Primer:  Air Service Development


Development of air service is a priority for many communities. At the moment, there is no definitive source to guide air service development teams. This primer highlights some common practices. The (U.S.) National Academy of Science’s Airport Cooperative Research Program (ACRP) is currently studying effective techniques in hope of publishing a comprehensive guide.


The Situation is Changing

The Bad News

  • Continual efforts are underway to change the Federal Aviation Administration’s (FAA) Essential Air Service program so that fewer communities would qualify for subsidized air service and more communities that do qualify would have to pay part of the tab. More communities are falling out of the program because the rules don’t account for higher fuel prices.
  • A number of communities have been abandoned by airlines since regional carriers switched from turboprops to regional jets. Either the community’s airport cannot handle the runway requirements for the jets or it cannot financially support this now more expensive route.
  • While the advent of low fare carriers has brought more business to some secondary, lower-cost airports, these carriers require a larger number of passengers to be profitable, thus low cost carriers are attracted to large metro areas.

The Good News

  • Because of higher fuel prices, airlines are again using turboprops for feeder service.
  • There are new opportunities with the new Open Skies treaty with the European Union as EU carriers seek new, untapped U.S. markets.
  • The advent of the Very Light Jet and the new air taxi industry will create opportunities for second and third tier airports in major metro areas.


Today’s Options for Airports

  • Point-to-point
  • Traffic between two large city pairs could support low-fare carriers.
  • But short-haul, point-to-point between smaller markets may not pay for itself.
  • Verdict still out whether ExpressJet and Go! routes are profitable. Independence Air could not make this strategy work with its formula.
  • Hub feeder
  • The regional carrier may need a code share to survive –  the regional leg needs a legacy subsidy.

The Bottom Line

  • An airline must be confident that its investment in new service will be profitable.

 

Airport strategies

The Lure

The challenge for any airport seeking new service is to make a proposed route attractive. A community can convince a carrier that it already draws inbound visitors – educational, industrial, recreational features. It may be a case of pointing to a competing, but perhaps more expensive carrier with a similar route. On the other hand, a community may need to do more than roll out the red carpet – it may need to offer some financial incentive. If the airline perceives a route to be risky it may demand more.

Prized demographics

    • An existing market with high origins & destinations (O & D) traffic
    • Population and income growth trends
    • The market has a recognized draw: major business/industrial institutions, educational center, government center, leisure/recreational facilities
    • Proximity to currently untapped market
    • New airport facilities
    • New runway which can handle larger, heavier aircraft
    • Airside terminal improvements which can ease fast turnaround of aircraft
    • Terminal improvements that enhance the passenger experience – improved baggage claim
    • New custom facilities, better hours

Incentives are needed. Options include:

    • Local campaign to publicize the new route with paid or donated media
    • Waiver of landing fees or terminal rents
    • Provide ground handling services
    • Guarantee a block of ticket sales
    • Monthly subsidy to underwrite costs of route if not enough tickets are sold
    • Funds for incentives can be obtained from local, public and private sources. The local hotel/motel association or tourism bureau could be a source of private funding.
    • Some states and the federal government have grant programs. The major source of the federal money is the Small Community Air Service Development Program and the Essential Air Service Program.

Campaign Research

Before approaching a carrier with a sales pitch, an extensive amount of research is needed. The research will enable a community to approach the right carrier flying the size-appropriate aircraft for the desired route.  The analysis needs to: 

  • Provide supporting socio-economic data
  • Assess impact of recent and project business growth
  • Analyze the economic feasibility of the market
  • Study current travel patterns by all modes
  • Survey travel agencies
  • Identify the airport’s catchment zone
  • Identify traffic leakage to other airports
  • Factor in growing congestion at nearby major airport and difficulty in traveling there
  • Assess operational challenges at competing airports
  • Provide regional enplaned and airline service data
  • Perform load factor analysis
  • Provide historical data
  • Assess the profitability of current service
  • Model the market if data doesn’t exist
  • Analyze possible destinations – determine potential traffic volume
  • Detail potential traffic to prime destinations
  • Develop route pro forma
  • Look at route to hub, then traffic to connectors
  • Explore new opportunities due to legislation like changes in the Wright amendment
  • Consider attractiveness as alternative airport for low-fare carriers
  • Provide a better fit for turboprop than regional jets
  • Will larger or faster planes make a difference to the bottom line?
  • Do facilities match aircraft needs

The Campaign

With the research completed, the airport and community then embarks upon the campaign to win new air service. Elements of the campaign should include:

  • Know the target airline’s current and future focus
  • Align the request with the target carrier’s strengths
  • Know desired aircraft’s availability
  • Focus on business traveler rather than leisure traveler
  • Form or align airport with a local grassroots group seeking more service
  • Local grassroots group can be more aggressive than airport
  • Use skills within the grassroots group to help in all areas: presentations, meetings, tours and negotiations
  • Point to success stories at similar airports with service similar to what is proposed
  • Does it make sense to offer an incentive
  • What type of incentive would be most effective
  • Negotiate incentive contract to ensure minimum risk and maximum reward
  • Marketing incentives can support new carrier or new service by existing carrier
  • Hub to hub advertising
  • Route ads: billboards, airports, print, carrier’s in-flight magazine, trade pubs, major metro travel sections
  • Make sure certain incentive offers don’t discriminate against an incumbent carrier
  • Plan inaugural celebrations for carrier, VIP and media
  • Follow-up to share success and set stage for next route, improved service

Small Community Air Service Development Program

Initiated by Congress in 2000, the U.S. Department of Transportation annually awards Small Community Air Service Development Program grants to communities seeking new or expanded air service.  The program was originally funded to make $20 million in annual grants, but in recent years, the grant pool has been $10 million. For fiscal 2007, DOT issued 26 grants. It has been reauthorized for an additional five years, through fiscal year 2008.


DOT gives priority to proposals from communities that:

  • Have high airfares compared to other communities.
  • Contribute financially to the project from sources other than airport revenues.
  • Establish or will establish a public/private partnership to improve their air service.
  • Submit proposals that will benefit a broad segment of the public with limited access to the national transportation system.
  • Will use the assistance in a timely fashion.

Funds can be used for:

  • The expenses of any new advertising related to improving the air service to the community.
  • New studies designed to measure air service deficiencies or measure traffic loss to other communities.
  • Employment of new, dedicated air service development staff.
  • Hiring of universities, public relations agencies and/or consulting firms.
  • Financial incentives to air carriers, including subsidy or revenue guarantees.

DOT's maintains a special website on the program at http://ostpxweb.dot.gov/aviation/X-50%20Role_files/smallcommunity.htm#Funds

 

ACI-NA Programs

ACI-NA has two programs that support air service development. It has its long-standing JumpStart® Air Service Development Program and a companion program, Air Service Data & Planning Seminar. JumpStart® has been held annually since 1997 while the Air Service Data and Planning Seminar will be held for the second time in January 2008.

JumpStart Air Service Development Program

  • The "round-robin" meeting format provides both airport and airline participants with the opportunity to build and strengthen relationships that enable air travel networks to expand across North America.
  • Airports request a private, 20-minute meeting with up to four airlines.
  • In 2007, 36 airlines and 141 airports came together in 740 meetings.
  • The 2008, JumpStart will be held in Pittsburgh, PA, on June 25.
  • Visit the JumpStart program or contact the Jumpstart team (jumpstart@aci-na.org) at (202) 293-8500.

Air Service Data & Planning Seminar

  • First held in 2006
  • Will be presented every other year
  • Next seminar in New Orleans on Jan. 24-25, 2008
  • Features presentations on the use of various data sources to build effective pitches to the airlines
  • At least eight different data sources will be discussed at the 2008 seminar
  • Seminar includes case studies by airports on the most effective ways to use the data.
  • For more information visit the Air Service Data & Planning Seminar event page.

Compiled by Thomas J. Smith (tsmith@aci-na.org)

Director, Communications

 

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