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CBMR pledges $1.2 million for flights

RTA hopes to add direct flights to new cities

The Gunnison Valley Rural Transportation Authority (RTA) is negotiating with several airlines to provide flights next winter and hopes to add a few new service destinations, including Houston, Salt Lake City, Atlanta and Chicago. Furthermore, Crested Butte Mountain Resort (CBMR) is prepared to pay $1.2 million to the airlines as a performance guarantee to add new cities.

 

 

The RTA is also prepared to contribute up to $800,000 in guarantees for the airlines to provide the service, bringing a total financial risk of just under $2 million. But even with the hefty price tag, there is no telling yet if the airlines will agree to the deal.
The RTA is a voter-approved organization that coordinates and develops ground transportation and airline service options for the Gunnison Valley. Part of the RTA’s responsibility is providing a financial guarantee to airlines flying into the local airport in the event that ticket sales do not cover operating expenses. In recent years, the RTA has split this responsibility with CBMR.
The new flights would represent a marked difference from last year. After CBMR and the RTA were forced to pay nearly $900,000 to meet the guarantees from the 2006/2007 winter season, flights were scaled back in an effort to increase the passenger load on each plane.
According to the RTA’s airline consultant Kent Myers each plane needs to be approximately 75 percent full to cover the operating expense of each flight—the majority of which is devoted to rising fuel costs.
While the RTA has seen some success after scaling back during this season’s winter airline program, Myers said the rising cost of fuel during the last four months alone will cost American Airlines an additional $30,000 to $40,000.
While costs for the airlines are going up, the pressure to provide flights to the area is also rising. The RTA board has also received letters and phone calls in recent months about the limited travel options locally, and the high cost of the few choices that are available.
As a solution, the RTA board discussed adding direct flights to new market destinations, rather than adding additional flights to current markets.
After negotiating with several airlines, the RTA determined that Continental and Delta were the two most viable choices, not only because of the particular markets they serve, but both have provided service at the Gunnison-Crested Butte Regional Airport in the past.
During a regular meeting of the RTA on Friday, March 14, transportation officials came prepared to bite the bullet. Myers presented a very preliminary service summary that outlined the basic service requirements and financial guarantees for an expanded air program. In coming weeks, Myers, RTA board members and CBMR representatives will attempt to sign contracts with the airlines to provide the future service.
Myers cautioned that the proposed flights were not official, and times and schedules were still being worked out. “These flights are not loaded. If someone calls United, they’re not going to be there,” Myers said. Once contracts are signed, Myers said, “We’ll know if they’re flying, but I do not have exact arrival and departure times.”
The RTA and CBMR will offer Delta Airlines $300,000 in guarantees to provide a daily flight from Salt Lake City, Utah, on a 50-passenger regional jet. They will also offer a $200,000 guarantee for Delta to provide a Saturdays-only flight from Atlanta on a 188-passenger Boeing 757. There are more than 4,000 potential round-trip seats between the two destinations.
The groups will also offer Continental Airlines a $700,000 guarantee to provide a daily flight on a regional jet from Houston. This could add more than 2,000 round trips.
RTA director Scott Truex says in coming weeks the RTA will try to negotiate getting a larger aircraft on weekends, or two daily flights on weekends, but, according to Myers, any additional requests could change the price of the guarantee.
While adding new service providers, the RTA plans to scale back on current service. The only airline avenue from Gunnison-Crested Butte into Denver is on United, but next season the RTA may discontinue a weekend-only Airbus flight on United, while keeping the usual two flights a day on a regional jet.
RTA board member Bill Babbitt said, “It will be an overall reduction in service because we won’t have the Airbus.”
And because the Airbus service isn’t being considered, the RTA won’t offer a guarantee to United. Myers said, “For United, we’re not going to have a contract. I assume they’re just going to fly the regional jets.” By replacing the Airbus with a regional jet on weekends, the RTA may lose about 3,000 potential seats, according to Myers’ data.
The RTA plans on service on American Airlines continuing, but hopes the Dallas service will be scaled back about 3,000 seats in favor of adding flights into Chicago, Ill. “We are requesting American to reduce their service—it’s not American’s decision,” Myers said of the Dallas service. American services Dallas with daily flights on a 757, but the RTA hopes they will switch to a smaller, cheaper 737 next winter for a total guarantee of $500,000.
CBMR vice president and chief marketing officer Ken Stone suggested keeping the smaller planes in an effort to keep load factors up (and possibly preventing the RTA and CBMR from paying full guarantees). “The best balance is to downsize. Even though the (financial guarantee) caps are the same, that extra capacity (on the 757) you’re going to end up paying for,” Stone said.
RTA board member Bill Babbitt said of Dallas, “The demand isn’t there.”
Plus, the RTA hopes American will agree to run a Saturday-only flight from O’Hare International in Chicago on a Boeing 757 for $250,000. Stone said, “The whole point is to have direct flights from more markets.”
Between the different air program proposals, the RTA and CBMR are expecting to provide a revenue guarantee of just under $2 million. According to Truex, when the season ends and guarantees must be paid, the first $800,000 will be split evenly between the RTA and CBMR. The RTA will then cover the next $400,000, and CBMR will cover the rest.
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Stone said the resort is taking a bigger risk by putting $1.2 million on the line, but believes the additional service will be worth it.
After the meeting, Stone explained the decision to take on the risk is due to a shift in CBMR’s destination marketing strategy, which follows along with ideas developed in the recently completed branding study.  “It calls for a greater percentage of destination visitors,” Stone says.  “We’re out of balance in our customer mix.  It’s susceptible to having ups and downs and having an uneven business level throughout the season.”
“We’re trying to build demand… but everybody asks which comes first, demand or more airline seats,” Stone says.  “Truly, having available airline seats from a number of new markets creates demand.”
Another change the RTA is considering that will affect the entire air service program is shortening the flight schedules across the board. The winter air program is generally classified as running between mid-December and mid-April. According to Myers the RTA typically has trouble filling flights in December and April. “We lose so much money in April it’s silly,” Myers said. “I can live with the December trips.”
Truex said of American Airlines, “We lost $30,000 a day in April last year.”
The RTA board agreed to have all potential airline programs end on March 30, leaving out all April flights.
CBMR will also change its winter season schedule to match. According to Stone, the ski area plans on closing on April 5, 2009—about a week sooner than usual. “That’s the plan right now, unless the owners come back and change their minds,” he said.
The big concern the RTA board discussed about expanded winter service is the carrying capacity of local infrastructure.
RTA board member Kimberly Metsch asked, “We’re talking about seven flights coming in on Saturday. Is there concern about the airport capacity or Alpine Express?”
Myers said it was a concern and he was discussing the matter with airport manager John DeVore. “We’re going to put two more airlines in the check-in counter. I don’t know where these guys are going to go,” Myers said. He also said the single baggage claim could cause problems. “You dump two 757s there at the same time… and we’re talking about squeezing 350 people through that portal,” Myers said. “We have to cover our bases with John.”
Morgan said it was something they would just have to cope with. “I think at times it may not be a pleasant experience at the airport. We need to be aware of that,” he said.
Alpine Express president Woody Sherwood said the constraints wouldn’t be limited to just the airport. “It affects the whole pipeline, from ski rentals on to hotels,” he said.
Myers said, “It’s like skiing at Christmas, except all the time.”

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