Published: July 1, 2013
The expansion of Alaska Airlines into the Colorado Springs Airport in November may be just the first fruit of a series of moves by airport officials to add carriers and flights by cutting fees charged to airlines, rewarding passengers for using the airport and boosting marketing efforts.
The Seattle-based low-fare airline announced plans Thursday to begin a daily nonstop flight Nov. 1 from its Seattle-Tacoma International Airport hub on a 70-seat regional jet flown by SkyWest Airlines. Dan Gallagher, the airport's interim director, said Alaska may later upgrade the flight with larger aircraft and may add other cities from the Springs if the Seattle flights are a hit.
It's good news for an airport that could use a lot more of it. In March, Mark Earle resigned as director amid a disagreement with Mayor Steve Bach. Frontier Airlines exited the Colorado Springs market in April, accelerating a steady decline in passenger traffic. Officials estimated that traffic would hit a 22-year low this year, although the forecast was made before Alaska Airlines announced its entry into Colorado Springs.
But airport officials have been undertaking strategies to turn things around. The airport is working to cut the fees it charges to airlines in the hope that lower fees will attract more carriers to recapture some of travelers who drive to Denver International Airport. Gallagher estimates up to two-thirds of local travelers fly from DIA rather than the Springs airport.
"We have at least 700,000 passengers a year who drive right past us and go to Denver that could fly from an airport in their own backyard," Gallagher said. "We need to retain the service we have and attract new service to recapture those passengers by looking at which markets have enough passengers to fill a plane rather than sending them through another hub.
"We also are trying to identify underperforming flights and determine how to get more passengers for those flights and identify existing routes that can support larger aircraft," he said.
Those numbers headed to DIA might have been even larger had The Broadmoor hotel launched a shuttle service to the Denver airport. Broadmoor President Steve Bartolin said that this year the resort studied whether to start such a service because of declining air service in the Springs. But The Broadmoor decided against it as efforts to expand local air service picked up momentum. The Broadmoor is owned by the Denver-based Anschutz Corp., whose Clarity Media Group owns The Gazette.
The airport's fees would have jumped nearly 50 percent to $13.20 per passenger, or more than Denver International Airport charges some airlines, if $3 million had not been cut from the Springs airport's annual operating expenses, Gallagher said. Airport management is reducing expenses by eliminating nine unfilled positions and taking other cost-cutting measures.
"We want to lower our operating costs 15 percent by 2015 and reduce our debt service costs by 25 percent over that period. We want to be a lost-cost operator," Gallagher said. "When Frontier left, we had to find a way to reduce our costs by $2.8 million this year and $3.5 million next year because that is how much we had received in revenue from them and their passengers. If we did not lower our costs, our agreements with the other carriers would have required them to make up that amount. We are trying to stabilize and even lower the rates we charge."
The cost-cutting strategy got a vote of confidence Thursday when Fitch Ratings, one of three bond rating agencies, affirmed its BBB+ rating on the airport's debt, citing the airport's low debt and little need for future bond issues. Fitch had downgraded the airport's debt bonds from A- in April 2012 because of falling passenger traffic and other issues threatening its "future operating and financial flexibility."
Mike Boyd, an Evergreen-based aviation industry consultant, said lower fees won't necessarily attract new carriers, but higher fees could chase airlines away, especially at a time when carriers are cutting flights and grounding some of their less fuel-efficient aircraft.
"Airlines have fewer planes and less capacity so there is less service to go around," Boyd said. "We are forecasting that airlines will retire 200 planes during the next two years, and will cut their seat capacity by 3 percent this year alone. That will probably mean fewer flights to existing destinations."
Looks to boost income base
Another tactic to expand service at the airport is to restructure its incentive program, which includes landing-fee rebates, income sharing and marketing help for airlines that launch or expand service in the Springs. The airport wants to include discounted rents instead of rebates as a way to help offset some of the cost of new service, Gallagher said. The airport is seeking Federal Aviation Administration approval for the changes.
To boost and diversify the airport's income base, airport officials also are stepping up efforts to attract more aviation-related businesses to lease land at the airport, such as those offering aircraft maintenance, repair, overhaul and refurbishment services, Gallagher said.
They also have contacted Corporate Office Properties Trust to see whether the company plans to remain as the primary developer of the airport's 272-acre Cresterra business park - another source of rental income for the airport - after it put most of its 21 local properties on the market.
But those improvements might not stem the flow to DIA if fares from Colorado Springs don't come down. The Springs airport has been hurt by a three-way battle for passengers at DIA among Frontier, Southwest Airlines and United Airlines that has driven average fares down by 42 percent between 2000 and 2012, It's the third biggest decline among the nation's 100 largest airports during that period, according to the U.S. Bureau of Transportation Statistics. Average fares in the Springs were down 31.4 percent during the same period, but remained $52 higher than DIA's average in 2012.
The difference in average fares between Colorado Springs and DIA was even larger in 2011 at $143. But local fares declined 22.1 percent last year, the biggest drop among the 100 largest airports, because of Frontier's presence. Gallagher said when Frontier launched nonstop flights to four cities in May 2012 as part of a short-lived attempt to make Colorado Springs a "focus city," it offered lower fares that prompted other airlines to cut their fares.
Frontier ended most of those flights in February, citing a decline in passenger numbers that began in September.
Marketing consultant sought
Gallagher blamed "a lack of awareness" of Frontier's flights to the four cities for the poor passenger numbers. He said the airport plans to hire a marketing consultant within a few weeks to develop a campaign to highlight flights available to the 11 cities served by the airport's five carriers.
The airport also is launching initiatives to make it more passenger-friendly, spurred on, in part, by the turnover in leadership this year. Gallagher was named the airport's interim director in March after Earle's resigned amid a disagreement with Bach over how the airport should try to attract more passengers and airline service. Bach said at the time he would take a more active role in seeking airline service.
Those efforts began last month when the airport moved its valet parking operation from the end of a hallway at the east end of the terminal to the ticket counter vacated by Frontier, opened a security line for airlines' best customers and began offering free parking for anyone who spends at least $30 per visit in the airport's gift shops or $12 per visit in its restaurants.
The airport also has reached an agreement with its restaurant operator, SSP America, to open a business center and lounge near one of gates in the passenger terminal for business travelers and other frequent travelers.
"We plan to package the valet parking, the premium security lane and access to the lounge into a package we will offer travelers for a daily or annual fee, but we also will recognize memberships in any of the airport clubs operated by our airlines," Gallagher said.
But the biggest news for the airport is the announcement that Alaska Airlines is stepping in to fill a gap left by Frontier's departure. It's only one route now, but the airline's manager of media and market strategy painted a promising picture, saying that Colorado Springs "is one of the largest unserved destinations from Seattle and was the perfect opportunity for growth."
"We see a lot of potential to grow in the Colorado Springs market, given the large number of residents that drive to Denver to find low fares," Clint Ostler said in a statement. "We're hoping that by providing competitively-priced fares from Colorado Springs, we'll recapture those driving to Denver, stimulate demand and position for potential growth."
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