Flight Blog

Jun 24 2010 Spin Control? BY sgf-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?

 


 

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.

 


Jun 15 2010 Slight of Hand BY sgf-adminTAGS Customer Service

 

The Detroit News reports that some airlines will waive bag fees if you use an airline credit card. There is, of course, a catch: the credit cards have annual fees.

This news comes on the heels of a survey which found, among other things, that "given the opportunity, 68% of respondents said they would fly at an inconvenient time of day with an additional connection in order to avoid fees; 32% said they would bite the bullet and pay the extra money to fly at a convenient time.  62% also said they would forego a carry-on bag in order to avoid a fee." All these fees probably won't go away any time soon. They generate too much income. By some estimates  fees generated over $7 billion last year.

And here's an airline revenue stream you may not have thought about: shopping catalogs. You know, those catalogs in the airplane seat pockets. Last week I flew to San Diego and had a chance to browse one.  This particular catalog featured one of those spiffy upside down garden things for $89.95.  Earlier in the week I saw one at a Springfield Wal-Mart for $15.00.

 


May 19 2010 Ozarks Honor Flight III BY sgf-adminTAGS Misc.

 

The Honor Flight departs Springfield as Airport Rescue Firefighters provide a water canon salute. (click any image for a larger version)

Yesterday the Airport was host to the third Ozarks Honor Flight. If you haven't heard about Honor Flight, please read on. Ozarks Honor Flight is a non-profit organization that formed late last year. It has one mission: to transport World War II veterans to Washington, D.C. so they can visit the World War II memorial. If that doesn't sound like a big deal, consider this: the World War II memorial wasn't built and finished until 2004. As a result, most veterans of that war have not seen their memorial. Most will leave us without having had the chance to visit their place of honor. Yesterday Honor Flight flew 75 veterans to Washington, D.C., free of charge. More than 500 Ozark veterans are on a waiting list.  Visit Ozarks Honor Flight for more information.

The Honor Flight returns to Springfield late Wednesday night, More than 300 people showed up to welcome them home.

 


May 13 2010 'Runaround in China' BY sgf-adminTAGS American

 

Three years ago American Airlines got permission from China to fly between Beijing and Chicago. The service has been delayed several times, most recently because the Chinese government wanted American to use operating slots in the middle of the night. "Slots" is industry jargon for arrival and departure times. The service is now scheduled to begin May 25 and the slots are no longer in the middle of the night. They're late in the evening: 9:30 pm and 11:59 pm, Beijing time. That's according to the Dallas Morning News.

The bnet blog has a good overview of the situation.

Why does any of this matter to us? Because easy connectivity to Asia is increasingly important for economic development. The American Airlines service between Chicago and Beijing is great for us because it means you can fly from Springfield to Beijing with just one connection, through Chicago. When Asian companies come to the United States, looking for a place to set up shop, this is the sort of connectivity they look for. Another point...

The American Airline slots in Beijing can affect the price we pay to fly there. That's because United Airlines also flies from Springfield to Beijing, via Chicago.  The airline that has the best slots will likely charge the highest fare.