Southwest! Now that I have your attention …
I recently attended an air service conference attended by communities and airlines across the United States. It is not surprising most communities have the same issues we face at Cherry Capital Airport (TVC): not enough capacity, fares seem high and there are not many airlines still in business. I heard many stories about lost flights and service and had to think to myself, “Wow, compared to others, we are very thankful for the service we have.” Since 2010, small airports have lost two percent of their service but Cherry Capital has grown about 15.7 percent. Why? We have three great airlines that serve our region.
Yet, many of our travelers still ask why we do not have a low cost carrier (LCC) or an airline like Southwest in Traverse City – believing a LCC is the answer to air service in our community. We meet with Southwest and other low cost carriers at least once a year to provide an update on our market. Important to remember is every community across the nation is looking for a low cost carrier. We are in a giant pool of communities that are competing for a LCC airline – much like communities compete to bring in a business or manufacturer. We have to have the right demographics for a company to bring in their business or factory; the same applies to the airlines. The airlines have found financial religion and are looking for markets that will not only make profits but more profits than other cities. Airlines are businesses directed by Wall Street not Main Street. So what must our community be able to do to attract a low cost carrier?
1. Score high in generating profits for the airline versus another community.
2. Fit the airline’s strategic plan and purpose. LCCs primarily fly non-stop routes and at off-peak times.
3. Generate significant local traffic to fill up the aircraft. For example, LCCs usually operate high-density aircraft with 160-plus seats going to a market such as Orlando, Tampa or Las Vegas. (Population catchment area between 1 and 2 million people.)
A low cost carrier also needs to look at other factors: How seasonal is the market? Is the demand directional, is it day of the week, or is it only high during already peak seasons? It also looks at other competition at the airport and in the region, the level of investment needed to develop a new marketplace and how much the community is willing to invest in it.
When reviewing this criteria, TVC has a lot of success for the current service we generate. We score well with the ability to generate profits for the carriers that serve the market. However, our traveling community does it in a fashion that promotes hub flying, not non-stop flying. Most of our destinations see a handful of people flying each day. When you combine these passengers, you generate enough traffic to sustain hub service. Our traffic is actually more destination traffic as the majority of our travelers do not originate in TVC – they originate out of state.
When looking to fill up large aircraft going to non–stop destinations, we need to look at less than daily service or even seasonal service. This is not so attractive when larger cities such as Pittsburgh or Cincinnati can support daily service. Then there are cities willing to promote revenue guarantees. (Note: FAA does not allow airports to provide revenue guarantees but does allow communities). Some communities have offered as much as $15 million a year for certain routes. These guarantees do not always work but are still offered. The airlines embrace this method as they look to reduce risk in a marketplace where they would not normally operate.
The changes in the industry continue to evolve into what our community desires. So if we desire a low cost carrier, our community needs to grow or produce revenue guarantees. As we desire more service, we need to demonstrate our service begins and ends at TVC and not another airport. The smallest city that recently opened for a LCC airline generated about 270,000 enplanements (people getting on board in that city) for that airline alone. TVC’s enplanements for 2014 for all three carriers was 199,801.
The reality is that many LCCs and Southwest Airlines do not serve small markets. That is why our efforts continue to be successful with the three carriers we have. Our focus remains on connectivity to our hubs, which provides our community with one stop travel to the world.
TVC offers incentives to the airlines for new services – in the form of fee abatements for one year, marketing funds and assistance with terminal improvements. These incentives can be a few thousand dollars to well over a hundred thousand dollars. Our current airlines have all used these programs to start or add service to TVC. We are seeing smaller aircraft retired and larger aircraft being operated in our market. This is providing more seats and when more seats are in the market, lower fares are in the market and the more competitive we are. TVC’s focus will be working with the three major carriers to continue to expand their services.
This summer is another strong summer for the carriers. All three carriers are returning services to the seven cities we offered last year. American will serve Chicago. Delta will serve Atlanta, Detroit, Minneapolis and New York LaGuardia. United will serve Chicago, Denver, and Newark. So we may not have Southwest Airlines or a LCC, but what we have is growth and improved air service. Thank you American, Delta and United!