Consultant to Quad-City airport board: Airlines, airports in survival mode

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By Jennifer DeWitt | Tuesday, April 15, 2008 9:55 PM CDT | () comments

Given the current course of the airline industry, smaller airports can expect a decrease in capacity, an increase in fares and very little expansion by the airlines “as they just try to survive,” an industry expert told the Quad-City International Airport’s governing board Tuesday.

Mike Bown, the airport’s consultant, offered a bleak outlook of the industry as he informed the Rock Island County Metropolitan Airport Authority that the Quad-City airport has been bucking the trend. “Very few airports have done as well as you have in the last five years,” he said, adding that the Quad-City airport now is the 23rd fastest growing airport.

The ranking was based on the airport’s growth in enplanements, which have increased 42 percent from 338,010 in 2002 to 480,523 last year.

His assessment came as the Quad-City airport announced that March enplanements hit a new all-time record for the month.

Bown said the Quad-City airport as well as most airports experiencing growth all have their low-fare carriers to thank for the rise in passengers. In the Quad-City market, he said AirTran’s existence is very important, which came as no surprise to airport officials.

Still, record jet fuel prices and deep financial losses are causing significant changes across the industry, he said. In the past two weeks alone, four airlines have shut down: ATA, Champion, Skybus and Aloha. Just Monday, Delta Air Lines and Northwest Airlines announced a merger.

“I think the next couple years are going to be very challenging,” Bown said, adding that airlines are not likely going to be expanding into any new markets in the current environment. That was sobering news for the Quad-City airport, which has been lobbying hard to bring direct service to Phoenix as well as Washington, D.C.

Bown said he did not expect the Delta-Northwest deal would have a huge impact on the Quad-Cities, which are served by both airlines. Once combined, the new airline would have about 36 percent of the Quad-City market.

Bruce Carter, the airport’s aviation director, said it’s too early to tell how the merger will impact the Quad-City airport but added that there is very little overlap in the markets served by Northwest and Delta.

Industry-wide, Bown said most U.S. airlines are announcing plans to reduce capacity by 5 percent or more — a trend he expects will only continue if the price of oil continues to climb.

“The planes are full, they’ve gotten much more efficient, yet airlines are losing money,” he said. “There is not a lot more they can do on the cost side.”

With fuel continuing to rise and labor and operating costs cut as far as they can go, Bown said the airlines now will have to cut flights and increase fares, which he pointed out have not even kept up with the rate of inflation. “To catch the CPI (Consumer Price Index), fares would have to double,” he said, showing how airfares have not kept up with other prices such as college tuition, prescription drugs, housing, vehicles and gasoline.

Bown said the Quad-City airport’s success has been because of low fares and an expansion of its market across eastern Iowa. Average fares at the Quad-City airport are $286 — below the industry’s average of $295. If fares rise, he believes it will squeeze out some of the leisure travel.

Carter said the Quad-City airport has not seen the flight reductions to the extent that others are seeing, but he learned last week it will lose one of its five daily flights to Minneapolis on June 5 as a result of the 5 percent capacity reduction by Northwest Airlink.

At the same time, he said some of the airport’s carriers are reinstating flights. Among them, Northwest restored a second daily flight to Memphis on March 2, and American Eagle brought back a second daily flight to Dallas-Fort Worth on April 7. Delta also will add an additional flight to Atlanta — giving five daily flights on June 5. AirTran will expand its Orlando service with a fifth weekly nonstop flight beginning June 10 for the summer months.

“When I look at other airports I feel fortunate we are keeping the number of seats we are,’’ Carter said.

Jennifer DeWitt can be contacted at (563) 383-2318 or jdewitt@qctimes.com.