BKG banking on 'Southwest effect'

Southwest Airlines officials want businesses in southwest Missouri to know that the airline will soon be flying its red-bellied planes out of Branson.

Representatives from Branson Airport and Dallas-based Southwest (NYSE: LUV) held an Aug. 27 news conference at the Branson Landing with Gov. Jay Nixon, Bass Pro Shops founder Johnny Morris and a bevy of local officials and entertainers to promote the airline’s daily nonstop flights to Dallas, Chicago and Houston and weekly Saturday service to Orlando, Fla., beginning March 9. Adding direct and connecting flights, Southwest will fly to 67 cities from Branson, and nearly triple the number of weekly seats available in March to 3,146 seats from 1,287 seats, according to Branson Airport Executive Director Jeff Bourk.

While Branson Airport picked up direct flights to Dallas, Southwest is canceling flights to Atlanta and Baltimore in 2013 as it converts AirTran Airways operations.

Southwest Airlines, which last year carried 104 million passengers and posted $15.7 billion in revenue, announced in January it would transition AirTran service to Southwest routes in Branson following its $1 billion purchase of the Orlando, Fla.-based discount carrier in May 2011.

On Aug. 28, the Taney County Business Development Partnership also hosted an invitation-only breakfast for Springfield-area business leaders to discuss Southwest’s plans for the Branson Airport, aka BKG. The airline introduced Bob Montgomery, vice president of airline affairs, who shared with an event crowd of roughly 80 that he expects Southwest to have a positive impact on the local economy by encouraging other airlines to lower fares.

“There’s a term called the ‘Southwest effect,’ which basically means that when we go into markets we bring fares down, and the travel explodes from there,” Montgomery said in a video presentation before his question-and-answer session during the breakfast. “That’s what we hope to do here in Missouri.”

Jonas Arjes, executive director of the Taney County partnership, said Southwest’s multiyear commitment to Branson should help business development groups attract companies to invest.

“Southwest Airlines gives us another brand new shiny blue-and-orange tool in our economic development toolbox,” Arjes said.  

Branson Airport is counting on an economic boost.

On July 23, bondholders of nearly $114 million in revenue bonds used to construct the airport extended a forbearance and funding agreement reached in April 2011. The original agreement was signed with trustee UMB Bank after a default related to the airport’s January 2011 debt service payment. The recent extension downgraded expectations for revenues and boarding passengers for the second time in the last year.

Though first- and second-quarter passenger volumes are up 15 percent and 20 percent, respectively, compared to last year, the private airport has lost more than $30 million since 2010, according to income statements filed with the Municipal Securities Rulemaking Board.

Bourk declined to discuss the airport’s financials, but he has maintained since Southwest’s acquisition of AirTran that the low-fare carrier is the answer to BKG’s financial woes. With Southwest service running, the airport is budgeting 50,017 enplanements, or boarding passengers, in the second quarter of 2013, a 53 percent increase compared to the 32,747 passengers recorded April–June this year.

In performance results posted Aug. 29 with the securities board, BKG reported a second-quarter operational loss of $1.8 million. The airport is projecting to turn a $17,000 profit from second-quarter operations next year.

“The investors are very encouraged about the prospects for the airport,” Bourk said Aug. 29.

Pete Houghton, senior director of airport affairs for Southwest, was among the airline officials who examined the airport’s financial standing before committing service to Branson. While BKG’s losses were worrisome, he said the work airport officials have done to ensure agreements are in place with its trustees alleviated the airline’s concerns.

“It was certainly a factor,” Houghton said, adding, “it is an issue between the airport and its investors.”

Montgomery said BKG’s booking and travel patterns from AirTran indicate the airport is worth Southwest’s risk. “AirTran already has a brand established in Branson, and for us, it was a low-risk way of addressing the marketplace,” he said.

Montgomery said Southwest Airlines took a chance on entering the Panama City, Fla., market in spring 2010 and if the company – which has 39-year streak of annual profitability – can find success there, then profitability in Branson should come. He said Southwest seeks a 15 percent return on its investment in each market it serves.

“I’ve been to Panama City, and I’ve been here, but they ain’t got what you’ve got,” Montgomery said. “They’ve got a beach, and that’s about it. There are so many wonderful things here, and so I’m confident people will fly.”

Bourk said Southwest’s comparisons between Panama City, Fla., and Branson are notable. With similar regional population demographics and 7 million visitors to the area annually compared to Branson’s 7.6 million, Northwest Florida Beaches International Airport recorded 70 percent passenger growth to nearly 450,000 enplanements the first year full with Southwest service.

Springfield-Branson National Airport Executive Director Brian Weiler said he expects Southwest’s presence would have relatively little impact on airport operations in Springfield.

“For the most part, it appears to be a continuation of the service that AirTran has had there for some time,” Weiler said. “Their flights haven’t had a significant impact to date.”

Weiler said SGF’s enplanements are up 4 percent this year through July compared to the first seven months of 2011.

He said the “Southwest effect” could encourage carriers flying directly to Dallas and Chicago to lower fares. Southwest Airlines reports an average one-way ticket price of $142.

“In general, I think competition is good,” Weiler said, adding that typical business travelers should still find more options flying out of Springfield with four daily flights to Denver, seven each by two carriers to Dallas and five dailies starting in September to Atlanta. “We still think we offer a good variety and good connections with our hub.”

Gary Whitaker, publisher of 417 Magazine, said the loss of flights to Atlanta in Branson should have him flying more regularly out of SGF, but he’ll continue to check rates and schedules at both local airports. Whitaker said he flies up to three times a year on business to Chicago, Dallas and Atlanta, and with Southwest flying daily to Chicago and Dallas, rates may be low enough to prompt him to drive south from Springfield. 
 
Whitaker said he has saved more than $200 on a roundtrip flight from Branson to Atlanta, but in recent months he’s valued the scheduling flexibility he gets flying from Springfield.

“(AirTran) is typically cheaper than Delta, but Delta’s schedule sometimes trumps AirTran,” Whitaker said, adding that he is often weighing price against convenience.

Considering the larger potential impact, Whitaker hopes the airline might bring more visitors to southwest Missouri.

“It will be interesting to see if Branson now becomes a fly-in destination and not just a drive-in destination. That would be good for all of us,” Whitaker said.[[In-content Ad]]