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48 Passenger Air Service Development Techniques A community with $250,000 more in manufacturing earnings received 4.8 more jet departures per week than an otherwise similar community. A community received 4.7 more jet departures per week for every additional 50 miles separat- ing the airport from an LCC. The 41 airports surveyed had estimated average catchment area populations of about 600,000. Non-hub and small hub airports differed significantly in terms of those populations: an average of 395,000 versus an average of 950,000. An additional variable that influences demand at small airports is their association with regional or natural attractions that may cause significant seasonality in demand. For example, airports in or around ski resorts may receive significantly more service during the winter months, which drops off dramatically during the summer. Service to some southern resort locations--such as Palm Springs, California--can also be seasonal: average daily departures drop as the average temperatures soar. See Figure 4.1. What are small airports' most common competitive challenges? Although small communities share certain fundamental economic characteristics, each is unique in terms of the size and economic characteristics of its catchment area; proximity to com- peting airports (perhaps a legacy carrier hub, an airport served by an LCC, or just a different air- port with service from other airlines); or physical limits, such as the length of its runways. Competitive Challenges Cause Passenger Leakage Because of these challenges, almost all small airports suffer from a phenomenon in which the passengers who might naturally use the local airport choose instead to fly from a different air- port. They may make that decision because they perceive that the fares are cheaper or because the other airport has service from a different airline, which may fly nonstop to a desired destination. 120 100 80 Average daily high temperature 60 Average daily departures 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Figure 4.1. Service in Palm Springs, California, is related to its temperatures.

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Understanding the Key Challenges to Viable Air Service at Smaller Communities 49 This loss of nearby traffic to a competing airport is referred to as "leakage." Smaller community Smaller community airports often have difficulty with passenger leakage. Nearly half of the nation's small commu- nity airports are within 100 miles of a large hub airport or another airport served by an LCC. airports usually have difficulty with Surveyed airports confirmed that they lose a significant share of their potential passenger traffic to competing airports that are, on average, between 75 and 100 miles away. As shown in Figure 4.2, passenger leakage, the situation is much worse for non-hub airports compared to small hub airports and is com- because most are pounded when competing airports have relatively good highway access. within 100 miles of Airport managers and ASD officials believe that the primary reason they lose business passen- gers is the greater range of choices available at competing airports. This is particularly true of a large hub airport non-hub airports: Eighty percent of the airports surveyed thought that they lost passengers or another airport because travelers had more options with nonstops, arrival and departure times, and frequencies. served by an LCC. (See Figure 4.3.) Easy highway access to those locations was also a factor. For business travelers, lower fares are also important (whether from legacy carriers or by LCCs), but are apparently not as critical as convenience. Leisure passengers use alternative airports for one essential reason: access to lower fares. Surveyed airport managers overwhelmingly agreed that they lost potential leisure traffic because better fares were offered either from an LCC or a network carrier at a competing airport. Leisure travelers also valued access to other destinations with nonstop service. Proximity to Legacy Network Hub Many smaller community airports are relatively close to a legacy network carrier's hub. As shown in Figure 4.4, for example, Colorado Springs, Colorado, is less than 90 miles away from United's hub at Denver International. As a result, passenger traffic that the airport might otherwise Small hubs Nonhubs 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent captured Percent leaked Figure 4.2. Non-hub airports capture less than 25 percent of their potential passenger traffic.

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50 Passenger Air Service Development Techniques More nonstop destinations Choice of arr/dep times Easy access by highways More frequencies Access to LCC Larger aircraft Legacy carrier lower fares Frequent flyer programs Jets not turboprops 0% 20% 40% 60% 80% 100% Small hubs Nonhubs Figure 4.3. Why business passengers use other airports. Figure 4.4. Colorado Springs is less than 100 miles from United's hub at Denver International.

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Understanding the Key Challenges to Viable Air Service at Smaller Communities 51 have captured drives instead to the larger airport, which offers service to far more nonstop des- tinations, with multiple daily frequencies, often using larger aircraft. The ease with which pas- sengers can reach those airports can vary, depending on whether they are connected via inter- state highways. In addition, the distance travelers will consider driving to reach an alternative airport can vary significantly. Particularly in midwestern and western states, many people are willing to drive several hours to reach an airport served by a carrier offering lower fares. Attracting additional service to these locations can be challenging because carriers realize that passenger leakage to the hub will be difficult to reverse. What reasons do passengers give for using another airport? Business passengers leak to larger airports because of: More nonstop destinations, Frequencies, Choice of arrival and departure times, Ease of access by highways, and Fares. Leisure passengers leak to larger airports because of: Fares! Fares! Fares! Proximity to Airport with LCC Service Similarly, as LCCs have spread into more markets (albeit usually larger cities), many smaller communities are also close to an airport served by an LCC. As shown in Figure 4.5, Santa Rosa, California, for example, is less than 70 miles to either Oakland International Airport (served by Southwest, JetBlue, and Allegiant) or San Francisco International (served by Southwest, JetBlue, and Virgin America). Just as some travelers will drive relatively long distances to reach service at a hub airport, others will drive long distances to reach an airport served by Southwest, AirTran, or other LCCs. This phenomenon is particularly true for family leisure travel, because the fare Figure 4.5. Sonoma County Airport is close to airports in both San Francisco and Oakland.

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52 Passenger Air Service Development Techniques differentials may be significant and leisure travelers do not always consider the value of their time, parking at the larger airport, and other expenses. Attracting more service to these airports can be difficult because the carriers realize that unless they can match the LCC's fares, a portion of the passengers will continue driving for LCC service. Small Populations that are Geographically Isolated Some smaller communities have difficulty attracting additional air service simply because they draw from an area with a relatively small population and a limited amount of economic activ- ity. In addition, many of those communities may be in areas of the country that have tradition- ally been served by a single airline, such as many smaller communities in the upper Midwest long served by Northwest. If a smaller community has access to only one network, passengers have no competitive choices for reaching many points. Some of these communities may only receive service because the federal government subsidizes it through the Essential Air Service program. Attracting competitive alternatives to those communities can be difficult, because of the chal- lenges associated with overcoming the local passenger's affinity to the incumbent airlines and because the small markets have difficulty supporting more air service. Aircraft capacity and the length of haul to another carrier's hub can be hurdles. Fragmentation of the Local Passenger Traffic Base among Competing Nearby Airports Other smaller airports may not be in the figurative shadow of a hub or an airport served by an LCC, but they might be close to several other smaller airports that have commercial ser- vice. The result is that they compete among themselves for the available passenger traffic. The nearby airports usually are not served by the same network carrier, because that carrier under- stands that it can attract passengers to its service with its presence at just one of the locations. Attracting additional competition to one of those airports can be difficult because carriers believe that the overall catchment area is already quite competitive. As shown in Figure 4.6, passengers flying to or from the northern coast of the Gulf of Mexico have multiple choices among nearby airports. Figure 4.6. Gulf Coast passenger traffic splits among several airports.

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Understanding the Key Challenges to Viable Air Service at Smaller Communities 53 Predominantly Inbound Markets that Rely on Tourism Some small communities are located near natural attractions that tend to be seasonal in nature. These may include major national parks (such as Yellowstone or Glacier) or ski resorts (such as Sun Valley, Idaho; Steamboat Springs, Colorado; or Rutland, Vermont). Year-round residents of those communities may have abundant service during the "high" season (although it may be expensive), but far less service during the off season. Certain airports, such as West Yellowstone, may only have service during parts of the year. Attracting additional service--even if it is only more off-season capacity--can be difficult for many of these communities, because airlines may not understand the permanent level of economic activity. Many Small Communities Face Multiple Challenges Smaller communities' airports often face more than one significant challenge. For example: Harrisburg, Pennsylvania, is within a relatively short drive of several major airports, includ- ing Washington Dulles International (a hub for United also served by JetBlue, Southwest, and Virgin America), Baltimore/Washington International (Southwest's largest East Coast oper- ation), and Philadelphia International (a hub for US Airways). Bakersfield, California, is relatively close to Fresno Yosemite International to the north and Los Angeles/Ontario International and Los Angeles International to the southwest. LawtonFort Sill (Oklahoma) Regional Airport divided its natural traffic with Will Rogers World Airport in Oklahoma City (88 interstate highway miles to the northeast, an airport served by Southwest) and Dallas/Fort Worth International Airport (American's hub 182 miles to the south). Table 4.1 provides examples of smaller airports and some of the competitive challenges they faced. Each may also face additional competitive pressures from other nearby facilities as well, along with limits to their infrastructure (such as relatively short runways or obstructions). Table 4.1. Competitive challenges at selected communities with smaller airports. Major Competitive Challenge Communities Logan, UT Kalamazoo, MI Toledo, OH Proximity to legacy network hub Rockford, IL Harrisburg, PA Colorado Springs, CO Huntington, WV Daytona Beach, FL Proximity to airport with LCC Santa Rosa, CA service Mobile, AL Rockford, IL Harrisburg, PA Butte, MT Marquette, MI Small, isolated communities Idaho Falls, ID Victoria, TX Dickinson, ND Greenville, NC Ithaca, NY Mobile, AL Fragmented market Lawton, OK Florence, SC Stewart (Newburgh), NY Hailey, ID Predominantly inbound (tourist) Hayden, CO market Kalispell, MT