When Hype Replaces Hard
Data
Internet Air Service Surveys - A Great Way
To Waste Money
April 25, 2011. One of today's trendiest schemes being foisted on communities as a response to the loss of air service is the internet survey. Set it up cheap on some second-source survey company. Then concoct profound questions at the intellectual level of "how many colors in an Oreo cookie?" and open it to the public at large. Finally, compile the answers, provide a shaman-like report, and send the client a healthy invoice.
It's quite the gig. But as for reliable air service insight, it's the cyber-version of smoke and mirrors.
The underlying idea - which to most folks makes sense on the surface - is to get good citizens to go on-line and register their desires - where they want to fly, how many trips they take per year, or whether they'd like this service or that, or how they feel about existing service.
Question Four: Would You Like To See Nonstop Flights To Seattle?
Now, just what would most folks answer? "Hell, no" isn't one of the options. Neither is, "Yeahbutt, I don't ever go there, but, by golly, I'll support it!"
Supposedly, it's great information to give to current or prospective airlines. "It'll show the airlines that the community is 100% behind adding or replacing service between our airport and (fill in the blank)!" Or so the story goes.
The reality is that as an indicator of anything, let alone air service demand, random internet surveys are barely anecdotal. A Ouija Board would be more accurate. And probably are given more credibility by airline planners.
Liking It - Not The Same As Using It. Think about it. Internet surveys are, again, random. Anybody - anywhere - can log on and register how much they'd really, really, really like to see those "direct flights" (a.k.a. nonstops) to San Jose, or Buffalo, or for that matter Beijing. That doesn't mean they've used it, will use it, or if there is an earthly chance it could be profitable. Furthermore, respondents are not a clearly defined sample of the population.
Let's look at an actual example from last year.
Wow! The Community Really Wants The Service. Alaska/Horizon, in the midst of a re-fleeting, found it necessary to drop flights routed between Boise and Idaho Falls. The Idaho Falls community - understandably - was concerned regarding how this would affect the local economy.
The options open to the community were clear, but, somehow, they got talked into doing, yes, an internet survey.
The results were impressive. According to
media reports, 850 folks responded. And over 80% indicated
interest in having nonstop air service reinstated to Boise. One
part of the survey was reported to indicate that 35 local Idaho
Falls companies spend $50,000 moving people between the two
points.
Well, that's game, set, match. As far as prima face evidence is concerned, there's lots of demand in the IDA-BOI market. Get the local congressman on the bandwagon. All that needs to be done is find an airline to take advantage of this huge market opportunity.
There's Survey Data. And Then There's Economic Reality. For IDA, losing BOI nonstops may be a loss - but the facts - which are in plain sight - indicate right out of the box that there's nowhere near enough demand to support a network carrier with any frequency. Without the flow traffic, Horizon never would have offered service between the two points in the first place. That immediately identified all of the options open to IDA.
Exactly what the community could do to get flights in the market was in plain sight before the first consumers logged on and indicated their shocking preference of nonstops to connecting flights to BOI.
Here's IDA's top ten O&D for the year ending 3Q 2010. Boise is 3.5% of the airport's traffic, and 9,700 passengers are certainly significant. But the real conclusion is that with that level of traffic, it's less than lottery odds that another network carrier could be recruited to operate between the two cities.
The actual numbers don't support the enthusiastic survey findings. Note that there were 13.3 passengers per day, each way (PDEW). Then notice that the local trip origination rate at IDA is 40.1%, meaning that of the 13.3 PDEW, only 5.7 of these are generated by Idaho Falls. That, regardless of the survey "results," is not a huge locally-generated market demand - only about 3,900 annual IDA travelers.
Point: the loss of the nonstops to BOI is one that a) affected a very small part of the IDA consumer base, and b) is one that based on its small passenger volumes will be very difficult to replace except with a network carrier that has the flow traffic to subsidize the local O&D. Unfortunately, there simply are no network carriers other than Alaska/Horizon that have a route system in the region that would benefit by tapping into a local O&D market of less than 27 passengers a day.
Unfortunately, Even With Flow Traffic, The Segment Was A Dog. Then, we can get some idea of how Horizon did on the IDA-BOI segment. It was hardly a barn-burner, operated by a 76-seat Q-400:
The IDA-BOI segment load factors were 52% for the same calendar period. And of the 43,000 passengers on-board, IDA-BOI only accounted for 22.5%. The rest were connect or through passengers. What's clear is that IDA-BOI isn't any great market opportunity. Nor is it a market that local IDA consumers were flocking to,
The hard conclusions here are that sometimes the public perception of "demand" are more illusory than real. While it's great to attempt to keep all the service possible, sometimes decisions need to be made regarding the cost of such efforts v the local economic impact. In the case of Idaho Falls, it's an open question how much money and resources should be applied to restore a market of just 13 passengers per day each way - especially when less than half are actually generated in Idaho Falls.
But, again, somehow, they got convinced to do an internet survey,
The New Reality: Some Service Will Never Come Back. Boyd Group International does not squander its clients' time on internet "air service demand" surveys. They are a waste of money because they can lead the air service planning process way off the reservation. As a tool to recruit air service, a goat sacrifice on the runway would be more reliable. And probably a lot more fun.
In the case of IDA-BOI, the simple numbers state the case: first, the actual market demand is not as robust as a non-scientific, feel-good survey would indicate. Second - and more importantly - the real data show that there are simply no network carriers that have the aircraft that can support a nonstop market as thin as IDA-BOI. Bingo! That quickly isolates the options open in regard to getting nonstop service back. And although they are limited, they're also obvious.
The Options Didn't Need A Survey To Discover. A third-tier air taxi, or perhaps SeaPort, might be options. SeaPort has attempted such service in the Northwest, with mixed success. The IDA-BOI market (what little there is of it) may not demonstrate the same demand for a single-engine PC-12 as it was for Horizon's Q-400s. But these options didn't require doing jive-time internet surveys - they were obvious from the gitgo.
Impossible To Run From Reality. It is unfortunate that air service consulting has in some cases degenerated into weird schemes and voodoo aimed more at magic than at hard reality. At Boyd Group International, our approach is to match communities with the economic realities of the airline industry. That means recognizing that the 1980s can't come back, and that the next five years will require that many communities re-think air service entirely and accept some tough decisions.
Like it or not, and regardless of what consumers indicate on wish-list internet surveys, the fact is that the range of viable airliner applications are shrinking. It has been shrinking for the last 25 years - the market structure and economics that once supported hundreds of Metro-IIIs, B-99s, J-31s, B-1900s, SF-340s, C-212s, EMB-120s, etc., are long gone. It's continuing today as 37, 44, and 50-seat jets are getting parked.
Like it or not, in many cases, the concept
of "local" air service will be eclipsed by "regional air service
access." Like it or not, intra-regional air service - like
IDA-BOI - is something that's more a
nd
more difficult because there simply are no longer aircraft that
have the economics that can match the often low demand.
It's not popular in some circles to state these facts, but those are circles within which we don't care to work. Ignoring reality leads nowhere positive.
We'd also point out that having accurate traffic and revenue data is an investment that can keep air service planning grounded in reality. Our Aviation DataMiner clients have that advantage. More information on DataMiner - which is tailored to each client - can be found by clicking here.
Join Us... At the 16th Annual International Aviation Forecast Summit, August 28 - 30, we're going to cover a lot things that may not be really popular now, but will be essential for dealing with the future. The Global Airline Industry - Challenges & Opportunities For US Airports is an intensive optional session held on Sunday afternoon, August 28 for Summit attendees.
Bring your armor and be ready to see things that nobody wants to discuss. There will be a lot of realities illuminated that may not track with the current thinking in air service planning. We're actually going to project out what air service patterns will look like in 5 years and 10 years, based on fleet and airline strategy changes.
We're in the business of assisting aviation clients address the future. Whether it's pleasant or not. For information on the Summit, click here.
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Getting Beyond The Media & Wall Street
Hype
New Research Report:
Southwest/AirTran - Independent Metrics Overview
Evergreen, Colorado. October 4, 2010. Boyd Group International today has published the first independent metrics review of the Southwest/AirTran merger.
The Report compares each carrier by system metrics, as well as in regard to how Southwest will replace AirTran as a major player at Atlanta Jackson-Hartsfield.
The data indicate that Southwest will easily replace AirTran, but will need to adjust to a schedule pattern closer to a banked structure than at any of its other large connect airports.
Contrary to much media speculation, the "Southwest Effect" of lowering fares and stimulating traffic has already been accomplished by AirTran. On the other hand, the analysis could find no substantive data to support the throw-away comments from some circles that the merger itself will result in an increase in ATL fare levels.
The Report can be viewed and downloaded
by clicking
here.
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It's Strictly Business. Not Another Merger
Domino
Update: Southwest - AirTran Media Pointers
Evergreen, Colorado. September 27, 2010. Boyd Group International has issued the following pointers to its clients who may be taking media calls today regarding the Southwest/AirTran transaction. The main outcome will be more flying, not less.
Myths & Realities
That’s flat-out wrong. Today, Southwest is
more and more a hubbing carrier. It does have hubs. In fact
close to 40% of its passengers at Denver are connecting to or
from another WN flight. At Denver, some markets are over 50%
connecting passengers. The AirTran Atlanta operation is a cake
walk for Southwest.
“Southwest only operates one type of
aircraft… they’ll have to dump the 117-seat B-717s…”
Another me-too canard repeated by people who
aren’t airline experts, but play them on Wall Street. Southwest
today operates two different aircraft – the 737-300/500 and the
737-700. The wings are different, the systems are different, the
parts and maintenance requirements are different. Furthermore,
they had a third type – the 737-200 – until 2005. And for
cocktail party repartee – they have also operated 727s in the
past, too.
Finally, the 717 is a key asset for this
merger and for Southwest.
“It’s more of the trend toward airline
consolidation…”
Not really. This is not a fallout from the
DL/NW or UA/CO deals. Southwest still faces many of the
challenges in the marketplace with or without this merger. The
drivers are very different and specific to Southwest – they get
ATL and they get a fleet of 717s, and they get a very efficient
and profitable airline.
“AirTran flies to a lot of markets that are
much smaller than those typically operated by Southwest. Cuts
are inevitable.”
“This will spawn more mergers! Now US
Airways and Delta will need to combine... or AA and US, or
whoever....”
Run for cover from these folks, y'all. They don't know squat. The fact is that it's likely the folks at Delta headquarters are smiling broadly over this deal. Bottom line: replacing AirTran with Southwest is a net positive for Delta - which might even see some increases in ATL RASM.
First, what is missed is that Southwest has higher costs than AirTran. That's not bad news. Second, Southwest probably won't offer a business cabin, as does AirTran - which makes WN less competitive for the, yes, business traveler. Third, Southwest most likely won't stray from it's bingo-boarding, no-advanced-seat-selection program.
Finally, watch
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Airports Need To Review For
Compliance
FAA Clarifies Air Service Incentive Guidelines
Evergreen, Colorado. September 22, 2010. The FAA has issued an Air Carrier Incentive Program Guidebook, clearly outlining acceptable applications of FAA-involved dollars in regard to attracting additional air service.
The document is exceptionally clear, and the guidelines are unambiguous. Some of the key points, which may well be cause for some shifts in programs at some airports, include:
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Airport revenues must be used only for clearly-defined improvements in air service - they cannot be used for any general economic development.
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Tourism or destination marketing that promotes off-airport enterprises or venues is NOT a permitted use of funds.
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"New service" is an acceptable use, defined strictly as a) nonstop service where none is currently offered, b) service with a new entrant carrier (note: this likely means airline brand, not certificated operator), and c) increased frequency to a specific destination. (Note: increased frequency, not larger aircraft.)
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Airport-generated revenue incentives are NOT valid to incentivize repeated seasonal service, and they are NOT valid for programs aimed at switching equipment or specifically increasing capacity on existing incumbent flights.
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Airport funds cannot be used to incentivize cabin upgrades on existing service. This means airports that want a carrier to upgrade from one-cabin 50-seaters to F/Y 66-seaters CANNOT use FAA-involved airport funds to subsidize or otherwise offset the risk or cost to the carrier.
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Incentives using these funds CANNOT be used when the incentive program limits the target service to a specific type or size of aircraft. That means no programs that are aircraft-focused, such as "mainline equipment" or "100-seat and above" airliners.
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Any incentives offered to enhance new service cannot be structured as to be paid for via increasing fees to incumbent carriers. If landing fees are waived pro tem for a new entrant, the airport cannot raise rates on incumbents to make up the difference.
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Outside organizations are free to incentivize, subsidize, buy, or entirely support new air service. But they must be totally separate from the airport and not be under any influence or control by the airport. This means if the Chamber of Commerce develops an air service incentive program, and the airport is a member, the money comes under the FAA guidelines - it is not without "influence" from the airport.
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Any programs that involve adjustment of fares are prohibited. These include any fare-offsets to passengers or to the airline itself.
The Guidelines can be downloaded from the
FAA website. To discuss how these may affect an airport's
current or planned air service development program, give Brian
Siler a call at (303) 674-2000.
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Staff Changes Strengthen Boyd Group International Market Intelligence Capabilities
Evergreen, Colorado. September 6, 2010. Boyd Group International has realigned its professional staff to enhance its growing aviation research and forecasting practice.
Brian Siler has been promoted to the
position of Director - Aviation Research.
In
this role, Mr. Siler will be responsible for liaison with
airport and financial industry clients, and in the direction of
enhancements to Aviation DataMiner, the industry's most advanced
market intelligence system.
"Since joining Boyd Group International, Brian has added depth to the firm's analytical firepower, and has gained enormous respect from our clients," said Michael Boyd, president of the Colorado-based company. His first priority after joining the firm was to implement fundamental upgrades in the company's air service development and airport consulting practices to meet the new and very different demands of the airline industry.
Part of A Year-Long Program. "In the past twelve months, Mr. Siler has assisted in taking these areas of the firm to levels far more advanced than any other consulting firm," Boyd noted. "We've always been ahead of the pack. But while some companies are still relying on home-based associates, literally using ruled pads, a pencil, old airline schedule guides, and sloppy second-sourced data to help clients second-guess the future, Boyd Group International now has the most advanced domestic and international aviation forecast and data systems in the industry. Brian is an important part of the advantage we offer clients in all areas of aviation."
Brian has extensive experience in airline planning and operations, including extensive market and revenue planning at AirTran. Prior to that, he was in the operations department at SkyBus. At Boyd Group International, he has taken a leadership role in dealing with new-generation approaches to aviation forecasting and future market analysis.
The promotion follows the recent addition of Jason Rew as Manager - Data Systems. Mr. Rew has assumed responsibility for enhancing the customer experience with Aviation DataMiner, and developing new data streams that address the new, globalized airline environment.
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Contact: Michael Boyd (303) 674-2000
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International Service Potential Analyzed
For Colorado's Vail Valley
Evergreen, Colorado. May 3, 2010. The expertise of Boyd Group International was brought to bear in assisting the Vail Valley Jet Center in analyzing the potential for nonstop international service to Eagle County Airport, the gateway to the growing I-70 Colorado Mountain Corridor.
"This is an evolving global economy," said Tim Sieber, VP/General Manager of Boyd Group International. "Demographics in the US are also evolving, and the I-70 Mountain Corridor is part of that dynamic. From a rural area focused mainly on seasonal ski and recreational traffic, it has grown into a diverse metro-region with a vibrant business and population base."
Boyd Group International reviewed current and forecast traffic demand for Latin American and EU service, including routing options in regard to customs and FIS alternatives.
Clients including airports, financial institutions, airlines and suppliers turn to Boyd Group International for incisive, futurist forecasting and research. The firm has the most comprehensive aviation data and research capabilities in the industry, which provides clients with unrivaled planning firepower. For information on Boyd Group International and its capabilities, click here.
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Boyd Group International Analysis:
Iceland Volcano Cuts Domestic Enplanements
Evergreen,
Colorado. April 19, 2010. The effects of the
trans-Atlantic flight cancellations due to volcano eruptions in
Iceland, will inflict approximately $80 million in lost revenue
to major US airlines, including measurable losses in secondary domestic
passenger traffic that is generated directly by international
service.
This is from an analysis accomplished by Boyd Group International, a leading aviation consulting and research firm.
“The financial hit for US airlines goes well beyond the passengers lost on the trans-Atlantic,” noted Tim Sieber, VP of Boyd Group International. “It extends into the domestic market as well, because international passengers also generate significant domestic enplanements.”
He pointed out that on average, each international passenger journey generates approximately 1.4 additional domestic enplanements.
“Passengers to and from abroad don’t all remain in US international gateway cities,” Sieber explained. “That passenger flying from Munich to Atlanta also makes domestic trips within the US, immediately or even days after he enters the US. With these volcano-related international cancellations, our data indicate a loss of more than 90,000 enplanements at airports across America in just the first four days subsequent to start of the Iceland eruptions." At current connection-to-passenger ratios, these enplanements represent approximately 73,000 actual domestic one-way passenger trips.
In terms of actual passengers, US carriers will see a loss of well over 200,000 passengers during the first four days of the event alone. This is a very small percentage of the over 540 million passenger trips carried by US carriers annually. "But it still represents a loss of revenue of nearly $80 million over a short period - and it's due to an event thousands of miles away in the North Atlantic," Sieber added.
These data again underscore that no communities are immune from events in the global economy. According to Boyd Group International's Airports:USA enplanement forecasts, over 27% of all US passenger enplanements will be directly or indirectly the result of international passenger demand by 2014.
The clear take-away is that an event in a small country such as Iceland can affect business in Ohio and Montana and Nebraska. These new global dynamics affecting all US air service - even down to rural communities - will be a focus of the Boyd Group International 15th Annual Aviation Forecast Summit, to be held in New Orleans, October 24-26, 2010. At the event, clear perspectives of the opportunities and vulnerabilities will be identified that airports, airlines, suppliers, and financial institutions will face in future. For details on this important event, click here.
Contact: Tim Sieber (303) 674-2000
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Boyd Group International
Joins With
ICAO To Provide International Data
Evergreen, Colorado. April 5, 2010. Expanding its position as the leader in 21st century aviation market intelligence, Boyd Group International is proud to announce that it has partnered with the International Civil Aviation Organization, ICAO, to provide a wide range of traffic and airline data for markets across the globe. This is a major enhancement to the firm's Aviation DataMiner programs.
"This is just the latest in our Global Market Perspectives program," noted Timothy Sieber, VP: & General Manager of Boyd Group International. "There are no more borders. Airports, airlines, financial institutions and suppliers need wider global market understanding, and this agreement with ICAO is a major step in assuring that our clients stay ahead of their competition."
It's A Global Economy - Nobody Is Immune. Having a wider understanding of global traffic trends is important to all areas of aviation, from international aviation suppliers to small airports in the US Midwest, Sieber said.
By 2015, nearly 30% of all US passenger enplanements will be directly or indirectly created by international service. "What happens in Wuhan, China can affect business investment in Bangor," Sieber noted. "With this new access to global market trends, Boyd Group International brings its clients the cutting-edge insights to understand and take advantage of the complex opportunities globalization represents."
Implemented starting in August, 2009, the Global Market Perspectives program focused on expanding the futurist forecast capabilities for which Boyd Group International has become renown. It entailed new staff, building advanced global aviation trend monitoring, and implementing new internal databases to monitor and forecast traffic and fleet trends in various regions.
These have resulted in Boyd Group International bringing incisive, futurist strategic planning assistance to its clients building presence both outside and inside the United States.
More information: Timothy Sieber - VP &
General Manager 303 674-2000.
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Boyd Group International
Assists
Greenbrier Resort In Gaining Delta Access
Evergreen, Colorado. March 22, 2010. Lewisburg, WV will have new international and domestic access this summer, thanks to the Greenbrier Resort and Delta Air Lines.
Starting in June, Delta will provide a daily flight from its hub at Atlanta, giving consumers across the globe easy access to Lewisburg and the world-class Greenbrier Resort. In addition, daily seasonal service will be provided from New York/LGA.
"We are honored to have worked with Delta in crafting a plan to facilitate consumers from all over the world in taking advantage of the spectacular facilities offered at the Greenbrier," stated Tim Sieber, VP - Boyd Group International.
Flights begin in June, and are initially offered on a seasonal basis.
This is another example of the professional Air Service Dynamics programs Boyd Group International offers its clients. "We are looking forward to more announcements of air service success in the coming weeks," Sieber added.
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Boyd Group International
Issues 3Q 2009 US Airport Traffic Review
Some Very Interesting Insights
Evergreen, Colorado. January 25, 2010. The nation's airport traffic declined by 2.4% in the third quarter of 2009 compared to the same period in 2008.
Any cursory review of industry load factors shows airlines addressed this decline effectively by reducing capacity. However this did not address the 13.3% decline in average fares.
The average one-way fare paid nationally was $176.22, inclusive of federal fees and taxes, which compares to $203.16 in the third quarter of 2008. Of the 150 airports covered in the Review, 145 experienced declines in average ticket prices.
Cincinnati/Northern Kentucky International: A Bright Spot. Delta Air Lines has been materially reducing hubbing activity at CVG, but this has masked a major spike local O&D traffic. In fact, local O&D at CVG grew substantially more - over 27% - than any other airport in the United States.
The total passengers through the airport declined, but local O&D passenger traffic jumped from just under 902,000 passengers to almost 1.15 million, year over year. Concurrently the average fare paid plummeted by more than one third, from $303.10 to $197.81.
"CVG is by no means a low-fare airport," noted Timothy Sieber, VP at Boyd Group International. "But it's no longer at or even near the top of the ticket-cost hit parade."
The Airport Traffic Review is issued by Boyd Group International, and is a product of the firm's Airports:USA DataMiner suite of aviation and market intelligence tools, the most advanced in the world.
To download a copy of the Airport Traffic Review, click here.
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Boyd Group International
Assists Fairbanks In Recruiting Frontier Denver Service
Evergreen, Colorado. December 17, 2009. Beginning in May, Fairbanks will welcome new service to the Frontier Airlines hub at Denver.
Boyd Group International is honored to have worked with Fairbanks in their efforts to add this additional nonstop access to the Lower 48. This included crafting the community's successful Small Community Air Service Grant that helped attract the service, preparing traffic and revenue forecasts for the new market, and liaison with the airline.
"All of us at Boyd Group International congratulate the community of Fairbanks and the Fairbanks International Airport on their hard work." stated Timothy Sieber, VP & General Manager. "We look forward to seeing more air service success at Fairbanks in 2010."
Out With The Old. In With The Future. This is just the latest in air service assistance provided to communities by the Colorado-based research and consulting firm. Relying on the most advanced data and forecasting analytics, Boyd Group International helps clients reframe their air service programs within the context of the airline strategies of the future.
Addressing the fundamental shifts in airline industry economics and structure, Boyd Group International has implemented new approaches to air service consulting. These efforts included development of new analytical traffic & revenue software, new forecast methodologies, and new futurist-focused staff.
Boyd Group International is holding a unique interactive air service planning workshop in Denver, January 19 -20. The Analytical Firepower Workshop will cover the new data and metrics airports will need to address in crafting air service enhancement programs in 2010. More information and registration can be found by clicking here.
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