Aaron has a question about our surging passenger numbers:

“As we all know everyone loves cheap fares, but it seems like this can be said even more so for Springfield, MO. Like you said, cheap fares are not just found in Southwest Missouri, but across the country. My question is since everyone else is getting these cheap fares why aren’t other airports seeing their passenger numbers soar like ours? Also, why doesn’t an airline like Southwest, AirTran, etc… take notice of the Springfield Branson National Airports surging passenger numbers during these cheap fare sales and try out the market? It only makes sense seeing our numbers. I’m sure we wouldn’t lose any more business to STL, KC, and Tulsa if that were to happen making our passenger numbers REALLY soar.”

These are really good questions. We’ve thought a lot about the first one: “why aren’t other airports seeing their passenger numbers soar like ours?”

Let’s begin with a caveat: trying to compare one air market to another is like comparing apples to oranges. Example: people chew on us about the fact that Fayetteville, AR has (or did have until the recession) daily direct service to Miami and Los Angeles. People say, “Fayetteville is smaller than we are and they have direct service, therefore the Springfield airport is screwing up…”

This point-of-view is detached from reality. First of all, the population of the Fayetteville metro area is bigger than Springfield’s. That means more people to feed the airlines. Secondly, the Fayetteville metro is home to several huge corporate headquarters: Wal-Mart, Tyson and JB Hunt. These companies, and Wal-Mart in particular, generate thousands of business trips every year. If Wal-Mart went away tomorrow, Fayetteville’s daily direct service to the coast would disappear in a heart beat.

Ok. I tell you all that to make the point that comparing one market to another is pretty tricky. Every market is different. That being said, here are some thoughts about why our passenger numbers are soaring, while other airports aren’t.   ; )

• The presence of Allegiant Air in the market has made a difference. It added service to Los Angeles in early May. It’s total May passenger numbers were up 56 percent in Springfield compared to the same month last year. Its low fares attract customers that normally wouldn’t consider flying.

• The generally lower fares offered by all the airlines has made a difference, but here’s a key point: the lower fares probably have a bigger impact in smaller air markets (like ours). Customers who live in small markets are used to dealing with higher fares. So when fares go down they jump. Customers who live in big markets (like Kansas City) are probably not as price sensitive. Bottom line: lower fares have a bigger customer impact in small markets like Springfield.

• Compared to other regional economies, our economy is in pretty good shape. That’s not to say that the recession hasn’t hurt us, but we are better off than many other areas.

Let’s move on to the second question:

Why doesn’t an Airline like Southwest, AirTran, etc… take notice of the Springfield Branson National Airport’s surging passenger numbers during these cheap fare sales and try out the market? It only makes sense seeing our numbers.”

It makes sense to you Aaron, but it doesn’t make business sense to Southwest or AirTran. Why? This market doesn’t have a big enough population. Or, to put it another way, we don’t have enough people to fill the number of seats those airlines would want to sell.

Let’s begin with AirTran. That airline won’t fly into a market this small unless it’s paid to do so. That’s what’s happening at the airport in Branson—the airport is paying the airline to provide the service. AirTran has a similar arrangement in Wichita.

As for Southwest, it’s a similar story, but with some key differences:

• Airports can’t buy Southwest service. The airline doesn’t run its business that way.

• The Southwest business model generally dictates that the airline won’t enter a market that has less than a million people living in the metropolitan area. That’s the customer base Southwest needs to do business. The Springfield metro population is approximately 420,000. We’re more than half-a-million people short!

Finally, whenever someone brings up the subject of Southwest I feel obliged to provide them with a couple of reality checks. Here they are, sorry!

Assuming that Southwest did decide to fly here, what market do you suppose it would fly to? It would almost certainly be its home base, Dallas Love Field. Have you ever tried to make a connection out of Love Field? It wouldn’t be the panacea that many people imagine.

And finally, Southwest isn’t as cheap as everyone thinks. According to well known aviation analyst Darryl Jenkins, of Embry Riddle University, Southwest is the lowest fare carrier in less than one-third of its markets. He says, “The illusion of low fare is better than a low fare and Southwest has the highest percentage of high fares of any airline.” If you’re skeptical about this, do a market by market comparison of fares and you’ll discover what those of us in the aviation industry already know: the mystique of Southwest has more to do with perception than low fares.

Whoa!

Southwest Airlines says it’s going to start “charging passengers $10 each way to board flights before general check-in starts, but after premium passengers, including those flying Business Select.”

Read the rest of the story here.

“Southwest Airlines will temporarily halt flights on three routes early next year as it deals with a decline in air traffic and tries to bend its schedule to fit seasonal demand.”

That’s the gist of a story today from the Associated Press and it’s a sure fire sign of how weak the airlines expect air travel to be during the next few months.

Along with that bad news comes word of more job cuts at American Airlines. Read more here.

Southwest Airlines is in a pickle it isn’t used to. With it’s second consecutive quarterly loss (4th quarter loss of $56 million), the airline says it plans to cut capacity 4.4% in the first three quarters of the new year. That’s according to the Dallas Morning News.

The paper quotes Southwest Chairman Gary Kelly, ““I definitely want Southwest Airlines to grow,” Kelly told a conference call. “I believe we will be able to grow, but that is certainly a secondary objective in this kind of an economic environment.”"

I’m blogging from Texas this evening because I’m attending a national air service conference sponsored by the American Association of Airport Executives. This is one of the conferences where you get a chance to talk to others in the airport/airline industries and find out what’s going on across the country.

This afternoon I listened to a speaker that I know many of you would find interesting: the director of network strategic planning for Southwest Airlines, Lee Lipton. I know if some of you were here you would chew his ear about the absence of Southwest in the Springfield-Branson market. For those of you who haven’t followed these past blog conversations, click here and here and catch-up!

Anyway, one point made by Mr. Lipton caught my attention because it vividly illustrates the financial conundrum facing all U.S. airlines. According to Lipton, Southwest presently has to sell the first 95 seats on every flight BEFORE the flight makes money. That’s 95 seats out of 137 on every flight–the 96th passenger puts the flight in the black. Put another way, if the flight is 69.3 percent full (these percentages are called “load factors”), the airline only breaks even. It wasn’t that long ago that most airlines were modestly content with a 70 percent load factor. What’s changed? Energy prices. I hate to think about what it’s like right now for those airlines that aren’t as efficient as Southwest…

Today’s Wall Street Journal provides an interesting read on Southwest Airlines. The headline says, “Southwest’s New Flight Plan: Win More Business Travelers.” Unfortunately, the story isn’t available on the paper’s web site unless you pay for it.

So, here’s the story in a nutshell: the airline wants to “wean itself from its reliance on budget travelers.” To accomplish this task the airline is trying to lure business travelers so it can raise fares. Here’s the catch: can it do it without maddening budget travelers?

That’s the meat of the story. But what’s really interesting are the details. The paper quotes an academic study that reports, “Southwest’s fares were lower only half the time when compared with fares of competitors selling tickets through the online travel site Orbitz.com.” You can find the study here and read the details.

This study, along with the Journal article, are two more blows for Southwest as it works to protect its low fare perception. What do I mean by that? Play along here for a moment and I’ll give you an example…

2007 began with a screaming full page advertisement in the Journal. The catch line said, “Fares as low as $49.” Who do you suppose the airline was? Southwest? AirTran? JetBlue? Wrong, wrong and wrong. The correct answer: American Airlines. Admit it—you thought it was Southwest.

According to well known aviation analyst Darryl Jenkins, of Embry Riddle University, Southwest is the lowest fare carrier in less than one-third of its markets. He says, “The illusion of low fare is better than a low fare and Southwest has the highest percentage of high fares of any airline.” If you’re skeptical about this, do a market by market comparison of fares and you’ll discover what Jenkins already knows: the mystique of Southwest has more to do with perception than low fares. Analysts say one reason so many airlines have been in bankruptcy is because they’ve actually been competing with Southwest.

Perhaps the bottom line challenge for Southwest, as it tries to appeal to business flyers, is maintaining the “illusion.”

Curtis leaves comments from a posting in August about Southwest Airlines:

“It is not true that Southwest won’t fly to an MSA of less than 1,000,000 people. It currently flies to 17 of them, not counting any cities in Hawaii. Five of these (Midland/Odessa, Amarillo, Lubbock, Harlingen/South Padre, and Reno) are smaller than Springfield MSA (according to U.S. Census 2006 estimates). I also don’t understand why they would only fly to one destination from SGF. The five smaller cities all have direct flights to at least three destinations each.”

You’re right Curtis, but there’s a little more to it…

When Southwest began service in 1971, it was a Texas based airline serving only Texas cities (this was long before the company adopted its “million people in the MSA guideline”).  The airline continues to service those small, legacy cities because it has a near monopoly on the service. Shawn Schroeder, the assistant director of our airport, used to work at the airport in Harlingen. The Harlingen MSA has about 378,000 people and Southwest service. He tells me that it’s very difficult to entice other airlines to provide service there because they don’t want to compete with Southwest. Southwest has no reason to leave Harlingen (or the other small Texas markets) because it has a lock on the market and they’ve always been there—the airline and Harlingen came to the dance together!

As for the Reno/Lake Tahoe market—its MSA is about the size of ours, but there’s at least one very important difference: the tourism and gaming industry. The Reno airport has eleven airlines and moves approximately five million passengers a year. We have five airlines and less than a million total passengers a year. Given these facts, it’s easy to understand why Southwest would serve the market. To compare our market to Reno, is to compare apples to oranges.

So, the bottom line is still true: today, in 2007, when people like me call Southwest and inquire about obtaining service, the airline says it generally doesn’t consider service to an MSA of less than a million people.

Karen and Aaron want to know about Southwest Airlines. Karen says, “What was the law that kept Southwest from flying into Springfield. Wasn’t that recently overruled, or didn’t a new law go into effect that would allow it?”

Karen… You’re thinking about the Wright Amendment. I most definitely am not an expert on this bit of airline/airport legislation. But in a nutshell: when the amendment was in full force it forbid Southwest Airlines from flying into any state that didn’t touch Texas (the airline is based at Dallas Love Field). In 2005 the law was amended to allow flights to Missouri.

Aaron says…Why doesn’t Southwest fly into Springfield-Branson? I get this question all the time, so forgive me for the well rehearsed response!

Low cost carriers (LCCs) are a tough nut to crack for smaller markets like Springfield. Why? Because the business model won’t allow for service into a Metropolitan Statistical Area (MSA) of less than a million people. The population of the Springfield MSA is 400,000.

I’d guess that Southwest would want to have five flights a day, with the goal of filling a 130 seat aircraft to at least 80% capacity.  And it would only fly to one place. This is a key point… Southwest doesn’t fly from point A to B or C, and so forth. It flys from point A to point B. And  in our case, where would point B be? It would almost certainly be Dallas Love Field.

So here’s the down and dirty: we don’t have the customer base to support an airline like Southwest, Airtran, JetBlue etc. In 10 to 15 years we might have the passenger numbers to entice an LCC–but don’t count on it.

I know what you’re thinking–what about Allegiant? It’s a low cost airline and it serves Springfield-Branson!

Allegiant is a completely different animal. It operates on a much, much smaller scale than Southwest and its business model is different. It serves small market airports (like us) with service to vacation destinations only. And at the beginning of this year it owned only about 22 airplanes.

I’m sure we’ll be talking about this subject a lot more!