27
Sep
2005
In 1997, low-cost carrier AirTran Airways entered the Quad Cities market. In the years since, traffic has skyrocketed at the Quad City International Airport, while fares have dropped. Roughly 250,000 people got on planes at the airport in 1995, while 450,000 are expected to board this year.
Bruce Carter, the airport's director of aviation, sees a cause-and-effect relationship between fares and boardings. Since AirTran arrived, "all other airlines in this market lowered their fares," Carter said. AirTran's presence in the Quad Cities is estimated to save the community $14.5 million annually in lower air fares.
The combination of lower fares and increased service have been good for business. A decade ago, surveys of businesses consistently rated air travel as a problem area. "Air service was always in the top five of business concerns," said Thom Hart, president of the Quad City Develpment Group. Now, he said, it's regularly in the bottom half of roughly 40 issues.
"The airport's been one of the [Quad Cities'] largest economic-development success stories," said Scott Tunnicliff, president of the Bettendorf Chamber of Commerce. And AirTran is "responsible in large part for airfare costs being more affordable," he said.
So when Delta announced last month that it was ceasing service to Cincinnati and replacing it with three daily flights to Atlanta - AirTran's hub - Carter saw the move as a threat.
"Can this region support both carriers [going to the same destination]?" Carter asked. "There are just so many bodies in this market."
"It clearly looks like a predatory action to me," Hart said.
Further complicating the issue is the fact that Delta filed for bankruptcy protection on September 15. Why would an airline in financial trouble choose to compete flight-for-flight with a low-cost carrier? Leaders at the airport and in the Quad Cities business community worry that the move was an attempt by Delta to drive AirTrain out of the market - and therefore allow Delta and other carriers to jack up their prices.
Business leaders and airport representatives have met twice since the Delta announcement to discuss strategy - the confabs were attended by approximately 75 and 40 commerce representatives, respectively, Carter said - and a third meeting was expected within the next week. In addition, some business leaders met with AirTran officials in Atlanta two weeks ago.
The challenge for the Quad City International Airport is generating support for the low-cost airline even though it cannot subsidize its operations. "You have to be on an equal basis for all carriers," Carter said. "Airports can't subsidize an airline." The airport can offer some incentives such as advertising and reduced fees, but that will only go so far. And that's where area businesses come in.
The results of those business meetings will probably be implemented quietly, as companies large and small implement travel policies (or simply habits) designed to ensure that AirTran doesn't lose a significant portion of its airfare purchases. In a bottom-line industry such as air travel, that's what matters most.
The Big Picture
Residents probably take the Quad City International Airport for granted. It's been here for decades, and it will likely always be here. And because of the nature of air travel, travelers can go virtually anywhere in the world through the airport, with or without service to Cincinnati, and with or without AirTran.
But Carter views it differently. The eight-member board of the Metropolitan Airport Authority of Rock Island County, he said, has "a vision of economic growth not just for the airport but for the region," he said. "They feel we're the mechanism for growth."
In that way, "we are very aggressive," Carter said, whether it's trying to increase air service to new destinations such as Phoenix or New York, pursuing federal money for infrastructure improvements, or creating jobs in the area.
For example, within the next two months officials will finish a business plan to develop a domestic and international air-cargo industry at the Quad City International Airport. Carter said the airport has the runway capacity to send planes from Moline to Asia or Europe, and he wants to see the Quad Cities become an air-cargo hub, possibly getting shipping businesses to move from Chicago O'Hare to this area.
That, in turn, would help the airport develop the industrial park on its south side - which has to this point been difficult because the airport authority doesn't have the power to create a Tax Increment Finance district or offer businesses other incentives.
In terms of nonstop- and direct-service improvements, Carter said the airport is targeting Phoenix, Las Vegas, and east-coast destinations such as New York City and Washington, D.C.
Convenient flights (with few or no stops) and inexpensive airfare to and from the Quad Cities mean more local businesses have easy access to customers and other businesses worldwide, while businesses from other parts of the world can reach the Quad Cities and its resources more readily. Travelers from the Quad Cities, for example, can fly to London or Tokyo with just one stop. And direct or nonstop connections to major metropolitan areas eliminate travel as an impediment to doing business with or from the Quad Cities.
Robert J. Driessnack, vice president and controller for Muscatine's HNI Corporation manufacturing company, said the Quad City International Airport "gives us access to be able to reach all our different customers and locations." (He left his phone message while traveling in Hong Kong.) Furthermore, he said, AirTran's presence has saved the company money: "We believe our fares have been reduced."
"You've got to have an airport to get your business people in and out" at a reasonable price, Carter said.
And that's why AirTran is so critical, Carter said. As the only low-cost carrier serving the Quad Cities, it provides competition that drives down all other airlines' fares. Business leaders fear that Delta's service changes threaten AirTran's livelihood, and hence its presence at the Quad City International Airport.
"The business community realizes that if AirTran ever left the market, their business would see their travel budgets either double or triple," Carter said. For large Quad Cities-area companies such as HNI, Deere, and Alcoa, that can mean hundreds of thousands of dollars per year.
A Threat or Boon?
Colorado-based airline consultant Mike Boyd, who sometimes works with the Quad City International Airport, cast the shifting airline landscape as a win-win-win situation: good for Delta, good for travelers, and good for businesses.
And for AirTran? In an interview last week, Boyd said Delta's changes might not be good for AirTran, but that the carrier can survive Delta's infringement into Atlanta. "There's room for both," he said. "I don't think it will blow AirTran out of the market."
For Delta and for passengers, Boyd said, "service to Atlanta is much more valuable than to Cincinnati." That's because Atlanta is now the number-one airline hub in the world, and thus gives fliers more destination opportunities on Delta and affiliated airlines. It also gives the airline more revenue potential.
That jibes with comments from Delta spokesperson Benet Wilson. The airline reduced its overall flights to and from Cincinnati by 26 percent, and service between Moline and Atlanta was added because "it was a market that could operate profitably out of the Atlanta hub," Wilson said. "We're looking at customer demand."
As for going head-to-head with AirTran on the Quad Cities-Atlanta route, Wilson said that wasn't a factor in Delta's decision. "We don't look at that," she said.
Boyd added that although Delta and other "legacy" carriers are in bankruptcy, their long-term financial prospects are strong. Northwest Airlines and Delta filed for bankruptcy the same day, he said, not because their business models aren't sound but because of soaring fuel costs. (Boyd didn't mention it, but changes that tighten bankruptcy laws next month were certainly also factors in at least the timing of the Northwest and Delta filings.)
He conceded that the six legacy carriers - four of which are in bankruptcy - have higher costs than discount carriers such as AirTran. That includes high workforce and pension costs because they've been around longer, but the major difference is that their route systems are different, he said. The legacy airlines, Boyd said, have a "Shreveport-Shanghai advantage"; in other words, they have highly profitable business and international destinations that upstart carriers don't. "Low-cost carriers are cherry-pickers, mostly," he said. While those routes have higher costs, they have a much larger revenue potential than destinations offered by airlines such as AirTran.
He added that the legacy airlines have gotten significant concessions from their employees, making their long-term prospects stronger. "Unions have been much more the solution than the problem," Boyd said.
Wilson said Delta has not made any decision about service in Moline as it relates to the company's bankruptcy. She wouldn't answer questions about whether there's the possibility Delta could eliminate its services in Moline altogether: "We're looking to right-size our entire network," she said.
Boyd's sunny forecast is predicated on AirTran's continued presence at the Quad City International Aiport. "AirTran is a linchpin to keeping fares down," he said, and it's critical that the community support the airline with its patronage.
And as long as the AirTran continues to do well in the Quad Cities, Delta's move helps everybody, Boyd said: "It's about as good as it can get."
AirTran Versus Delta
That assessment might prove to be true, but that didn't stop airport officials and business leaders from worrying.
Hart recalled paying between $800 and $1,200 for round-trip tickets to Washington, D.C., seven or eight years ago, fares that are now between $250 and $450.
Tunnicliff said he remembers that round-trip airfare to Chicago cost $500 to $600 eight years ago, and that AirTran came to the market at a time when other carriers weren't seriously looking at the Quad City International Airport as a regional entity.
And he believes that the local business community needs to support AirTran, because he doesn't think the market can support two carriers to Atlanta unless the Quad City International Airport draws people from an even larger geographic area.
Carter stressed that AirTran is not leaving the Quad City International Airport, although he wouldn't say that the issue hadn't been raised by AirTran. "They've always been concerned about it," he said, referring to Delta service between Atlanta and Moline. AirTran's director of corporate communications did not return two phone messages seeking comment.
Certainly, some of the alarm at Delta's announcement had to do with the lack of warning. "We at the airport weren't approached by Delta," Carter said. "We didn't see any signal."
But although AirTrain is clearly the entity with which the Quad Cities is casting its lot, it has to play a political game - supporting AirTran without alienating Delta.
The airport needs to be welcoming to all air carriers, and the business community needs to let "Delta know that they add value," Tunnicliff said.
Hart, Carter, and Tunnicliff said businesses have discussed a wide variety of possibilities, from travel banks to advanced purchases to corporate policies that recognize the long-term, big-picture effect that AirTran has had driving down fares at the Quad City International Airport.
Yet at this point, it's unclear what will emerge from the discussions. Rather than a high-profile community action, though, efforts will likely be under-the-radar on a company-by-company basis, whether a change in corporate travel policy or just spending money with AirTran.
HNI, for example, has designated AirTran as a preferred carrier, meaning that it will choose AirTran flights over those of other airlines assuming its fares are "reasonably close" to those of competitors, Driessnack said.
"Our passengers will continue to book AirTran and be loyal to AirTran," Carter said. Since Delta's announcement, Carter said, AirTran's "advanced bookings have gone very, very well."
Still, there's a danger people might look at short-term savings - that a particular flight to Atlanta on Delta is $10 cheaper than a similar flight on AirTran, for example. As Carter acknowledged, "Everything's price-driven."
But AirTran does have some advantages in that arena, Carter noted. Travel agents, for example, still get a 5 commission with AirTran that many other airlines don't offer. That means they're more likely to steer customers toward AirTran.
And the early returns are encouraging. AirTran is expanding service at the Quad City International Airport, adding three weekly direct flights to Orlando starting November 9. "We've been loyal to them," Carter said. "I think they'll be loyal to us."
Bruce Carter, the airport's director of aviation, sees a cause-and-effect relationship between fares and boardings. Since AirTran arrived, "all other airlines in this market lowered their fares," Carter said. AirTran's presence in the Quad Cities is estimated to save the community $14.5 million annually in lower air fares.
The combination of lower fares and increased service have been good for business. A decade ago, surveys of businesses consistently rated air travel as a problem area. "Air service was always in the top five of business concerns," said Thom Hart, president of the Quad City Develpment Group. Now, he said, it's regularly in the bottom half of roughly 40 issues.
"The airport's been one of the [Quad Cities'] largest economic-development success stories," said Scott Tunnicliff, president of the Bettendorf Chamber of Commerce. And AirTran is "responsible in large part for airfare costs being more affordable," he said.
So when Delta announced last month that it was ceasing service to Cincinnati and replacing it with three daily flights to Atlanta - AirTran's hub - Carter saw the move as a threat.
"Can this region support both carriers [going to the same destination]?" Carter asked. "There are just so many bodies in this market."
"It clearly looks like a predatory action to me," Hart said.
Further complicating the issue is the fact that Delta filed for bankruptcy protection on September 15. Why would an airline in financial trouble choose to compete flight-for-flight with a low-cost carrier? Leaders at the airport and in the Quad Cities business community worry that the move was an attempt by Delta to drive AirTrain out of the market - and therefore allow Delta and other carriers to jack up their prices.
Business leaders and airport representatives have met twice since the Delta announcement to discuss strategy - the confabs were attended by approximately 75 and 40 commerce representatives, respectively, Carter said - and a third meeting was expected within the next week. In addition, some business leaders met with AirTran officials in Atlanta two weeks ago.
The challenge for the Quad City International Airport is generating support for the low-cost airline even though it cannot subsidize its operations. "You have to be on an equal basis for all carriers," Carter said. "Airports can't subsidize an airline." The airport can offer some incentives such as advertising and reduced fees, but that will only go so far. And that's where area businesses come in.
The results of those business meetings will probably be implemented quietly, as companies large and small implement travel policies (or simply habits) designed to ensure that AirTran doesn't lose a significant portion of its airfare purchases. In a bottom-line industry such as air travel, that's what matters most.
The Big Picture
Residents probably take the Quad City International Airport for granted. It's been here for decades, and it will likely always be here. And because of the nature of air travel, travelers can go virtually anywhere in the world through the airport, with or without service to Cincinnati, and with or without AirTran.
But Carter views it differently. The eight-member board of the Metropolitan Airport Authority of Rock Island County, he said, has "a vision of economic growth not just for the airport but for the region," he said. "They feel we're the mechanism for growth."
In that way, "we are very aggressive," Carter said, whether it's trying to increase air service to new destinations such as Phoenix or New York, pursuing federal money for infrastructure improvements, or creating jobs in the area.
For example, within the next two months officials will finish a business plan to develop a domestic and international air-cargo industry at the Quad City International Airport. Carter said the airport has the runway capacity to send planes from Moline to Asia or Europe, and he wants to see the Quad Cities become an air-cargo hub, possibly getting shipping businesses to move from Chicago O'Hare to this area.
That, in turn, would help the airport develop the industrial park on its south side - which has to this point been difficult because the airport authority doesn't have the power to create a Tax Increment Finance district or offer businesses other incentives.
In terms of nonstop- and direct-service improvements, Carter said the airport is targeting Phoenix, Las Vegas, and east-coast destinations such as New York City and Washington, D.C.
Convenient flights (with few or no stops) and inexpensive airfare to and from the Quad Cities mean more local businesses have easy access to customers and other businesses worldwide, while businesses from other parts of the world can reach the Quad Cities and its resources more readily. Travelers from the Quad Cities, for example, can fly to London or Tokyo with just one stop. And direct or nonstop connections to major metropolitan areas eliminate travel as an impediment to doing business with or from the Quad Cities.
Robert J. Driessnack, vice president and controller for Muscatine's HNI Corporation manufacturing company, said the Quad City International Airport "gives us access to be able to reach all our different customers and locations." (He left his phone message while traveling in Hong Kong.) Furthermore, he said, AirTran's presence has saved the company money: "We believe our fares have been reduced."
"You've got to have an airport to get your business people in and out" at a reasonable price, Carter said.
And that's why AirTran is so critical, Carter said. As the only low-cost carrier serving the Quad Cities, it provides competition that drives down all other airlines' fares. Business leaders fear that Delta's service changes threaten AirTran's livelihood, and hence its presence at the Quad City International Airport.
"The business community realizes that if AirTran ever left the market, their business would see their travel budgets either double or triple," Carter said. For large Quad Cities-area companies such as HNI, Deere, and Alcoa, that can mean hundreds of thousands of dollars per year.
A Threat or Boon?
Colorado-based airline consultant Mike Boyd, who sometimes works with the Quad City International Airport, cast the shifting airline landscape as a win-win-win situation: good for Delta, good for travelers, and good for businesses.
And for AirTran? In an interview last week, Boyd said Delta's changes might not be good for AirTran, but that the carrier can survive Delta's infringement into Atlanta. "There's room for both," he said. "I don't think it will blow AirTran out of the market."
For Delta and for passengers, Boyd said, "service to Atlanta is much more valuable than to Cincinnati." That's because Atlanta is now the number-one airline hub in the world, and thus gives fliers more destination opportunities on Delta and affiliated airlines. It also gives the airline more revenue potential.
That jibes with comments from Delta spokesperson Benet Wilson. The airline reduced its overall flights to and from Cincinnati by 26 percent, and service between Moline and Atlanta was added because "it was a market that could operate profitably out of the Atlanta hub," Wilson said. "We're looking at customer demand."
As for going head-to-head with AirTran on the Quad Cities-Atlanta route, Wilson said that wasn't a factor in Delta's decision. "We don't look at that," she said.
Boyd added that although Delta and other "legacy" carriers are in bankruptcy, their long-term financial prospects are strong. Northwest Airlines and Delta filed for bankruptcy the same day, he said, not because their business models aren't sound but because of soaring fuel costs. (Boyd didn't mention it, but changes that tighten bankruptcy laws next month were certainly also factors in at least the timing of the Northwest and Delta filings.)
He conceded that the six legacy carriers - four of which are in bankruptcy - have higher costs than discount carriers such as AirTran. That includes high workforce and pension costs because they've been around longer, but the major difference is that their route systems are different, he said. The legacy airlines, Boyd said, have a "Shreveport-Shanghai advantage"; in other words, they have highly profitable business and international destinations that upstart carriers don't. "Low-cost carriers are cherry-pickers, mostly," he said. While those routes have higher costs, they have a much larger revenue potential than destinations offered by airlines such as AirTran.
He added that the legacy airlines have gotten significant concessions from their employees, making their long-term prospects stronger. "Unions have been much more the solution than the problem," Boyd said.
Wilson said Delta has not made any decision about service in Moline as it relates to the company's bankruptcy. She wouldn't answer questions about whether there's the possibility Delta could eliminate its services in Moline altogether: "We're looking to right-size our entire network," she said.
Boyd's sunny forecast is predicated on AirTran's continued presence at the Quad City International Aiport. "AirTran is a linchpin to keeping fares down," he said, and it's critical that the community support the airline with its patronage.
And as long as the AirTran continues to do well in the Quad Cities, Delta's move helps everybody, Boyd said: "It's about as good as it can get."
AirTran Versus Delta
That assessment might prove to be true, but that didn't stop airport officials and business leaders from worrying.
Hart recalled paying between $800 and $1,200 for round-trip tickets to Washington, D.C., seven or eight years ago, fares that are now between $250 and $450.
Tunnicliff said he remembers that round-trip airfare to Chicago cost $500 to $600 eight years ago, and that AirTran came to the market at a time when other carriers weren't seriously looking at the Quad City International Airport as a regional entity.
And he believes that the local business community needs to support AirTran, because he doesn't think the market can support two carriers to Atlanta unless the Quad City International Airport draws people from an even larger geographic area.
Carter stressed that AirTran is not leaving the Quad City International Airport, although he wouldn't say that the issue hadn't been raised by AirTran. "They've always been concerned about it," he said, referring to Delta service between Atlanta and Moline. AirTran's director of corporate communications did not return two phone messages seeking comment.
Certainly, some of the alarm at Delta's announcement had to do with the lack of warning. "We at the airport weren't approached by Delta," Carter said. "We didn't see any signal."
But although AirTrain is clearly the entity with which the Quad Cities is casting its lot, it has to play a political game - supporting AirTran without alienating Delta.
The airport needs to be welcoming to all air carriers, and the business community needs to let "Delta know that they add value," Tunnicliff said.
Hart, Carter, and Tunnicliff said businesses have discussed a wide variety of possibilities, from travel banks to advanced purchases to corporate policies that recognize the long-term, big-picture effect that AirTran has had driving down fares at the Quad City International Airport.
Yet at this point, it's unclear what will emerge from the discussions. Rather than a high-profile community action, though, efforts will likely be under-the-radar on a company-by-company basis, whether a change in corporate travel policy or just spending money with AirTran.
HNI, for example, has designated AirTran as a preferred carrier, meaning that it will choose AirTran flights over those of other airlines assuming its fares are "reasonably close" to those of competitors, Driessnack said.
"Our passengers will continue to book AirTran and be loyal to AirTran," Carter said. Since Delta's announcement, Carter said, AirTran's "advanced bookings have gone very, very well."
Still, there's a danger people might look at short-term savings - that a particular flight to Atlanta on Delta is $10 cheaper than a similar flight on AirTran, for example. As Carter acknowledged, "Everything's price-driven."
But AirTran does have some advantages in that arena, Carter noted. Travel agents, for example, still get a 5 commission with AirTran that many other airlines don't offer. That means they're more likely to steer customers toward AirTran.
And the early returns are encouraging. AirTran is expanding service at the Quad City International Airport, adding three weekly direct flights to Orlando starting November 9. "We've been loyal to them," Carter said. "I think they'll be loyal to us."
