RTA, CBMR work to get ahead in air service debate

Will consider separating bus and air

The Gunnison Valley Rural Transportation Authority (RTA) and Crested Butte Mountain Resort (CBMR) are looking to try something new when it comes to shoring up the valley’s air program—namely, to get ahead of the game.

After a board meeting on Friday, January 13, the partners have agreed to develop a new, more detailed five-year strategic plan. Every option is on the table—including the separation of the bus program from the RTA to free up funds for air.
Newly re-appointed chairman Chris Morgan pushed for the development of a plan, asking CBMR and airline consultant Kent Myers to work together and put something on paper.
“Understanding it’s a moving target, we need to be able to say that by 2016 we want to grow these markets, we think it’s going to cost this much, we want these kinds of planes, this kind of schedule, and we’re going to anticipate needing X-amount of money,” Morgan said.
The suggestion comes as the valley feels the effect of the air program’s reduced capacity and rising ticket prices.

Current program underperforming
According to Myers, bookings for direct service out of Houston are flat.
“There are some real issues as it relates to perception of snow,” Myers said.
“Right now it will be a real challenge to get to load factors at last year.”
Jeff Moffett, CBMR’s director of Crested Butte Vacations, said the overall air program is down 13 percent compared to last year, just over the 11 percent reduction in capacity. It has been tracking that way for over two months, and even with low snow, out-of-state sales remain strong. The $599 sale is tracking slightly up over last year.
“From our perspective the reduction in capacity is a bigger impact than snow, which has only been an issue in the last month,” Moffett said.
Some airlines are performing better than others—American Airlines service is up 28 percent. By contrast, United service out of Denver is pacing about three percentage points behind last year and the airline is less willing to work with CBMR on special fares. Reduced capacity seems to be a contributing factor.
“They don’t have to fly as many people as possible to be profitable. They could fly one plane and hold out for $1,000 fares and kill it, or fly two to three flights and do all the work to bring in $400 fares and hope they’re profitable,” Moffett said.

Cost of doing business
Whether it’s snow conditions, pricing, limited schedules or all of the above, one thing has come to a head: the cost of minimum revenue guarantees (MRG) to the airlines. To secure the 2012 air program, the RTA will pay $420,000 and CBMR committed up to $1.3 million, most of which it expects to pay.
The figures are enough to garner some sticker shock, but CBMR’s general manager Ethan Mueller says it’s still a worthwhile investment. Calculations performed last year suggested that the total amount paid in revenue guarantees equals about $75 per arriving winter passenger. Once here, estimates showed the per passenger spend is around $1,300.
Still, that price tag has its limits. CBMR and the RTA opted not to pursue a United MRG for an overnight flight out of Denver—one that would arrive at night and depart in the morning—because the price tag came in at well over $1 million. That reality is what’s prompting the RTA to think beyond where next year’s money will come from, and consider a long-term plan that provides consistent air service.
“Because of the constraints on funding that the RTA has had over the last few years and the fact that we depend on our partnership with CBMR—which is a good thing—we’ve been making decisions from year to year. We need a long-range plan for success for the next five years, not just now,” Morgan said.

Thinking outside the box
At Friday’s meeting, the RTA and CBMR tasked Moffett, Myers and RTA executive director Scott Truex with outlining a range of options: grow the existing direct service from Houston and Dallas; focus instead on developing a robust service out of Denver; or partner with Montrose to develop regional air service.
Ethan Mueller, CBMR’s general manager and vice president, asked for a new idea to be added to the mix: the separation of the bus service and the air program to maximize RTA dollars for the air program.
“There’s a conflicting return on investment (ROI) between the two. Air has an economy driving ROI; the bus does not. Let’s not have a discussion about getting rid of one or the other—let’s separate the two so we can do what they were designed to do,” Mueller said.
Mueller wondered if it would make more sense to combine the RTA bus program with Mountain Express.
“I am encouraged we’re looking at the next five years and the air program, but we have some problems here and now we need to address,” he said.
Such a change would require taking a referendum to Gunnison Valley voters. The 2008 reauthorization of the bus service, voted on by taxpayers, placed equal prioritization, if not equal dollars, on bus and air service.
Truex pointed out that the RTA bus program and Mountain Express both rely on federal grants—the RTA to the tune of $135,000. There is no way to assume that amount would stay the same if the services combined.
But even with the debate, the idea was added to the mix for Truex to outline as part of strategic planning. He, Myers and Moffett will share their outline with the board and CBMR in March.

A stacked deck?
A strategic plan is one of many changes CBMR and the RTA have pursued to get the air program back on track. Last spring, the RTA and CBMR officially split airline negotiations, and the RTA reduced the size of its contract with Myers. Last month, they explored the development of a subcommittee that could tackle the questions in more detail than the entire board.
One thing is increasingly clear as the RTA and CBMR continue to adjust their strategy: the complexity of the challenges they face are not limited to the Gunnison Valley. According to Moffett, Telluride is anticipating fewer flights to Texas this summer. The airport is also on the verge of losing federal funding as enplanements—the number of passengers boarding aircraft—could fall below 10,000 per year.
Scott Stewart, executive director of the Telluride Montrose Regional Airport Organization, explained that aircraft serving the Telluride airport are limited by the high elevation and short runway. As a result, Telluride lost U.S. Airways service from Phoenix. That could put the airport under the 10,000 enplanement mark.
“That means the airport loses $850,000 in entitlement funds, going from $1 million a year to $250,000 a year,” Stewart said. “It is not final, however. We are working on something that’s proprietary… that may add service for summer, fall and early winter of this year to maintain enplanement.”
In addition, Myers noted that one airline turned down a major Colorado ski resort for summer aircraft. And last month, National Public Radio reported that major cities like Pittsburgh and Cincinnati have begun using MRGs to ensure flights.
The rules of the game have changed since the 1980s when CBMR’s then-owner Ralph Walton pioneered MRGs. When asked if it might be time to think outside the box again—to think beyond simply paying the airlines more money—Morgan said, “It might be. The airline industry is changing the way they operate. In general, they are reducing supply in order to increase demand… and increasing prices of tickets. The model of the more seats we have the more people we bring to Crested Butte might not be the same as it was five years ago.”
From Mueller’s perspective? Every option is on the table—even passing conversations about charter flights and CBMR owned jets.
“We want to get creative and come up with a model that works,” he said.