Flight Blog

Dec 16 2008 Woes at NW Arkansas BY adminTAGS Airports


The Irony Gods are at work at the NW Arkansas airport (XNA).


The Benton County Daily Record reports that Wal-Mart  "recently launched a companywide initiative to book associate business flights out of Tulsa International, Fort Smith or other airports if ticket prices at XNA are higher."


XNA was built about ten years ago—largely due to the urging and political influence of Wal-Mart. It's probably fair to say that the airport would not exist if Wal-Mart hadn't pushed for it. Remember that Arkansas Democrat who occupied the White House in the 1990s? NW Arkansas had political horsepower in spades.


The headline on the newspaper's web site alludes to that horsepower: "Forcing the airline's hand? : Wal-Mart considers more flights from Tulsa."


Forcing the airline's hand? How's that? The headline writer overestimates available horsepower.


Airlines don't care what market they sell the seat in. What matters, from the airline's point-of-view, is that the seat is sold. Doesn't make any difference if it's sold at XNA or Tulsa. The economics driving the airline's fare structure is simple: they charge higher fares in smaller markets because there's less competition and a smaller supply of seats. Those rules of airline/airport economics are something that Wal-Mart can't change.

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Mike poses an astute question : "Are you certain they [the Branson airport] are subsidizing [AirTran]? USA Today quotes, “We’re not writing a check for $5 million or anything crazy like that. That’s all I can say” To me, when you are talking millions, even $2 million is pretty crazy."


It may not be "a check for $5 million," but you can be sure that AirTran isn't doing it for free. Consider the case of Gulfport, Miss. AirTran is ending its service to the casino laden area in January. Here's what the Atlanta Business Chronicle had to report on December 3: "It is an unfortunate but necessary decision to discontinue AirTran Airways’ service to Gulfport-Biloxi,” AirTran said in a statement. “We have flown under a contract with the casinos since we began the market in 1999, since that is the bulk of the business flying into the market. The casinos have made the decision to operate without a contract for flying, and the market is just not financially viable for us without that support especially in today’s volatile economic times."


Does it sound to you like the casinos were buying (AKA: subsidizing) the service? Look, it's in the airline's best interest to take a deal if it's offered. After all, AirTran reported a net loss of $107.1 million in the 3rd quarter. Today its stock closed at $3.64. That compares to American at $9.53. United at $9.94. Delta at $10.50. Allegiant at $43.08. Southwest at $7.30. JetBlue at $5.55. Alaska Air at $26.48. As I look at a list of airline stock closings, it appears that only Frontier closed lower: 0.185 ! 



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Dec 11 2008 More Branson Comments BY adminTAGS Branson airport


We've received comments from Marc:


"I have a friend flying to my home in Wichita from Phoenix for Christmas. We are going to Branson after Christmas to spend time in my second home there. She is flying home and leaving from Springfield. The ticket costs $170.00 one way from Phoenix to Wichita and $765.00 one way to return from Springfield to Phoenix. I have read that Springfield is planning to build a 150 million terminal and Branson has built an entire airport for 150 million...."


Marc, your friend could fly from Phoenix to Springfield for a base fare of $129. I just looked it up on the Allegiant Air web site. That's leaving on the 24th from Phoenix-Mesa Gateway Airport and departing Springfield on the 31st.


As for the cost of the terminal, the total of cost of our new terminal project is $117 million — not $150 million. While I understand your logic in attempting to tie the cost of the project to the price of tickets, it is based on faulty assumptions. The existence of $129 roundtrip fare from Springfield to Phoenix proves my point.

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Dec 11 2008 Branson Comments BY adminTAGS Airports


Carl writes in with this:


"This is nothing but spin tactics by SGF–Just last week, you were saying this was never possible. You even brought in your big Shot from Boyd Aviation to tell us, “Write this down” “No” Branson is not going to get a mainine low cost carrier. SGF is still a joke and always will be. You should close shop and send all of your flights to BBG."


That's not right Carl. We never said it wasn't possible. In fact, if you go back through this blog's postings, you'll find that we mentioned the possibility of subsidized service several times.


As for aviation analyst Michael Boyd, who visited Springfield on November 19, here's what he said about AirTran: "...unless someone is going to pay them a lot of money, it's just not going to happen." Click the link and listen for yourself—Boyd pegged it.

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Dec 11 2008 Branson Airport News BY adminTAGS Branson airport


Tonight USA Today and KYTV are reporting what we confirmed earlier: AirTran will provide the new Branson Airport with one-flight-a-day, daily service between Atlanta and Branson beginning in May. We congratulate Branson airport investors and management.


No doubt many of you are wondering how Branson did it—or more to the point—how come AirTran is flying to Branson rather than Springfield? The answer lies in the business details. But since both the airport and AirTran are private companies, details probably won't be forthcoming.


The answer is almost certainly money. In short, AirTran is being subsidized to fly to Branson. We’d hazard a guess that the amount is in the neighborhood of $2 million a year.


We base that guess on the fact that AirTran is currently given $6.5 million a year to provide service in Wichita. That’s for three flights a day, Sunday through Friday, with two flights on Saturday. So, one flight a day in Branson might reasonably be expected to cost about $2 million a year.


Why doesn't Springfield subsidize airlines? There are two main reasons: 1) the airport is publicly owned. As such, it can't subsidize one airline without subsidizing all of them. That doesn't work from a business point of view because the airport has to generate revenue in order to stay up to date, open and operating. 2) Subsidizing air service was faddish several years ago, but is rarely done now because it generally does not work. Once the money goes away, the service goes away. It tends to be a bad investment.


How does this impact our airport? Not much––we already provide service to Atlanta: four flights a day on Delta. In the long run the new Branson service may have a positive impact for SW Missouri customers because competition between AirTran and Delta may drive down fares at both airports.


The task facing the Branson airport now is to establish and grow the new service and to make it viable over the long term––without the benefit of subsidies. That will be a huge challenge in the current economic environment and we wish both AirTran and the Branson airport the best of luck.

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