data costs, and other expenses normally associated with basic ASD, such as conference attendance and travel costs to visit airline headquarters. 2 "Extra" resources are those affiliated with particular types of incentive programs, such as minimum revenue guarantees, subsidies (e.g., fee waivers)
From page 77...
... Outside Resources Small airports don't have to do the work of attracting new air service alone. There are many ways for them to expand their ASD teams to take advantage of the unique capabilities of nonairport people and organizations with specialized expertise.
From page 78...
... • City/county economic development authorities help to generate new local businesses and inbound travel. 80 Passenger Air Service Development Techniques Most consultants have professional experience with an airline, airport, trade association, or manufacturer.
From page 79...
... • Successful ASD teams comprise a range of professionals who contribute specialized skills. These professionals may include in-house airport staff, consultants, or other local professionals.
From page 80...
... Incumbent carriers have a good understanding of the community's traffic patterns and are a first line of opportunity for adding new service -- whether more frequencies, larger aircraft, or most commonly, service to a new point or connecting hub. However, service from incumbent air carriers -- whether a mainline network carrier, an LCC, a regional affiliate of a network carrier, or a low-fare niche carrier -- can be a double-edged sword for ASD efforts.
From page 81...
... The airports surveyed identified several general categories of ASD goals: • Retaining existing service • Adding service to a new destination • Adding frequencies to current services • Lowering fares/introducing new competitive service • Improving service reliability • Upgrading aircraft • Increasing access to global networks Retaining Existing Service Retaining existing service by incumbent carriers was the top goal identified by the airports surveyed (Figure 7.1)
From page 82...
... Short-term stays on routes by incumbent carriers could have been caused by an air carrier's reorganization, either for financial reasons or fleet changes. Adding Service to a New Destination Successful ASD teams understand the balance of continuing to work to retain air service while developing new services.
From page 83...
... of air service to a particular region or from an air carrier at those nearby airports will affect the opportunity of the ASD team's community to add new service. ASD teams should assume that if their airport is working toward developing air service by an incumbent to a new location, and if competitive airports have the same incumbent carrier, then those airports may have the same air service goals as well.
From page 84...
... The current marketplace has seen a growth in these types of connections due to new business models from niche carriers, a changing regional aircraft fleet, and new marketing techniques by airport communities. One such niche carrier, Allegiant Air, has been developing a route network that connects top leisure destinations (Las Vegas, Orlando, Phoenix, Tampa Bay, and South Florida)
From page 85...
... Source: Image courtesy of Allegiant Air. Figure 7.4.
From page 86...
... For these airports, adding new service on another legacy carrier to a new connecting hub becomes a realistic goal. Service to a different hub may also introduce new connections that were previously unavailable.
From page 87...
... Allegiant's entry at Redmond Municipal Airport doubled traffic to Las Vegas. CASE STUDY Expanding service with other network carriers Airports often seek service from different network carriers if they are looking for more connections to the global marketplace or if the current service is unsustainable due to delays or unfavorable routings.
From page 88...
... Customers -- especially leisure passengers -- are typically willing to make long drives in order to get cheaper prices. Airports that are within driving distance 90 Passenger Air Service Development Techniques CASE STUDY Adding frequencies to an existing location Dickinson Theodore Roosevelt Regional Airport (DIK)
From page 89...
... Louis and Nashville when those airports were larger regional hubs. Lowering prices remains a major goal of Barkley Airport to retain air service and to market the airport for potential future expansion of air carriers and destinations.
From page 90...
... Complementing Existing Service A community is more likely to attract new air service to its target market if that market currently receives only connecting service. That is, if the only service available between Point A (the community's airport)
From page 91...
... Responses by airlines already serving your airport can vary widely depending on the nonstop market being entered, the incumbent carrier's position in that market, the aircraft type to be used, and the importance of the revenue generated by the market's traffic to the incumbent. An incumbent carrier might make no competitive response at all if, for example, the target market is in a different region of the country than the current airline serves (at least on a nonstop basis)
From page 92...
... 94 Passenger Air Service Development Techniques 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 August 2005 August 2006 August 2007 August 2008 Number of Departures Figure 7.6. Delta has decreased its non-hub point-to-point flying.
From page 93...
... For some communities, they have replaced larger aircraft such as an MD-80 or 737, while in others they have replaced 50-seat RJs. If a community's market assessment indicates that its nonstop route network and frequency of service are unlikely to change, then a goal of upgrading aircraft would be a positive step.
From page 94...
... domestic and global route networks are key for a small community generating air service demand. 96 Passenger Air Service Development Techniques Figure 7.9.
From page 95...
... An airport with a competitive structure of rates and charges and realistic capital improvement plans will be attractive to an air carrier that deems the airport attractive based on traffic trends and forecasts. If a small community has not illustrated Establishing and Validating ASD Goals 97 CASE STUDY Competing airports in central Illinois provide different connections to the world.
From page 96...
... 98 Passenger Air Service Development Techniques CASE STUDY (Continued)
From page 97...
... Choosing Between Hub-and-Spoke and Point-to-Point Service Deciding between targeting network (i.e., connecting) service and point-to-point service usually equates to a choice between legacy carrier service to a hub and LCC service to a major business center or a resort destination.
From page 98...
... In contrast, if the primary service deficiency is to a leisure market, the most likely candidate to offer new service in that market may be an LCC or niche carrier, in part because of the legacy carriers' reluctance to offer much point-to-point service in the current operating environment. Considering Competitive Service When reviewing the service needs of a community's potential target market, it is important to know what competitive service is already being offered in the market on both a local and beyond basis.
From page 99...
... Obviously airports and communities should not propose a new service with an aircraft type that cannot properly and successfully operate in the target market. Suggesting the use of an aircraft that does not fit its market needs will lower the ASD team's credibility with the airlines and lessen the likelihood of new service being started.
From page 100...
... 102 Passenger Air Service Development Techniques The Sacramento Bee reported in May 2008 that airlines were upset with the plans of Sacramento International Airport (SMF) to build a $1.27 billion expansion, including a new terminal, hotel, parking garage, and people-mover tram.
From page 101...
... • The most common ASD goals are – Retaining existing service – Adding service to a new destination – Adding frequencies to current services – Lowering fares/introducing new competitive service – Improving service reliability – Upgrading aircraft – Increasing access to global networks • ASD goal-setting should begin with incumbent airlines; retaining existing service is the top goal for most airports. • It is critical to ensure that ASD goals are realistic in light of – The service airlines offer to similar communities – The strength of the airport's passenger market – Aircraft performance characteristics – Airport infrastructure Establishing and Validating ASD Goals 103 Santa Rosa and its Horizon Q-400s Charles M
From page 102...
... , Selecting Appropriate Techniques for Air Service Development Except in unusual circumstances, all smaller communities will need to provide some sort of risk mitigation to attract new or enhanced service.
From page 103...
... Also, depending on the source of the revenue guarantee, it may not motivate the community to use the service. The U.S.DOT Inspector General's office reported the example of a community that attracted Selecting Appropriate Techniques for Air Service Development 105
From page 104...
... 106 Passenger Air Service Development Techniques Pensacola's travel bank Pensacola's travel bank was the product of a large community effort involving support from numerous community stakeholders. The Chamber of Commerce, Pensacola city officials, and airport officials conducted intensive outreach to the local community and persuaded 319 businesses to contribute $2.1 million for two years' worth of prepaid travel on AirTran Airways.
From page 105...
... Cash subsidies are paid without regard to the amount of revenue that a carrier may Selecting Appropriate Techniques for Air Service Development 107 Redmond, Oregon's travel bank Redmond and Bend lie in the heart of central Oregon, the fastest-growing area in the state. It is also an important vacation spot in the Pacific Northwest.
From page 106...
... (See sidebar.) 108 Passenger Air Service Development Techniques Ground station costs at Mobile, Alabama Prior to leaving the Mobile Regional Airport (MOB)
From page 107...
... Marketing programs may or may not require a carrier match. [Note: A separate ACRP study on marketing small communities' air service (ACRP Project 01-04)
From page 108...
... In 2006, ALW used a $250,000 SCASDP grant to support Big Sky Airlines' efforts to commence nonstop service to Boise using 19-seat turboprop aircraft. The federal funds were used to pay for landing fees, pilot wages, fuel, and hotel costs.
From page 109...
... 2. Involving local advertising or marketing firms, along with the local media, as part of the ASD team or task force helps ensure some publicity for the airport's successes.
From page 110...
... , particularly where services such as air travel are concerned. Airports may need to undertake specific types of marketing activities to create, maintain, or 112 Passenger Air Service Development Techniques Source: Burlington International Airport Figure 8.2.
From page 111...
... Small communities could leverage the marketing and public relations expertise resident in some of their other key stakeholder organizations, such as the local chamber of commerce, economic development agency, or tourism board. Local resorts or hoteliers may also be willing to accommodate crew at a discount above and beyond those normally made available.
From page 112...
... 114 Passenger Air Service Development Techniques
From page 113...
... Those incentive programs would be beyond the FAA's reach. Selecting Appropriate Techniques for Air Service Development 115
From page 114...
... 116 Passenger Air Service Development Techniques
From page 115...
... Selecting Appropriate Techniques for Air Service Development 117 More Revenue Guarantees Ground and customer serviceRisk Sharing Start-up costs Fee / cost waivers, marketing funds Less Platinum Gold Silver Bronze Figure 8.3. Differing levels of incentives reflect different levels of risk sharing.
From page 116...
... Organizing the travel bank also requires a local "champion." Travel banks have typically been organized by chambers of commerce or economic development councils, but they still need strong individual leadership 118 Passenger Air Service Development Techniques 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Hired consulting firm Marketing Assistance -- Carrier Match Marketing Assistance -- No Carrier Match Direct subsidies Guaranteed ticket purchase Revenue guarantees Non hubs Small hubs Total Figure 8.4. ASD techniques used by small airports.
From page 117...
... The Inspector General reported that using funds for marketing programs in support of other programs like revenue guarantees or cost subsidies can stimulate demand by increasing awareness and reversing leakage. Using ASD funds for marketing without other efforts may not be as effective.
From page 118...
... 120 Passenger Air Service Development Techniques Identified Air Service Problems Revenue Guarantee (%) Travel Bank (%)
From page 119...
... There are many different ways to work with consulting firms, not necessarily all expensive. Selecting Appropriate Techniques for Air Service Development 121
From page 120...
... As illustrated in Figure 9.1, almost all airports surveyed reported that they presented a "business case" to targeted airlines. Small hub airports consistently tended to present more information than non-hub airports.
From page 121...
... They identified their highest priorities from a flight-scheduling and route-planning perspective, as shown in Figure 9.2. 0 20 40 60 80 100 Other Business Travel Information Research on Leakage Demographic and Economic Data Projections or forecasts Route analysis Business case to airlines PercentSmall hubs Non hubs Total woLhgiH ytiroirPytiroirP 54321noitamrofnifoyrogetaC Economic & demographic data Actual or potential market demand Airport operating cost data Airport infrastructure (e.g., gates, runways)
From page 122...
... The most important business information that a community can supply to the airlines includes the following: • The names and descriptions of the community's largest and most prominent businesses • Total employment at each of those businesses • Inbound and outbound travel demand, especially to an airline's hubs and major cities • Travel patterns of particular businesses/corporations • The ratio between domestic and international travel in the aggregate as well as for individual businesses • Information on existing corporate contracts and the willingness to enter into new contracts with the target airline • Business feedback about the quality and desirability of current service • The availability of financial support from the business community • The existence of a business-backed airport support organization (such as an ASD task force) If the proposed new market is heavily oriented toward business travel, it is valuable to highlight the potential business travel patterns between both endpoints of the route.
From page 123...
... can have a large number of military and government installations in their areas, which can contribute to substantial demand for air service. Actual or Potential Demand Airlines the study team spoke with were quite clear: the most important information concerns the actual or potential demand at a community.
From page 124...
... Four primary statistical areas should be covered: current service, current O&D market rankings, current onboard data, and passenger seasonality. Current Service These statistics will provide a target airline with (1)
From page 125...
... In addition to the absolute costs, your airport also needs to provide information on cost trends and benchmarks against competing airports. Target airlines usually want to understand the cost trends at your airport.
From page 126...
... . Communicating facility availability to a target airline is critical because aircraft allocation, staffing, advertising, and financing of the operation must be planned and must occur at specific intervals to ensure the successful start of the new route.
From page 127...
... There are eight critical elements of that forecast: the proposed schedule, the aircraft type, a comparison to similar new markets, operating assumptions, financial assumptions, forecast operating results, forecast financial results, and a financial sensitivity analysis. Proposed Schedule To illustrate the community's desired departure and arrival times and indicate a basic understanding of the target airline's operations, the route forecast should include proposed times of each flight in the target market (in both directions)
From page 128...
... This route comparison would show the frequency of service offered, the aircraft type flown in each market, the destinations served from each market, and the load factors achieved in each market for the relevant time period to emphasize the strength of the proposed service. In essence, a community would be asking the target airline to apply the same fundamental operating formula to the proposed market that it uses in similar communities.
From page 129...
... • Contributory beyond revenues, that is, revenues associated with additional passengers carried on connecting market sectors as a result of new service in the target market Financial Sensitivity Analysis The final part of the route forecast should include the impact of potential changes in the forecast RASM and/or CASM on the airline's forecast operating margin in the target market, if the actual operating and financial results should differ from the forecast. For example, as shown in Table 9.1, the "base case" assumption is that a carrier's CASM will be 13.85 cents, and it will earn an average yield of 20.39 cents, producing an estimated operating margin of 11.0 percent.
From page 130...
... Meetings at industry conferences such as JumpStart or Network are limited to 20 to 25 minutes, so a general rule would be to include no more than one slide per minute. Airline headquarters meetings are typically 60 to 90 minutes long, allowing greater depth in presenting the ASD team's business case.
From page 131...
... Provide at least five years of traffic statistics to illustrate trends. If passenger leakage is a significant problem, offer evidence in support of the market's true demand.
From page 132...
... Securing air service may require a prolonged effort: a number of industry conferences and headquarters meetings may be required. Therefore, airports (and community groups)
From page 133...
... Headquarters Meetings Most of the airports surveyed reported that they presented their cases to the airlines directly at headquarters meetings, typically following initial contact at an industry conference. One of the challenging but strategically important aspects of setting up a business meeting between the airport and the targeted airline is deciding on the composition of the team.
From page 134...
... It is important to gauge the level of interest of an airline in serving the airport and adjust goals and strategies accordingly, as repeated emails and phone calls could be counterproductive. On-Site Headquarters Meetings On-site headquarters meetings with incumbent carriers should not occur more frequently than once per year, and not less than once every two years.
From page 135...
... • The route forecast is an important part of any proposal that will be presented to a target airline. It represents an airport's best estimate of how successful the new service will be.
From page 136...
... C H A P T E R 1 0 Evaluating and Improving ASD Efforts Sound program management requires an evaluation to improve and build upon past efforts. Measurement allows for improvement.
From page 137...
... . As discussed in Chapter 7, other commonly used objectives include the following: • Retaining existing service • Adding service to a new destination • Adding frequencies to current services • Lowering fares/introducing new competitive service • Improving service reliability • Upgrading aircraft • Increasing access to global networks Progress toward these types of goals is easily measured.
From page 138...
... Considering the importance of maintaining existing service, particularly in difficult economic times, it is vitally important that the effects of any ASD program be considered on the incumbent carriers: • Did service to the new hub shift passengers from the incumbent's connecting service? • What happened to their load factors?
From page 139...
... Challenges in Measuring the Outcomes of Marketing Efforts Many airports' ASD goals are linked to a marketing campaign. Several airports surveyed had engaged in various marketing efforts to re-capture a greater share of passengers that they were losing to nearby airports.
From page 140...
... . Figures 10.3 and 10.4 show enplanement and operations data from the U.S.DOT report that illustrate successful ASD efforts.
From page 141...
... But he also reported that there were many setbacks that the grant could not control, such as a drought in the region leading to a weak ski season, a major forest fire that caused a drop in enplanements, and a drop in the overall economy. This case study illustrates the role of external factors in affecting the viability of air service.
From page 142...
... (This reality is the underlying basis for establishing travel banks and minimum revenue guarantees.) Evaluations may need to allow several months for the public to understand and appreciate the differences in service options that are available at the airport before they accept and act on them.
From page 143...
... . Summary • Evaluating results is an essential element of an ASD program, as it allows the ASD team to refine its approach.
From page 144...
... U.S. Government Accountability Office, Commercial Aviation: Initial Small Community Air Service Development Projects Have Produced Mixed Results, GAO-06-21, November 30, 2005.


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