On a cold night in January, a pair of pilots from Chicago mistakenly landed a Boeing 737 at the M. Graham Clark Downtown Airport in Hollister. While Southwest Airlines suspended the pilots who took 124 customers near the edge of a 100-foot embankment, it appears they weren’t the only ones who don’t have Branson Airport on their proverbial radar.
With low-fare, national discount carrier Southwest Airlines’ (NYSE: LUV) planned exit in June, the clock is ticking for Branson Airport to replace revenue the airline was generating for the cash-strapped BKG, as it's known in airport code.
Three national airline industry analysts told Springfield Business Journal the odds are against BKG securing a successor in the short-term, and now airport officials are making financial projections with only one carrier on board, according to recent filings with a municipal bond reporting website.
The Municipal Securities Rulemaking Board indicates an airport budget prepared in November ahead of Southwest’s exit announcement estimated 2014 revenue of $8.3 million with total passengers at more than 178,000. A recent budget adjustment assumes no replacement carrier and no service expansion by Frontier Airlines, projecting operating revenue of $4.8 million and 82,175 passengers. A 2015 budget with the same assumptions puts the airport’s operating revenue at just more than $2 million with 32,086 passengers, according to the MSRB.
Darryl Jenkins, chairman of the American Aviation Institute and an airline consultant, said no major airlines are entering small to midsize markets.
“I was not surprised that Southwest pulled out. Southwest is a major airline, and it looks for major revenue,” Jenkins said. “Branson is entirely a leisure destination. It is a nice destination, but it is seasonal. And the most difficult places to make money are seasonal.
“Branson will have some difficulty replacing Southwest.”
He said possible options are Virgin America or Spirit Airlines, but revenue guarantees likely would need to be part of the equation – a tough proposition for Branson Airport. “The locals will have to cough up some money to bring somebody else in,” Jenkins said.
According to the budgets on file with the MSRB, airport officials are projecting a net operating loss of $96,103 this year and $1.9 million in 2015.
With activity from Southwest, Branson Airport posted $3.9 million in net operating income in 2013 – not including depreciation or interest expenses – which follows $21 million in combined net operating losses through its first four years in business.
Little demandRepresentatives from Virgin America, Spirit Airlines and Sky West Inc. each said no plans were in place to bring air service to Branson. Sky West is the parent company of Express Jet Airlines, which oversees Continental Express, and Continental Express had previously run regional service Branson Air Express out of BKG.
William Swelbar, a research engineer at Massachusetts Institute of Technology’s International Center for Air Transportation with 25 years of experience consulting airlines, said Branson Airport would be challenged to find a successor.
“It’s a complicated market. There is fly traffic, but there is also a lot of drive traffic. That makes the demand equation difficult to quantify,” Swelbar said. “One could say that with Springfield and Branson, by having two airports, is splitting demand.”
Swelbar said the airport is not alone in its desire to better connect to markets nationwide.
“It is a very difficult time for smaller airports, and I believe it will only get more difficult before it gets better,” he said. “I would say the odds are against them.”
The high price of fuel and a demand for pilots among major carriers are factors, Swelbar said, pointing to steady industry consolidation the last decade. The recent merger between American Airlines Group Inc. (Nasdaq: AAL) and U.S. Airways was likely a key factor in Southwest’s exit because gates on the East Coast opened up and Southwest has a plane shortage, according to analyst Michael Hynes of Branson-based Hynes Aviation Service Industries.
Low-cost carriers are the best fit for Branson, Swelbar said, but the pool is small. Jet Blue focuses on the East Coast; Spirit Airlines sticks to larger markets; and Allegiant Air is already in Springfield. “Frontier is the only one that tends to have an appetite for markets like Branson,” he said.
Hynes said it is not uncommon for airports the size of Branson to only utilize one carrier, but with Frontier Airlines being the only game in town, he doesn’t think the airport can climb out of its financial hole without investor funding or a Southwest successor. Hynes said BKG’s best option is to restart Branson Air Express routes or find a regional carrier with surplus planes that have at least 70 seats.
Capital needsSpringfield-Branson National Airport spokesman Kent Boyd said he has no fear Allegiant, or any other SGF airline, would bolt for Branson.
“We’ve had the conversation with Allegiant, and they’ve told us they aren’t going anywhere,” Boyd said.
Boyd is aware Branson Airport officials have courted SGF airlines in the past, but not in the last two years. He said airline shrinkage would make it tough on BKG.
“I think the public has this idea that there are so many airlines out there that an airport can just go knock on the door and say, ‘Come fly to our community,’ and it just isn’t that way anymore,” Boyd said. “There are about nine significant airlines that offer a daily schedule and two or three niche carriers like Allegiant and Sun Country that fly charters, and that’s about it.”
Sun Country Airlines officials did not respond to requests for comment by press time.
Branson Airport Executive Director Jeff Bourk declined an interview for this story, but said via email the airport was pursuing a replacement for Southwest.
“We continue to work on air service development efforts related to growing commercial service at the Branson Airport,” Bourk wrote. “At the present time, we are not able to go into detail related to those efforts.”
According to the MSRB, Branson Airport has hired aviation consultancy ICF SH&E (Nasdaq: ICFI) to assist in the fallout from Southwest. ICF spokesman Steve Anderson declined to comment.
According to the privately owned and operated airport’s funding and forbearance agreement, first penned in April 2011 following a default on money owed to construct BKG, a June 30 deadline approaches that could trigger ownership or management changes, Hynes said.
Hynes expects the airport to remain operating without a replacement airline, but BKG still needs a cash infusion.
He estimated the airport would need an additional $3 million to $5 million by the end of June to meet the terms of the agreement, and at least that much money per year to cover operational expenses through 2021.
“I just think there may be a change in ownership or how it is being managed. I don’t see it closing,” Hynes said. “If the bonds go into default and are sold for 10 cents on the dollar, that would change the economics considerably.”
