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CHAPTER 5 Taking Stock of the Situation An effective ASD program begins with an honest assessment of the airport's existing services, as well as the facility itself, to identify how the air service can best be improved--realistically. This evaluation needs to encompass not just an analysis of current and historic passenger traffic patterns and fares, but also a comparative evaluation of what services are offered at other nearby airports and similarly sized airports elsewhere. In this chapter, the techniques used to measure and analyze air service are discussed in order to provide insight into how best to define, address, and correct any deficiencies. What are the airport's current services and how are they performing? Before the airport's air service can be improved, the ASD team needs a complete picture of the The first step in air service currently offered and how well it meets the needs of the traveling public. This evalu- improving an air- ation involves analyzing passenger and airline data in the airport's top origin-and-destination (O&D) markets as well as conducting a more subjective assessment of how convenient and com- port's air service petitive it is to fly into or out of the airport. is developing a complete picture Destinations and Load Factors of the service it Regardless of the size of the commercial airport, the person(s) tasked with marketing and/or currently offers new business development should conduct a periodic review of the airport's existing air services. and how well that This review should encompass not only scheduled flights by commercial airlines, but also flights by charter carriers to quantify which destinations are being served and how well. It is best to keep meets the needs of a running time-series comparison of the number and airport name of nonstop destinations its travelers. served. Close attention should be paid to any market seasonality. For example, does an airline provide nonstop service between the airport and Orlando or some other leisure destination only during the peak winter and spring break seasons? U.S.DOT has a large database that is used to analyze patterns of O&D travel. This database is populated by the information large airlines are required to report on a sample--10 percent--of all tickets sold. This rule applies only to airlines domiciled in the United States and not to for- eign carriers. (However, these data may capture information on passengers who purchased a ticket on a foreign carrier whose code-share flight is operated by a U.S. carrier--for example, a passenger with a Lufthansa ticket flying from Chicago to Frankfort on the United code-share flight). The O&D data thus provide a statistical estimate of the number of passengers who travel from an airport and where they go. U.S.DOT releases the data on a quarterly basis, usually with a three- to four-month lag time. 57

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58 Passenger Air Service Development Techniques The O&D data, which is market specific, can show whether there is a substantial amount of traffic in the target market despite the lack of nonstop service. This data shows the origin, desti- nation, passengers, revenues, average fare, average yield, and itinerary distance for the target market as well as any connecting market traffic that might flow over an airline's hub. Table 5.1 shows some basic information for the top 25 destinations from Providence, Rhode Island [T.F. Green Airport (PVD)]. However, users need to note that because the data are sampled, they are also subject to statis- tical sampling errors. In smaller markets, because the total number of tickets sampled can be small, the sampling error can be correspondingly large. Estimates of traffic in certain smaller markets may be statistically questionable. Another important dataset that U.S.DOT issues is the "T-100 data," which is segment specific. These data show the departure airport, arrival airport, departures, onboard passengers, available seats, RPMs, ASMs, and load factors. (See for example Table 5.2.) U.S.DOT requires that all carriers that fly international and domestic operations to/from/via the United States provide operational statistics on those services. This rule applies to both scheduled and nonscheduled (e.g., charter) flights, as well as passenger and cargo flights. U.S.DOT releases T-100 data each month, with a three- to four-month lag for domestic service. Analysts can use these data to determine the extent to which load factors on critical market segments are relatively high or low. Load factors represent the average number of seats filled with (paying) passengers on a nonstop flight. High load factors can be interpreted either as a sign that the market is performing relatively well for the carriers, or that loads are so high that passengers' choices may be limited, especially during peak times of the day, week, or year. In that manner, Table 5.1. Top 25 destinations for Providence, RI, passengers. PVD Daily Each Way Average Nonstop Rank Market Passengers Revenues Fare Service 1 BWI 731 $58,788 $80.39 Y 2 MCO 660 $75,965 $115.10 Y 3 PHL 421 $35,293 $83.87 Y 4 TPA 403 $46,146 $114.43 Y 5 FLL 267 $33,478 $125.24 Y 6 MDW 199 $23,411 $117.80 Y 7 ORD 189 $28,141 $148.98 Y 8 PHX 184 $27,081 $147.43 Y 9 LAS 169 $27,040 $160.30 Y 10 RSW 140 $17,059 $121.85 N 11 LAX 132 $22,034 $167.17 N 12 PBI 125 $14,097 $113.13 N 13 DCA 118 $29,864 $253.93 Y 14 DTW 115 $19,097 $165.88 Y 15 BNA 108 $14,927 $138.30 Y 16 CLE 108 $13,172 $122.50 Y 17 SAN 96 $17,835 $185.84 N 18 CLT 93 $18,310 $197.77 Y 19 RDU 93 $10,731 $115.99 N 20 JAX 87 $10,524 $121.55 N 21 PIT 85 $9,994 $117.91 N 22 ATL 74 $18,533 $252.15 Y 23 DEN 73 $12,474 $171.21 N 24 ORF 68 $8,311 $122.34 N 25 SFO 67 $12,379 $184.58 N Note: Data for year ending June 30, 2008.

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Taking Stock of the Situation 59 Table 5.2. Example of T-100 data for travel between Providence and Chicago O'Hare. Onboard ASMs RPMs Load Carrier Passengers Seats (000) (000) Factor American Airlines 69,549 84,258 71,532 59,048 83% United Airlines 234,787 279,130 236,988 199,337 84% Note: Data are for year ending September 2008; passengers are both inbound and outbound. high load factors may act as an inhibitor to traffic growth in the absence of new air service, offer- ing support for the contention that new flights in the target market will allow normal market growth in the community to be better accommodated. The T-100 data include information for both scheduled and nonscheduled (e.g. charter flights) operations. The data are reported on an "as-flown" basis. That is, if a commercial sched- uled flight from New York City (JFK) to Los Angeles (LAX) makes an unexpected stop en route in Kansas City (MCI), the data will record that the flight required two segments, JFK-MCI and MCI-LAX, and will not appear in the nonstop JFK-LAX data. The T-100 and O&D data are available from both public and private sources. High-level data are available to the public online through the U.S.DOT's Bureau of Transportation Statistics (BTS). These traffic and operational data are also available on a subscription basis through other private U.S.DOT-authorized providers, such as Dallas-based Database Products and OAG BACK Aviation Solutions. Route Deficiencies Having learned where the airport's passengers go, the next step involves assessing how they get there and how routes might be improved to provide more convenient service. Nonstop Markets Passengers may Hub-and-spoke systems emerged as the most efficient means for connecting passengers not care for con- between two different locations. Passengers often do not care for connecting over hubs, but hubs necting over hub do allow airlines to aggregate traffic in ways that make serving many smaller communities pos- sible. Only a certain number of markets will support nonstop service. Point-to-point nonstop airports, but hubs flights require substantial demand in the local market to justify such service. allow airlines to An airport's route deficiencies include those markets that could potentially support but cur- aggregate traffic in rently lack nonstop service. When route deficiencies are evaluated, it is important to realistically ways that make assess the market's potential for nonstop service to other hubs. Those hubs may provide new connecting possibilities (e.g., cities not already served on a one-stop basis) or other passenger serving small com- conveniences. Additionally, a realistic assessment should be made of whether the market might munities possible. generate sufficient demand for point-to-point service, perhaps to a large leisure destination such as Las Vegas or Orlando. (Other factors, such as the possibility of stimulating traffic or address- ing leakage, also figure into an airline's evaluation of the viability of nonstop service on a given route. These factors are discussed in detail later in this chapter.) The assessment should also consider international connections. Hubs that used to provide only regional or national access now provide access to international cities, often through an air- line's global partners. The three major global alliances--oneworld, SkyTeam and Star--have established a wealth of connecting opportunities in global markets. Some airports may find that they lack nonstop service to major international gateways that would link them to the world at large. This lack of service also constitutes a route deficiency.

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60 Passenger Air Service Development Techniques Circuitous Routes Circuitous routings involve itineraries where passengers travel in a less-than-direct manner between their origin and destination airports. Flight schedules from smaller airports to a final destination frequently involve circuitous routings via major hub(s). Circuitous routes add to passenger travel times. Take the example of Walla Walla, Washington, which is served only by Horizon Air to Seattle. Passengers traveling anywhere else on Horizon or another airline must "backhaul" over Seattle before proceeding to their "downline" destination (see Figure 5.1). A passenger from Walla Walla traveling on Horizon to Denver must first fly west to Seattle before turning around and flying back to the east. If O&D passenger estimates warrant, the airport could approach an airline to propose new nonstop service to a different hub that would provide better (i.e., less circuitous) connections to the south or east. This might include service on a Delta Connection flight to Salt Lake City or a United Express carrier over Denver. Flight Frequency, Times, and Total Travel Time The number of daily nonstop flights between a city pair can have a direct effect on that market's relative attractiveness to the traveling public. Business travelers generally prefer to travel early in the morning and in the late afternoon to maximize time at their destination. Leisure passengers may travel at any time of day. If sufficient passenger demand exists, a typ- ical minimum flight complement in a city pair is three flights per day--morning, noon and evening. In many leisure markets, one flight per day may be sufficient to match the market demand. Figure 5.1. Backhauls from Walla Walla.

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Taking Stock of the Situation 61 CASE STUDY Adding service to another hub to reduce circuity Lawton, Oklahoma, is the third largest city in the state. improve access to the air transportation system by Its airport's catchment area includes a population of providing another nonstop destination and more nearly 350,000 and two large military bases--Fort Sill domestic and international connections. Delta would and Altus Air Force Base. With service only from also provide competition in the market, giving the American Eagle Airlines on Saab 340s, the Lawton community more choices and most likely lower Metropolitan Area Airport Authority estimated that it overall airfares. lost 72 percent of its passenger traffic to Oklahoma The 2005 grant provided $525,000 of revenue guar- City (88 miles to the northeast) and Dallas/Fort Worth anteed to Delta or any airline that would serve the (184 miles south). Fares to eastern destinations were market for one year with a route to the east. Delta high in comparison to other nearby airports. finally launched its new service in March 2008, but In conjunction with a local public-private partnership, only after Lawton increased the size of its revenue the airport authority won a U.S.DOT SCASDP grant in guarantee to $1 million. 2005 to support new nonstop service to Atlanta pro- The City and its Chamber of Commerce also launched vided by Delta Air Lines. The new service would par- a 90-day promotional campaign to support both ticularly help move military personnel to eastern U.S. Delta and American. That effort focused on the out- destinations. bound market and was aimed at reducing leakage to Lawton began its efforts in 2001 when it identified Oklahoma City and Dallas/Fort Worth. The airport Atlanta in a passenger demand survey as its top reported positive results. desired new hub. The airport authority hired consul- In February 2009, however, Delta announced that it tants to complete two additional analyses to quantify was discontinuing the service as part of its 10 percent its passenger leakage and top markets from the catch- reduction in domestic capacity. Another key factor ment area. Both studies found Atlanta to be the was that American had won government contracts for number one destination for the catchment area. carrying military personnel. Lawton's airport manager The airport authority believed that adding Delta's noted that 70 to 80 percent of the airport's traffic was regional jet service to Atlanta would greatly military. Delta dropped service in April 2009. Although network airlines previously scheduled the flight connections at their hubs to mini- mize passenger connecting times, hub connect times of one to two hours are now common. While this schedule lengthens total elapsed travel time, it provides a more realistic measure of traveling across the country or around the globe, and allows some leeway for operational irreg- ularities (flight delays, cancellations, or re-routings.) To create some leeway in their operations, airlines have also increased their scheduled flight block times to allow for extra ground and/or flight time related to congestion, weather, or other sources of delay. In a report on flight delays, the U.S.DOT Office of Inspector General reported that, between 1988 and 1999, the 10 major air carriers reporting to BTS increased their scheduled flight times on more than 80 percent of their domestic routes (1,660 of 2,036 routes). From 1988 through 1999, those schedule changes added nearly 130 million minutes of travel time for air passengers (9). Excessive travel times can arise from infrequent nonstop service between a smaller airport and a hub, coupled with long layover times at that hub. This is especially true for very small airports that rely on nonstop service to one hub. An airport's geographic relation to its closest hub air- port can also lead to backhaul flights, as illustrated in the preceding Walla Walla example. Multi- stop itineraries also create excessive travel times.

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62 Passenger Air Service Development Techniques Airports should It is important to periodically review the flight connections that exist between an airport and its top O&D markets to ensure that connection times are reasonable via intermediate connect- periodically review ing points. existing flight con- Hub Congestion nections between A passenger's experience at the hubs to which an airport connects is another important aspect their facility and of air service and influences the relative appeal of flying out of an airport. Major network airline top O&D markets hubs have become increasingly congested over time with large banks of flights. to ensure that At certain airports--notably Chicago O'Hare, Newark Liberty, and New York JFK--carrier connection times operations became so congested that U.S.DOT administratively restricted the number of flights. U.S.DOT decided that the problems of airline over-scheduling and delay were so great at those are reasonable. airports that the only way to fix the problems was to impose an absolute limit on the number of operations that airlines could make in any given hour. (U.S.DOT lifted the restriction on the number of hourly flights at Chicago O'Hare International Airport in September 2008.) When hubs get particularly congested or if weather conditions deteriorate, service to small communities is often affected. Carriers may try to operate their larger aircraft and sacrifice the Passengers equate schedules of regional affiliates. Moreover, air traffic problems associated with intermixing the performance smaller aircraft with larger aircraft (e.g., wake vortex restrictions and departure patterns) can further complicate the departure process of all aircraft. The resulting effect of a hub's arrival and and convenience of departure delays causes arrival and departure delays at ensuing small community airports. carriers with the Figure 5.2 illustrates the hubs served from Burlington (Vermont) International Airport (BTV). desirability of using A majority of those hubs are congested, and on-time arrivals and departures have suffered as a result. an airport. When flights do not depart those hubs on time, on-time arrivals and departures at Burlington also suffer. Air Carrier Issues Passengers come to associate the performance and convenience of the air carriers at an airport Consider: with the desirability of the airport itself. Examining issues such as air carrier pricing, capacity, air- How many seats craft type, and reliability helps to identify and prioritize potential improvements in air service. are available, and First, however, the ASD team should consider the airlines servicing its airport within the con- how many of text of the aviation industry, as discussed in Chapter 3. What are the dynamics of airlines serv- those are filled? ing the airport as well as other nearby airports? Are the airlines facing financial difficulty? How Which of the focused are they on costs? Are airline mergers being discussed? How could that potential consol- idation affect the airport being evaluated? airport's nonstop markets have Pricing experienced sig- The prices that airlines charge for services they provide at an airport have a substantial impact nificant changes on passenger demand, especially for leisure travelers. Business travelers are more likely to accept the fares as listed, particularly if flying to an alternative airport would add significant ground travel year-to-year in time. That does not mean, however, that they are not sensitive to prices--especially if there are the number of other issues associated with the carrier's service (e.g., difficult connections over congested hubs). nonstop seats If prices at an airport are significantly higher than those for comparable service at a competing offered? airport, it may experience a notable loss of passenger traffic. Figure 5.3 illustrates the significantly What effect has different airfares available from three competing airports for service to Denver in October 2008. that had on O&D Available Seating Capacity passenger demand All U.S. network carriers own or have a partnership with regional carriers to provide connect- in those markets? ing service to their hubs from smaller cities. (The network carriers also use their regional partners

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Taking Stock of the Situation 63 BTV: 77% On Time ORD: 77% DTW: 87% On Time On Time JFK: 67% CLE: 81% EWR: 67% On Time On Time PHL: 80% On Time IAD: 76% On Time ATL: 76% On Time Source: BTS on-time departure data, October 2008. Figure 5.2. Many of Burlington's connecting hubs suffer from congestion and delay. NW = Northwest Airlines, UA = United Air Lines, F9 = Frontier Airlines Source: Travelocity, for departure on October 15, 2008. Figure 5.3. Lowest average one-way airfares between Denver and Des Moines, Omaha, and Sioux City.