Questions About Air Service in SW Missouri

 

The posting on Spirit Airlines has evolved into a conversation about Branson and air service. You may want to catch-up before reading on...

 

Mike has several questions:

 

"Well, what data did the developers of the new Branson Airport currently under construction use that justify a multi-million dollar airport for the city? Are they using the build it and they will come strategy? I don't think they had only charter service in mind. Based on how many people visit Branson when they get a carrier I think it will open itself to the entire country as a destination market. What would you do if one of the big carriers into Springfield pulled out and went to the new Branson Airport? Or, what could happen if an airline like US Airways decides to fly to Branson and use a big jet like a 737 that could also mean cheaper ticket prices compared to flying into Springfield?"

 

Mike...I can't speak for the Branson airport developers. You'll need to ask them what data they used. You wonder what the Springfield airport would do if a big carrier pulled out and went to Branson?  That's not going to happen.

 

As for your question about US Airways... It's hard for me to imagine how this implausible scenario would mean cheaper ticket prices compared to Springfield. That's not how the industry works. Absent external forces (which I'll get to in a moment), air service and the price of tickets is largely determined by supply and demand: prices are cheaper in large markets and more expensive in small markets. Low-cost carriers (LCCs) are not going to consider daily service into any market that doesn't guarantee them roughly 238,000 enplanements (people getting on an airplane) a year. That's how many bodies just one LCC would want. And then they would provide service to just one destination.

 

Now what about those external forces? Here's an example. Over the years ski resort towns in Colorado have done different things to gin up air service. For example, local businesses have pooled money that is offered to airlines for service. They might say to the airline, "If you provide us this service, we'll guarantee your revenue: if the plane isn't 70 percent full, we'll pay you for the empty seats." The hope is that the service will grow strong enough that it doesn't have to be subsidized. This approach is fraught with problems, including 1) the service often doesn't grow and businesses grow weary of paying the subsidy, and 2) the airline demands more money. There are dozens of other issues I could raise here and you probably have at least as many follow-up questions. So, I'll close with this...

 

The Branson project faces several challenges, the least of which is the volatility of the commercial airline business. Since 9/11 the airlines have been running by the skin of their teeth. Profit margins are slim. Bankruptcy is common. High fuel prices and labor unrest are constant worries. The expansion of routes, or the addition of new service, is done with extreme caution. Given this business climate, getting an airline to jump into an unproven market will be a tough nut to crack. And before airlines could be persuaded to jump in, there would have to be proof positive that hundreds of thousands of people across the country are willing to pay air fare to Branson.

 

Don’t get me wrong. It is not my intent to cast dispersions on the Branson airport. We wish the Branson project good luck and best wishes. I'm just saying they face some HUGE challenges. If the developers can pull it off, they deserve our applause.

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