The Battle Over Air Service Development

Nov. 1, 2018
Getting successful and robust airline service means finding the right needs for your community.

No matter what size community you live in, having an airport that connects you to the global air transportation system is key. For example, in its search for a second headquarters, Amazon required that potential cities be with in 45 miles of an international airport.

Aviation has directly created 9.9 million jobs and created a $664.5 billion economic impact, according to “Aviation Benefits,” a 2017 report published by the Industry High Level Group, an ICAO initiative. Its members include the heads of ICAO, ACI, IATA, the Civil Air Navigation Services Organisation (CANSO) and the International Coordinating Council of Aerospace Industries Associations (ICCAIA).

So what are airports — large and small — doing to balance keeping existing air service with boosting frequencies and adding new flights? Many of them choose to hire air service consultants to help.

Mike Boyd founded Evergreen, Colo.-based aviation consultancy, Boyd Group International, in 1984 after stints in planning and marketing at three airlines. He leveraged his experience into a firm that is well respected not only for its air service consulting, but its annual aviation summit, an event that attracts top airline executives from around the world as speakers. It has become a must-attend event.

The first consideration when it comes to air service is pretty simple — is it possible, Boyd asked. “Many communities just want air service, no matter where it goes. Our biggest challenge with them is getting them to understand that air service access isn’t always possible at the local airport,” he said.

Take the example of Youngstown–Warren Regional Airport, which has worked for 20 years to get air service, said Boyd. “They do have Allegiant Air for leisure travel, but that’s just leisure air service,” he said. “The best service for Youngstown comes out of Pittsburgh International Airport, an hour’s drive away. But some communities don’t want to hear that.”

Another example is Topeka Regional Airport, said Boyd. The airport had three daily US Airways Express flights to Kansas City that ended in 2003. It won a Small Community Air Service Development grant in 2012 for $950,000 to operate United Express flights to Chicago, but the service ended in September 2014 after the funds ran out. Even Allegiant Air couldn’t make flights work and they stopped flights in July 2007.

“Why didn’t it work? Because it’s more convenient to drive to Kansas City International Airport, which is a one-hour drive away,” said Boyd. “This is happening at small airports across the country. Your air service isn’t always at your local airport.”

Even the right case for air service can be wrong, said Boyd. “Airlines aren’t stupid. They don’t need a consultant to send them a leakage study. If the traffic is there, the airline will know it,” he said. “The only case to be made for air service is does an airport meet the corporate objectives of the airline.”

Pueblo, Colo., is literally an hour away from Colorado Springs Airport, said Boyd. “It is spending millions of dollars to keep two United Express 50-seat flights to Denver running at a 27 percent load factor,” he said. “More people go to Starbucks that fly on these flights, and yet the community says it needs this service. But they already have great service — out of Colorado Springs.”
Air Service Development: What it Takes

Every firm interviewed in this story cited their expertise, their staff with airline experience and connections, but is that enough? How do you show off your work, but also not just tell airports what they want to hear when it comes to air service?

Joseph Pickering is the business unit leader for Madison, Wis.-based Mead & Hunt's air service consulting group. Because each airport’s situation is unique, the first thing to discuss are the goals of the effort, he said.

“Is this a one-off project providing technical guidance or a longer-term air service development effort for an airport looking to grow existing service, add new domestic service, re-establish lost service or looking to strategically pursue new international routes,” Pickering asked. “We also ask to review any past air service development efforts to see if we can build on those efforts or if we’re starting fresh we tell them we need to complete a market study to determine the market’s potential, the number of air travelers and where they are going.”

Kevin Schorr is a vice president at Alexandria, Va.-based Campbell-Hill Aviation Group LLC. “Most airports do an RFP/RFQ process for air service consultants, but there are some who call and want to learn more. They want to understand what we do differently than other firms,” he said.

“When an airport comes to us, we tell them how we’re different. Our group of consultants have 150 years of aviation experience. We are of the industry,” said Schorr. “We’ve had 206 air service wins from 28 airlines since 2015. We can tell them how good we are, but it all comes down to answering the question ‘can you get us more air service?’”

Another thing that makes Campbell-Hill different is that there’s one office, said Schorr. “Ten of our 13 employees work in that office,” he said. “We work for different kinds of airports, from small ones to large hubs in the U.S., Canada, Latin America and Europe.”

But the biggest difference is that the firm works for airlines as well as airports, said Schorr. “One of our biggest clients is Southwest Airlines. People are surprised when we tell them this,” he said.

Sabine Reim is the senior vice president of airline network strategy for Vancouver, British Columbia-based InterVistas, a dedicated boutique aviation consultancy. “We pride ourselves on our broad service offering, provided by subject matter specialists, many of who have completed distinguished industry careers,” she said. “We can therefore offer both depth and breadth, which is an important combination for delivering the services airports need to succeed in developing air service.”

InterVistas can help with a number of disciplines that complement the more traditional air service development functions of business case development and route forecasting, said Reim. “For example, it includes economic impact analysis, leakage studies, tourism, facilities development, facilitation and regulatory, and non-aeronautical business development,” she said. “We can also offer our clients experience and airline contacts gathered from projects completed around the world.”

As industry margins have become more squeezed with U.S. carriers not adding much incremental capacity in the near term, and at the trans-oceanic level high growth rates not expected to quite continue to the same degree, competitiveness between airports can be interpreted to have gone up, said Reim.

“However, we are still in a position for air service development where a lot of airlines have got used to being more innovative when it comes to air service and more comfortable with trying out new opportunities,” she said. “This in turn creates opportunities for both larger and smaller airports, and that is a good thing.”

The airlines typically have more route opportunities than there are aircraft to fly those routes so airports are competing for a limited asset that is easily deployed where it has the potential for the best return on investment, Pickering noted.

“Air service development can be a highly competitive undertaking. Recently the industry has been constrained by a regional airline pilot shortage, which means that air service development at smaller airports has become even more competitive,” he said. “With aviation fuel prices increasing we’ve seen some airlines respond by eliminating ‘thin’ or underperforming routes, making the hurdle even higher for new markets to be launched.”

Sometimes airports have to tell potential clients news they may not want to hear. Which is why it’s important to take a step back and really look at air service through a very objective lens, said Reim. “This is often a core reason why a community brings in an air service consultant. Issues arise when a particular air service target becomes emotionally charged, which ends up misguiding a community. This ultimately wastes real opportunities, and so a community loses,” she stated.

It is okay to select a more ambitious aim for new air service as such targets are really a long-term effort, and determine how to work toward it, said Reim. “However, it needs to be clear what the more near-term targets are in order to maximize growth opportunities in the meantime,” she explained.

Having worked with many airports and airlines, Mead & Hunt has a good sense of what is realistic and credible once the relevant background work has been completed, said Pickering. “That usually takes some analyses to determine realistic opportunities and to set priorities and we sometimes have to tell the airport that we don’t see a possible market as being viable,” he said.

“For example, if the market study indicates an airport has 10 passengers traveling daily each way between a potential point-to-point route, then that potential route wouldn’t be considered a target route,” he explained. “We review our analyses and assessment with client airports to make sure there is a clear understanding of what is realistic, where to focus our efforts, what will be required to move this forward and the resources and timeline that might be required.”

Some communities still look at airlines as a public utility, said Schorr. “They see it as their right to have air service. But we are realistic when we work with airports, communities and their partners. We put ourselves in the role of the airline network planner, asking will a route work or not, since as a firm with our experience, we know how airlines make these decisions,” he said. “We want to develop strategies that actually work for the market so there’s no surprises.”

While it’s always good to outline strategies and priorities, in the end, it’s all about bringing in air service. For Schorr, that means there are no favorite air service wins. “We have 206 wins since 2015. But most importantly, those wins represented all sizes of airports in the U.S., Latin America and Europe ranging from ultra-low-cost airlines to network carriers,” he said.

One win Schorr highlighted is the recently announced Lufthansa flight between Austin, Texas, and Frankfurt. “This flight is a testament to the strength of this market. British Airways has been here with a flight to London Heathrow Airport since 2014, but it’s seen such demand, the airport saw that it would need more international flights,” he said. “It’s good that Austin has Condor and Norwegian, but local businesses said they wanted a Star Alliance carrier.”

Campbell-Hill worked with Lufthansa for a few years to show it why Austin was such a good opportunity, said Campbell. “It’s good for the community because of its big economic impact,” he added. Other Campbell-Hill wins include Jacksonville-Denver on United Airlines, Santa Barbara-Minneapolis St. Paul on Sun Country, Philadelphia-Mexico City on American Airlines and Columbus-Seattle on Alaska Airlines.
InterVistas’ Reim highlighted her firm’s Nashville flight to London Heathrow on British Airways. “It was a great example of combining forces from across the community to present the best data and strongest commitment. The service has been operating just under half a year and is doing very well,” she said.

The strong performance to date is really important for other communities looking for similar services, said Reim. “If new air services prove a success, it encourages airlines to continue looking for new opportunities,” she noted. “Therefore, while airports compete with each other to at least some degree for air service, they even more so depend on each other’s successes.”

Launching a new route can sometimes take years before coming to fruition, said Pickering. “Some airports view working with a nearby airport a conflict so we determine if there’s a perceived conflict before proceeding,” he said. “Other factors include the airports level of experience and organization with regard to their air service development efforts.”

Pickering highlighted Mead & Hunt wins including Indianapolis-Paris, Monterey, Calif.-Denver, Colorado, St. Louis-San Jose, Daytona Beach, Fla.-Toronto and Wilmington, N.C.-Chicago, to name a few.

So when the time comes to consider hiring an air service consultant, all three have solid advice. “I always say talk to multiple firms, since we all have different approaches when it comes to doing air service development,” said Schorr. “I also encourage airports to talk to their peers about their experiences with air service consultants. And talk to airline network planners for their thoughts.”

Reim advised working with a consultant who can compliment your airport. “It is important that you combine as a strong team. We always like to say that it is important for the consultant to be seen as part of the airport’s air service development team,” she said. “Of course, ensuring that the consultant has the right staffing and resources goes without saying. Combining all that will ensure that you get value from the relationship.”

First, have realistic expectations about your market’s potential and understand that results may not be immediate and usually take time to develop, Pickering warned. “Be prepared to discuss your current and past air service development efforts, the history of your market and the wants/needs/goals of the community,” he said. “Second, most airport staff don’t come from an airline route planning background steeped in data analysis, strategic planning and route forecasting, but many air service consulting firms do and are experts at developing the credible analyses needed to develop a meaningful proposal to pitch to airline planners.

“As air service development consultants, we employ similar methodologies, talk to airline planners on a frequent basis and can represent and advocate for the airport over time as various airlines consider their air service proposals,” said Pickering. “Third, an air service consultant can help the airport set realistic expectations for the community by updating them on industry trends, the often-changing air service environment and help them to understand how their market fits into airline priorities,” he stated. “Finally, consider working with air service consulting firms that have staff with previous airline route planning and airport experience, have established relationships and credibility with all of the carriers important to the airport, are financially stable and have been in business for many years with a track record of success.”

It’s time to tell airports and communities to wake up and smell the global economy, Boyd quipped. “City fathers say we have to have air service and way too many people pander to that thinking. Lakeland, Fla., will spend $250,000 to get scheduled flights,” he said. “But why? They’re only one hour away from 600 flights a day at two other airports — Orlando and Tampa. Someone needs to ask them how can they compete with a transfer flight to Atlanta when passengers can just drive to Orlando and fly around the world?”

Cities like Naples, Fla., Topeka and Cheyenne, Wyo., haven’t died because they don’t have air service, said Boyd. “The air service access conversation needs to change. It’s a fantasy that every community needs air service,” he said. “You want to connect to the rest of the world, but it’s not always going to be via your local airport.”

As communities at large become more involved in air service development, it is imperative to bring community stakeholders on board, starting with communicating how success and failure realizes in aviation, said Reim. “This will help rallying – and lining up – communities in support of air service development, which will ultimately be a powerful message for airlines.”