Sunday, March 14, 2010

Up in the Huntsville air

Airport suffers from high fares, faces big hurdles
By Eric Fleischauer, Staff Writer, The Decatur Daily

Every Tennessee Valley recruitment effort, whether aimed at individuals or corporations, brags of the close proximity of Huntsville International Airport.

Absent from the promotional material, however, is this fact: Fares at Huntsville International are the most expensive in the nation. While fares at most airports are dropping, fares in Huntsville are increasing.

“We’re the highest in the nation, and we’re the highest by a long shot,” said Damon Hylton, vice president of Seabury APG, a consultant for Huntsville International. “We’re 21 percent higher than the next highest airport.”

Hurts recruitment

High air fares cause problems for all aspects of a community.

“When we recruit new companies to this area, one of the things that always comes up, it never fails, is air service,” said Jeremy Nails, president of the Morgan County Economic Development Association. “When we are competing with other areas for industry, many times the peer cities we compete with have two and sometimes three low-cost carriers.”

Nails said many local companies, struggling with low travel budgets, fly from Birmingham, Nashville or Atlanta rather than Huntsville because of the more attractive fares.

“We’ve had tremendous growth in our area,” said Decatur-Morgan County Chamber of Commerce President John Seymour. “However, in recent weeks, our community has received a ranking that casts a shadow on our progress. The Huntsville International Airport was named as having the highest average airline fares nationwide.”

It’s a problem for recruiters. It’s a disaster for the airport, which estimates 450,000 passengers a year drive to more distant airports — especially Birmingham and Nash­ville — to avoid Huntsville fares.

It’s a problem that the Decatur-Morgan County Convention & Visitors Bureau fears will hurt a major injection of cash into the local economy.

Kayla Riggs, special events director of the bureau, said teams traveling to Decatur for soccer and softball tournaments increasingly fly into Nashville and Birmingham to avoid Huntsville’s high fares.

Ultimately, she fears, that will dissuade them from choosing Decatur as a forum for their tournaments.

The problem is Hunts­ville International has no low-fare carriers.

As numerous airports have discovered, luring a low-fare carrier does not just mean it has one carrier with lower fares, it means legacy carriers must also reduce fares.

So the good news is by attracting a low-cost carrier, an airport can reduce fares of all its carriers. The bad news is low-cost carriers have discovered their power.

“What’s happened in the last 10 years,” said Hylton, “is the airlines have said, ‘We bring a lot of value to the community. The communities are benefiting from what we do, and they need to help us mitigate the risk.’ ”

Airports all over the nation, supported by the communities they serve, are bidding for low-cost carriers to offer flights.

•In Panama City, Fla., corporate and community sponsors offered $24 million to attract Southwest Airlines.

•In Wichita, Kan., local and state contributors compiled $6.5 million to attract a low-cost carrier.

•Pensacola, Fla., offered $2.1 million.

•Sarasota, Fla., snagged a low-cost carrier with $1.2 million.
Hylton said he is working with several communities that plan to offer more than $10 million in risk-mitigation funds to attract low-cost air carriers.

Federal law limits airports to waiving landing fees and promotional costs as incentives for carriers. That leaves airports looking to other funding sources for incentives, and their best resource for funds in most communities is large corporations.

Panama City provides one example of this approach.

Community solutions

St. Joe Corp., a land developer, has a huge econo­mic interest in low-cost fares to Panama City. It shouldered most of a $24 million risk-mitigation pack­age to attract Southwest Airlines to the Panama City-Bay County International Airport.

“Just as the problem of high air fares is a communitywide issue,” Seymour said, “so must be the solution.”

Huntsville International, however, has a more difficult hurdle in attracting viable low-cost carriers. It has two huge employers in its service area — the Army and NASA — but they will not be contributing.

Not only are federal agencies limited by law in what they can offer to subsidize low-cost carriers, they are limited in motivation.

The U.S. General Services Administration bids out fares from cities nationwide to reduce the government’s price tag for employee flights. Delta and United Airlines, for example, provide far lower prices for federal employees from Hunts­ville to Washington, D.C., than they offer to non-federal travelers.

“They’re the largest users of the facility,” said Hunts­ville International spokes­person Barbie Peek, “primarily because they are the largest employers.”

This presents Huntsville International with two problems.

One, low-cost carriers without a governmental contract will not receive any passengers from among federal employees, who are required to use carriers with a U.S. contract.

Two, it deprives Hunts­ville International of its most obvious source for contributions in the effort to attract low-cost carriers.

For the leisure traveler and private companies that would prefer not to send their employees to Birmingham or Nashville, Hunts­ville International’s problem is a constant financial drain.

Decatur employers have an airport 15 minutes away, but its legacy carriers charge prohibitive fares.

Huntsville International is doing what it can to tackle the problem. It recently received a $1 million federal grant — the largest such grant in the nation — to lure low-cost carriers, although the terms prohibit it from using the money to subsidize a low-cost carrier offering flights already offered by a legacy carrier.

It succeeded in attracting AirTran, a low-cost carrier that will offer flights to Orlando and Baltimore/Washington airports beginning May 27. Its fares are about half those of legacy carriers operating from the airport.

The fear — realized in the past with Independence Air and Allegiant Air — is that the low-cost carrier will leave the market when legacy carriers meet its fares.

The success of landing AirTran is not overwhelming. Orlando is not a major connecting airport, so it will attract few passengers whose final destination is not near Orlando. Good for Disney, but not a major destination for Huntsville travelers.

Baltimore/Washington is more significant, both as a final destination and as a connecting flight, but most Huntsville flights to D.C. are federal. Thus, AirTran — which has no contract with the federal government for reduced fares — will not be a player in the lucrative competition for NASA and Army employees.

Atlanta flights

What Huntsville International needs is a low-cost carrier with flights to Atlan­ta. As a major hub, Atlanta is a stop in most domestic and international flights that originate in the Southeast.

Huntsville International officials estimate that if AirTran added Atlanta to its Baltimore and Orlando flights, the communities the airport serves would save up to $91 million a year in fares.

Delta provides direct flights from Huntsville to Atlanta, but enjoying its lack of competition, its fares are high. A roundtrip flight from Huntsville to Atlanta on Delta, reserved shortly before departure, costs $712.

Huntsville International’s constrained effort is to seek contributions from non-federal entities that would benefit from a low-cost flight from Huntsville to Atlanta.

Chambers of commerce have generally obliged, pledging 10 percent of projected savings toward an incentive package. The Deca­tur-Morgan County Chamber of Commerce recently made such a pledge, only binding if a low-cost carrier takes the bait.

“What the airlines want is for the communities to get involved,” said Hylton. “They want the corporations at the table to say they will support them.”

Average fares

The top five average domestic fares, according to the U.S. Department of Transportation:

Huntsville: $492.

Grand Rapids, Mich.: $406.

Savannah, Ga.: $396.

Washington Dulles: $391.

Knoxville: $388.


Huntsville International Airport’s competitive disadvantage is demonstrated by walk-up fares to various locations, as compared to fares from Birmingham and Nashville.

To Washington, D.C.: Huntsville, $1,042; Nash­ville, $742; Birmingham, $408.

To Orlando, Fla.: Hunts­ville, $745; Nashville, $344; Birmingham, $332.

To Boston: Huntsville, $643; Nashville, $396; Birmingham, $448.

To Philadelphia: Hunts­ville, $408; Nashville, $242; Birmingham, $407.

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