Flight Blog

 

faucet2.jpg Today I have some really good news to report: our airport has seen an 18 percent decline in the number of customers leaving the market to fly from other airports. The news comes from a leakage study we commissioned late last year. The results just came in. “Leakage” is the aviation term used to describe customers leaving the market to fly from other airports. It’s typically caused by two things: cheaper fares at other airports and more non-stop destinations.

 

The last time we did a leakage study was in 2005. The finding back then was that 30 percent of our potential customers were leaving the market to fly from other airports. A study in 1997 reached the same conclusion. We expected that the new study might show some slight improvement, but the 18 percent decline blew us away.

 

What does the finding tell us? It tells us that Springfield fares are still high, but not as high as they used to be. It also says that the vast majority of customers are deciding the difference in price isn’t worth the drive to airports in Kansas City, St. Louis or Tulsa.

 

The study cites two reasons for the improvements: the addition of Allegiant Air service in April 2005, and the addition of Delta service to Atlanta in December 2005.

 

As many of you know, Allegiant flies from here to Las Vegas, Orlando and Tampa. Round trip tickets are sometimes as low as $200. Before Allegiant’s arrival, it cost twice or three times as much to reach those cities. As for the impact of Atlanta service, that has less to do with cost and more to do with connections. The service makes it much easier to connect from Springfield to the East Coast and Europe. 12 direct destinations. While the study doesn’t mention it, I think that’s another reason for the leakage improvement. Nine of those destinations are big hub airports. This makes it possible to reach most places from Springfield with only one connecting flight.

 

What’s the practical, real world impact of this improvement? I think it’s a strong selling point for new or additional service. As the author of the leakage study put it, “Airlines generally prefer existing strong capture rates rather than the potential to recapture traffic with new service. In the age of $95 oil, most airlines don’t want to work any harder chasing passengers than they have to and most are also risk adverse."  

 

Bottom line: when we’re talking to airlines we’ll use this study to show them the strength of the market. If you give us the seats, we’ll fill them.


Jan 23 2008 Seasonal Travel and Fares BY sgf-adminTAGS How the Airport Works

 

Greg wonders, "What effect if any does seasonal airfare have on us. I notice when booking a recent allegiant trip that sometimes flights are only 2 days a week while other time 4 days a week."

 

The number of people traveling by air peaks in the summer; trends down through the fall and hits rock bottom in January. Take a look at the graph. This shows the pattern for Springfield in 2007. In January there were 54,438 total passengers. In June: 85,354. December: 69,758. 2007graph.gif

 

The January 2008 number will be similar to the same month last year. With few exceptions our graph always looks something like this and the same is true for the industry as a whole. The airlines counter the winter downtime by lowering fares and cutting flights. This is what Greg noticed with Allegiant.

 

Here's a tip for the savvy air traveler: start looking for the bargain January/February fares in November and December.


 

Dustin wants to know: So how will the transition to the new terminal take place? Will there be all new loading bridges for the passengers or will the existing bridges be transplanted? Also, any word on new food/beverage vendors in the new terminal? And getting back to the "un-named" airline that was supposed to begin servicing SGF (the one that went so far as to sign a ground handling contract with the city), what ever happened to them?

 

The transition will occur over three months and will begin at a date yet to be determined. When we hit that three month window, the six loading bridges at the current terminal will be taken down and moved to the new terminal. Some of the bridges will be rehabilitated. They will join the four new bridges at the new terminal. During the three month window we'll have to ground load all planes at the current terminal. That means passengers will be outside, walking up and down airplane steps.

 

As for food in the new terminal, that's yet to be determined.

 

As for that unnamed airline that I mentioned back in August, it was a small charter airline based in Rockford, Il. They told us they planned to fly several times a week between St. Louis, Dallas and Chicago with 737s full of Branson bound tourist. We haven't heard from them in several months.


Dec 07 2007 State Auditor's Report BY sgf-adminTAGS How the Airport Works

 

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.


Nov 27 2007 Perception is Reality BY sgf-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."