Community Air Service Optimization

Community Air Service Optimization Should be the Focus

Community Air Service Optimization
Good Air Service Performance Not New Flights should be Initial Focus

Community Air Service Optimization, not new air service acquisition is the wiser focus of airline service development organizations. Communities should start with air service optimization. Today’s airlines are risk averse. Incentives and revenue guarantees as well as other risk abatement measures are becoming required tools in the tool box of communities looking to capture more air service at their local airports. This likely comes as no surprise to many of you.

Despite the recent increase in incentive driven air service acquisition measures, commercial air service has seen a decline in operations since 2007 of about 14% (2007-2012 per the May 2013 MIT Small Community Air Service White Paper), with most communities showing a decrease in air service and this has occurred disproportionately to medium and smaller communities vs. large communities.

Community Air service optimization focuses on increasing passenger use and flight revenues on the communities current air service as a first step to successfully gaining new air service. Depending on passenger demand, air service growth may NOT always happen and/or be very limited. The benefits to focusing on community air service optimization can still be derived by the community through increased guest spending, airport services used and fees collected etc.

Community Air Service Optimization
More than Acquiring New Flight Service

Despite the above air service development challenges, many communities stay laser focused on just one air service development action: acquiring more air service. Communities often focus on adding new markets or capacity, and don’t often take action on other community air service optimization actions. Most importantly, these communities are unaware of how their current air service is performing.

What other air service development actions should communities be pursuing other than adding more air service?

Communities looking to acquire more air service, in many cases should first take actions to build-up their current air service profitability performance!

That’s right. Many communities while actively seeking additional air service have current air service not performing to a strong financial level for their partner airlines. These communities are not focused on effective community air service optimization. For example, their current incumbent air service is not highly profitable or are not profitable, let alone producing a strong profit.

In this type of situation it’s nearly impossible to successfully attract new air service or attract air service in a cost-effective way for the community. These communities are overreaching and they won’t see community air service optimization. Surprisingly, many communities have no idea and do not even look to see if they are performing well with their current air service…they have only one focus, which is to add more flights and seat capacity.

You may ask: Doesn’t acquiring more airline seats typically mean more flying guests and more airline passenger enplanements? This is a good thing, right? Yes…and NO!

Because of the value of each air passenger to a community, particularly inbound visiting flyers, due to the spending they do in the region, on this basic level more passengers means more economic activity for your community. This is a good thing.

On the other hand, if there are not enough extra passengers and more extra revenue on the flights to cover the increased air service costs, the flight service won’t be sustainable. Unsustainable airline service adds “an air service failure” to your communities air service record. Unfortunately the positive from the growth in passengers will only be short lived and won’t be sustained.

This increases the various airlines perceived risk of air service to your community going forward and either makes it difficult to obtain air service when you next ask or the cost of this air service will be more expensive to your community. This impedes community air service optimization efforts. You may have also wasted community air service support dollars in the process!

Why wait until an airports flight performance is strong before trying to acquire more air service?

A Formula 1 race car driver wouldn’t race a car that wasn’t properly tuned up as they could blow the engine in the race. They would first work on this vehicle so it was in a condition to where it could potentially win the race, before entering the race. Air service acquisition, and sustaining air service, in many ways, is a competition like Formula 1 racing. As noted at the top of this article, the current environment indicates little to no air service growth and any air service growth that does occur going forward, will likely only go to the most competitive and strongest air service markets.

Communities and Airports should first, build-up your current incumbent airline service (Community air service optimization) to where it is performing well financially for your partner airlines. An airline that looks at your airport and sees strong and profitable air service is more likely to consider new service to your airport than if you have a modest or worse air service performance history. If the airline still perceives risk but will consider more air service, it will take a lower community investment to abate this risk and acquire the service with strong incumbent flight service versus modestly performing flights.

A wise and prudent air service investment is an extra consideration for building up to strong flight performance before actively seeking to acquire more flights. If you invest community monies in more air service before you’re ready to successfully run these flights, you have just flushed community investment money down the drain when the air service is cancelled. This won’t lead to community air service optimization. Additionally, your community has become a more “Risky” community air market option in the eyes of the airline. This will make it harder to acquire more air service in the future.

If instead, a community invests in focused and professional flight support services that build-up their flights to a more profitable place, before then pursuing air service increases, you will have invested your money more wisely. You will have also shown community air service optimization is a focus AND given yourselves a better chance for long-term air service development and management success.

I understand the difficulty many airport managers and other community organizations have with holding off the “More, More, More Air Service Mantra” many communities and community leaders can put out. I further understand that focusing on flight performance improvement, is not as exciting as getting a new market or larger aircraft that brings your community more seat capacity. It is the most efficient and effective method, however, if you want to build-up sustainable air service long-term.

My recommendation is that you counter the push for this short-term flight increases by focusing on the long-term and bringing up the following question for your community leaders to consider:

1) “If you were running an airline, and you were highly risk averse, would you add service in an airport market where community air service optimization wasn’t happening? Where the air service wasn’t making money or was making only a little money and where there wasn’t an excess of passenger demand?”

Or

2) “Would you be more likely to add air service to another airport that came to you after having iffy air service performance a few years earlier, but took proactive steps to support and grow passenger enplanements and revenue on their flights. Where this strongly focused optimization effort moved the service to strong profitability?  A community that also appeared to have stimulated passenger demand that exceeds current capacity?”

Let’s say I’d be surprised if your community leader chose to add service for situation 1 above over situation 2. The view on adding service is different when you’re an airline looking at the added costs and risks to profitability than when you’re a community focusing on increasing air access.

Focusing first, on community flight airline service passenger and revenue build-up to airline profitability, brings benefits beyond air service acquisition!

While you’ll benefit from long-term community air service optimization and development success with a build-up approach, the fact is that it’s possible many communities won’t be able to raise their flight performance to a point where they can pursue more air service…why should they be proactive in building-up their incumbent air service?

There are two main reasons to make the effort to build-up current air service via a community air service optimization effort….

1) You could have at risk air service where if you didn’t improve performance you could lose some or all of this service and

2) You improve your airport’s financial performance and your communities economic benefits received with every incremental passenger and bit of flight revenue you capture.

I know of an airport and community that is anxiously looking for air service from a third airline, to a third hub market. They feel this service will lead to community air service optimization. Unfortunately they are doing a 57% load factor with their incumbent air flights. The national average now for flight occupancy is about 83% for larger aircraft and 76% for smaller regional jets. While their revenue per passenger is slightly stronger than average, their overall flight revenue performance is questionable on airline profitability due to being well below the 83% load factor average nationally, 76% for regional flight service. Therefore, one or both of their flight markets could be at risk. A focused air guest capture/leakage recapture effort could improve their load factor and likely their revenue performance, moving them away from having incumbent air service that is potentially at risk. In this situation, it likely wouldn’t create enough of a performance improvement, however, that would rise to the level where pursuing more air service acquisition would be successful.

This is the perfect example of where, while gaining new air service is not likely with an air guest capture/leakage recapture effort, this community could produce a community air service optimization situation and would see other benefits from this effort. These other benefits would include creating a more sustainable service with their incumbent flights long-term and where more passenger capture; both visitors and locals, would increase local economic activity and strengthen airport revenues.

Recommended Steps for a Community looking for successful Community Air Service Optimization and ultimately Air Service Acquisition:

1) Evaluate all of your current incumbent air service to estimate its profitability/strength
(Evaluate total service and by airline market–use a professional aviation firm)

2) If your air service is strong to very strong – Create a plan to meet community air service optimization and attract more air service. Continue to build-up your current air service even more via air guest capture/leakage recapture professional services  to out-compete other communities looking to add air service.

3) If your air service is weak or so-so – build-up your current air service through air guest capture/leakage recapture efforts. This can lead to community air service optimization.

4) If you’ve done step 3 and it’s then built-up to strong to very strong profitability performance air service – create a plan that helps you pursue and effectively support more air service.

5) If you’ve done step 3 and it’s improved your flight performance but not to the level to where you can likely successfully pursue more air service, keep working on your flight performance build-up. In the meantime appreciate the increased economic benefits you’ve helped drive to your airport and community through increased airport driven economic activity. You can meet community air service optimization without the ability to add more air service.

Summary:

Municipal funding available to support community services in general, is very limited. In today’s environment the idea of investing this money wisely is critical to best providing a return on investment for your community. When you focus on community air service optimization instead of moving forward in trying to capture more air service when your community does not have a strong incumbent air service performance, this is a wiser course of action. You are unlikely to be successful and in the long-term pursuing more air service when incumbent air service is performing weakly. Focusing on air service growth over community air service optimization tends to lower your communities return on air service investment AND will spend more of your communities limited resources than taking more prudent actions would.

Community Flights recommends a strategic approach as it regards air service development and management that has communities first consider the strength of their current air service. This will then direct the community & airport next actions to either:
1) Act to acquire more service or
2) Act to build-up current air service profitability performance before acting to acquire more air
service….the community air service optimization approach.

In essence, Community flights believes airports and communities should act in a way that best focuses their resources on actions driving the best air service financial return on investment. Community air service optimization will help maximize the effectiveness of the airport air service in delivering a strong return on their community investment.

For the communities where it would be wiser to build-up flight profitability performance, Community Flights offers air guest capture/leakage recapture professional services. We have a track record of success in improving flight performance AND in capturing more airline service (And in a time when most airports lost air service capacity). To ask about the Community Flights air guest capture/leakage recapture services email: [email protected] or call at 970-759-3559.

Assessing the profitability performance of your communities flights is also a critical action to knowing if you now have community air service optimization. Communities need to decide if taking air service acquisition efforts are wise or if they should focus on flight performance improvements (And with what air service markets). Community Flights offers services that will evaluate your air service by market. This air service profitability audit will help gauge where your flight markets fall in regards to profitability*. Emailing [email protected] or calling Scott at 970-759-3559 can give more details on this service.

*Note: Airlines have different ways of calculating air service cost and revenue allocation and often their method is proprietary, therefore this profitability audit is an educated estimate of the markets reviewed in relation to their profitability.

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