Airport Leakage Improves a Whooping 18 Percent
Today I have some really good news to report: our airport has seen an 18 percent decline in the number of customers leaving the market to fly from other airports. The news comes from a leakage study we commissioned late last year. The results just came in. “Leakage” is the aviation term used to describe customers leaving the market to fly from other airports. It’s typically caused by two things: cheaper fares at other airports and more direct destinations.
The last time we did a leakage study was in 2005. The finding back then was that 30 percent of our potential customers were leaving the market to fly from other airports. A study in 1997 reached the same conclusion. We expected that the new study might show some slight improvement, but the 18 percent decline blew us away.
What does the finding tell us? It tells us that Springfield fares are still high, but not as high as they used to be. It also says that the vast majority of customers are deciding the difference in price isn’t worth the drive to airports in Kansas City, St. Louis or Tulsa.
The study cites two reasons for the improvements: the addition of Allegiant Air service in April 2005, and the addition of Delta service to Atlanta in December 2005.
As many of you know, Allegiant flies from here to Las Vegas, Orlando and Tampa. Round trip tickets are sometimes as low as $200. Before Allegiant’s arrival, it cost twice or three times as much to reach those cities. As for the impact of Atlanta service, that has less to do with cost and more to do with connections. The service makes it much easier to connect from Springfield to the East Coast and Europe.
12 direct destinations. While the study doesn’t mention it, I think that’s another reason for the leakage improvement. Nine of those destinations are big hub airports. This makes it possible to reach most places from Springfield with only one connecting flight.
What’s the practical, real world impact of this improvement? I think it’s a strong selling point for new or additional service. As the author of the leakage study put it, “Airlines generally prefer existing strong capture rates rather than the potential to recapture traffic with new service. In the age of $95 oil, most airlines don’t want to work any harder chasing passengers than they have to and most are also risk adverse." Bottom line: when we’re talking to airlines we’ll use this study to show them the strength of the market. If you give us the seats, we’ll fill them.
Kent
Jessica has a follow-up question:
"With the state of the airline industry right now, do you see the results of this study strong enough to get an airline to consider adding service or a new destination for us? Or will this help when airlines are in more of an expansion mode?"
Jessica is alluding to the current atmosphere of uncertainty in the airline industry. Almost all of them reported a 4th Quarter loss due to fuel prices. Couple that with the state of the economy and you've got a bunch of jittery airlines. Additionally, several airlines are talking about consolidation—most notably Northwest and Delta. The industry grapevine says route planners at those two airlines are in a state of paralysis waiting for consolidation to happen. Industry observers predict the airlines will cut service across the board in 2008...
So, here's what I think the study will do for us: in the short term it will help us make the case for maintaining the service we have—it may help us avoid the chopping block. In the long term, when the aviation outlook is rosier, the study should help us attract new and additional service.
Make sense?
Kent
Another follow-up from Jessica:
"...if an airline commits to add flights out of SGF and wants to wait until a certain day to announce it, would you be allowed to do some sort of countdown on the blog to gather excitement throughout the community. I just thought it would be a good idea, but I don't know if it is something you can do, and I know I am hopeful in assuming that we will have added service or new service."
Yes, that's something we could do...assuming it was OK with the airline.
6 Comments
Reader Comments (6)
With the state of the airline industry right now,do you see the results of this study strong enough to get an airline to consider adding service or a new destination for us. or will this help when airlines are in more of an expansion mode
got a different question and thank you for the great response. My question is if an airline committs to add flights out of SGf and wants to wait until a certain day to announce it, would you be allowed to do some sort of countdown on the blog to gather excitement throughout the community. I just thought it would be a good idea, but i don't know if it is something you can do, and I know i am hopeful in assuming that we will have added service or new service
12% leakage sounds really good. But, just a retired truck driver being curious...how did you guys figure out that is was 12%. Did you survey residents? I also noticed that the report said that 13% of the 8 million people that visit Branson fly, but only 10% of those fly through Springfield? That number seems low...how did you figure that. Do you think that if the airport raises that number...say to 50% will you be able bring more low fare airlines and lower existing prices for us locals?
I think that as long as you all believe that the leakage is small, you will keep fooling yourself. Even crazier to spend money on running ads to tell us who does fly out of SGF. We still are an expensive market to fly out of. I fly almost every week and I always check the next closest airports Flights out of TUL, MCI or STL are almost always cheaper by $200 per person. At least Allegiant offers some cheaper fares. Too bad their schedule is not the best.
Don't spend your money on ads telling us how great it is to fly out of SGF. Get us lower fares.
I would agree with Mike W. GET LOWER FARES OUT OF SPRINGFIELD! I know everyone in my office always checks MCI, TUL,XNA and STL. We rarely fly out of Springfield because the fares are always cheaper out of these cities. Even Joplin is typically cheaper than Springfield.
I had a question about ExpressJet. I see they fly out of Tulsa and yes i know tulsa has totally different demographics then us, but my question is, this is a different airlines, not low cost, and not a legacy carrier is this an airline SGf would have a shot at or would it be harder then one of the other airlines. i know your answers are limited due to any pending contracts ( i hope) but if you could please answer as best as possible that would be great. thanks so much .