Losing Air Service…It Could Happen to Your Community!
THE HARD TRUTH:
The flights may have been full or close to it when the person flew, but overall the flights were often not full….
The flights were pretty full with high load factors in general but the flights didn’t have people paying enough for their tickets and didn’t have enough revenue on them. Airlines can’t go to the bank to pay their bills and hopefully make a profit with people in seats…if these people didn’t pay enough for their ticket.
If you want to get to a situation where you are not losing air service…these people in the seats also need to spend enough dollars with the airlines to cover costs and spend enough so there is an airline profit…butts in seats doesn’t always equate to enough dollars in the airlines bank account! If you need a dollar and you get 90 cents your losing money no matter how many passengers you carry and your increasing your chances of losing air service.
Very recently, Flagstaff Arizona announced that they were losing air service on Horizon Airlines to Los Angeles. Unfortunately a small community losing air service is not usually a big news item in these times of many airlines reducing capacity and service. What makes this incident of note, is that Horizon not a month or so before this discontinuance of service announcement, had advised Flagstaff that the flights were profitable!
You may ask how can a community be losing air service when the service is profitable?! The answer is actually simple and goes to THE BIG TRUTH of Airline Service Development…
“Profit alone doesn’t make community air service secure. Making a bigger profit than if the airline used the plane to fly to another community helps but also important is a profitable service that fits in with the airlines system and business plan!”
THE BIG TRUTH is exactly what Horizon shared with the Flagstaff community. Yes the flight was profitable…unfortunately for Flagstaff they were on the bottom of the profitability list of airports Horizon had service to at a time when Horizon was going to see a reduction in aircraft. Horizon had to cut service. Like a good business will…Horizon kept their most profitable service and cut service from their least profitable service communities when they have to make cuts…including cutting service from Flagstaff. It’s sad but profitability is not a protection against losing air service.
If the service is profitable why not get or keep enough planes to fly all profitable routes? Good Question but with logical answers. In an industry that has reduced capacity and thus flights to get to an overall pricing power position needed to drive their whole systems to profitability…you don’t just casually add or keep planes and flights. Those extra flights could put too many seats in the system driving down system airfares and jeopardizing more of an airlines overall system flight schedules ability to make a profit. Many more communities would experience losing air service if the airlines put in too much capacity.
“Airline Revenue Guarantees or other incentives can help especially if the community has a sustained ability to offer risk abatements.”
Flagstaff’s funds were for start-up support. If they had an ongoing program with consistent funding source availability…Horizon could have gone back to Flagstaff and allowed them the chance to move them up the profitability ladder via extending a revenue guarantee and Horizon could have cancelled another communities service instead of their losing air service.Better still, with professional air service management Flagstaff could have gotten an estimate of how their service performed against other Horizon markets and taken proactive action to elevate their performance so that they were closer to the top in market performance and not the bottom. Knowing Flagstaff’s investment for air service was short-term and not a longer term support that was sustainable… Horizon cancelled the service and didn’t make the call about their planned discontinuance of air service until after executing on the decision.
If a community is generating a profitable service why would they even consider offering a revenue guarantee or other incentives?
In the present environment…there are fewer aircraft available for a growing number of communities who want the air service and the large economic development and activity that the air service can generate.