Airport traffic up again (Philadelphia, Washington: income, cabin, eat)

[PITairport]

“Cleveland’s fares are above ours, so we’re a much better value,” said JoAnn Jenny, spokeswoman for the Allegheny County Airport Authority. “We have more local travelers today than we’ve ever had, which makes us a better airport than when we were a hub for US Airways.”

The ACAA's talking head has embarrassed herself once again. The reality is PIT's O&D peaked in 2007, and its been downhill ever since. Right now its only slightly higher than during the US Airways hub.

Page 3:
http://74.209.241.69/static/entransi...missioners.pdf

While that report only goes through the end of 2009, the latest report shows traffic in May 2012 being down 5% from May 2011.

In 2009, PIT's average airfare was $42 below the national average. Today, it is only $12 below the national average:

http://triblive.com/csp/mediapool/si...res-080112.pdf


One of the silver linings of losing a hub is that while there is less overall service, there is usually a more diverse mixture of airlines remaining and therefore more competition which leads to lower fares. This was playing out in PIT in 2007 and after, but now the local fares are trending back to the national average (even though they remain well below the fortress hub days).

So to summarize, PIT has not recovered local O&D travelers to the extent the ACAA would have you believe. PIT has lost its hub, but fares are only down to approximately the national average and not well below as you would think. Why? The low cost carriers are putting their growth assets elsewhere, as evidenced by the 5% drop in traffic since last year, despite positive air travel growth across the nation, not to mention Pittsburgh's stronger local economy. That's how its going to be as long as it costs the airlines substantially more to operate at PIT compared to other similar airports.

PIT is not in an enviable position as not only have we have lost the hub, but fares in the aftermath really aren't that low and the local market isn't as stimulated as it could be.

[LIRefugee]

I'd think that the three recent mega-mergers have had something to do with it too. Three of the country's largest airlines have now been eliminated, leaving four very large carriers, one large one, and a few smaller ones that either fill a particular niche or have minimal options. This would have the effect of raising fares everywhere due to reduced competition.

I'm sure the May drop can be largely attributed to the AirTran/Southwest reductions. At the same time, the 12-month passenger numbers of May 2010-Apr 2011 vs. May 2011-Apr 2012 only show a 0.58% drop in revenue passengers, so things don't look so bad when looking at the yearly data, but obviously that could increase if the month-by-month drops continue to be as high as it was in May.

Here are the May-Apr total revenue passenger numbers in thousands for years ending in:

2006: 10,066
2007: 9,695
2008: 9,232
2009: 8,098
2010: 7,597
2011: 7,917
2012: 7,871

Traffic is still 3.48% above the May 2009-Apr 2010 trough.

The most recent net yearly increase was for Mar 2011-Feb 2012 vs Mar 2010-Feb 2011.

BrianTH earlier posted info that debts have been refinanced and payments should start going down in 2016. Is there a publicly available source for that data? I get all my passenger stats from RITA | BTS | Transtats

[BrianTH]

PIT - Newsroom : Audited Financial Statements

Note 8 starting on Page 27 has the debt schedule.

[LIRefugee]

Originally Posted by BrianTH

PIT - Newsroom : Audited Financial Statements

Note 8 starting on Page 27 has the debt schedule.

Looks like they are projected to drop by half, on average, starting in 2017, assuming nothing much changes before then.

[PITairport]

Originally Posted by LIRefugee

I'd think that the three recent mega-mergers have had something to do with it too. Three of the country's largest airlines have now been eliminated, leaving four very large carriers, one large one, and a few smaller ones that either fill a particular niche or have minimal options. This would have the effect of raising fares everywhere due to reduced competition.

Yes, absolutely. But it does not explain why local fares have increased more than the national average over the past few years.

I'm sure the May drop can be largely attributed to the AirTran/Southwest reductions.

Absolutely, and this is a great example of my point. Greener pastures elsewhere for WN/FL.

At the same time, the 12-month passenger numbers of May 2010-Apr 2011 vs. May 2011-Apr 2012 only show a 0.58% drop in revenue passengers, so things don't look so bad when looking at the yearly data, but obviously that could increase if the month-by-month drops continue to be as high as it was in May.

The next couple months reports will be interesting. If June and July look like May's numbers, consider it a loss for the calendar year.

The original construction bonds for the terminal were due to be paid off by May 2018, although they have been refinanced at least a couple times. After that, it should be smooth sailing for getting some serious airline growth here.

In the mean time, too bad Allegheny County screwed up a golden opportunity to lower the airports operating costs via natural gas drilling rights on airport land. Trying to divert that revenue to the county's general fund where it does not belong was not only misguided, but illegal. But at least they now see the light and agree to put 50% of the revenue toward the airport, and 50% in escrow, where they hope it will go to the county with FAA approval (good luck with that); if not they relent and it all goes to the airport.

Problem is, natural gas prices are so low now that I doubt any major driller will be interested.

[BrianTH]

I don't think a couple bucks lower in landing fees would have prevented USAir from running Southwest out of the Philly route with predatory pricing, which allowed USAir to then jack up its fares to monopoly levels, leading to an overall reduction in travelers and increase in average fares.

In other words, landing fees may matter here or there at the margins, but there are generally much bigger factors at play.

[pman]

Originally Posted by BrianTH

I don't think a couple bucks lower in landing fees would have prevented USAir from running Southwest out of the Philly route with predatory pricing, which allowed USAir to then jack up its fares to monopoly levels, leading to an overall reduction in travelers and increase in average fares.

In other words, landing fees may matter here or there at the margins, but there are generally much bigger factors at play.

in fairness, it's more complicated than that. southwest set the price when they entered the market and it made sense when costs were lower. the problem as southwest put it, and I'm one of these customers, was that people were loyal to US Air since because of the miles program. at the same price, I'm going to take US Air because I earn miles for international (or any other travel). if you believe the recent article in the wall st journal, profit and loss at an airline is often determined by one person.

[BrianTH]

USAir may have had a competitive advantage among certain Philly fliers due to miles, connections, and so forth, but that doesn't mean their natural share of the market for that route is 100%.

It is also EXTREMELY clear that USAir deliberately put excess capacity on this route until Southwest was forced out, then reduced that capacity as they introduced monopoly pricing. That is precisely how what is called "predatory pricing" (which might actually be better named "predatory capacity") works.

In any event, none of this is about airline fees, and we are talking about big changes in volume and pricing on a major route out of PIT. That was my point--that attributing the back-and-forth in the overall statistics to airline fees (which in fact I believe have actually been reduced recently) is missing much more important factors.

Edit: article on reduced airline fees this year:

http://triblive.com/x/pittsburghtrib...tworkHeadlines

[LIRefugee]

I don't think we should forget that there are a large number of factors outside the control of both the airport and the county, such as airline consolidation, the enormous hurdles in starting a new airline (like a revived PeoplExpress), fuel costs, the state of the economy in general, that would have an effect on passenger numbers.

I did notice in the Trib article that the budget assumed 4.2 million embarking passengers, but given the recent drops in numbers, that may not be reached. I think it's also fair to note that PIT's 0.58% drop in May 2011-Apr 2012 numbers comes at the same time as a national 1.6% increase. But nothing (usually) can boil down to one simple factor.

I don't see Southwest dropping PIT-PHL specifically to be a big deal in the grad scheme of things (remember that Southwest dropped other PHL routes at the same time, so I don't see it as a PIT issue but as a PHL issue), but I do find it interesting that no airline is setting up any new non-Tropical point-to-point routes. That's not counting the wannabe PeoplExpress, which would apparently love to if they could actually get the airline up and running.

[pman]

Originally Posted by LIRefugee

I don't see Southwest dropping PIT-PHL specifically to be a big deal in the grad scheme of things (remember that Southwest dropped other PHL routes at the same time, so I don't see it as a PIT issue but as a PHL issue), ...

that's exactly it, they were unable to compete with US Air on a number of short haul routes out of Philadelphia owing to "loyalty" which is largely drive by the mileage program (since no one actually likes US Air)..and US Air serves better destinations. personally, I've gotten a free trips to london and greece using my miles. those are places southwest couldn't offer, not even a trip to the carribean. Of course, like most others, I appreciated the vastly lower fares they brought to PHL and hoped there were enough other flyers to fill both flights, and I suppose there were, at lower fuel prices. that's why I think Brian's take isn't correct, it's oversimplified.

Lufthansa AG said it will have to step up its cost-cutting efforts to offset high fuel prices partly by reducing its passenger services this winter only months after announcing a wide-ranging restructuring plan to improve long-term profitability and protect fleet-renewal plans...The German flag carrier's warning comes despite a better-than-expected performance in the second quarter though net profit still fell 24% due to higher fuel costs

UPDATE: Lufthansa to Tighten Belt Further as Fuel Bill Rises - WSJ.com