“Fly From Nearby”: More Than A Marketing Slogan

By Kevin C. Klein

Air transportation and the airline industry are constantly in a state of change, with the fluctuations in the past decade even more pronounced. The industry – through consolidation, fleet renewal and capacity discipline – is seeing progress in the search for profitability. What does this mean for northern Michigan travelers?

Two of the major challenges to profitability are the volatility of fuel prices and the variable strength of the dollar in the global economy. The industry is dependent on long lead time for resources and aircraft availability and with a workforce whose rules inherently impact the ability for airlines to react quickly. Capacity restraint (an airline’s ability to charge higher fares because supply of seats is not increasing faster than demand) remains a key word in the airline industry and leaves communities in the position of competing for increasingly scarce resources. Since the number of providers has become more limited through consolidation, airlines are primarily focused on major markets; smaller markets are generally in the position of having to be more aggressive to maintain/improve existing service or attain new service.

Remember 1978? Congress decided to deregulate the airline industry. The reason for deregulation was to end the monopoly, so to speak, by the big four airlines at the time: American Airlines, Eastern Air Lines, TWA and United Airlines. Pan Am was also a dominate player but was only allowed to fly international routes. Since deregulation, more than 300 airlines have come and gone. Almost all carriers have experienced bankruptcy or major reorganization to compete in today’s market. After 36 years of struggles, today we again have four major carriers flying more than 85 percent of domestic traffic: American Airlines, Delta Air Lines, Southwest Airlines  and United Airlines. There are a few other point to point airlines out there but they are large city-focused, cleaning up what the big four left behind. The marketplace, through financial forces, has in a sense re-regulated the economics of the industry.

Again, what does this mean for those traveling to and from northern Michigan? The great news is three of the four major carriers serve TVC. Not only do they have strong domestic networks but they also have worldwide connections to allow for TVC to compete in the global marketplace. Southwest has lost its foothold on low fares as Bill McGee of USA Today recently reported, “May the Southwest Effect R.I.P.”

Nationwide growth is very slow with most communities seeing growth numbers around 0.5 to 1 percent, but at TVC growth for 2013 was at 3.6 percent and so far in 2014 it is at 6.1 percent. We have also seen our fares become very competitive with the airports that surround us. For example, our average fare is within $20 of Detroit and $40 of Grand Rapids. It begs the question: What is the value of your time?

Air service is a critical component of business, and a community can determine where that air service is located – at your back door or down the road. In today’s airline business world, same as it is in any business world, it is about pleasing shareholders. If a route cannot produce the return on investment the airline is looking for, then the community will loss the route. Competition between communities is fierce. In a recent study conducted by the airport, use of TVC by locals since 2008 is relatively flat. However, the use by out-of-state visitors is in a strong growth pattern. In order for TVC to see the growth our business traffic desires, we need the local traveler to fly TVC! Otherwise, our growth will continue to be when our visitors come to town.

Kevin Klein is the director of Cherry Capital Airport in Traverse City.

 

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