Flight Blog

Aug 11 2015 Fares Are Down, Say What?! BY sgf-adminTAGS Airlines, Fares

 

Here’s something you haven’t heard about …

In Springfield, and Northwest Arkansas, the airlines are charging less; fares are going down.

Yes, you read that right. Fares are down. They've been going down for the past two years. They’re not down much, but they are down. Take a look at the numbers. The cost of fare is shown as “one-way” because that’s how the industry tracks fare data:

 

Springfield (SGF)

2010

2011

2012

2013

2014

Average one-way fare

$230.03

$255.00

$260.49

$257.82

$253.56

           
           

Northwest Arkansas (XNA)

2010

2011

2012

2013

2014

Average one-way fare

$276.41

$305.59

$318.02

$318.21

$296.73

Fare data compiled by Boyd Group International August 10, 2015

 

Common wisdom says the recent airline mergers have driven up the cost of flying, but it isn’t happening here. So, what’s going on? We think it boils down to one thing: competition among the four big airlines that survived the consolidation wave. Here’s an example …

In early July American Airlines announced new service between Springfield and Charlotte, beginning November 5. The lowest introductory fare we saw American offer was $225 round-trip. The price bounced up and down for several days. Then Delta and United jumped in with their own low fare trips to Charlotte. By July 21 all three airlines matched each other for round-trip to Charlotte: $303.

This kind of competitive price matching goes on in Springfield more than people realize …

Since July 1 we’ve seen the following price wars:

  • Allegiant offered round-trip fare to Los Angeles for $322. Delta countered with $318.
  • American, Delta, and United, matched each other with round-trips fares to Cancun: $566.
  • Delta and United matched each other (again) for a round-trip to Charlotte: $278.
  • American’s fare for a round-trip to Cancun fell to $464.
  • Delta and United matched fares to Fort Lauderdale: $280.

In the past week we’ve seen:

  • American round-trip to Dallas: $170
  • American round-trip to Austin: $274
  • American round-trip to New York City - Kennedy Airport: $315
  • Allegiant round-trip to Las Vegas: $142
  • Allegiant round-trip to St. Petersburg/Tampa: $135
  • Delta round-trip to Charlotte: $224

There's more, but you get the idea — the airlines are definitely going head to head in Springfield. Ditto for Northwest Arkansas. Let's hope the trend continues.

 


 
The peak summer travel season is in full swing at our airport and it's promising to get even busier ......
 
In June, July, and August, Allegiant Air is growing its Springfield flight schedule by a total of 57% over the same three month period last year (222 flights this year, vs. 141 last summer). This growth comes after a banner 2014 when passenger numbers at the Springfield airport grew at an annual clip of 12%.

Allegiant flights to Orlando get the biggest bump. In June the airline will fly between Springfield and Orlando six days a week. That’s up from four days a week last June.
 
The increase in the Allegiant schedule will probably give the airport double digit passenger growth in June, July and August. It’s a strong indicator of continued improvement in the regional and national economies. People wouldn’t be buying Allegiant’s vacation packages in numbers like this if their budgets were hurting.
 
Not to be left out, the other Springfield airlines are bringing bigger planes to Springfield. American, Delta, and United are all shedding some of their 50-seat regional jets:
 
  • Delta's bringing in an Airbus 319 (126 sets) for one its four daily flights to Atlanta
  • American begins using Bombardier CRJ-900s (76 seats) for two of its seven daily flights to Dallas
  • United begins using Bombardier CRJ-700s (66 seats) for two of its four daily flights to Chicago
Here’s the bottom line: this summer the airlines will shed a total of seven 50-seat jets from their Springfield schedules. That’s good for a couple of reasons. Number one: the airlines wouldn’t bring bigger jets here if they couldn’t fill them. It shows that demand for air travel in Springfield is high. The second reason is comfort. Many people hate 50-seat jets because they’re cramped and stuffy. So the bigger planes are a welcome relief.
 
Some 50-seaters will probably come back as the summer travel season winds down. But some may stick around. Airline schedules for the fall are preliminary at this point, but they all show some bigger planes in the mix.
 
Why does all this matter? The growth is passengers (and flights) means that airport passenger numbers are trending up. Not just month to month, but year to year. After the uncertainty of the recession, this trend is very welcome news — not just for the airport, but for the local economy and travelers.
 
 

 

Our post “You Wanna Fly Where?!” generated good questions.  The best way to start answering them is to begin with the paragraph that ended the last post:

“When an airline considers adding service from a small market, such as Springfield, to a big hub, it’s not asking how many people want to fly from Springfield to that hub airport. It’s asking how many people it can connect beyond the hub, and how much revenue will those connecting customers generate?”

Our air service consultant, Michael Boyd, puts it a bit differently:

“There are no markets, other than vacation-package markets, where Springfield has sufficient passenger demand to support non-stop service, without the support of the feed traffic that a connecting hub generates.”

“Vacation-package markets” are those destinations served at our airport by Allegiant. Allegiant considers itself a travel company. Generally speaking, it flies from small markets, such as Springfield, to vacation destinations. Besides selling a plane ride, it also sells resort packages, rental car deals, etc.

Allegiant currently flies from Springfield several times a week to Phoenix, Las Vegas, Orlando, and Tampa/St. Pete. It flies seasonally from Springfield to Los Angeles and Punta Gorda/Ft. Myers. We talk to Allegiant on a regular basis about new destinations. Myrtle Beach and New Orleans are top of mind.

When Mike Boyd talks about “feed traffic that a connecting hub generates” he’s getting back to what we wrote earlier: “... how much revenue will those connecting customers generate?”

In the current airline business environment there’s only one hub city, that we don’t have service to, where connecting customers (aka: “feed traffic”) would generate a significant amount of airline revenue: Charlotte.

Charlotte service would be a good thing for Springfield customers. Flying to the Northeast from Springfield means taking connecting flights through Atlanta or Chicago O’Hare — two of the most congested airports in the country. Flights from Springfield to those two airports are frequently sold out. The addition of Charlotte flights would provide needed relief — it's the 8th largest airport in the country with dozens of connecting flights to Eastern cities, plus international non-stop flights to Canada, Western Europe, and South America.

We’ve been pursuing Charlotte service since 2010. The conversation began with US Airways. The airline’s route planners agreed with our financial analysis. They basically said ‘yes, the route would make money, but we can’t commit right now because of a plane shortage and the general state of the economy.’

If that answer sounds evasive, it wasn’t. When the recession began all the airlines began grounding planes to save money — that trend continues to this day. Bottom line: they didn’t have any spare planes to devote to a Springfield-Charlotte route. And while they didn’t say it, the planes they had in the air could make more money flying elsewhere.

Meanwhile, US Airways and America Airlines merged. As a result, we essentially had to restart the Charlotte conversation from scratch with the new American Airlines. That conversation continues to this day.

Several of you asked about the possibility of service to specific hub airports. Here’s an overview …

What about service to Salt Lake City on Delta?

Delta is not growing its Salt Lake City hub. Departures are down 19% between 2009 and 2014 and seats are down 4%. Additionally, the distance between Springfield and Salt Lake is 1,028 miles, which means it’s too for a 50-seat jet even if Delta weren’t retiring the majority of the 50-seaters (more on retirements later). The plane that’s the next step up has 66-70 seats and that would make it even more difficult to make the passenger revenue work.

What about service to Phoenix on American?

Maybe in the future but not now — American can make more money connecting Springfield customers to points west by using the Dallas hub. Additionally, Phoenix's hub status is uncertain in the aftermath of the US Air/American merger.

What about service to Philadelphia?

From the airline perspective it’s more economical to connect Springfield passengers through Chicago O’Hare, or Atlanta. As with Phoenix, Philadelphia's hub status is uncertain in the aftermath of the US Air/American merger.

What about service to Houston on United?

It’s been talked about but it would mean that United would have to compete with American’s Dallas service for south bound traffic from Springfield.

What about service to New York City’s Kennedy Airport?

Not going to happen. New York service could be in our distant future, but it would likely be to Newark Airport, not Kennedy.

What about service to Miami and Los Angeles?

The response from the airlines: you can already get to those places by connecting though Denver, Dallas, or Atlanta. Bottom line: those routes would be money losers from Springfield.

Patrick wanted to know if bigger planes are in Springfield’s future (meaning bigger than 50-seat regional jets). They definitely are. The airlines are retiring those jets as fast as they can. We expect to see bigger planes from all three of our legacy airlines: American, Delta, and United.  You can read more about it in this blog post from last August.

 


Feb 10 2015 You Wanna Fly Where?! BY sgf-adminTAGS Airlines, How the Airport Works

 

It’s the question we’re asked all the time …

“Does the airport have non-stop flights to __________ ?!

You can fill in that blank with the destination of your choice. I keep a list.  There’s Ft. Wayne, Indianapolis, Little Rock, Flagstaff, Hartford, Centralia, Illinois; Muncie, Eau Claire, the list goes on and on…

I’ve gradually realized that some folk have what amounts to a fantastic vision of how the airline business works. I’m not being critical — it’s just what they think.

Here’s how the vision goes …

“The airlines offer (or should offer) dozens of flights every day from Springfield. These flights fly non-stop to dozens of destinations in all fifty states.”

There’s just one problem …

That’s not how the airlines work —if an airline tried it would be bankrupt in about five minutes. Here’s what they do instead …

Rather than flying from Springfield to a whole bunch of places, the airlines fly from Springfield to a few “hub” cities. This is called hub and spoke flying. Let’s explain how it works by using American Airlines as an example.

Suppose you want to fly from Springfield to Amarillo. To get you there American flies you from Springfield to Dallas. At Dallas you get on another flight that takes you to Amarillo. In this scenario Springfield and

Amarillo are the “spokes,” and Dallas is the “hub.”

Take a look at the diagram. The “hub” is Dallas. The smaller cities are the "spokes." On any given day a handful of customers in each spoke city want to fly to Amarillo. Rather than provide a flight from each of those cities to Amarillo, American flies them to Dallas where they’re gathered up (from all those spoke cities) and then flown to Amarillo on a different flight. (Note: this diagram shows only a fraction of Dallas' spoke cities.)

I hope you noticed the bold face in the phrase, handful of customers. This is a key point. On any given day there aren’t enough people who want to fly to Amarillo, in each of those spoke cities, to justify the cost of a non-stop flight. So the airline gathers them in Dallas and then sends them on to Amarillo.

I talk to people on a regular basis who think there are tons of people who fly (or want to fly) from Springfield to places like Amarillo. The truth is surprising …

In 2013 an average of 1.2 people per day flew from Springfield to Amarillo.  That many people won’t fill the smallest plane that an airline is going to use — a 50 seat regional jet. Let’s put it another way: an airline isn’t going to fly that plane between Springfield and Amarillo if, on average, 48 seats are empty.

Now wait … there’s someone out there reading this who’s thinking, “If they had a non-stop flight to Amarillo more people would fly there!”

The airlines know from experience that “provide the service and they will come” rarely works. Just because the service is there doesn’t mean that the number of people who want to fly to Amarillo, on a daily basis, is going to change enough to make the route a money maker.

Let’s talk some more about passenger numbers and where those passengers want to go — because really, when you get right down to it, this is the nitty-gritty math that the airlines deal with …

Take a look at the top ten destinations for people flying from Springfield in 2013. The numbers represent passengers using the three airlines, serving Springfield, which have daily service: American, Delta, and United:


1. Atlanta:
avg number of people each day: 40.7. Non-stop

2. Dallas:
Avg number of people each day: 37.5. Non-stop

3. Chicago:
Avg number of people each day: 29.9. Non-stop

4. Los Angeles:
Avg number of people each day: 22.5. Must connect

5. Denver
Avg number of people each day: 21.3. Non-stop

6. New York City:
Avg number of people each day: 18.8. Must connect

7. Orlando:
Avg number of people each day: 16.2. Must connect

8. Seattle:
Avg number of people each day: 15.7. Must connect

9. Philadelphia:
Avg number of people each day: 15.3. Must connect

10. Boston:
Avg number of people each day: 14.6. Must connect


See the numbers for the average number of people each day? There aren’t enough people going to any single destination to fill one regional jet in Springfield.

Here’s another way of putting it: there aren’t enough people going anywhere to justify air service in Springfield.

So how come we have service? This gets complicated, so please bear with me …

The Springfield to Dallas service is the busiest route we have — approximately 400 people a day use it, but only 38 make Dallas their final destination. The rest take a connecting flight from Dallas to go to their final destination.

Let’s go back to our Amarillo example …

If we asked an airline for non-stop service to Amarillo, we’d politely be told, “No, it’s a money loser. You can already get there by connecting through Dallas.”

And the same goes for Ft. Wayne, Indianapolis, Little Rock, Flagstaff, Hartford Centralia, Illinois; Muncie and Eau Claire … and almost anywhere else we can name …

Here’s a bottom line point: at minimum, anytime we ask an airline for new daily service, it must be for a city that is a major airline hub. And to take it a step further ….

When an airline considers adding service from a small market, such as Springfield, to a big hub, it’s not asking how many people want to fly from Springfield to that hub airport. It’s asking how many people it can connect beyond the hub, and how much revenue will those connecting customers generate?

It’s complicated. Please ask questions ....

 


 

2014 was the fourth busiest year in the 69-year history of our airport. The total passenger count for the year: 846,324. That’s a 12% increase in passengers when compared to the year before.

Not only was 2014 one of the airport’s best years, it’s the best year we've had since the beginning of the recession. And it’s a strong indication that the local and national economies are improving.

The success of 2014 comes after several years of gloomy news in the airline and airport industries. The last time we had double digit growth was before the recession — in 2005. And for the past five years passenger numbers have been flat or negative ...

During the recession, and in its aftermath, airlines made big cuts at airports across the country and Springfield was no exception. In 2011 alone the airlines cut the supply of seats here by 21.5%. Since then supply has been flat. And that’s where we're bucking the trend ...

Airlines are actually bringing seats back to Springfield because they see strong demand here. In 2014 the airlines increased our number of available seats by 5.3%. Nationwide, airlines added 1.8%.

Will double digit passenger growth continue in 2015?

It’s doubtful — double digit growth isn’t the norm at any airport. In 2014 the airlines basically figured out that they’d cut too much in Springfield. So they spent the year putting seats back in the market. That helped grow our passenger numbers.

The airlines are bringing even more seats to Springfield in 2015. Advance schedules show a 4.5% increase for the first half of the year. Nationwide, the supply of seats will be up 1.8%.

That local increase is further evidence that the Springfield air market is stable and getting stronger.