Springfield, MO

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Outlook fragile for airline industry

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While announcing a 2 percent dip in 2010 total passengers through Springfield-Branson National Airport, Aviation Director Gary Cyr cast a somber prognosis for the next 12 months during last week’s annual State of the Airport address.

“The industry is still in a very fragile situation,” Cyr told the 70 attendees at Springfield Area Chamber of Commerce on Feb. 9. “We expect no significant growth in demand, mainly because the recession is not over. Unemployment continues to hover around 10 percent (and) employment is a key driver in demand.”

The airport moved 796,251 travelers last year, 15,500 fewer than in 2009, reducing flight demands by 1 percent, airport officials said.

“This reality has had a direct impact on commercial air service in Springfield,” Cyr said.

The impact has been felt in Kansas City’s municipal airports as well. Kansas City’s two municipal airports handled fewer flights in 2010 than one airport alone handled in 1966, according to a Kansas City Business Journal report.

Take-offs and landings totaled 228,645 at Kansas City International Airport and the Charles B. Wheeler Downtown Airport in 2010, according to data released this week by the Kansas City Aviation Department, 3,669 fewer flights than the 232,314 at the Downtown Airport in 1966.

Cyr called 2010 a year of challenges, and he expects more of the same in 2011.

Springfield airport officials brought in airline industry expert Mike Mooney of Eugene, Ore.-based Sixel Consulting Group Inc. to address pricing, which historically has been perceived as higher than other airports in the region.

Mooney, a 30-year industry veteran who most recently worked as a vice president of pricing for Midwest Airlines, said it’s typical for small-market airports to often get beat on price simply due to seats and flights available.

Mooney used service from Springfield to Denver as an example of skewed ticket pricing between airports.

In a worst-case scenario, he said a seat to Denver could cost $1,200 from Springfield but only $250 from Kansas City. Volumes are the big factor to airlines setting the prices, he said.
Springfield offers four airline choices compared to Kansas City’s 30, and there are 200 daily seats from Springfield to Denver compared to 3,374 from Kansas City to Denver.

Airlines typically pocket 80 percent of a ticket price, known as the net fare, according to Mooney’s presentation. Using the Denver destination as an example, the average one-way net fare is $198 on a flight from Springfield to Denver and $93 from Kansas City to Denver.

“(Airlines are) going to do what any good business does in that situation, they’re going to optimize their revenue,” Mooney said. “It’s not personal, it’s just business.”

The airline industry isn’t the only one that uses the pricing practice, Mooney explained. Hotels, automobile rentals and concert promoters also sell advance tickets at a lower rate and raise prices as demand increases and the date nears.

Frequent business flier Skip Motsenbocker, managing director and chief marketing officer at SignalPoint Asset Management, said he has no allegiance to any one airport. While logging more than 40,000 miles annually, Motsenbocker usually shops four airports in the region – Springfield, Branson, Kansas City and St. Louis – to find the best prices.

“It is kind of the way I leverage my time, and I can tell you that Branson is more cost-effective than Springfield,” said Motsenbocker, who recently returned from a business trip in Florida.

Airlines believe a certain number of Springfield business travelers will always choose to fly despite higher fares, and they offer just enough flights to cover that number.

The airlines realize that higher prices will drive some away, but they calculate the number of ticket sales and number of flights necessary to make a profit.

“They’ve made a business calculation that a sufficient number of businesspeople will pay the higher fare and skip the drive,” Mooney said.

Nationwide, companies are expected to spend 5 percent more on travel in 2011 than they did last year, according to an Associated Press story, a sign of confidence in the economy that is giving a boost to airlines, hotels and rental car companies. That’s double the growth rate from 2010, which followed two years of decline.[[In-content Ad]]


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