2012 forecast mixed for airline industry (Correction)

by The City Wire staff (info@thecitywire.com) 20 views 

Forecasting what will happen in the airline industry is about as unpredictable as forecasting the weather.

“Going forward, it looks like there’s good news and bad news,” said Steve Lott, vice president of communications for the Airlines for America organization, formerly known as American Transportation Association. The A4A works with the airlines, policy makers and other airline industry leaders to help support policy and measures that encourage aviation safety and security.

The good news is air traffic seems to be picking up, which Lott said is tied to economic recovery. The airline industry is one of the few industries affected by local, state, national and global economies all at the same time. The industry is also drastically affected by what Lott refers to as “external events,” such as natural disasters, pandemics and terror threats.

Demand is increasing, but airlines are not being so quick to add back a lot of flights, he said.

The increase in demand is already evident at the Fort Smith Regional Airport. According to Fort Smith’s records, January 2012 was up by nearly 1,000 passengers from this time last year. In January 2012, there were a total of 13,138 passengers (enplaned and deplaned) compared to January 2011’s 12,256 passengers.

Northwest Arkansas Regional Airport (XNA) traffic declined 10.39% during the same time frame with 37,711 passengers versus 42,088 in January 2011.

Lott said the bad news is linked to unpredictable fuel prices escalating higher as jet fuel is one of the biggest costs for the airlines alongside labor.

“Last year, jet fuel averaged $3 a gallon and that represented a record high. That puts a significant cost on the airline industry,” Lott said. “So far this year, it’s crept up to about $3.10 a gallon.”

He said the largest cost is also the most volatile, and something which airlines have no control. Rising fuel costs often force the airlines to raise ticket prices, which drastically affects passenger’s decisions with respect to air travel.

Kelly Johnson, XNA airport director, said XNA is watching the fuel costs closely because officials know that as fuel prices rise so do fares, which ultimately means fewer people are likely to fly.

“(The fuel costs) will keep lots of people in their cars and some people going through other airports,” Johnson said. “We’ve budgeted for zero increase in enplanements for this year. We’ve planned for flat traffic.”

There is increasing anecdotal evidence that passengers who live in Northwest Arkansas are driving the extra miles to Fort Smith because they can find cheaper rates.

John Parker, executive director of the Fort Smith airport, said the airports have no control over ticket prices because it’s entirely up to the airlines.

Douglas Hutchings, an Elkins resident who owns a Fayetteville-based company, travels farther south to Fort Smith to save flight fare costs. Hutchings estimates he flew about 18 times last year. His business takes him to the East and West coasts, specifically the San Francisco area and Boston.

Hutchings said he often finds lower rates out of Fort Smith, especially when flying to Boston.

“The trips to Boston have been up to 100 bucks cheaper to fly out of Fort Smith,” he said.

Corrected paragraph: The Bureau of Transportation Statistics tracks historical price data for the nation’s airports as part of its many statistical jobs. The BTS reports that average fares during the third quarter of 2011 — the most recent data available — were $515.61 at XNA and $517.59 in Fort Smith. The average fare out of Tulsa was $415.24, with the Little Rock average fare at $395.73. The national fare average during the third quarter was $361.

XNA is the 114th largest airport by total 2010 passenger count, while Fort Smith is 223 among the 442 airports listed on the BTS report.

Expedia.com, an online discount travel site, indicates flights departing Fort Smith are less expensive than the same destinations from XNA. The dates chosen for the comparison were departing Sunday, April 1, 2012 and returning Thursday, April 5, 2012.

The lowest rate available from Fort Smith to Boston for those dates was $438, a 19.4% savings from the $544 fare departing XNA. The savings going west were greater. Roundtrip fares from XNA to San Francisco were about $650, versus $371 from Fort Smith. These fares were checked around midnight Tuesday, Feb. 21, and are subject to change at any time for any reason.

Johnson said it does not surprise her that sometimes people find lower rates at Fort Smith compared to XNA  despite Northwest being a  busier airport. There are a number of factors that affect the prices, but it is mostly the natural course of airline pricing, she said.

“The cheapest fares always sell first,” Johnson said. “Then that tips the fare bucket (the number of seats available at a given price point) and each time the fare bucket sells out, the prices increase.”

Because XNA is busier, Johnson said it sells out of cheap seats sooner and pushes prices higher for the remaining seats.

In spite of a cloudy forecast , XNA continues to invest in airport improvements. On the heels of the new concourse, the airport recently unveiled new full body scanners that are deemed safer and less invasive than former search methods.

The new scanners do not use radioactive material to create the image and they only show an outline of the person, making it unnecessary for a private viewing room, Johnson said. The new scanners went in last week installed by the Transportation Security Administration.

"If you opt out of using the machine for some reason, you will have to go through alternative screening procedures just like you do in other airports," said Johnson.

The new body scanner cost about $150,000 taken from their fiscal year budget. XNA is the second Arkansas airport to use the new technology.