Frontier Airlines short-lived “focus city” experiment in Colorado Springs failed because the Denver-based carrier underestimated how willing local passengers are to drive to Denver for a wide selection of inexpensive flights, the experiment’s architect says.
The carrier unveiled ambitious plans nearly a year ago to launch nonstop flights from the Springs to Los Angeles, Phoenix, Portland and Seattle as part of a strategy to make the city a test market for tiny hubs in smaller cities. By the time the flights started in mid-May, Frontier officials said bookings were so strong that the airline would replace Portland and Seattle as summer season destinations that were scheduled to end in the fall with winter season service to San Diego and Orlando, Fla.
But bookings declined in the fall, forcing Frontier to discount fares more than anticipated to fill the 138-seat aircraft it uses for the Springs flights, said Daniel Shurz, Frontier’s senior vice president of commercial and architect of the Springs expansion. As a result, Frontier will halt flights to San Diego on Feb. 21 and Orlando on Feb. 25 while trimming its schedule to Phoenix from daily to five days a week and its schedule to Los Angeles from six to three days a week. Flights to Denver will end March 2 because Frontier is phasing out its fleet of 99-seat regional jets.
The cuts mean fewer opportunities for people to fly out of the Springs and more reason to drive to Denver. And they’re another setback for the Colorado Springs Airport, which expects to see the first annual increase in passenger traffic in four years when final figures are released for 2012 — an increase fueled by the new Frontier flights. The flights added by Frontier in May were the largest expansion by any airline locally since Western Pacific Airlines operated in the Springs in the mid-1990s; Western Pacific moved its hub from the Springs to Denver in 1997 and went bankrupt months later.
“The challenge is that the market knows there is high-frequency, low-fare service to virtually any market of significant size from Denver,” Shurz said. “We know there is healthy demand — Colorado Springs is large enough to generate that demand, but when you compare multiple daily flights in Denver to several flights a week from Colorado Springs, it turned out to be more of a challenge than we thought. At times when demand was high, we could get the fares where they were economically viable, but the trick is not doing it in July, it is doing it in enough months to generate a profit.”
The percentage of seats sold to every destination but Phoenix fell sharply between August and September, and was between 20 and 40 percentage points lower than Frontier flights to the same destination from Denver, according to U.S. Department of Transportation data.
Frontier plans to continue service to Phoenix since it has generated strong demand in both the Springs and Denver and will continue the Los Angeles service at least through the summer since bookings were strong on the route last summer, Shurz said.
“We are focused on keeping the company sustainably profitable and to do that each plane has to justify its existence. As a result, the capacity in Colorado Springs has been reallocated to flying from Denver,” Shurz said.
What about Southwest?
Don’t expect low-fare giant Southwest Airlines to swoop into the Springs to replace Frontier. The Dallas-based carrier doesn’t anticipate adding any new cities during the next two years other than those already served by its AirTran unit, which it acquired in 2011, said Chris Mainz, a Southwest spokesman. Southwest hasn’t ruled out serving the Springs or other cities, he said, but the company has focused in Colorado on expanding its Denver operations, which have grown in six years to 163 flights to 54 cities, making Denver Southwest’s fifth-largest hub.
Colorado Springs Airport officials continue to work with other carriers about adding service, touting some of the most aggressive incentives offered by any airport in the nation, but those efforts often take years to bear fruit, said Mark Earle, the city’s director of aviation. Airport officials recruited Frontier to expand its schedule in the Springs after the shutdown of ExpressJet in 2008 ended service between the Springs and three California cities, but Earle said the process took two years and dozens of meetings to play out.
Earle said the airport has ongoing conversations with Southwest and several other carriers and keeps them aware of changes in the market that could create opportunities, targeting its pitches to those carriers whose strategy, fleet and route network would best fit the Springs.
“These latest changes create opportunities for some of our existing carriers and we are in conversations with specific carriers about specific routes, but we can’t disclose that,” he said.
The most likely candidates to replace Frontier on the routes it is ending would be United to Denver (the carrier already operates several daily flights to its Denver hub); Allegiant Air to Orlando, where it operates flights to 45 cities; and Alaska Airlines, which operates hubs in both Portland and Seattle. A spokeswoman for Alaska Air said the carrier doesn’t discuss plans for new destinations, while an Allegiant spokeswoman said the carrier has no plans for new destinations from the Springs but is “always evaluating new opportunities in our network.”
Mayor Steve Bach said he believes “there is demonstrated demand for increased air service to certain destinations and we are optimistic that these and additional routes will be picked back up by Frontier or other carriers.”
Incentives go only so far
The Springs airport offers incentives that include landing-fee rebates, income sharing and marketing help for up to three years to encourage airlines to launch or expand service in the Springs. But the incentives are meant to defray startup costs, not to convince airlines to start or keep unprofitable flights in place, Earle said.
“Incentives won’t get a carrier to consider a market it wouldn’t otherwise service or to continue service that is not profitable. Airports can’t afford to subsidize service from their own revenue, unless there is outside money involved from a chamber of commerce, convention and visitors bureau or some other source,” Earle said. “Our incentive package is one of the best in the nation because of its duration (up to three years), but very small compared to the overall cost of operating in a market. They are just a tie-breaker with another destination in some cases.”
Springs airport officials have been studying “how we do business” for two years and are in discussions with airlines on how the airport might restructure its operations to be more attractive to new service, Earle said. He declined to elaborate, but said the talks should be completed within two months.
Mike Boyd, a Golden-based aviation industry consultant, said he doubts Southwest will consider expanding to the Springs “anytime soon” and that the carrier remains focused on expanding its operations in Chicago and Denver. He said other low-fare carriers like JetBlue and Spirit focus mostly on large cities like Denver.
“It is time to tell the community you have what you have,” Boyd said. “There are only 10 full-schedule airlines left and that could be reduced to nine if American merges with U.S. Airways. You have to manage what you have now,” he said, and hope not to lose service as carriers continue to reduce capacity.
Yet local employers always rank better air service as one of top three or four issues they face and employers considering moving the Springs continue to cite local air service as a concern, said Joe Raso, CEO of the Colorado Springs Regional Business Alliance.
Contact Wayne Heilman: 636-0234 Twitter @wayneheilman
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