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Experts say several factors stack the odds against daily service



Published: Sun, May 11, 2014 @ 12:01 a.m.

By Ed Runyan and TOM McPARLAND

news@vindy.com

VIENNA

Though an air-service consultant to the Youngstown-Warren Regional Airport thinks the potential for expanded flights at the local airport is “still fairly good,” others say several factors stack the odds against daily service.

Washington consultant Tom Reich said he thinks several recent events influenced United Airlines’ decision last week to not start flights here.

In addition to the news April 24 that United lost $489 million in the first quarter of 2014, the company also had experienced poor results from other recent startups and is experiencing a pilot shortage as is most of the industry, Reich said Thursday.

A Chicago writer called the first-quarter results “stunningly bad,” especially in light of news that two other airlines, American and Southwest, reported profits of $480 and $126 million, respectively.

Even in the best of times, however, small airports face challenges in landing new air carriers, even with multi-million-dollar revenue guarantees.

A study published in January by Michael D. Wittman of the Massachusetts Institute of Technology International Center for Air Transportation suggests that it’s a long shot for small airports to attract commercial air service using the methods the Youngstown-Warren Regional Airport is using.

His study evaluated revenue guarantees and other initiatives taken with help from U.S. Department of Transportation’s Small Community Air Service Development grants to attract new airline services between 2006 and 2011.

And, the study concluded that SCASD grants were successful only 36.5 percent of the time in securing new service within 28 months of receiving it.

UNITED’S VIEW

Mary Clark, United spokeswoman, said she could not discuss specific market information that led to the decision against starting service in Youngstown, but she wants to dispel the suggestion that United “changed its mind” about starting service here.

“We are continuing to expand into new markets,” she said, adding that the decision regarding Youngstown was “all based on what makes a business case for service.”

Clark said the letter United Airlines representative Martin Kammerman emailed Monday to airport officials gives the reasons for the decision.

The letter is short on specifics, however, saying only, “We have concluded that there is not a solid business case for establishing service.” Then it goes into detail about revenue guarantees.

Saying he wanted to address “any confusion or misinterpretation” regarding the guarantee United would need to start the service, Kammerman indicated the amount would be $7 million per year for two years — not the $1.75 million Dan Dickten, aviation director at the airport, had been estimating would be needed.

“The discrepancy between your revenue guarantee goals and our business requirements provide further pause for establishing service,” Kammerman said.

Reich said United’s mention of the $14 million in revenue guarantees sounded like the position taken by someone selling something who later decided against selling.

“You offer some crazy, high price. You know the person won’t give you that amount. That’s what United has done here.”

WHAT WORKS ELSEWHERE

Reich said the $1.75 million guarantee Dickten was working toward falls in line with what other communities have offered to start new service.

He said for a carrier that is “very serious about a market,” $2 million to $3 million is sufficient. Dickten said the $7 million would be roughly the equivalent of operating two flights per day with no passengers on them.

The airport in Atlantic City, N.J., provided about $3.1 million the first year and $1.5 million the second year to start AirTran service in 2009, Reich said.

Manhattan, Kan., offered about $1.5 million to start American Eagle service there in about 2010, he said.

St. Cloud Regional Airport in Minnesota put up $1 million for United daily service to Chicago, which started last week, airport director Bill Towle said.

He said a $7 million revenue guarantee over two years, while not unheard of, is unusually high.

“It says to me that the airline thinks it’s risky to come to Youngstown,” he said.

Much of that risk lies in the airport’s location. Because Youngstown is halfway between major international hubs in Cleveland and Pittsburgh, it’s often easier and cheaper for travelers to drive to those cities, and it is incumbent upon the airport’s staff to prove to an airline that the airport can pull passengers back in with daily service, Towle said.

Airports make their case by providing detailed analysis of passenger demand and behavior and by proving a barrier that would discourage passengers from driving to another airport. But perhaps the biggest factor is reaching out to local businesses for support and monetary contributions.

In St. Cloud, Towle and his team secured $6 million toward a travel bank, an account businesses pay into and then use only to travel with the airline.

“You need to galvanize the community,” he said. “At the same time, we were able to keep things from a media standpoint to a very small group.”

“You need to find a way to find balance,” by not naming the airline and only speaking publicly in general terms, he said. Airlines are very wary of media and prefer to make an announcement only after a deal is in place, Towle added.

OVERSOLD OR NOT?

As for whether Dickten had been overly optimistic in his statements about the likelihood that United would start service here, Reich said he thinks Dickten was optimistic in the same way a baseball manager would be positive leading up to the start of the World Series.

“I don’t think he oversold it. He was just helping get the community excited about it.”

In a March 31 email to Dickten, however, Reich said the message coming across in Youngstown-area media was a bit too optimistic.

He cited one media report saying the effort to land United was “on solid ground” and “moving forward fast.”

“We’re not on solid ground with United,” Reich said in the email. “I would say we’re hopeful, and the negotiations are moving, but they’re not moving forward fast.”

Dickten said he would continue to solicit pledges from public and private entities.

The Cafaro Foundation, part of the Cafaro Corp., had pledged $100,000. Warren City Council pledged up to $30,000, and the Youngstown council was set to approve up to $40,000 to the fund in mid-May.

But Mayor John A. McNally said that proposal is likely on hold following the United announcement.

“I imagine the council commitment is contingent on definite plans or a definite airline” ready to commit, he said.

HOW MUCH MONEY?

The Youngstown-Warren Regional Airport received its first SCASD grant in 2004 to market the airport to airlines. It received another one of $575,000 in October 2007 but was unable to find an airline to use it, so it was revoked and replaced with one for $780,000 in 2012.

The port authority was planning to use the $780,000 as part of the $1.75 million United revenue guarantee, along with $420,000 from the port authority and local donations.

Wittman said efforts to acquire new air service using a SCASD grant frequently fail because of the “highly speculative” nature of such efforts.

One thing that does work, the study said, is getting airlines involved in the application process. For example, the airport in Appleton, Wis., secured letters of support from four airlines already flying out of the facility for its 2009 application.

The $150,000 grant it received was successful in marketing the airport’s ease of use and helped retain the same level of service through 2011, the study said.

Non-hub airports such as Youngstown-Warren — those with lower numbers of passengers using them — were among the least successful at achieving their goals with their SCASD grants, the study said.

Looking at grants from 2011, only 24 percent of nonhub airports succeeded in attracting new air service.

Airports in the next higher classification — small hubs — were successful five times out of six (83 percent) in acquiring additional service in 2011, the study said.

Dickten, however, says the Wittman study lumps together airports in low-population areas and higher-population areas such as the Mahoning and Shenango valleys. If a study were done looking at the success rate of only communities like Youngstown-Warren, the percentage would be higher.

“All of our consultants are telling us our opportunities to get daily service in the coming year are better than they’ve been in the past decade,” Dickten said.

WHAT AIRLINES NEED

The first thing airlines look at when deciding where to set up service is the number of passengers, said George Williams, owner of Williams Aviation Consultants. Because it is expensive to move equipment and people into a new airport, airlines must be sure they can see returns on their investment.

“If they’re not going to make money on the flights, they’re not going to do that,” he said.

While the Youngstown-Warren airport has seen a boom in passengers since 2009, it still served fewer than 100,000 people last year. That number is not all that attractive to an airline the size of United, Williams added.

Williams said Youngstown’s location may also factor against it. Because of its proximity to two international airports, airlines likely fear that customers will make the 90-minute drive to Pittsburgh or Cleveland, where they can find more flights, often for less money.

Ron Klingle, owner of Howland-based Avalon Holdings and vice chairman of the port authority, said he believes the work being done by Dickten and his staff will be successful in attracting new air service.

The dramatic increase in passenger numbers at the airport as a result of additional Allegiant Air flights — from 34,890 passengers in 2009 to 94,212 in 2013 — is evidence that Dickten and his staff will succeed in attracting daily service, Klingle said.

“I have an incredibly high level of respect for Dan Dickten and his staff,” Klingle said. “I think our [community members] absolutely want to use this airport.”


Comments

1listener(112 comments)posted 4 months, 1 week ago

Well Mr. Klingle, you are the only one who has respect for Dan Dickten. He must go along with the board and other staff at this useless port authority.

Suggest removal:

2Erplane(483 comments)posted 4 months, 1 week ago

To the Vindy - a very fair story that shows the situation, but do you think you can update your stock photo of the airport? The frontage has been cleaned up, signs repainted. And maybe take that photo when people are arriving/departing for an Allegiant flight, so as to show the activity that is occurring.

As for listener, you are simply wrong. Ron Klingle reflects the views of many of the progressive leaders who are the doers in the Valley. Recall when Dan Dickten accepted the job, there was no daily service already for 7 years, and the physical infrastructure was so bad at the airport, there werent even restrooms once you went past security. Dan has vastly improved the structures at the airport, and has the respect of many in the airline industry. I've seen it first hand.

As for United, it was right to go down the road and negotiate with them first. They expressed interest, most likely as a mea culpa to political leaders in Ohio for pulling out of Cleveland. But the fact is they are not a well run airline. They have significant financial losses. I travel to Houston many times for work, and the whole energy industry laments the loss of former Continental to that merger.

Daily service will return to YNG, and within the next 12-18 months. I am really hoping its a Delta Connection flight to Detroit, a world class airport that will take travelers to over 150 destinations on Delta in just a 30 minute flight. Such a Yotown-Motown shuttle is exactly the right call. Or it may be Chicago on a airline that operates as a United or American carrier.

Its a new Valley with a new purpose. Daily service will happen. And everybody should praise Dan Dickten for what he has done, especially in the wake of such dysfunction at the WRPA board level.

Suggest removal:

3Erplane(483 comments)posted 4 months, 1 week ago

One correction to the story - the writer states Cleveland and Pittsburgh are 'major international hub' airports. They are far from that. They both have lost their hub status. PIT has a Delta Pittsburgh to Paris flight. But they are not hubs.

Suggest removal:

4Search4Answers(726 comments)posted 4 months, 1 week ago

Why do we need a Youngstown airport when Akron/Canton, Cleveland, and Pittsburgh are within an hour and ten minutes for us and will always offer a wider array of flights?

Waste of money...

Suggest removal:


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