The Springs Cools Its Jets

The main conference room in the finance department at Southwest Airlines' Dallas headquarters bears a sign with the name "Colorado Springs" printed against a mountain backdrop.

It's one of roughly a dozen such rooms Southwest christened after popular cities the airline doesn't yet serve.

For now, at least, it will remain the carrier's only link with Colorado Springs.

Southwest's decision late last year to launch flights in Denver rather than the Springs underscores the challenges Colorado's second-largest city faces as it tries to lure passengers and new airline service, a key component for attracting tourists, residents and businesses.

The city's airport is financially sound and moving forward on a promising new business park, and observers say its airline service is "adequate."

But the Springs has struggled to grow passenger traffic and boost service despite population gains and a nationwide expansion in air travel.

Although city leaders say they never put all their eggs in the Southwest basket, the airport hasn't been able to attract much discount service, making it in many cases a more expensive option than Denver International Airport.

Now that Southwest has established a growing presence at DIA, the Springs could find it even tougher to generate enough demand for new flights.

"Colorado Springs is going to have a very difficult time getting low-cost service," said Virginia-based airline consultant Darryl Jenkins. "It's a perfectly good airport with good managers, but when Southwest made the decision to go into Denver it really hurt Colorado Springs."

Golden age

The Springs is nearly a decade removed from its golden age of air travel.

In 1995, upstart low-cost carrier Western Pacific Airlines set up shop in the city, launching its first flight in April of that year. The airline quickly made a significant impact, lowering fares enough so that even Denver residents were making the trek south to catch flights.

By the end of 1996, annual traffic at the Colorado Springs Airport had rocketed by 71 percent to roughly 4.8 million passengers - triple what the airport was designed to handle. The number of nonstop markets it served jumped threefold, and the airport ranked as the 56th-busiest in the country.

WestPac planned a huge expansion to meet demand, promising to add five new gates and add a host of new destinations. Meanwhile, fares at DIA, which opened in 1995, were relatively high, because airlines had to pass on significant airport costs to customers.

WestPac, it seemed, had ushered in a new era of air travel in the region.

"The competitive vitality that we are bringing to this market is a huge benefit to the entire state of Colorado," WestPac chief Ed Beauvais told the Rocky Mountain News in 1996.

But the good times ended almost as quickly as they began.

WestPac, struggling with huge losses, fell hard. The carrier moved its headquarters and most of its flights to Denver by the summer of 1997 and shortly thereafter joined the pantheon of failed airlines.

Demand stagnant

Air service and demand in the Springs have never recovered. Passenger traffic in 2005 totaled just over 2 million - less than half what it was in the mid-1990s - while the number of departures is down nearly 40 percent.

In recent years, the airport's numbers have been relatively stagnant:

* Passenger traffic last year was lower than in 2001, when air travel nationwide dropped off sharply after the Sept. 11 terrorist attacks.

* Departures are up 14 percent since 2001, yet much of the new service involves smaller regional planes that carry fewer passengers.

* The airport ranks as the 89th-busiest in the nation in terms of enplanements - down from 81st in 2000, according to the U.S. Bureau of Transportation Statistics.

* Fares in Colorado Springs are higher than those in Denver and the national average, according to the BTS. It's no wonder: Of the 14 nonstop routes offered from the airport, just two are served by more than one airline.

That's all come despite 13 percent growth in El Paso County's population since 2000 and a 4.6 percent jump last year alone in the number of passengers U.S. airlines carried.

Carriers also don't fly nonstop from the Springs to major East Coast destinations such as Washington, D.C., Philadelphia and Boston. Experts say nonstop air service to major cities is critical for attracting corporate headquarters, which could in part explain why the Springs has a dearth of such operations.

"Colorado Springs lacks nonstop flights to many gateway cities, and that makes the city less attractive" from a business standpoint, said Dennis Donovan, a corporate relocation expert with the Wadley-Donovan Group in New Jersey. "Executives like to get back and forth to their research and development offices and manufacturing plants. In Colorado Springs, you can't do too many one-day business trips."

Several factors

To be sure, air travel in the Springs has been influenced by factors specific to the region.

The rise and fall of WestPac in the mid-1990s heavily skewed numbers, creating what some say are unrealistic expectations going forward. The city had a thriving technology industry in the late 1990s that helped mute the impact of WestPac's fall, supporting a higher-than-usual level of air travel. When the high-tech economy sank in 2000, the Springs was hit particularly hard. Colorado Springs also has a high concentration of military personnel, making the city vulnerable to swings in air traffic depending on deployments.

Industry changes brought about by the Sept. 11 terrorist attacks have had a significant impact. Large airlines, struggling to make profits, have scaled back in smaller cities either by cutting service entirely or using regional planes that carry fewer passengers and typically fly shorter routes.

"Capacity was built back into the system, but it was built back differently," said Mark Earle, aviation director of the Colorado Springs Airport. "It's come back in the form of smaller, regional jets."

Since 2001, regional jet operations at Colorado Springs Airport have more than doubled, from 3,362 departures to 7,860 last year. Meanwhile, service by larger carriers has dropped 16 percent.

The net result: "it's roughly the same number of seats, just more frequency," Earle said.

Metropolitan focus

Some low-cost carriers also changed their strategies.

In the past, discount airlines such as Southwest typically focused on offering service to smaller airports in or near major metropolitan areas. So-called secondary airports often charge airlines less in landing fees and other charges, meaning the carriers can offer lower ticket prices. The Colorado Springs Airport, for example, has average fees of about $8 per passenger, while Denver's are around $13.

Recently, Southwest Airlines chose Pittsburgh and Denver as its two newest markets, rather than, say, Allentown, Pa., and Colorado Springs - what were once considered likely choices. At the same time, Denver has lowered its airport costs in recent years and now has service from most major discount carriers. That's helped DIA - where airlines once offered some of the highest fares in the nation - become a hub for cheap tickets.

The Springs, too, has seen fares drop in recent years, but at a much more modest pace than for Denver and the nation. The city's only low-cost carrier, America West, has not built the critical mass of flights necessary for significant fare competition.

"I think people love our airport, there's no question about it," said Dennis Weber, a member of the Colorado Springs Airport Advisory Commission. "But when the price differential between our airport and Denver gets to a critical point on a certain fare, people are making the drive to Denver."

Demand deciding factor

Airports are limited in what they can do to lure new air service, aside from lowering operating costs for airlines and working to make their operations more efficient.

In the end, the decision comes down to demand.

With an abundance of low-cost service available an hour and a half away in Denver, it's unclear whether Colorado Springs currently can support a low-cost hub, observers say.

"What people in this town get caught up in is the brief success of WestPac," said Randy Peter- sen, who runs several frequent flier Web sites and publications in Colorado Springs. "They say it's a proven market, but these are different times and different days."

Airlines are being much more careful about where they add service given the industry's volatility, eyeing cities with larger populations and lower risks.

Denver-based Frontier Airlines said it looks at the Springs "pretty regularly." Yet it has no plans to start service there, in part because it's doing so well in Denver, where it's been growing rapidly and increasing market share.

"There are separate schools of thought" at the company, said Joe Hodas, a Frontier spokesman. "One is that if people are willing to drive to Denver, what is the purpose of re-creating service in the Springs? The other thought is that we could reach the other side of the Springs and areas like Pueblo to stimulate more traffic."

Some experts had pegged Southwest as the city's best chance of landing a new low-cost carrier, and the airline has from time to time indicated strong interest in the Springs. The city's current mayor even made attracting Southwest a key part of his campaign platform several years ago.

"I don't think a week went by where people didn't ask me about Southwest," said Terry Sullivan, president of Experience Colorado Springs at Pikes Peak, the city's tourism and convention bureau. "We had concocted all sorts of grandiose schemes about how we'd get them here hell or high water."

Many of Southwest's own employees also want the carrier to fly to the Springs. The question of whether or not the airline would serve the city inevitably arises at company meetings, hence the conference room named after the Springs.

Southwest, though, felt the better opportunity for entering Colorado was in Denver.

"We announce usually on average maybe three cities a year," said Southwest spokeswoman Paula Berg. "We have to choose the ones that have the most growth and revenue potential and fit best into our route structure. Denver fit that criteria."

Convenience king

But the airport has several major benefits that trump DIA, at least for residents in the Springs.

It's located just a short drive from the city's downtown area, security lines often are nonexistent, and parking is ample and much cheaper than at DIA.

Convenience is where the airport is aiming its focus, pumping more than $10 million in the past two years into upgrading and expanding the main terminal.

"I think the passenger services at the airport and its on-time records are very good, and that outweighs price for a lot of people," said Judy Laumann, owner of Total Travel & Tours in Colorado Springs.

The airport, which has strong bond ratings, also has experienced other types of growth. Aside from enhancing services for private fliers, projects under way include a new military complex, a Skywest Airlines maintenance hangar and a long-planned $300 million business park.

Greater business activity in the region, coupled with population gains, likely will stimulate more air travel over time, experts say.

As long as passengers fly out of the Springs.

"The best thing the business community and residents here can do is to use our airport as much as possible," said Mike Kazmierski, head of the Colorado Springs Economic Development Corp. "The more people use Denver International Airport, the less chance we have of getting low-cost service."

Still, the airport's Earle believes the Springs can land a low-cost carrier in the next couple of years.

A Southwest planning official, responding to a question in the company's new blog, expressed optimism that the airline could indeed fly from the Springs down the road.

"After the city grows larger, and after we're pretty well tapped out in Denver, you could see Southwest at both airports," Bill Owen, senior schedule planner for Southwest, wrote last month. "Wouldn't that be a Rocky Mountain high?!!"



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