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Posts Tagged ‘budget airlines’

Benet Wilson writes that Chicago Rockford International Airport, an airport on Chicago’s far western fringe with limited commercial service, is going to partner with a charter airline (actually, a brand — Southern Skyways) to offer scheduled services to Denver and Detroit, the former to replace service United is withdrawing this summer. Rockford will control routes, destinations, and fares, and will eat the losses. As Benet points out, this is a bad idea.

Regular airlines are struggling, and low-performing routes are getting cut. If Rockford can’t supply enough traffic to Denver when the route is a regional jet and has interline connections, how will it generate sufficient traffic with a larger plane and no connecting opportunities? Well, it will operate less frequently — a few times a week. Says the airport’s director: “You’ll see as many flights as you can fill.” That’s just the problem — there will be so few flights that being unable to fill them will become a self-fulfilling prophecy.

Rockford says it’s doing this to prove what a good market it is to other airlines. Yes, it’s such a good market that United is leaving. The trouble with the fund-your-own-airline-service strategy is that Rockford is creating a different type of service than it’s trying to replace or recruit. It’s best to get connecting service to major hubs — the airport is already served to cheapo leisure markets by Allegiant. But the Southern Skyways service won’t resemble the connecting hub service the airport claims to need: the aircraft types and sizes, schedules, and traffic feeds will be completely different.

Rockford’s taken a bad idea too far. There are better ways of recruiting airline service.

Rockford Airport Gets into the Airline Business [Towers and Tarmacs]

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Last week, Sean O’Neill addressed the tricky nature of measuring changes in airfares. Air fare indexes pick up or decreases in base fares over time, but they don’t pick up “nickel and diming” (the addition of lots of charges for luggage, food, over-the-phone booking) or declines in service (cranky flight attendants, less legroom).

I’m on record as being in favor of price transparency. The regulation-era model of aviation ticketing assumed a monolithic travel market, like a Soviet-style clothing factory — one size fits all. There were few limitations on the ticket, a meal and a drink onboard, and room in the hold for three suitcases. Pre-deregulation experiments like the loosening of the Florida market demonstrated that the market is diverse. Some people are flying somewhere for a year and need all the luggage they can tow; others are flying for a weekend and are fine with a carry-on. Some people get very hungry in-flight; others eat beforehand. Some people may need to make changes at the last minute; others plan their schedules around their flights. One of the reasons average airfares went down by almost 40 percent in real terms from 1980 to 2005 was exactly that the cheapest tickets offered during this time were less flexible and included fewer amenities. Unbundling ancillary services from the basic cost of travel, many airlines have made it possible for low- and middle-income people to enjoy unprecedented access to air travel. You get what you pay for.

Now, as far as incorporating levels of service into the Bureau of Labor Statistics’s Consumer Price Index goes, Sean has some links worth checking out. Another way of measuring airfares is the Bureau of Transportation Statistics’s Air Travel Price Index. (For more on methodology differences, click here and here.) The ATPI measures discount fares, frequent flier mile awards, and package deals, whereas the CPI does not. (According to the ATPI, average airfares continue to fall — by 19 percent in inflation-adjusted terms from 2000 to 2007.)

Sean neglects to mention service improvements over time, especially in routing. Deregulation freed airlines from their patchwork routes, and the carriers organized themselves around hubs, collecting feeder traffic to national and international networks. Today, almost every airport in the country is only one stop away from almost every other airport in the country and from many major markets in Europe, Asia, and Latin America. Compare that to the convoluted route maps in the Airchive.

Increased transparency in air travel pricing is nothing to mourn. Moreover, one would be hard-pressed to argue that in the past thirty years, ancillary fees have gone up enough to compete with the inflation-adjusted reduction in average fares.

Airfares: Price hikes that go underreported [This Just In]

Photo credit: Flickr user alex-s. Used through a Creative Commons license.

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Yes, this sounds like a good idea: start a low-fare carrier in an era of $100+ oil. Compound that brilliance by making it point-to-point only, but based at an airport with less than 285,000 enplanements in 2006 and a metro area of 300,000 people. Throw in the fact that even scheduled charter services masquerading as airlines are having trouble in that market, and you have the recipe for a great airline!

. . . Well, OK. This might be a recipe for disaster, but at least you can get the city — Charleston, W.Va., in this case — to pony up $3 million to support the theoretical “hometown airline.” Behind this plan is the same guy who did this with Skybus in Columbus, Ohio, and he seems to have come up with a pretty good shtick.

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Mike Boyd of the Boyd Group has released his 2008 airline industry predictions. Key among them: $100 oil will drive regional jets (RJs) to the desert graveyards sooner than expected; desperate “low-cost carriers” will need to cut capacity somehow; and “comprehensive network carriers” will need to improve their management of every minute. Boyd’s weekly commentaries, archived here, are always must reading for its boldness and contravention of conventional wisdom. If you recognize his name, it’s because he’s quoted in newspapers all the time. An industry consultant, he openly acknowledges who he’s consulted for when relevant (for example, he’s very bullish on Embraer’s E-Jets, for which his firm consulted). He’s also a spicy writer:

  • “The point is that it’s dumb and useless for some Steve Cute in a studio in New York to tell the world that an airport across the continent has ’30 minute delays.'”
  • “No question, Senator, that when it comes to the FAA, the Bush Administration is on an intellectual vacation to the Outer Rim.”
  • “We’re referring, of course, to Ted, where United got the brilliant idea to simply re-paint some A-320s, make ‘em all economy class, put them right back in service, and, poof!, try to convince the public that it was now a ‘low cost’ and ‘low fare’ airline. The assumption, apparently, was that the entire naive flying public had fallen off a turnip truck.”
  • “The DOT criticizing airlines for flight delays is like Willie Sutton writing a nasty letter to banks complaining about robberies.”
  • “Leslie Neilson beware: Bush is auditioning for your part in the next Scary Movie sequel.”

Boyd was given a blogging gig for the New York Times‘s Jet Lagged in December, which is (sadly) closed. Hopefully, it won’t disappear forever. In the meantime, I’m sure readers will find Boyd’s predictions worthy of discussion.

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Airports in the United States are almost always owned and operated by municipal or county authorities. (In a few cases, like Indianapolis and Chicago Midway, private companies have managed airports for the authorities.) These airports lease gates to airports in long-term leases, and then that airline has exclusive use of those gates. Most big-city airports have extra space to accommodate new entrants or airlines wishing expand service, as airlines rarely wish to lease more gates than they need. In some cases, however, gate unavailability has limited the entrance of new carriers. (Issues like this have threatened US Airways international expansion in Philadelphia.)

Airlines who lease gates at airports usually offer the same amenities to all airlines/tenants: baggage facilities, concessions, and the like, which means that gate-lease fees vary little. If there is competition for amenities and fees, it is among airports. For example, Providence and Manchester offered lower fees and attracted discounters like Southwest unwilling to pay the higher fees of Boston’s center-city Logan Airport. The same applies for Miami versus Fort Lauderdale, Orlando International versus Orlando Sanford, and several others. There has been until now little competition within U.S. airports for fees and amenities.

Austin-Bergstrom International Airport in Texas is now attempting to pull this off. Its only passenger terminal, the Barbara Jordan Terminal, is fully occupied and leased. So, to add significant service, it will need to build more space. But this new space is intended to serve the super-discount airlines like Skybus and Mexico’s vivaAeroBus that Austin wants to attract. Back in June, it began negotiations with GE Commercial Airline Services (GECAS) to build and operate a no-frills terminal at Bergstrom. GECAS would operate the terminal for thirty years, and it would be expressly designed for super-cheap airlines, with neither luggage facilities nor assigned gates. Gate fees at the GECAS terminal would presumably be much less than those at the Jordan terminal. (more…)

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The title above has nothing to do with inflight meals, unfortunately, and everything to do the airlines wanting to have their cake and eat it too in the congested airspace brouhaha (see yesterday’s post). There are several options the FAA is currently weighing to resolve the delay problem:

  • Charging more for slots at congested times of day (I think this is preferable)
  • Imposing arbitrary schedule cuts
  • Fines for chronically delayed flights (due to lack of truth in advertising about scheduled flight times)

The airlines are having none of it. “‘We’re disappointed that they’re taking this course of action given the effort by industry to significantly reduce delays,’ said David Castelveter, spokesman for the Air Transport Association,’ reported the AP. I’m as leery of fines like this as the airlines, but do the airlines like any alternatives? AP: “But airlines say that so-called ‘congestion pricing’ approach would simply result in higher fares and pledged to challenge mandates for it, or mandated schedule cuts, in court or legislatively.” Oh, I see. So the airlines oppose any measure that will reduce delays. Combined with their insistence that they cannot cut schedules on their own, this leaves them rejecting every possible alternative.

Now, the airspace redesign and other ancillary improvements at JFK can cut delays, but will such cuts keep pace with the airport’s recent and ongoing dramatic growth? The airlines’ only solution is the long-term issue of air traffic control’s technological and financial transformation. They claim to want to avoid delays and yet they reject any measures that might actually stop delays. I tend to support self-enforcement, but when the airlines refuse even to consider it, then market forces should be permitted to make congestion unprofitable.

U.S. May Fine Airlines for Chronically Delayed Flights [AP via Aviation.com]

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The latest example of this is at Dallas’s Love Field, which was stifled for many years under the ridiculous Wright Amendment, a provision pushed through by a powerful House Speaker to promote the closer-to-his-hometown Dallas-Fort Worth International Airport. Even with only a few restrictions lifted and several still in place, fares have dropped and passenger volume is up–at both airports. As has been shown time and time again, protection and regulation are not consumer-friendly, nor are they healthy for the airline industry.

Flights up, fares down one year after Wright Amendment changes [Today in the Sky]

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