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Not for Sale

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Understanding the Role of Air Service Development 27 Costs associated with launching service at a new community can be difficult for carriers to absorb, particularly in difficult economic times. Start-up costs Additional explanation of include repositioning equipment, renting space, and hiring and training person- importance of containing nel. Entering a new market also involves changing passengers' existing travel pat- airport costs terns and loyalties. Routes may take a year or more to mature and become self- sustaining. Today, airlines may not be as able to afford such losses while building Myrtle Beach (South Carolina) a customer base. International Airport is aware of the need to keep airport costs down. GAO provided some insight into these costs in a 2003 report. Regarding "Airlines tell us that whatever we the costs of serving small communities, the agency noted: "Another major part do, we must maintain efficient, low- of the expense of providing air service is `station' costs, according to airline offi- cost service." The airport manager cials. These stations require staff to handle passengers, bags, and cargo. One air- noted that, "Our airlines aren't line official estimated that it can cost as much as $200,000 to set up a station for excited about temporary rebates or new service, and annual station operating costs can range from $370,000 to incentives. They want a long-term $550,000" (depending on the size of aircraft used) (2, p. 12). plan that shows a partnership. . . . In the survey of carriers, the study team asked carriers to identify the top Our overriding priority is to build priorities they take into account in examining small markets for new or addi- a terminal that will lower costs for tional service. The results (highest to lowest) are as follows: current and future airlines. We're a seasonal market, but one of 1. Actual or potential market demand (e.g., traffic, yields, competition) the fastest-growing ones in the 2. Demographic/economic data (e.g., catchment area population, per capita Southeast. We know that airlines income, employment growth) look at Myrtle Beach as a seasonal 3. Airport costs market, so we hope to encourage 4. Congestion at the carrier's hubs airlines to stay year-round."(3). 5. Incentives 6. Limits on the potential community's airport gates and runway In August 2008, the airport announced that it would cut its landing fees from $1.97 to 50 cents How can an airport or community influence per 1,000 pounds of landed weight air service decisions? for all flights. The cuts equate to approximately $1.2 million in sav- Airports and communities can help carriers decide whether to serve a mar- ings for airlines. The airport also ket or not by providing them with information that they might not otherwise waived landing fees entirely for all have had. Airlines have limited numbers of route planners, and they tend to scheduled flights for December focus more on larger markets. Airline staff may be relatively unfamiliar with through the first two months of changes in a local area's economy or the existing air service. New or expanded 2009--the months when seasonal businesses in an area can generate the amount and types of employment that traffic is lowest. can make air service viable. If a community does not make the effort to bring that sort of news to an airline's attention, the carrier may never learn of the opportunity or the community's unmet air service needs. Not everyone agrees with this approach. Research revealed that a minority of small airport directors do not think it is useful to attempt to influence an air carrier's decision about whether to serve a market. They hold that these decisions are purely market driven, that the carriers know better than anyone else whether the market will work for them, and that the airport has no place interfering with a carrier's business. However, such a passive position assumes that airlines have perfect information about a community's current and future passenger demand, as well as the amount and quality of service provided by other carriers. That is simply not the case with smaller markets. What can an airport or community control? First, the airport can make every effort to control the local costs associated with starting and operating new service. Even more importantly, the community and the airport can influence the carriers' decisions by providing information on the