Southwest Airlines (NYSE: LUV) announced on Thursday it will cease operations at Branson Airport in mid-2014, just more than a year after the Dallas-based carrier flew in.
Southwest, which officially launched its service at BKG in early March, said it's no longer financially viable to provide flights in the southwest Missouri city. Southwest also announced it is leaving two other airports, Key West International Airport in Florida and Jackson-Evers International Airport in Mississippi.
"It really comes down to the viability of our markets. It's hard to pinpoint just one issue that would cause Southwest to leave a city. It's a combination of many factors," said Southwest spokeswoman Michelle Agnew, noting the airline looks as how best to optimize its schedule companywide and manage in-demand markets. "The market did not meet the demand that we needed to remain viable in that market."
Southwest is scheduled to cease its Branson operations on June 7. Until that time, the airline plans to continue its current flight schedule, which Agnew said comprises four daily nonstop departures.
Southwest entered the Branson market through the purchase of Orlando, Fla.-based AirTran Airways in May 2011 for $1 billion. AirTran had operated flights at Branson Airport.
The news comes in the midst of a potential financial turnaround for BKG, which also is serviced by Frontier Airlines. The four-year-old airport reported $2.2 million profits through the first three quarters of last year, a dramatic shift considering BKG had posted $21 million in cumulative operating losses through the end of 2012. The figures do not include depreciation or interest expenses, according to
Springfield Business Journal archives.
Leading the charge in pulling the airport out of the red was the red-bellied planes of Southwest, BKG Executive Director Jeff Bourk said in the Nov. 25 SBJ story "
Air Economies." Bourk could not be reached for comment on this story. Agnew said that while Branson Airport's financials were a factor in its decision, they were not the determining factor.
Following an early 2011 default on roughly $115 million in revenue bonds used to construct the airport, BKG officials asked investors in late 2012 for up to $23 million to support operations. In exchange, lenders would receive priority over bondholders with regard to first right of foreclosure.
Bond trustee UMB Bank said in a summer report filed with Municipal Securities Rulemaking Board it determined not to make the semiannual interest payment of roughly $3.4 million scheduled for July 1, based on factors including the airport’s history of financial losses. The trustee also stated in the report it withheld a $2.1 million sinking-fund payment in July. Securities that have a sinking fund call provision provide higher yields to make up for the additional risk associated with holding them, according to Investopedia.com, but if the bonds are called, the call price is usually paid at a premium, according to SBJ archives.
In a Dec. 5 filing with the MSRB, BKG said the trustee is seeking the help of bondholders to discuss necessary next steps.
"The bond trustee is evaluating this very recent announcement and is in communication with management of the airport. The bond trustee is seeking bondholder participation to discuss what action may be appropriate in view of this announcement. Prior notices reflect that holders of a majority in principal amount of the bonds outstanding have certain rights to direct remedies," the filing said.
Reporter Brian Brown contributed to this story.[[In-content Ad]]
