Will Richmond's Campaign to Save Low-fares Take Off?
Richmond kicks off its second public education campaign in effort to keep airfares low. Why aren’t more passengers flying these airlines?
Attention flyers, Richmond International Airport (RIC) has a new stewardess, and she is here to serve you a warning.
Her employer?
The Greater Richmond Chamber of Commerce (GRCC), which received a $600,000 grant from the Capital Region Airport Commission to market the value of low-cost airlines.
In reality the only thing she flies are airwaves. Perhaps you’ve seen the stewardess broadcast on the new TV ads that are part of the "Save Low Fares" public education campaign.
"If AirTran and JetBlue quit serving our area, the lack of competition will make Richmond one of the nation’s most expensive airports, again," she states.
Never mind the seats and tray tables. According to the stewardess, the only thing upright, if fliers don’t support low-fare carriers, will be the skyrocketing prices.
So she walks us through the new procedures.
"Above your seats you will find a device that allows you to pay through your nose," she instructs.
"Or simply grasp your wallet upside down, pull apart and shake," she continues.
A decade look at fares from RIC
And face it, it’s not like tickets were going for peanuts anyway, especially during a recession. After a 13 percent dip in 2009, prices flew back up 11 percent at RIC, with the average price of a ticket selling last year for $340.
The song that the chamber is singing, to the tune of Joni Mitchell, is that you don’t know what you’ve got till it’s gone. We won’t get a second bite at the apple, so to speak.
Already, JetBlue flights to the Big Apple were canceled in late 2010. As a result, roundtrip fares from RIC to New York are up a reported 167 percent (from $150-$400).
"The mere fact that Airtran and JetBlue operate from RIC has changed the pricing structure to more than 60 markets," Troy Bell said, spokesperson for the airport.
"Low-cost airlines are solely responsible for more than a 40 percent reduction in airfares during the past five years," Kim Scheeler said, president and chief executive officer of the chamber.
Analysis of data from the Bureau of Transportation yields a more complex story, and different statistics.
Airfares started dropping before low-cost carriers arrived.
Over the past decade at RIC, airfare prices have made a mostly steady descent. The average price of a ticket at RIC in 2000 was $472, a hefty $133 more than the national average. Those were the days when RIC lost passengers to the six surrounding airports that hosted low airfare carriers.
The cost of a drive to BWI or Norfolk was still justified by the lower ticket price. For 37 of 40 markets, one or more of the alternate airports had a lower fare than Richmond.
In the five-year period from 2000-2005, before AirTran’s arrival, RIC airfares dropped 28 percent. Compare that to a 10 percent drop in the following five years, when AirTran and JetBlue started service. RIC fares now hover closely with national averages.
Change in leadership adds up.
April 2000 brought changes in both the administration and philosophy of the airport commission.
"That changed top to bottom how the airport was run," Bell said.
"Part of it was an element to be competitive, the understanding that you don’t want to price yourself out of the market," he continued.
The mindset changed from simply "build it and they will come," Bell said, to "let’s continue to keep costs reasonable and look for opportunities to make it as competitive as possible."
The new administration opened up the throttle on investing. Capitol spending ensued, as seen in terminal expansions and upgrades. Behind the scenes, changes were made that would make RIC more financially attractive to airlines.
Bell dismissed the influence of reduced landing fees, the charges paid by an aircraft to an airport for landing. Yet, in the last decade, landing fees at RIC have plunged as much as 22 percent, from an annual accumulation of almost $4 million to just a little more than $3 million (see chart).
That’s a difference which rivals the "Save Low Fares" campaign expenditure of $600,000—seemingly enough to be influential.
In the past, the U.S. Transportation Department has mediated disputes where airports could not reasonably justify exorbitant landing fees.
"Landing fees are one of the many components that go into developing a fare," Delta spokesperson Leslie Parker said.
The RIC landing fee, now at $1.19/thousand pounds max gross landing weight is comparable to, and in many cases much better than, other airports around the nation.
Did landing fee reductions, in addition to other changes, trigger the initial fare reductions?
Other fees that generate revenue for airports are terminal rentals and gate and baggage area charges. RIC now charges less per square footage.
"Where it is today is half of what the former administration was projecting, "said Bell, referencing an older financial plan that had higher rates and charges.
The next step, in 2004, was for RIC to aggressively recruit and secure low-cost carriers. That was done by applying for a federal loan and harnessing local business investors.
The Historic Richmond Region initiative procured $1.6 million dollars to run an educational campaign.
Sound familiar?
Now Richmond is running yet another campaign--to keep the low-cost carriers here.
Just how much lower are these airlines anyhow? And why has Richmond had to spend almost 2.2 million in marketing to help keep them here?
Fact: Low-cost carriers provide competitive prices.
Perhaps certain changes made RIC more desirable to low-fare carriers, but the presence of AirTran and JetBlue doesn’t statistically show that big of a drop in average ticket prices.
Again, since 2000, we’ve seen a 28 percent decrease in airfare, but since 2005 when the low-cost carriers arrived, the decrease in average fare has only been 10 percent. Regardless, fares have been reduced, something RIC desperately needed.
What Scheeler, Bell, and business leaders will tell you is that the mere presence of these low-cost carriers helps keep ticket prices from jumping too high.
"These carriers changed fare structure, changed rules, and also offer attractive amenities," Bell said.
If you are booking a ticket out of RIC, the least expensive carrier depends on the market and hub of your destination. AirTran and JetBlue won’t always have the cheapest ticket but low-fare carriers have created a significant travel asset--the one-way ticket.
The economics of flight.
Business must balance the cost of travel from different standpoints: value of a person’s time as well as dollars. It is entirely possible to buy from a major airline one part of the trip, and a low-fare carrier the other leg of the trip.
"Fly when you can, sometimes it won’t work," Scheeler said.
Bell and Scheeler both point out the obvious advantage held by market leaders (Delta, US Airways, American).
"If you are a market leader, you might undercut your competition’s cost to gain market share," Scheeler said. "Once you gain market share you are going to raise prices again."
It’s a sound logic that apparently falls on the deaf ears of indifferent consumers. Why else would Richmond be on its second marketing campaign for low airfare carriers?
"The business community is a little more in tune than the average consumer is with long term value," Scheeler said.
Yet, one major obstacle low-fare carrier’s face is frequent flyer miles, most likely racked up by the business community.
"Frequent flyer miles are narcotic," Bell said.
Despite the temptation of free tickets and upgrades, some in the business community remember how high fares once were, and are trying to support the campaign.
"I've been opting for JetBlue specifically because of the concern about them pulling out, even though I have status and lots of miles with USAir," Doug Meacham said, a consultant with IBM.
Will RIC prices stay competitive?
Consumers will have to change habits to support the campaign. Even without the frequent flyer incentives, low-fare carriers offer good products.
JetBlue is considered one of the better airlines in the market, "with comfortable seats, DirecTV and XM/Sirius," Meacham said.
Regardless, right now airfare travel is an expensive luxury for many.
Gas prices will soon spike the price tag even more. It’s really a chicken or egg scenario—low-fare carriers need traffic to keep costs low and travelers need low costs to fly.
Currently, no carrier has confirmed that they plan to pull service from RIC. JetBlue, AirTran, and Delta were contacted for this article.
"JetBlue has a strong preference to remain in our existing Richmond routes," Alison Croyle said, spokesperson for the airline.
"However, whether we grow our operation or shrink further is dependent on the support we receive from the traveling public and greater Richmond community," she continued, the sentiment echoing that of the chamber.
Save RIC and low fares.
Southwest recently acquired AirTran, which will expand Southwest’s low-fare service to many more domestic markets, including, hopefully, RIC. Southwest serves almost 90 million passengers annually, compared to the 20 million served by AirTran, and the merger means that 100 markets will be served.
"We are interested in serving the great majority, if not all, of AirTran's current markets," said Southwest in a recent press release.
The chamber doesn’t want to take a gamble with that. A lot of money and media has gone into educating fliers, and a lot of investment has produced a modernized RIC. More flights, and more passengers means more revenue for RIC—which makes money from vendors, sales, parking, and flights.
"Save Low Fares," definitely seems to be something to consider, Richmond—avoiding a loss of the gains we do make as a city.
What are your experiences with low-cost airlines like JetBlue, AirTran, and Southwest? Will you make an effort to support the new campaign? Leave comments below!
*Data in tables has been rounded up or down as needed or appropriate. For example $339.71 was rounded up to $340.
Alix Bryan is a dedicated traveler. She’s very sad that she found a cheap ticket to Puerto Rico on AirTran while researching this article, but she can’t afford a vacation. She remembers when bag check and meals were compliments of all airlines and wishes we could go back to those days.
