Target: Air Service

Target: Air Carriers

Report from this year’s AAAE Air Service Conference

By John F. Infanger, Editorial Director

May 2001

MILWAUKEE — Highlights from this year’s 6th annual National Air Service Conference, hosted here by the American Association of Airport Executives, include updates on successes some airports have had in attracting and keeping air carriers, and various marketing initiatives. In addition, attendees were offered information upgrades from United and AirTran, among others, about the pending United-U.S. Airways-American transactions and what the low fare carrier seeks from prospective airports.

This year’s conference featured both airport and airline representatives relating what it is they look for from each other in developing successful air service arrangements. Airports shared some things they do to help air carriers be successful in their markets, while airline reps offered insights into where they see their future market focuses. Both sides emphasized the need for a partnering relationship for ensuring success.

From the Airports
Kristie Van Auken, director of marketing for Akron-Canton (OH) Regional Airport, says that to lure an air carrier to serve a market takes both money and a commitment from the airport sponsor, the community, and local businesses.
Tara Smith, manager of air service development for Kansas City Inter-national Airport, says that it’s important that officials outline in detail what’s going on in the host city, because airlines in general will no be familiar with local demographics or market potential. Such information should include types of businesses, their destination needs and desires, and leakage to other airports in the region.
Echoes Paul Toth, Jr, airport director for Toledo (OH) Express Airport, "The most important thing is to know your market when going to an airline." He adds that airports need to consider the potential impact on incumbent carriers to avoid a situation in which adding service from a new carrier is merely taking market away from one already serving the airport.
That said, Toth adds that a new carrier may be bringing an ability to serve a larger market than an incumbent carrier wishes to serve. At Toledo, for example, Toth says he went to AirTran for service to Atlanta because he knew that the incumbent, Delta, did not want to commit more resources to his market even though research showed there was more customer demand than was being met.
Toth adds that he approaches potential new entrants with a full marketing plan already laid out. And, relating what other airport officials here stated, he makes sure the airport follows through with what it originally said it would do to help air service to his market succeed.
Pat Corfman, director of marketing for the Flint (MI) Airport, says an open channel of communications between airport and airline is essential. "Keep in touch," she says, "they rarely let you know before they pull the plug." In addition, high load factors may lure an airport into a false sense of market security, confident the airline is happy with the market. However, it may not be achieving the market yield (dollars per passenger) it needs to sustain service.

Marketing Initiatives
Some of the public relations and marketing efforts shared by airports at the conference include ...
• Flint’s Corfman has AirTran identify the media in which it will be advertising and then she buys time on the same outlets to complement the carrier’s efforts.
• At Akron-Canton, Van Auken matches AirTran’s advertising dollar for dollar, hosts speaking engagements with business leaders at which air carrier representatives speak, and facilitates meetings between travel planners and airline reps.
• Van Auken’s radio promos include flyaways that give away free airline tickets — "a fairly inexpensive way" to get attention, she says.
• At Tri-Cities (TN) Airport, director of marketing Melissa Thomas offered a "Take Me Away for Valentine’s Day" radio promotion that included an air carrier and a hotel that had an affiliate in Toronto, the destination being promoted. Each day, a "ninth caller" qualified and then listeners called in or could go online to vote on whom should win. The winner received round trip tickets and free hotel accommodations. The radio station provided 80 spots while the airport played the role of matchmaker. A key objective of the promo was to gain exposure for the airport’s new website.
• Thomas also sponsored another promotion, "Anywhere From Here Trivia Game," to highlight the website. Each week, a different question was placed on the site and players could submit answers online and weekly winners were announced. At the end of the month, a grand prize of a free airline ticket was awarded. Thomas says that an attractive part of the promo was that the winner could be expected to buy a companion ticket from the same carrier.

Air Carrier Perspectives
Jeff Stanley, manager of regulatory analysis for United Airlines, presented the carrier’s point of view on the proposed merger with U.S. Airways and subsequent agreement with American Airlines. Saying that United’s current route structure is east-west and weak, Stanley says that when the deals are approved the result will be "the first truly national airline network."
U.S. Airways’ Pittsburgh hub, he says, gives United an opportunity to relieve congestion at Chicago’s O’Hare International, while bringing an additional 100 destinations for its current customers and another 147 for U.S. Airways’ customers. The United/ U.S. Airways deal also:
• Will result in 89 new daily flights to new or existing domestic and international destinations.
• Creates single-carrier service to more than 500 O&D markets.
• Will allow United to service more than 14,600 city pairs, 5,000 more than currently.
Stanley relates that the agreement with American gives the latter 49 percent equity in the new DC Air, which will take over the shuttle routes at Reagan National, with the remaining 51 percent owned by Robert Johnson. United will also "dispose of unneeded assets," transfering ownership of some 86 aircraft (Fokker 100s, MD-80s) which do mix with its existing fleet. American will also obtain 22 jet and 14 commuter slots at New York LaGuardia and 14 gates at other U.S. Airways bases.
John Kirby, director of network planning for low fare carrier AirTran, relates that the carrier currently operates 56 aircraft and is the launch customer for the Boeing 707, and serves 34 airports with 144 daily departures from Atlanta, it’s main connecting hub. The airline, which he says has experienced eight consecutive quarters of profitability, doesn’t emphasize the leisure markets as much as the "business element" when exploring new service, which is why AirTran focuses on serving major airports, unlike Southwest Airlines which frequently looks at secondary facilities.
Kirby says that key items which AirTran considers when exploring new markets include:
• an economic profile that shows strong growth potential;
• an active airport sponsor with well-developed marketing plans;
• ongoing community support, especially from local businesses and the Chamber of Commerce;
• available facilities for startup and expansion opportunities as the market develops.
Regarding the merger/buyout activity among the major carriers, Kirby expresses a number of concerns and calls for provisions that will ensure competition. The United-U.S. Airways-American transactions, he says, will "in essence lock up" gates in Eastern U.S. markets and that there are potential barriers to entry for smaller airlines. As an example, he points to Delta paying three to four times for slots at Reagan National what AirTran could afford to pay to keep the low fare carrier out of the market. He also cautions that, in light of recent labor disputes among the majors, a strike with the resulting megacarriers could have a serious negative impact on the national transportation system.
The post-merger United, says Kirby will result in the carrier controlling nearly 28 percent of the East Coast market, as well as 92 percent of the market in Charlotte and 81 percent in Philadelphia. "These numbers are daunting," he says.
"The only moderating force on pricing is the competition provided by low fare carriers," says Kirby. "A strong low fare network is essential to maintain the competitive balance."
Regarding the proposed DC Air, Kirby asks, "Did you know that Robert Johnson will be able to turn around and sell it the next day (following the merger approval)? He’s already sold 49 percent to American Airlines." Kirby adds that following the transaction the new DC Air will rely heavily on regional jets to the Washington market, potentially reducing by as much as 50 percent the number of seats going to DCA. "What will that do to fares?" he asks.

Perspectives from Midwest Express, Corporate Airlines

Attendees at this year’s air service conference also heard from representatives of Milwaukee-based Midwest Express and Smyrna, TN-based Corporate Airlines.

Mike Mooney, VP of planning and pricing, says that its commuter feeder, Skyway, will begin phasing out its Beech 1900s, and the company announced in April an order for 20 Boeing 717s, with options for 30 more, and an order with Embraer for 20 regional jets and options for 20 more.
Mooney relates that, as the company looks at new markets, it finds that often what airport boards think citizens want is not realized once service begins. He points to Rockford, IL, as one example, where air carriers have repeatedly been frustrated by customers busing to Chicago O’Hare instead of using the airlines.
Meanwhile, at Corporate Airlines, which serves as a commuter for TWA and Midway Airlines, president Charles Howell is optimistic that the buyout of TWA by American will not negatively impact his airline’s routes to St. Louis. "We will continue to operate as a TWA Express affiliate," he says. Howell says Corporate will continue to operate its 19-seat aircraft: "Reports of our (19-seaters) death is greatly exaggerated," he says.