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Establishing and Validating ASD Goals 83 incumbent carrier has not responded to the airport's need to keep fares lower than or competi- tive with those available at similar-sized airports, the community may want to seek a low-cost or niche carrier. Finally, ASD teams must remember that each air carrier that either serves the community or is a target for new air service has a specific business model and operates differently than other carriers. ASD teams must tailor their goals to the unique circumstances of their market and the air carriers they are targeting. What are the categories of ASD goals? The airports surveyed identified several general categories of ASD goals: Retaining existing service Adding service to a new destination Adding frequencies to current services Lowering fares/introducing new competitive service Improving service reliability Upgrading aircraft Increasing access to global networks Retaining Existing Service Retaining existing service by incumbent carriers was the top goal identified by the airports sur- veyed (Figure 7.1). Retaining service is important in and of itself and also for an airport's ability Percent of airports surveyed 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Retain Existing Add Service to Add Frequencies Lower Pricing Improve Service Upgrade Aircraft Service Other Hubs Reliability Used Figure 7.1. ASD goals for incumbent carriers.

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84 Passenger Air Service Development Techniques to recruit additional or expanded service. Retaining air service is necessary for both the business and leisure sectors of air service markets. Why work hard to In fact, in the current environment, retaining existing air service may be the most impor- tant goal for many smaller communities. It should not matter whether an airport is 200 miles retain current air away from a competitor or within 40 miles of three airport competitors; an airport's ability to service? retain air service will always help the ASD team develop new service with incumbent carriers. Serves as a key The industry's overall financial condition, potential mergers or consolidations, labor issues, changes in fleets, and proposed congestion pricing at some airports are among the many rea- marketing tool in sons that existing air service may be re-examined by air carriers. If the incumbent air carrier developing new has warned the ASD team that a route may be underperforming, service at the airport may be services threatened. Helps maintain If an airline announces that it intends to restructure its hubs or fleet, smaller communities links needed need to understand the implications for retaining air service: between airport A major air carrier closing one hub (e.g., St. Louis) and shifting traffic to another affects an and business ASD team's goals because the new hub may be more congested, ultimately affecting the travel community experience for those using the small airport. However, small communities are better off if traf- fic is reassigned to a new hub than if all air service is lost. A regional carrier deciding to remove a certain aircraft type from its fleet or reassigning a fleet to a different hub can lead to a change in ASD goals as well. Today's environment of high fuel costs makes it even more critical to monitor air carrier fleets and related impacts on ASD goals. The possible The possible negative impacts of losing incumbent carrier service should be a stark warning to small airports nationwide. In response to the deteriorating economy, several airlines announced negative impacts of withdrawals from markets that they had served for many years (see Table 7.1). Although an losing incumbent incumbent's leaving may open the door to a new entrant, small airports will face additional hur- carrier service dles in overcoming negative market impressions that either the community is too small to sup- port service or that the market is too competitive for a carrier to have sustainable business. If the should be a stark incumbent has served the marketplace for many years, it will be difficult for the community to warning to small argue for another carrier to enter the market. If the incumbent has been in the market for only a short time, the community can argue that the problem was due to the carrier's marketing plan, airports nationwide. or that the air carrier simply did not give that route enough time to turn a profit. Short-term stays on routes by incumbent carriers could have been caused by an air carrier's reorganization, Hurdles grow either for financial reasons or fleet changes. exponentially if an Adding Service to a New Destination airport loses all Successful ASD teams understand the balance of continuing to work to retain air service while scheduled service. developing new services. Now more than ever, communities realize that bringing in service that Table 7.1. Markets that lost incumbent carrier service over the last five years (service lasted a minimum of five years). Location Airline Pulling Out Service Cut Toledo US Airways 2004 Newburgh, NY American 2007 Bakersfield American 2001 San Luis Obispo American 2008 Sarasota Continental 2008 Fort Wayne US Airways 2004 Hilton Head Delta 2008

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Establishing and Validating ASD Goals 85 will directly compete with their current services could be harmful to the sustainability of their market. ASD teams need to consider a number of issues: Will new air service significantly overlap with the airport's existing service from other carriers or make its current service less sustainable? Will service to a different connecting hub create a new directionality of air travel out of the ASD team's community? Will service to a new connecting hub create many new one-stop opportunities? Are these new opportunities important for passengers within the airport's catchment area? Will new service improve the customer service experience for the airport's passengers? How will new service affect the potential that the community has for attracting new entrant carriers? Small communities often need to pursue new air service because of changes to the mainline carrier's hubs. After Delta closed its hub at Dallas/Fort Worth International in September 2004, some communities in the Midwest sought new westward connections via Delta's Salt Lake City hub. Similarly, after US Airways downsized its Pittsburgh operation in November 2004, the air- line shifted service from many small communities to Philadelphia International. However, for some communities, that was a directional backflow. In addition, the flights increased the level of congestion at Philadelphia International. For many of these communities, a new goal of adding air service to US Airways' hub at Charlotte Douglas International offered a realistic alternative to supplement Philadelphia services. Incumbents will scrutinize the goal of service to a new destination. They understand that adding new service will divert current passengers and revenue from the existing service. By assessing the situation through the techniques outlined in Chapter 5, an ASD team should iden- tify traffic and revenue dynamics that help support the argument that expanding incumbent air service will add incremental benefits. ASD teams also need to account for competitive service offerings at nearby airports. The recent loss (or gain) of air service to a particular region or from an air carrier at those nearby air- ports will affect the opportunity of the ASD team's community to add new service. ASD teams should assume that if their airport is working toward developing air service by an incumbent to a new location, and if competitive airports have the same incumbent carrier, then those airports may have the same air service goals as well. Understanding that likelihood enables ASD teams to be better prepared to campaign for new service. In the survey of ASD teams, gaining new service to a new destination was a top motivator for seeking service from new air carriers (Figure 7.2). Surveyed airports were essentially evenly split between obtaining that service from an LCC or a legacy carrier. Communities simply wanted the new nonstop destination. Bringing in LCC service as an alternative to existing ser- vice has also been a major goal of small airports because of the fare dynamics and community feedback. Adding LCC Flights to New Destinations Lower fares entice both business and leisure travelers to larger, more distant airports where more carriers offer services. Because of this price differential, many small airports ranked very high the goal of bringing a low-cost carrier into their market. LCCs do not have a history in small communities. Rather, LCCs tend to serve only airports in or around larger metropolitan areas, which provide a critical mass of passenger traffic and an ability to enter markets with multiple frequencies. Thus, small communities are less likely to have service from carriers such as Frontier Airlines, Southwest Airlines, JetBlue Airways, and AirTran Airways.

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86 Passenger Air Service Development Techniques Percent of airports surveyed 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% LCC nonstops Legacy LCC LCC access to Legacy: Other Legacy: other to new nonstops to competitive key leisure competitive access to key markets new markets alternative to points alternative to leisure market existing existing service service Figure 7.2. ASD views on goals for new entrants. Still, certain small communities have been successful in gaining LCC services. In many of these examples, that service has been into a connecting hub (i.e., Frontier and its regional partners adding services to Denver or AirTran adding service into Atlanta and Orlando). A significant amount of passenger leakage from small communities to larger airports is due to the availability of lower-fare services to key leisure and business destinations. Connecting small communities with key leisure markets has long been a challenging goal. Hub networks, the lim- ited range of turboprops, and airline business models prohibited these services from fully grow- ing. The current marketplace has seen a growth in these types of connections due to new busi- ness models from niche carriers, a changing regional aircraft fleet, and new marketing techniques by airport communities. One such niche carrier, Allegiant Air, has been developing a route network that connects top leisure destinations (Las Vegas, Orlando, Phoenix, Tampa Bay, and South Florida) to small com- munities with less-than-daily service (Figure 7.3). Allegiant's use of relatively large aircraft-- older MD-80s (see Figure 7.4)--works in part because it does not operate those routes on a daily basis. Small-community ASD teams throughout the country that are losing access to key net- work hubs and experiencing high average fares regard attracting Allegiant and similar niche car- riers as a potential goal for their community. Unique service patterns that rely on point-to-point traffic have created opportunities for small communities, which mostly rely on hub connectiv- ity. Survey respondents around the country have identified niche carriers as a way to proactively expand service, while making it sustainable due to new and creative partnerships between the air carrier and the community. Figure 7.5 illustrates how new niche LCC service at Roberts Field-Redmond (Oregon) Municipal Airport stimulated local traffic to Las Vegas. Allegiant Air introduced twice weekly nonstop services to Las Vegas in March 2007. In response to Allegiant's low fares, traffic in the Las Vegas market doubled. Average fares in the market dropped by 30 percent.

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Establishing and Validating ASD Goals 87 Figure 7.3. Allegiant's system connects smaller community airports with major leisure destinations. Source: Image courtesy of Allegiant Air. Figure 7.4. Allegiant's 150-seat MD-83.

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88 Passenger Air Service Development Techniques CASE STUDY Akron-Canton Airport's recruiting an LCC Akron-Canton additional service to Akron-Canton in August 2001. The Airport (CAK) in airport was still under a million passengers at this point North Canton, Ohio, but maintained realistic goals of developing air service. is a small hub airport After the events of September 11, 2001, Delta con- in northeastern Ohio verted its services out of Atlanta from mainline aircraft that serves as an to CRJ regional jets. Akron-Canton Airport's next ASD alternative airport to goal was to develop new low-cost service to key the Greater Cleveland business-focused markets. The U.S.DOT awarded the metropolitan area. The airport has a marketing airport a SCASDP grant in 2003 which helped AirTran campaign that follows a set of realistically developed commence service to New York LaGuardia in 2004. ASD goals. With an overwhelming response from stakeholders, Prior to 1996, Akron-Canton Airport was served by CAK was able to apply all of the grant funds to market- four carriers with nonstop service to four locations. ing (i.e., none were used in the revenue guarantees). In the early 1990s, airport management decided to With an amended agreement, CAK was also able to start working toward increasing enplanements by apply some of the SCASDP funds to support AirTran's bringing in low-cost air service to northeastern Ohio. service to Boston. At the end of the agreement cycle, The area around Akron-Canton is fiercely competi- CAK returned $230,000 to U.S.DOT. The success of the tive with Cleveland Hopkins International Airport-- program with AirTran helped CAK proactively look to 55 Interstate miles to the northwest (a hub for its next goal of creating new westward low-cost service Continental Airlines)--and Pittsburgh International for both the airport and its community. Service by Airport--110 Interstate miles to the southeast (then Frontier Airlines to Denver began in June 2006. a hub for US Airways). In the mid-1990s, nearby Youngstown-Warren Regional Airport--65 Interstate With the downturn beginning in 2008, CAK focused miles to the east--was also served by three carriers on retaining its existing service. However, the airport to three locations. has set some new goals that include working toward limited international service to nearby regions such Akron-Canton Airport's initial goals were to attract a as Canada, Mexico, and the Caribbean. low-cost carrier to the market for either business or leisure destinations. After hard work, the airport wel- The airport's goals are not "pie-in-the-sky" by any comed AirTran Airways with service to Orlando. In means. The ASD team realizes that, as a small alter- April 1997, the airport attracted ValuJet Airlines with native airport in a large metropolitan area such as an average of three flights a day to Atlanta. After Greater Cleveland, CAK can have two low-fare carri- ValuJet and AirTran merged, their services to Atlanta ers, but only with hard work. CAK has effectively and Orlando continued under AirTran. In the face of developed itself as a low-fare, small facility, easy-to- this new low-cost competition, Delta Air Lines added use gateway for Northeast Ohio residents. Developing New Legacy Carrier Service to New Destinations If an airport's market assessment indicates that LCC service is unlikely in the near term, the ASD team should examine service from a new network carrier. The business traveler mix may be strong and showing signs that it could grow if more services were added. For these airports, adding new service on another legacy carrier to a new connecting hub becomes a realistic goal. Service to a different hub may also introduce new connections that were previ- ously unavailable. In addition, as noted previously, when a major carrier reorganizes its hubs, small communities may need to develop strategies to move their traffic and service over a dif- ferent hub.

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Establishing and Validating ASD Goals 89 Passengers Average Fare 35,000 $160 $140 30,000 $120 25,000 $100 20,000 $80 15,000 $60 10,000 $40 5,000 $20 0 $0 2002 2003 2004 2005 2006 2007 Annual Passengers Average Fare Source: InterVISTAS' analysis of U.S.DOT data. Figure 7.5. Allegiant's entry at Redmond Municipal Airport doubled traffic to Las Vegas. CASE STUDY Expanding service with other network carriers Airports often seek service from different network regional jets. In 2002, US Airways entered bankruptcy carriers if they are looking for more connections to reorganization and eventually made the decision in the global marketplace or if the current service is 2004 to shutter its Pittsburgh hub. US Airways shifted unsustainable due to delays or unfavorable routings. some of the Pittsburgh service to Philadelphia. The In 1997, Northwest Airlines decided to bring new problem, however, was that US Airways' connections service to three markets in Central Pennsylvania and over Philadelphia forced travelers into a directional Southern New York. These markets included backhaul and increased airspace congestion in the Binghamton, New York; Elmira-Corning, New York; Northeast. Communities that had obtained service and State College, Pennsylvania--markets previously from Northwest suffered less of an impact because served only by US Airways to its Pittsburgh or access to Detroit provided east-west flows. Northwest Philadelphia hubs. These communities were ecstatic later added two more similar small communities to its to see a new carrier enter their market because it Detroit hub portfolio in 2005--Latrobe, Pennsylvania, meant access to a large Detroit hub that serviced des- and Ithaca, New York. tinations throughout North America, Europe, and This example shows that for many small communi- Asia. The number of connections made in Detroit far ties an important goal may be improving the types outnumbered those made at the hub in Pittsburgh. of new entrant hub connections that can be made Northwest developed these services over time, in their market, both in the short term and upgrading some from turboprop frequencies to longer term.

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90 Passenger Air Service Development Techniques Adding Frequencies to Current Service The greatest need for some communities may simply be additional frequencies on existing routes to help fill out service patterns and provide more connection opportunities at hubs. Developing more demand from the community through additional frequencies in the short term will also help attain new services in the long term. Because small airports generally face challenges in fare and capacity competition from larger airports, the goal of adding frequencies is usually to attract more business travelers. Connecting hubs have various banks of departing and arriving flights. By expanding access to those banks at the hub, the ASD team is incrementally giving its passengers additional opportunities for con- nections. Adding frequencies from niche carriers that may have less than daily service to a des- tination with no onward connections also can be an important ASD goal for a community. Lowering Fares/Introducing New Competitive Service Lowering Fares for Existing Service Small airports clearly offer passengers the ease of parking convenience, shorter lines, and shorter driving distances. Relatively high prices on airfares, however, are typical and often a key factor that causes passengers to use other airports. The extent that high airfares affect passenger traffic depends mainly on the geographic loca- tion of competing airports. In fact, even airports three hours away from a large hub airport should be concerned with airfares. Customers--especially leisure passengers--are typically will- ing to make long drives in order to get cheaper prices. Airports that are within driving distance CASE STUDY Adding frequencies to an existing location Dickinson Theodore Roosevelt Regional Airport (DIK) a third frequency. Both agreed that the airport in North Dakota services western North Dakota, east- should pursue a SCASDP grant to help support a ern Montana, and northwestern South Dakota. With third daily flight to Denver. approximately 8,500 annual passenger enplane- With support from a U.S.DOT SCASDP grant in 2004, ments, service at DIK is supported by the Essential Air Great Lakes was able to operate a third roundtrip Service Program. Although the airport is small, it still from June 2004 through December 2004. This trial provides a lesson in how a community can add fre- period proved to be a great success. After the trial quencies with an incumbent. period Dickinson went back to two round trips a day. In the early 2000s, Dickinson had two daily flights to In November 2006, through the Essential Air Service Denver International Airport provided by Great Program, Great Lakes and the airport were granted Lakes Aviation, a code-sharing partner with both three roundtrips. The basis for the increase was how United Airlines and Frontier Airlines. Great Lakes well the third roundtrip was utilized during the trial operates the Embraer 120 Brasilia, a 40-seat twin- period. The third roundtrip started in February 2007. turboprop aircraft, for service between DIK and It was immediately embraced by the community and Denver International. Both Great Lakes and during 2007 the airport saw a 40% increase in Dickinson Airport officials noticed an increase in enplanements. Through October 2008, both total demand traffic due to the oil sand exploration in traffic and load factors increased compared to 2007, western North Dakota. The airport and air carrier with October enplanements nearly 20 percent above held strategic discussions to discuss ways to develop October 2007 levels.

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Establishing and Validating ASD Goals 91 of a connecting hub also face price pressure because certain passengers may choose to drive to the hub rather than take a connecting flight. With gas prices and hotel costs increasing, it is espe- cially important that smaller airports make efforts to keep their prices competitive. The higher average airfares in small communities are generally due to the lack of competition in those markets (2). Airport officials and ASD teams nationwide are fully aware of the difficulty they face in trying to lower their average airfares. This awareness may be the reason why airports ranked lowering prices in the middle of their team goals. It is understandable that ASD teams would want to pursue lower prices as a goal, but the reality is that price competition from nearby airports and their air carrier offerings are difficult to overcome. Many small airports are focused on increasing service, frequency, and air carriers in hopes that new competition may spur lower prices. Introducing a Low-Cost Carrier In the cases of many small communities, the incumbent carrier may not be willing to intro- duce significant changes. Incumbent carriers typically favor playing it safe and keeping current hub connections in place. These current services to the hub are probably attracting an adequate level of passengers, making a revenue contribution to the carrier's network, and providing pas- sengers with reasonable connectivity to the global network. CASE STUDY Paducah, Kentucky's fare comparisons against Nashville The Barkley Regional Airport (PAH) serves Paducah, tracks the differences in fares between both cities. Kentucky, and has a catchment area that includes The BestFares project tracks fares to the top 25 markets western Kentucky, southern Illinois, southeastern and includes an analysis on fuel costs and Nashville Missouri, and northwestern Tennessee. The only International Airport hotel costs. BestFares' focus scheduled carrier in the market is Northwest Airlink to changes weekly. One week the BestFare may be to Memphis International Airport. The airport previously New Orleans, the next to Houston, Texas. It may had service to St. Louis and Nashville when those also show an increase or a decrease in comparison airports were larger regional hubs. Lowering prices to other months. The airport sends its BestFares remains a major goal of Barkley Airport to retain air report to six Chambers of Commerce in its catch- service and to market the airport for potential future ment area. The airport's ability to educate its com- expansion of air carriers and destinations. munity on the total costs of driving the 150 miles to Nashville has been valuable to key passengers using Barkley Airport's leakage is mainly to Nashville its Northwest Airlink service. It also has generated International Airport (150 miles away) due to lower interest from the community in expanding air service fares being offered by LCCs and greater access by at Paducah. legacy network carriers. The Barkley Airport staff is aware that it has no control over the fares that Paducah has supplemented its BestFares effort with Southwest Airlines can offer out of Nashville; how- a communication link to sales staff representatives at Northwest Airlines to further understand fare ever, to inform the traveling community of how com- dynamics. The airport and air carrier have come to petitive its fares and service are and to help retain many agreements on "right-sizing" fares in certain business passengers flying out of its airport, the staff markets to increase reservations on key hub con- developed an approach called BestFares. nections. These agreements have proven to be Understanding that Northwest serves both Paducah mutually beneficial to both the community and and Nashville over Memphis, the staff regularly Northwest.

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92 Passenger Air Service Development Techniques While small communities need to maintain positive relationships with incumbent carriers to stimulate fare competition, they may need to introduce service from LCCs with networks that rely on hub connectivity, such as Frontier at Denver and AirTran at Atlanta. Examples of new service provided by such LCCs include Frontier's service at Hector International in Fargo (com- peting with United) and AirTran's service at Charleston (South Carolina) International (com- peting with Delta). Seeking LCC service does not necessarily mean that the airport seeks to eliminate its current services. Every small community wants to keep both their network carriers and their LCCs-- Delta and AirTran, Frontier and United, and Allegiant and US Airways. But pursuing LCC ser- vice can create a conflict between the stability provided by network carriers and the possibilities raised by LCC entry. Introducing Competition by Legacy Carriers The majority of growth by legacy network carriers at small communities has been to connect- ing hub complexes. In today's marketplace, not many destinations can sustain competing ser- vice on two legacy carriers. The only exceptions are either large airports with more than one hub carrier such as Chicago O'Hare (hub for American and United) or large multi-airport metro- politan regions where different legacy carriers fragment markets (e.g., New York City; Los Angeles; Washington, DC; etc.). Small communities understand the nature of nurturing current services, supporting market growth, and thereby stimulating an expansion of services to other connecting hubs. If a community such as Lincoln, Nebraska, already has service to MinneapolisSt. Paul on Northwest Airlink, then it is not going to attract a competing legacy carrier to the same market. Communities have tried to access markets such as Chicago O'Hare, Los Angeles, New York LaGuardia, and Washington National with more than two carriers but are often thwarted by burdens of market access, com- petitive strength, and slot availability. In most cases, seeking services to other hubs by legacy carriers is a more achievable goal. Complementing Existing Service A community is more likely to attract new air service to its target market if that market cur- rently receives only connecting service. That is, if the only service available between Point A (the community's airport) and Point C is via one or more intermediate hubs B, then the community airport stands a better chance of convincing an airline to serve that market on a nonstop basis. Few small communities can generate enough passenger traffic to support two airlines com- peting to provide nonstop service to a particular destination. In addition, there are an equally small number of situations where two carriers are logical choices to offer nonstop service in the same market from these communities. Introducing new nonstop service, on top of existing non- stop service, will likely harm relations with the incumbent airline and could also provoke a com- petitive response (see the following subsection). But the main reason nonstop service in a new market is more likely to be successful is because it will have a greater impact on the community's travelers by making another market much eas- ier to reach. It could also have the effect of introducing another airline, and potentially another airline alliance, to the community with all of the competitive benefits that that would entail. Anticipating the Likely Competitive Response An airport should understand that new service will likely generate some form of competitive response from its current carriers. But that should not impede efforts to attract new services and carriers to a community. As long as the proposed new services can reasonably be expected to be supported by the community's travelers, the airport can at least reasonably discuss the situation

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Establishing and Validating ASD Goals 93 with its incumbents. The airport needs to anticipate what the reaction will be and how its pas- sengers might react. That can affect the ultimate viability of the service. Responses by incumbent airlines. Responses by airlines already serving your airport can vary widely depending on the nonstop market being entered, the incumbent carrier's position in that market, the aircraft type to be used, and the importance of the revenue generated by the market's traffic to the incumbent. An incumbent carrier might make no competitive response at all if, for example, the target market is in a different region of the country than the current airline serves (at least on a non- stop basis). For example, Alaska Airlines/Horizon Air's response at Redmond, Oregon, to Delta's entry from its Salt Lake City hub appeared generally passive; the two carriers did not compete in any nonstop markets, as Alaska/Horizon concentrated on the West Coast markets of Seattle, Portland, and Los Angeles. An incumbent may alter its frequencies or aircraft capacity in a market upon the entry of a competitor. For instance, in both of the Bloomington (Illinois) and Wichita to Atlanta markets, Delta increased the number of its flights in each market when AirTran began serving them. Similarly, Delta upgraded some of its flights from RJs to mainline jets in both the Mobile and Pensacola to Atlanta markets upon AirTran's entry. In similar situations, the response may not entail service changes but may include fare actions to be competitive with the new service offering. For example, after JetBlue launched its nonstop service from New York JFK to Long Beach (California) Airport, American responded by match- ing the fares and offering double frequent flyer miles. In dramatic contrast, the response by an incumbent carrier facing nonstop competition for the first time, especially to one of its hubs, could be a virtual declaration of war to protect its mar- ket (and market share) at all costs. The most determined of such responses is sometimes consid- ered to be Northwest's reaction to Reno Air's inauguration of nonstop service in the Reno to MinneapolisSt. Paul market in the early 1990s where U.S.DOT became involved to moderate Northwest's actions. Similarly, Northwest defended its Michigan turf when Independence Air began flying between Washington Dulles and Lansing (Michigan) Capital Region International Airport. Even though Northwest did not originally operate in that market, it treated Lansing as if it were a hub route and put significant capacity into the market (which had never had nonstop service prior to Independence Air's arrival), eventually helping to force Independence Air to abandon the market. Responses by airlines serving competing airports. New service at some smaller communi- ties could trigger a competitive response from airlines at nearby airports, especially if the two air- ports have overlapping catchment areas and the competing airports have larger population bases. A good example of this phenomenon occurred at Baton Rouge Metropolitan Airport after Delta Connection launched new nonstop service to Orlando International in 2003. Both Southwest and AirTran increased their own service to Orlando International from New Orleans International (about 70 highway miles from Baton Rouge). While Delta's Baton Rouge to Orlando service lasted for several years, it was eventually dropped because of the continued and growing competition at New Orleans, as well as Delta's significant reduction in its point-to-point flying in 2007, as illustrated in Figure 7.6. Another potential response at competing airports could involve leisure destinations such as Orlando and Las Vegas that may be perceived to be interchangeable. The theory is that there is only a limited amount of leisure demand at most smaller airports, so more service to leisure destinations from a nearby airport could fragment the smaller airport's demand for such service and render its leisure destinations unprofitable, causing that service to be discontinued.

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94 Passenger Air Service Development Techniques Number of Departures 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 August 2005 August 2006 August 2007 August 2008 Figure 7.6. Delta has decreased its non-hub point-to-point flying. For example, Allegiant recently ended its twice-weekly nonstop service from Lincoln to Las Vegas. Southwest's three daily nonstop flights to Las Vegas from Omaha, about 60 highway miles from Lincoln, may have contributed to Allegiant's decision to drop its less frequent service. Improving Service Reliability In a magical world, every airline would run perfectly with on-time service. Each airport would be designed to handle foul weather situations without delay. Air traffic and airport congestion would not exist. The reality is rather different. Flights are delayed and cancelled because of main- tenance, weather, and congestion. Particularly at smaller airports that have less frequent con- necting flights, service reliability can become a major problem. Improving service reliability is an important goal for retaining passengers. After one too many cancelled or delayed flights, those travelers start complaining, "I don't want to fly through that hub anymore--my flight is always cancelled or severely delayed." Many aspects of service reliability are completely out of an airport's control. For instance, departure or arrival delays may often be caused by FAA air traffic control issues at a different air- port. Air traffic congestion in key large metropolitan areas--such as Chicago, New York, and Washington, DC--also can affect operations at smaller airports, if FAA holds aircraft on the ground. Some small airports--especially Essential Air Service communities--experience a related issue: they are dependent on service to a single hub that has its own operational reliability diffi- culties. For example, Williamsport, Pennsylvania, and New Haven, Connecticut, have service only from US Airways into its Philadelphia hub (Figure 7.7). When operations at Philadelphia suffer delays, service to Williamsport and New Haven suffers as well.

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Establishing and Validating ASD Goals 95 Figure 7.7. Some airports depend on service to a single hub. As a result, it can be very difficult for an individual small airport to tackle "improving service reliability" as an ASD goal. Small airports do work to improve operations and introduce efficien- cies, but those efforts are usually outside of their ASD programs. If service is suffering greatly from poor reliability to the hub, then the airport can have a goal to explore other options with a new entrant carrier. Collectively, small airports have an active voice through their trade associ- ations to maintain their access to congested markets and keep their piece of the pie. Upgrading Aircraft The economics of the regional aircraft industry is changing as advancements in fuel efficiency, range capabilities, and operational performance are influencing how small communities are served. Smaller turboprop aircraft and regional jets have been cut in some longer-haul markets, but carri- ers will continue to need and use them in the foreseeable future. If an airport's market assessment shows that services on 50-seat regional aircraft are threatened, then the community may be wise to see if it can support service with larger regional aircraft--even if it means less daily frequency. Regional aircraft manufacturers have introduced many improvements in new turboprop air- craft, particularly in terms of speed, vibration, and noise. Horizon Air, which has been a large operator of the 76-seat Bombardier Q-400 (Figure 7.8) in the Pacific Northwest, has praised the economics and passenger experience repeatedly. In the northeast United States, Continental Airlines has partnered with Colgan Airlines to introduce Q-400 service into closer-in markets of all sizes. Continental previously served those markets from its Newark hub multiple times a day with 37- and 50-seat RJs that contributed to delays in the local congested airspace. The Q-400 allows Continental better usage of scarce run- way capacity at Newark, cuts down on operational delays, and introduces more seats per depar- ture. For markets like Albany, New York, and Burlington, Vermont, these qualities work toward the goals of both upgrading aircraft and retaining service. Larger regional jets--including the Embraer 170/175 family and the Bombardier CRJ-700/900 family (Figure 7.9)--have been playing a dual role in many carrier fleets. For some communi- ties, they have replaced larger aircraft such as an MD-80 or 737, while in others they have replaced 50-seat RJs. If a community's market assessment indicates that its nonstop route network and frequency of service are unlikely to change, then a goal of upgrading aircraft would be a positive step. Larger

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96 Passenger Air Service Development Techniques Figure 7.8. Horizon Air Q-400 serves Kalispell, Montana, from Seattle. regional jets can include a first class cabin, which could create additional benefits for business travelers who use the airport. It is paramount, however, to be able to demonstrate attractive mar- ket dynamics on the current services (high load factors, yields, passengers) before setting a goal of increased aircraft size. Increasing Access to Global Networks Today's aviation industry is truly global. One-stop connections can be made from South Bend (Indiana) to Beijing, from Cheyenne (Wyoming) to Frankfurt, or from Big Flats (New York) to Osaka. Carriers earn relatively high yields on these flights, and business travelers on those routes are often repeat customers who are less price sensitive. Access to both U.S. domestic and global route networks are key for a small community generating air service demand. Figure 7.9. Embraer 170 in US Airways livery.