Flight Blog

Jun 30 2010 Chicago Headache BY adminTAGS FAA

 

The airlines are definitely feeling the impact of the new federal rules concerning tarmac delays:

"Elaborate action plans, high-tech bells and whistles and stockpiles of emergency snack kits that carriers created to comply with a new three-hour tarmac rule have been tested by storms that buffeted the Chicago area this month. The new federal regulation mandates that airlines give passengers the option to get off planes that have sat on the airfield for three hours. More than 500 flights were canceled at O'Hare on June 23, despite the addition almost two years ago of what the Daley administration heralded as a "bad weather runway" on the north airfield to mitigate disruptions to travelers. A downpour on June 18, accompanied by 70 mph winds, left O'Hare's flight schedule in tatters: 221 flights were canceled and 328 departed more than 44 minutes late, according to FlightStats.com."

Read the rest of the story from the Chicago Tribune.

 

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Jun 28 2010 Dueling Channels BY adminTAGS How the Airport Works

 

We received this email from Bryan last Friday...

"I recently flew into and out of the Springfield airport.  The terminal looks new and clean, and was very efficient.  However, on the televisions providing information to passengers, FOX News was showing on two.  This makes a very strong partisan statement on the part of the airport.  FOX News is not neutral – it is very offensive to many, especially those who dislike seeing lies and distortions promulgated as “news”.  Just as porn cannot be balanced by showing the BBC, so this intellectual porn – which people may certainly watch in the privacy of their own homes (or closets) – cannot be “balanced” with other news channels.  CNN is an accepted reasonably nonpartisan source of news in most other airports in this country.  If you’re looking for the best possible customer reaction to the very nice airport you’ve constructed, I suggest you dispense with FOX News.  Please let me know your television policy."

Bryan... While we understand your point-of-view concerning Fox News, the airport serves a diverse customer base of all races, religions and beliefs. In short, we serve in a democratic society which tolerates many points-of-view and individual beliefs. We are reminded of this all the time. Here are some recent examples of issues raised by people who use the airport:

  • Playboy and Maxim magazines are obscene and should not be sold in gift stores at the airport.
  • CNN. Is it appropriate for the airport to show such a “biased” news source on the terminal TVs?
  • The art glass in the new terminal. As one person put it, “…why not just take out the grotesque windows and put up a wall with some real, quality art work from local artists?”
  • In the old terminal we had several art objects which have yet to move to the new terminal. They included an abstract, geometric drawing of colored balls, and a metal sculpture in the lobby fountain. Several times a year, on our comment cards, we would find comments objecting to both. The colored balls were typically found to be “meaningless” and/or “suggestive.” Some thought the metal sculpture was a phallic symbol.
  • Fox News. Is it appropriate for the airport to show such a “biased” news source on the terminal TVs?
  • The carpet in the terminal. One fellow disliked the carpet so much he wrote the newspaper claiming that the carpet triggered his vertigo. The newspaper printed it.

There are other issues as well but you get the idea… For several years the issue of the dueling cable news channels was a recurring topic. It settled down when we made sure that each “news” outlet had equal representation. Here’s how that works: the airport has nine TVs in the terminal. Eight are in the gate areas and here’s what they show:

  • Two TVs are tuned to Fox News
  • Two TVs are tuned to CNN
  • Four TVs are tuned to Weather Channel

One TV is pre-security and it’s the orphan child: it’s tuned to Bloomberg financial. There are two TVs in the post-security restaurant but the airport does not own or control them. They are typically tuned to tell-all talk shows or the Andy Griffith Show. So far, no one has raised objection to the Weather Channel.

 

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Jason has explained the logic behind his thought that the Branson airport caused last year's upswing in Springfield passenger numbers:

"Prior to Branson Airport opening in May 2009, out of the top 150 commercial service airports in the country, Springfield consistently ranked in the top 15 as one of the highest airfare airports in the country. Those are DOT numbers not mine. Branson Airport brought low fare competition to the region and effectively lowered fares from Springfield."

Jason... Your overall premise here is that the Springfield airport is in a state of denial. It is not. We have consistently said in public, and on this blog, that competition in the market is a good thing because it could lower fares. We have also said that the Branson airport has created competition in the market. We just think it’s inaccurate to say that it was responsible for last year’s overall drop in Springfield air fare—the notion isn’t supported by fare data.

Fare data does show that the Branson airport created competition on one Springfield route: the American service to Dallas. It was short lived, but it sure was sweet while it lasted. The competition was created by the Sun Country service between Branson and Dallas. While that service was running (and it was only for a few months), American was matching the Sun Country fare. During that time customers could fly from Springfield to Dallas for less than $200. In 2008 and 2007 that fare was typically between $400 and $600.

Bottom line: the overall decline in fares last year was a national phenomenon. It was driven by the fact that airlines faced terrible advance sales early in the first quarter ’09. Their response was to cut fares across the board in an attempt to fill the seats. In the Springfield market the national fare decline was given an extra bump by the short lived competition on the Dallas route.

As time goes on, and as more fare data come in, it’s our hope that we’ll see strong evidence of Branson competition driving down Springfield fares down. At this point, however, we’re not particularly optimistic that it will happen. With the economy on the mend fares are trending up and they’ve been doing so (with a vengeance) since the first of the year. 

 

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Jun 24 2010 Spin Control? BY adminTAGS How the Airport Works

 

Jason has some comments apparently in response to the postings about airline profits and the airport's May passenger numbers being down:

"Spin this one however you want.  Great! The airlines are making money now.  How are you going to pay for that new terminal with less passenger revenues for the airport?  You were up 17% last May because of Branson Airport!  You can continue to spin it in any direction you want to serve your purposes, but that is all it is and people are getting sick of it."

Jason... Paying for the new terminal is not an issue. The debt service plan is extremely conservative—as routine we make annual payments that are 1.5 times the amount required. Even if passenger numbers drop 15 percent for 12 consecutive months, debt service can be paid back at 1.25 times. This debt service plan survived the depths of the recession when passenger numbers were down 18%. The fact that passenger numbers were down 4% in May is not an issue. As for the thought that the Branson airport caused last year's upswing in passenger numbers...could you please explain that logic?

 

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Our passenger numbers are in for May and they show that we were down four percent for the month and four percent year-to-date. Here’s how the numbers breakdown, showing a month to month comparison:

  • May 2009: 81,496 total passengers
  • May 2110: 67,609 total passengers

Take a look at how the individual airlines did during May 2010, compared to May 2009:

  • Delta: - 27%
  • United: - 17%
  • Allegiant: -10%
  • American: -15%

On the surface these negative numbers seem lousy—especially when compared to last May when the airport’s total passenger numbers were up 17 percent. The numbers seem lousy, but they really aren’t. That’s because this year the airlines are making money. Last year they were losing money. In the jargon of the business, “yields” have improved. Here’s how yields work… Suppose you’re an airline with a jet that holds 50 people. Would you rather sell 50 seats at $100 a piece, or 30 seats for $200 a piece? You do the math:

  • 50 seats sold for $100 = $5000
  • 30 seats sold for $200 = $6000

wingsdollars1The dollar amounts used here are hypothetical, but this illustrates exactly what’s going on in Springfield right now: the airlines are selling fewer seats this year, but they’re selling them at a higher price. Let’s look at the big picture and gain some perspective… Last year, early in the first quarter, the airlines took a look at their advance bookings and nearly stroked out—advance bookings were terrible. In response, airlines cut fares across the country. At this airport, in 2009, fares were down an astounding 22.3%. Bottom line: more people were flying due to fare cuts, but the airlines were losing money hand-over-fist. It was good for customers, but bad for airlines. This year, early in the first quarter, something unexpected happened: business travel ticked up. As an American Airlines route planner told me last week, “It was like someone turned on a faucet and the business traveler was suddenly back.” The return of the business traveler, after the depths of the recession, gave the airlines the leverage they needed to start raising fares. Here’s the bullet point summary of where the airlines are right now:

  • Fares are up
  • Airlines continue to cut the number of seats in the air, thus further reducing operational costs
  • Fuel prices are down (compared to last year)
  • Airlines are giddy because they’re making money...

Here’s the take-away from all this: airports tend to get giddy when passenger numbers are up because it means more airport revenue. That’s what happened last year at our airport. The downside was that the airlines were losing money. Now, the tables are turned: the airlines are making more money and the airport is making less money. In the final analysis, airports would rather have happy airlines. An airline that’s losing money is a lot more inclined to pull up its stakes and leave the market.

Having said all that, be warned! We’ll see wild swings this year. The month of June has 59 more flights than May; all of them seasonal. This will probably cause passenger numbers to swing to the positive side. But this fall, when those seasonal flights go away, numbers will swing back the other way. It’s true for the entire industry—just two months ago the International Air Transport Association (IATA) predicted a  $2.8 billion global loss for airlines this year. Last week the IATA changed its mind and predicted a $2.5 billion gain.

Don't be surprised if the entire industry swings back and forth for the duration of the recession.

 

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