Springfield Fares

Sep 29 2010 Springfield Fares BY admin TAGS Fares

 

We received this email from Robert:

"I read with great interest the comments on your website today regarding the upcoming acquisition of Air Tran by Southwest Air. While I realize that Springfield's airport doesn't set the prices for flights out of Springfield - surely somebody there with leverage could push for lower prices. As much as possible I choose to fly out of other airports (Tulsa, St. Louis, Fayetteville) for business/pleasure, simply because it's so expensive to fly from Springfield. My wife and I flew to Denver last month. We chose to drive to Tulsa and fly Southwest direct -  and saved over $490.00 (including fuel & parking)- - I've included a screen shot from your website about 'more together time' - - which is a misnomer, considering that our trip actually took less overall time, even with the drive to Tulsa, than it would've to fly out of Springfield.  Plus, we were together the whole trip! I flew out of Fayetteville 2 years ago to Louisville, the price difference was over $600.00 to fly Northwest. I've had to fly out of Springfield 4 times in the past 4 years for business on short notice - - each time the costs were exorbitant. I'm thankful I didn't have to personally pay for the flight...Hopefully, someday Springfield will give us more options and lower costs for flights (I'm not talking about Allegiant Air either)."

Robert... I understand your frustration; we live with it everyday. My desk is covered with stacks of analytical data showing the fare difference between Springfield and bigger air markets. We’re aware that some people drive to other markets to fly (in the jargon of the industry it’s called “leakage”). We also know that their numbers have declined over the years.

Leakage studies done in 1997 and 2005 showed that 30 percent of potential customers left the market to fly from other airports. A 2008 study showed an 18 percent decline in the number of customers leaving the market. In other words, airlines in Springfield were capturing 88 percent of customers that could be expected to fly from Springfield. This told us that Springfield fares were still high, but not as high as they used to be. It also said that the vast majority of customers had decided the difference in price wasn’t worth the drive to other airports.

The 2008 study was performed before the recession. If we did one today, it would almost certainly show worsening leakage. While 2009 blessed this market with a 22.3 percent decline in fares, 2010 has brought fare increases. Throw in customer leakage to the Branson airport and I’m sure that leakage is higher than it was in 2008.

I’m not trying to snowball you with a bunch of statistics, I’m just making the point that we know what’s going on. Here’s data concerning one-way fares in Springfield and Fayetteville (XNA). It reflects the first and second quarters of 2008:

While I would never claim that fares are always lower at SGF, I will say that on average, Springfield and XNA fares are roughly equal. I suspect that you always comparison shop, but I just want to make sure that you don’t fall into the trap of assuming that your $600 savings at XNA is always going to be the case.

You said, “While I realize that Springfield's airport doesn't set the prices for flights out of Springfield - surely somebody there with leverage could push for lower prices.”

Thank you for the realization, but you’re still blaming the airport for the realities of small market air service. There is no magic leverage. Forgive the analogy, but this is like blaming Simon Property Group (the owner of the Battlefield Mall) for the cost of designer socks at the department store.

Here’s the reality: we’re a small market airport. Ticket prices tend to be higher in small markets and cheaper in larger markets. Remember the economics law of supply and demand? The larger the supply of seats, the cheaper the price; the smaller the supply of seats, the higher the price. Airports like Tulsa, Kansas City, St. Louis have a larger supply of seats than we do. There are other economic factors at work, such as competition (or the lack of it), but supply and demand are a large part of the equation. Check out the total 2009 passenger numbers (read supply and demand) for the following airports:

  • St. Louis: 12,824,538
  • Kansas City: 10,280,591
  • Tulsa: 3,022,871
  • Fayetteville: 1,077,958
  • Springfield, MO: 778,444

Yes, we are a small market. I stress this point only because I run into people all the time that think we have passenger numbers on par with Tulsa and Kansas City.

There are no magic bullets. Simply put, there are three main things an airport can do to increase the supply of seats in the market (hence, bring down fares): 1) maintain a low cost environment from which the airlines can operate, 2) encourage incumbent (already in the market) airlines to add flights and destinations, 3) encourage new airlines (new to the market) to fly from Springfield.

Item #1 is easy. #2 is harder. #3 is the real trick: we can plead with airlines. We can tell them that this is a wonderful place to live and work and that we deserve their service. We can offer them breaks on landing fees and money for advertising (we do). We can fall on our knees and beg. But in the final analysis there’s only one thing that matters: does the airline think it can sell enough seats in the market, at the price that it wants, to make the service worth its while?

(Check out this story from the Tampa Tribune: it's a good overview of what publicly owned airports can and cannot do to attract airlines.)

There are other questions airlines ask… Does the city wanting the service fit well into the airline’s network? “Network” refers to the different routes the airline flies and how those routes connect to one another via the airline’s hub airports.

What sort of revenue quality does the city offer? Here’s a simple example of revenue quality: can the airline fill every seat in a 50-seat airplane and charge $100 a seat…or can it fill the same airplane to 60 percent capacity and charge $250 a seat? The plane that’s 60 percent full has better revenue quality. Airline math gets even more complicated…

Here are some other airline revenue measurements:

  • Revenue passenger miles
  • Available seat miles
  • Average stage length

Airlines also want to know about the area:

  • What’s the per capita income in the metro area? The ten county region?
  • What’s the effective buying income of the metro area? The region?
  • How fast is the area population growing? The region?
  • What are the major sectors of the local economy?

I’ll leave you with one final thought…and I’m going to pick on United to make the point…

Right now I’d wager that the highest average roundtrip from Springfield is the United service between here and Denver. Lately it’s always been $600 plus. It doesn’t matter if you book the day before or six weeks out. Here’s the point: United customers are paying $600 plus to fly to Denver and back. The planes leave Springfield nearly full and the revenue quality is apparently peachy. The airline has no incentive to lower fares. That’s the reality of a small market airport.

 

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