Flight Blog

 

Jake writes in with a quote and a comment:

 

""About $1.2 million was not collected by the Springfield-Branson National Airport because the authorization to collect a Passenger Facility Charge expired."" $1.2 million is a lot of lost revenue."

 

Jake is quoting from the state audit of the City of Springfield. The Missouri state auditor released it Thursday evening. Here's a link to the report. The auditor had five findings concerning the Airport, including the one mentioned by Jake. Here are the findings and the Airport's response to each one; audit findings are in bold face:

 

1) Approximately $1.2 million in revenue was not collected by the Springfield-Branson National Airport because authorization to collect a Passenger Facility Charge (PFC) expired.

 

The Airport respectfully disagrees with this finding. Here’s how PFCs work: the PFC program is overseen by the Federal Aviation Administration (FAA). It allows airports to charge passengers getting on a plane a fee for using the airport. The money collected is then used to fund FAA approved projects.

 

Airports charge the PFC only when they have an FAA approved project online. The PFC ends when the project is paid for. During the period citied by the auditor, a PFC project was not online—we were between projects. Key point: the PFC is charged project-by-project—it is not meant to be a continuous revenue stream. It is charged only when needed and approved by the FAA.

 

When the midfield terminal was officially approved for PFC funding, we began charging the fee again—there was no loss of revenue. Collection simply began nine months after the previous PFC expired.

 

Read more about the Passenger Facility Charge on the FAA web site. This page provides a clear and concise explanation of the program. This page provides PFC reports. Learn how the PFC program fits into the airport's overall funding by reading this previous blog posting.

 

2) The airport's lease agreements with six car rental companies for office space requires monthly lease payments based upon gross sales, and authorizes airport officials to verify gross sales are accurately reported by examining the books and records or by requesting an independent audit report. Airport officials indicated that gross sales amounts reported by the car rental companies are reviewed each month for significant fluctuations, but gross sales are not verified and independent audits are not requested. The airport receives approximately $1.5 million annually from the six car rental companies.

 

The Airport agrees with the finding. As a matter of routine, the airport business manager has always reviewed rental car accounting for obvious problems. However, we will do independent audits in the future.

 

3) The airport's lease agreement with a travel agency is not consistent with other airport lease agreements. The airport has leased office space to one travel agency since 1982, and in 2006 renewed the lease agreement for another 3 years. While lease agreements for the car rental companies and the food vendor base the lease amount on their gross revenue, the lease agreement with the travel agency is a flat rate of $30 per square foot of office space, or $992 per month.

 

The Airport responds: There are four different kinds of businesses that operate in the terminal: 1) airlines, 2) rental car agencies, 3) restaurant/gift shop and 4) the travel agency. It does not make sense to charge each kind of business the same way. Each is treated differently. Each business type operates on a unique business model.

 

For example, the airlines generate millions of dollars in revenue at the airport and make direct use of airport capital infrastructure that costs millions of dollars (the gates, the ramps, the taxiways, the runways, etc.). The travel agency occupies an office space of about a hundred square feet and makes a few dollars per business transaction.

 

Would it be fair to charge the travel agency the same rates as the airlines?

 

The Airport also notes that nothing prevents another travel agency from operating in the terminal. In fact, McDaniel Travel operated in the terminal, but decided to leave in the aftermath of the September 11th attacks.

 

4) Airport officials have been operating on a month to month basis with a company for parking lot management services since the contract expired in 2003. In 1997 the Airport Board solicited proposals and subsequently signed a 5-year contract that expired in 2003 for parking lot management services. Airport officials indicate proposals were not solicited for these services when the original contract expired because of the future plans to construct a new terminal, and proposals have now been solicited for management services at the new terminal site. The airport receives approximately $2.5 million annually in parking fees.

 

The Airport responds: When the parking contract expired in 2003 we allowed it to convert to a month-to-month basis. There were two reasons: the depressed economic condition of the aviation industry in the aftermath of September 11; and the plans for the new terminal. Under the terms of the contract, the Airport received 86 cents from every dollar collected in parking fees. If the contract was rebid, that amount was unlikely to be matched given the industry’s depressed condition. This year the Airport bid the parking contract for the new terminal.

 

5) The airport terminal has vacant office spaces available for additional vendors and there is no documentation to indicate the Airport Board has performed any procedures to market the open spaces to potential tenants. Additionally, according to airport officials the new terminal currently under construction will be much larger and have more spaces available to lease.

 

The Airport responds: The auditor is apparently referring to two offices in the baggage claim area. Both have counter space and are used seasonally by shuttle services. They are at the far end of the baggage claim area, off the beaten path. One office is being converted for Airport police use. We occasionally get inquiries from businesses interested in leasing them full time, but so far, no takers.

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Nov 27 2007 Perception is Reality BY adminTAGS Southwest

 

Today’s Wall Street Journal provides an interesting read on Southwest Airlines. The headline says, “Southwest’s New Flight Plan: Win More Business Travelers.” Unfortunately, the story isn’t available on the paper’s web site unless you pay for it.

 

So, here’s the story in a nutshell: the airline wants to “wean itself from its reliance on budget travelers.” To accomplish this task the airline is trying to lure business travelers so it can raise fares. Here’s the catch: can it do it without maddening budget travelers?

 

That’s the meat of the story. But what’s really interesting are the details. The paper quotes an academic study that reports, “Southwest’s fares were lower only half the time when compared with fares of competitors selling tickets through the online travel site Orbitz.com.” You can find the study here and read the details.

 

This study, along with the Journal article, are two more blows for Southwest as it works to protect its low fare perception. What do I mean by that? Play along here for a moment and I’ll give you an example...

 

2007 began with a screaming full page advertisement in the Journal. The catch line said, “Fares as low as $49.” Who do you suppose the airline was? Southwest? AirTran? JetBlue? Wrong, wrong and wrong. The correct answer: American Airlines. Admit it—you thought it was Southwest.

 

According to well known aviation analyst Darryl Jenkins, of Embry Riddle University, Southwest is the lowest fare carrier in less than one-third of its markets. He says, “The illusion of low fare is better than a low fare and Southwest has the highest percentage of high fares of any airline.” If you’re skeptical about this, do a market by market comparison of fares and you’ll discover what Jenkins already knows: the mystique of Southwest has more to do with perception than low fares. Analysts say one reason so many airlines have been in bankruptcy is because they’ve actually been competing with Southwest.

 

Perhaps the bottom line challenge for Southwest, as it tries to appeal to business flyers, is maintaining the "illusion."

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Nov 19 2007 Gale Warning BY adminTAGS Airlines

 

gale.gif On the coast they fly flags to indicate the weather forecast. Today I'm borrowing the one used for gale warnings...

 

I need to bring you up to speed on the current mood of the airline industry: gloomy.

 

The sudden and dramatic rise in energy prices, combined with a generally poor economic outlook, is forcing some to predict that airlines will begin scrutinizing existing markets for profitability. Revenue quality, not volume, will rule the day. Smaller markets will experience service cuts. In fact, just last week Allegiant Air cut six of its Las Vegas routes. The affected cities: Lansing, Springfield, Illinois, Champaign, Marian, Gulfport and Huntsville. The official reason for the cuts: high fuel prices.

 

What do I mean when I say "revenue quality," not "volume" will rule the day? Here's a simple example: suppose an airline flies to two markets. In one market a 50 seat plane is always 80% full and the fare is $50, In the other market a 50 seat plane is always 50% full and the fare is $150. Do the math. If you were the airline, which flight would you drop?

 

The challenge for airports in the coming year: maintaining the service they have. Airlines will expand only in markets where new service is a sure thing. In reality, that's the environment we've been operating in since the 2nd quarter of 2006. That's when the airlines began cutting back on the supply of seats and holding the line on the prices.

 

Where do we stand? At the end of October our total passenger count was up 2% for the year. We did this despite a zero percent growth in the number of flights. That's good news. It's tells us that the Springfield-Branson air market is strong. The next two or three months will tell the real story, though. That's when we'll know if today's bad economic news is having an impact.

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Oct 30 2007 A Piece of History BY adminTAGS History

 

This wonderful image appeared in the Springfield News & Leader on November 15, 1953. The plane is the venerable DC-3. The colonial style building is the first terminal.

 

The story accompanying the photo is a detailed account of the airport’s first eight years of existence.oldterm_dc3.jpg Here’s how the story described the airport’s financial situation:

 

“…our airport is a pocket sized port compared with the mammoth fields like Chicago’s Midway, or Boston’s Logan or New York’s Idlewild. Yet if our airport must be termed small, it can also be called efficient and distinctive. It’s distinctive because it is in the black, without the backbone of direct tax support. It’s in the black because it is efficient.”

 

In the years since 1953, many things have changed. The first terminal is gone and DC-3s are seen mainly in museums and air shows. One thing hasn't changed—our airport still operates efficiently and in the black, “without the backbone of direct tax support.”

 

By the way, the reporter who wrote the story still works for the paper: Hank Billings.

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Oct 23 2007 Questions About Southwest BY adminTAGS Southwest

 

Curtis leaves comments from a posting in August about Southwest Airlines:

 

"It is not true that Southwest won't fly to an MSA of less than 1,000,000 people. It currently flies to 17 of them, not counting any cities in Hawaii. Five of these (Midland/Odessa, Amarillo, Lubbock, Harlingen/South Padre, and Reno) are smaller than Springfield MSA (according to U.S. Census 2006 estimates). I also don't understand why they would only fly to one destination from SGF. The five smaller cities all have direct flights to at least three destinations each."

 

You're right Curtis, but there's a little more to it...

 

When Southwest began service in 1971, it was a Texas based airline serving only Texas cities (this was long before the company adopted its "million people in the MSA guideline"). The airline continues to service those small, legacy cities because it has a near monopoly on the service. Shawn Schroeder, the assistant director of our airport, used to work at the airport in Harlingen. The Harlingen MSA has about 378,000 people and Southwest service. He tells me that it's very difficult to entice other airlines to provide service there because they don't want to compete with Southwest. Southwest has no reason to leave Harlingen (or the other small Texas markets) because it has a lock on the market and they've always been there—the airline and Harlingen came to the dance together!

 

As for the Reno/Lake Tahoe market—its MSA is about the size of ours, but there's at least one very important difference: the tourism and gaming industry. The Reno airport has eleven airlines and moves approximately five million passengers a year. We have five airlines and less than a million total passengers a year. Given these facts, it's easy to understand why Southwest would serve the market. To compare our market to Reno, is to compare apples to oranges.

 

So, the bottom line is still true: today, in 2007, when people like me call Southwest and inquire about obtaining service, the airline says it generally doesn't consider service to an MSA of less than a million people.

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