After a Slump, Kansas City is Climbing

Mar. 27--Stephen Gregory remembers the barren landscape that was Kansas City International Airport after the 2001 terrorist attacks and the shutdown of Vanguard Airlines less than a year later.

"I cried the day Vanguard closed," joked Gregory, a frequent traveler who works for TalentSecure, an Overland Park database design firm. "We lost a lot of nonstop service from an inexpensive airline."

Gregory and industry observers agree that the scene at KCI is vastly different these days. KCI has rebounded from the loss of service after Vanguard's demise and the airline industry's collapse after 9/11.

The airport handled more than 10.5 million passengers in 2006, an 8.6 percent jump from 2005 and KCI's busiest year since 2001. That upward trend has continued through the first two months of the year: Passenger traffic was up nearly 5 percent at KCI, while nationally domestic passenger traffic was up only 0.1 percent.

With more passengers come more flights. In January 2005, KCI had 200 departures daily on weekdays during peak activity. This month, the airport has 234 daily departures on its busiest days.

And there are more flights to come as the spring and summer travel season heats up. Midwest Airlines, which has replaced Vanguard as the alternative to Southwest Airlines, will add several flights through June, including a new destination.

ExpressJet Airlines, a company once owned by Continental Airlines, will have Kansas City on its nationwide schedule when it launches its independent air service Monday. Other carriers that recently announced that they are adding flights at KCI are AirTran Airways and American Eagle, the regional carrier of American Airlines.

"I think you guys in Kansas City have finally recovered from Vanguard's disappearance," said Terry Trippler, airline expert for MyVacationPassport.com. "I've always felt Kansas City was a good place to fly from in terms of airfares."

Trippler, airport officials and other observers point to several factors that have led to KCI's recent surge in activity:

--More airplanes, more seats. Many airlines are adding planes to their fleets and thus looking for new routes.

--The emergence of a "hometown" carrier. Even though Midwest is based in Milwaukee, it has established Kansas City as its second base of operations, offering flights to business and leisure destinations that Southwest has generally avoided.

--The "Southwest effect." Kansas City's busiest carrier has generated new air travelers by launching nonstop service to Dallas and Denver, two of the most popular destinations from Kansas City.

--The lack of a hub carrier. Kansas City was criticized through the years for not having a hub, but the lack of a dominant airline that can bully competitors has allowed low-cost and smaller airlines to flourish at KCI.

--Cheap, available space. Many of the biggest U.S. airports are congested and have little room for more flights. In addition to having the capacity for new service, KCI is relatively inexpensive for airlines as well as its customers.

Mark Van Loh, director of the Kansas City Aviation Department, emphasized the final point. "Airlines can offer a flight, and if it doesn't work out they can try something else, because it's not very costly," he said.

Van Loh also pointed out that momentum begets more momentum. While U.S. passenger traffic was flat in 2006, KCI's traffic was up sharply. The airport's passenger load factor for all flights was 75.6 percent in 2006, up from 71.7 percent in 2005. Despite little change in U.S. passenger traffic, most airlines reported profits due to having fewer seats available than earlier this decade and experiencing average fare increases of 15 percent to 20 percent from 2005. Fares at KCI also have risen, but the percentage increases have been in the single digits.

"People take notice of our numbers, so they take a closer look at what's going in Kansas City," he said. "It's like a snowball effect."

Southwest leads the way

A big part of the "snowball effect" can be attributed to the "Southwest effect." After years of a relatively stable schedule in Kansas City, Southwest began flying nonstop between Kansas City and Dallas in December 2005 after congressional action removed restrictions on the direct flights. Eight months later, Southwest did the same between KCI and Denver, creating competition with United and Frontier airlines.

Those moves not only lowered fares, but they also generated more air traffic by persuading travelers to leave their cars at home and fly to those cities. Both were already among the 10 most popular destinations from Kansas City.

Before Southwest, an average of 400 passengers flew daily from KCI to Denver at an average one-way fare of $200, said Justin Meyer, the Aviation Department's air service development manager. Now, KCI handles about 800 passengers to Denver daily, and they pay an average ticket price of $100. Denver has also become the most popular destination from KCI.

Virtually the same thing happened when Southwest started service to Dallas in competition with American. Since Southwest began flying nonstop to Dallas Love Field from Kansas City in late 2005, the average number of daily passengers going to both airports there has nearly doubled, to 744. Fares to Love Field are 65 percent lower than what it previously cost to fly to Dallas-Fort Worth International Airport, and the price of flying to DFW from KCI has dropped 48 percent.

"People always talk about the Southwest effect," Meyer said. "It's alive and well in Kansas City."

With the Dallas and Denver flights, the number of Southwest passengers at KCI jumped 15.6 percent in January from January 2006. Southwest's market share at KCI has vaulted to 37.2 percent from 33.8 percent last year.

Southwest is seeing many Dallas customers on their way to Denver for the skiing season connecting through Kansas City, said Whitney Eichinger, a Southwest spokeswoman.

"We're very happy with what's going on with our Denver service," she said. "The Kansas City-Denver flights have become important to our system."

For several years, KCI had its busy Southwest schedule flying point-to-point to various cities. That was supplemented by the major carriers offering service to their various hub cities, along with a smattering of low-cost carriers with flights to niche locations.

Vanguard was attempting to become the No. 2 airline at KCI with service to cities not on Southwest's schedule when industry turmoil contributed to its demise. Midwest, which suffered several years of losses after 9/11, has emerged in that role and has begun to report profits.

In January, Midwest had an 11.2 percent market share at KCI --second to Southwest -- after passing American Airlines' KCI traffic in the past year. Midwest, which is in the midst of fending off a hostile takeover offer from AirTran, will add Seattle to its Kansas City schedule next week. By June, the carrier will have 37 daily departures at KCI, more than any carrier except Southwest since Braniff in the late 1980s.

Midwest is adding more planes and six cities to its system. At a recent news conference announcing this spring's new service, Midwest Chairman Timothy E. Hoeksema said more than half of the airline's total expansion in 2007 would be in Kansas City.

"We consider Kansas City to be a focal point for us," he said. "The market has supported us, and it's very important for our growth plans. We have just over 200 employees here now."

Meyer of the Aviation Department noted that Midwest had committed resources to a marketing campaign directed at Kansas City travelers. In addition, the airline is involved in civic activities such as the arts and is the airline for the Kansas City Royals.

"They've really worked hard to create a strong brand name in Kansas City, and it's paid off with a loyal customer base," Meyer said.

The newest entrant at KCI will be ExpressJet next week, the first new carrier at KCI since 2002. ExpressJet will be an all-regional jet operation that will offer 50-seat flights to Austin, Texas; Tucson, Ariz.; and Ontario, Calif., near Los Angeles.

The carrier has said it plans to add nonstop flights later in the spring to cities such as Louisville, Ky., Jacksonville, Fla., and Raleigh, N.C. Shortly after ExpressJet made its plans public, American Eagle, American's regional service, said it would start flying Kansas City-Raleigh in May.

A fare trade-off

Earlier this month, Meyer attended a networking conference among airport officials and airlines as cities vie for new service. Meyer found himself in the unusual position of not seeking out an airline to introduce a nonstop flight to one of KCI's 30 most popular destinations. Kansas City now has nonstop service to its 30 most popular cities. When American Eagle and ExpressJet begin flying to Raleigh, the top 40 cities will have nonstop KCI service.

"There aren't a whole lot of holes to fill on our route system right now," Meyer said. "That's pretty good, especially when you consider we're a nonhub airport."

Kansas City's nonhub status may have worked in its favor in attracting more flights in recent months.

St. Louis was the envy of the Kansas City business community when Trans World Airlines decided to make Lambert-St. Louis International its hub in the 1980s. After American acquired TWA and downsized operations there after 9/11, Lambert went from being the 10th-busiest airport a decade ago to No. 32 now, just two slots ahead of KCI.

"You've got people driving in from Topeka, Wichita and Nebraska to fly out of Kansas City," said Trippler of MyVacationPassport.com. "Kansas City's airport seems to be going in a different direction from St. Louis', which has had some setbacks."

For Meyer, the networking conferences are an opportunity to find carriers that want to compete in certain markets to help lower prices at KCI.

"Other than the airport, there are other things I can pitch to them now, like the Sprint Center, the downtown revitalization and the World War I museum," he said. "We also want to make sure all our airlines are happy with their traffic and that they are profitable routes."

Although KCI is still considered a relatively cheap airport to fly from, average one-way fares did increase in the 2006 third quarter to $148.73, a 6.2 percent jump from the same time in 2005.

Nevertheless, that was less than the U.S. average increase of 8.1 percent. Kansas City has consistently remained among the 20 cheapest airports in the country. Besides, the trade-off between slightly higher ticket prices and having more nonstop flights to most of the country's metropolitan areas is one most frequent travelers are willing to make.

"We were actually discussing that a recent staff meeting -- about being able to get to a lot more cities directly than we used to," said Gregory, TalentSecure's director of sales and business development. "I certainly prefer nonstops instead of changing planes at a hub. There's less chance they can lose your bags."

To reach Randolph Heaster, call (816) 234-4746 or send e-mail to rheaster@kcstar.com.

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