Understanding Airline and Passenger Choice in Multi-Airport Regions (2013)

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A I R P O R T C O O P E R A T I V E R E S E A R C H P R O G R A M ACRP REPORT 98 TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2013 www.TRB.org Research sponsored by the Federal Aviation Administration Subscriber Categories Aviation • Passenger Transportation • Planning and Forecasting Understanding Airline and Passenger Choice in Multi-Airport Regions Barney C. Parrella InterVISTAS ConsultIng llC Washington, DC i n a s s o c i a t i o n w i t h Evaluation and Training Institute Los Angeles, CA Kvistad Design Wenham, MA

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in trans­ portation of people and goods and in regional, national, and inter­ national commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal respon­ sibility for managing and regulating air traffic operations intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Coopera­ tive Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near­term solutions to meet demands placed on it. The need for ACRP was identified in TRB Special Report 272: Airport Research Needs: Cooperative Solutions in 2003, based on a study spon­ sored by the Federal Aviation Administration (FAA). The ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. It is modeled after the successful National Coopera­ tive Highway Research Program and Transit Cooperative Research Pro­ gram. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, mainte­ nance, operations, safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport opera­ tors can cooperatively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100­Century of Aviation Reauthorization Act. The primary participants in the ACRP are (1) an independent governing board, the ACRP Oversight Committee (AOC), appointed by the Secretary of the U.S. Department of Transportation with representation from airport operating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International­North America (ACI­NA), the American Associa­ tion of Airport Executives (AAAE), the National Association of State Aviation Officials (NASAO), Airlines for America (A4A), and the Airport Consultants Council (ACC) as vital links to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. In October 2005, the FAA executed a contract with the National Academies formally initiating the program. The ACRP benefits from the cooperation and participation of airport professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research orga­ nizations. Each of these participants has different interests and respon­ sibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited periodically but may be submitted to the TRB by anyone at any time. It is the responsibility of the AOC to formulate the research program by iden­ tifying the highest priority projects and defining funding levels and expected products. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport pro­ fessionals, the intended users of the research products. The panels pre­ pare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing cooper­ ative research programs since 1962. As in other TRB activities, ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the intended end­users of the research: airport operating agencies, service providers, and suppliers. The ACRP produces a series of research reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work­ shops, training aids, field visits, and other activities to ensure that results are implemented by airport­industry practitioners. ACRP REPORT 98 Project 03­26 ISSN 1935­9802 ISBN 978­0­309­28364­9 Library of Congress Control Number 2013953149 © 2013 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not­for­profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB or FAA endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not­for­profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the Airport Cooperative Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the Airport Cooperative Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report. Published reports of the AIRPORT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national­academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. C. D. Mote, Jr., is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. Mote, Jr., are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org

C O O P E R A T I V E R E S E A R C H P R O G R A M S CRP STAFF FOR ACRP REPORT 98 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Michael R. Salamone, ACRP Manager Joseph D. Navarrete, Senior Program Officer Terri Baker, Senior Program Assistant Eileen P. Delaney, Director of Publications Hilary Freer, Senior Editor ACRP PROJECT 03-26 PANEL Field of Policy and Planning Debbie K. Alke, Montana DOT, Helena, MT (Chair) Lew S. Bleiweis, Greater Asheville Regional Airport Authority, Asheville, NC Hampton Brown, San Diego County Regional Airport Authority, San Diego, CA Stephen P. Gordon, Oakland International Airport, Oakland, CA Robert H. Gould, Warren Averett, LLC, Montgomery, AL Mukesh B. “Mookie” Patel, Alaska Airlines, Inc./Horizon Air Industries, Seattle, WA Kent Duffy, FAA Liaison Peter LeBoff, FAA Liaison Christine Gerencher, TRB Liaison AUTHOR ACKNOWLEDGMENTS The research study conducted for this guidebook was performed through ACRP Project 03­26 by InterVISTAS Consulting LLC, with the assistance of Evaluation and Training Institute (ETI), and Kvistad Design. Barney Parrella of InterVISTAS Consulting LLC was the principal investigator for the project and pri­ mary author of the guidebook. Steven Martin, Christopher Warren, and Richard Sullivan of InterVISTAS were also investigators for the project, and each had major roles in the development and conduct of the research plan and writing of the guidebook. Zach Mensen, Taylor Miller, Mira Aiello, and Debbie Homo­ nai of InterVISTAS assisted with the research, data collection, data analysis, and project management aspects of the project. Dr. Claire Rose, Maisha Hudson, and Jenna Blough of ETI performed the literature review and related tasks in support of the project. Amy Kvistad of Kvistad Design provided graphics ser­ vices throughout the project and for the guidebook. The study team would like to sincerely thank the airport and airline representatives who participated in this project for their contribution to the development of the airline industry background section and the regional case studies. These elements of the study were essential for the development of a report that provides useful guidance for practitioners of air service development in the airport community.

F O R E W O R D By Joseph D. Navarrete Staff Officer Transportation Research Board ACRP Report 98: Understanding Airline and Passenger Choice in Multi-Airport Regions provides insight into the business models airlines use to establish service in regions with multiple airports and how passengers select an airport within a multi­airport region. The report features five cases studies, consisting of two classic examples of multi­airport regions (the Los Angeles Basin and the San Francisco Bay Area) and three diverse examples (West­ ern Carolina, the Northern Gulf Coast, and Central Wisconsin). The report’s findings will help airports and their stakeholders focus limited resources on strategies that can provide sustainable levels of service within the context of their multi­airport environment. Commercial service airports place a high priority on developing and maintaining air service for their communities, requiring a thorough understanding of air service, geography, and socioeconomic issues at both the regional and national levels. The factors underlying airline service decisions and passenger choice are made even more complex when a region is served by more than one airport. While there is an extensive amount of literature focused on passenger choice, very limited research has been undertaken concerning how airlines choose to serve multi­airport regions. This lack of knowledge has led to misunderstandings of why airlines often decide not to serve a particular airport in a multi­airport region and why one airport may have significantly more passengers than others in the region. These misunderstandings may also lead to unrealistic expectations regarding the level of passenger and airline activity an individual airport in a multi­airport region may be able to support. The research, led by InterVISTAS Consulting, began with a review of recent relevant lit­ erature which was used to develop an initial list of key factors affecting airline and passenger choice in multi­airport markets. A series of air service regions, each representing different types of multi­airport markets, was then identified, and case studies were conducted to better understand the interplay of various airline and passenger choice factors. The lessons learned from the case studies were combined with the contractor’s insight to produce the report’s findings. Chapter 1 provides a background and summary of the research objectives and approach. Chapter 2 highlights key features of multi­airport regions, including market size, catchment area, geography, air service, and other factors. A summary of relevant literature is provided in Chapter 3. Chapter 4 describes the factors passengers consider when selecting an airport in a multi­airport region, while Chapter 5 provides insight into the process airlines use to evaluate the most profitable way of serving a multi­airport region. Five regional case studies are presented in Chapter 6 to provide real­world examples of the interplay of the various factors described in the previous chapters. The findings and conclusion of the research are provided in Chapter 7. A glossary and annotated bibliography are included as appendices.

C O N T E N T S 1 Summary 4 Chapter 1 Background 4 Research Objectives 4 Research Approach 5 Demand, Supply, and Choice 7 Chapter 2 Multi-Airport Regions in the United States 7 Size of Market Demand 7 Geographic Size of the Catchment Area 8 Natural Geographic Boundaries 8 International Border Boundaries 8 Nature of Underlying Market Demand in the Catchment Area 8 Presence of Airline Hub 8 Nearby Alternate Airports 8 Airports with Subsidized Service 10 Chapter 3 Review of Relevant Literature 12 Chapter 4 Passenger Choice Factors 13 Airfares 13 Flight Frequency 13 Accessibility 14 Nonstop Flights 14 Frequent Flyer Memberships 14 Aircraft Type 14 Airport Service Quality 15 Chapter 5 Airline Choice Factors 15 Airline Business Models 16 Primary Drivers of Demand 18 Secondary Drivers of Demand 19 Revenue Generation Considerations 20 Primary Drivers of Supply 21 Secondary Drivers of Supply 21 Expense Considerations 23 Airline Business Models 27 Application of Business Models in Multi­Airport Regions 29 Chapter 6 Regional Case Studies 30 Case Study 1: Los Angeles Basin 35 Case Study 2: San Francisco Bay 44 Case Study 3: Western Carolina 51 Case Study 4: Northern Gulf Coast 58 Case Study 5: Central Wisconsin

64 Chapter 7 Findings and Conclusions 64 Airline Choice in Multi­Airport Regions 65 Passenger Choice in Multi­Airport Regions 66 Conclusions 69 References 70 Appendix A Glossary of Terms, Abbreviations, and Acronyms 73 Appendix B Literature Review 86 Appendix C Case Study Selection 90 Appendix D Industry Contacts Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions.