Airport will not see Frontier flights soon

Airline industry changes hit small airports hard

When Frontier Airlines announced over a year ago that it would be flying into a handful of new mountain markets, local transportation officials pitched their best offer, then waited, and waited… and waited. Last month the low-cost airline announced it had chosen Aspen, Vail and Grand Junction as three new mountain markets, but more connections were in the works.

 

The announcement doesn’t provide much hope for getting Frontier to begin service at the Gunnison/Crested Butte Regional Airport, according to transportation consultant Kent Myers—at least not anytime soon. During a regular meeting of the Gunnison Valley Rural Transportation Authority (RTA) on January 11, Myers said, "I don’t think Frontier is going to come here for next winter."

Myers and RTA board member Bill Babbitt recently attended a meeting with Frontier representatives to discuss the airline’s market potential in Gunnison. Regarding the conversation, Babbitt said, "The cost of fuel is causing their operations to hunker down and survive."

While fuel costs may be the biggest factor affecting Frontier’s decision-making, Myers said after the RTA meeting that other factors are affecting not just Frontier, but the entire airline industry.

Myers says the constraints include a tremendous demand for international flights, poor connectivity between the Denver hub and rural airports, and a limited supply of aircraft equipped to fly in the mountains.

Crested Butte Mountain Resort (CBMR) vice president and chief marketing officer Ken Stone says these factors also weigh on the decisions local officials must make when attracting new airlines to the valley. "There are certainly some bumps in the road in the airline industry we have to take into consideration," Stone says.

Take, for instance, the massive demand for international flights. Myers says the major air carriers "have made a major shift in the deployment of aircraft to international markets. That’s where the money is. The competition has gotten so fierce… These guys are pointing aircraft to Europe and Asia where the economies are booming."

Myers says the side effect of international demand is aircraft availability locally. Larger aircraft like 747s that were once used mainly to serve large hub cities like Denver are now being flown overseas. Therefore, mid-size aircraft are becoming the staple of hub connections within the states. But the most damage is done to small community airports like Gunnison, which receive even smaller aircraft—or no aircraft at all.

"The smaller markets at the bottom of the food chain are getting squeezed," Myers says.

He says small aircraft getting forced into small markets makes flying even harder due to the cost of fuel. "Depending on the vintage, some of these turboprops, and even some regional jets, are real gas-guzzlers," Myers says.

Myers says with small aircraft in such high demand elsewhere, it’s tough to convince airlines to fly into the local airport at the risk of taking losses. "If there was no (financial performance) guarantee in place we would not have those aircraft," Myers says of the RTA and CBMR’s combined guarantee of close to $1 million. The RTA and CBMR split the cost of performance guarantees to both United and American Airlines to ensure that flights continue even when the airlines incur losses.

Myers says connectivity between Colorado cities and rural communities also plays a role in affecting demand for flights to certain areas. As flights from other states are added at Denver International Airport, the demand for direct flights to rural resorts decreases. Myers says this happens because, for many vacationers, skiing in Colorado is the same experience no matter where they go. "Each resort has its own personality, but we all have blue sky, white snow and green trees," he says. Shuttle services and a short drive mean that resorts close to Denver, such as Winter Park and Breckenridge, benefit from additional flights into Denver.

Stone agrees that not everybody is going to fly into Denver and then make the four and a half-hour drive to Crested Butte. "We can’t depend solely on a drive market here to have a sustainable community. We need a stronger mix of air passengers," Stone says.

As the RTA and CBMR consider attracting new airlines and markets to the area, Stone says it’s also important to meet the needs of local travelers trying to get out.

Considering the factors affecting the industry, Stone says airlines are now looking to cut costs while keeping existing service levels and adding new service areas. "They’re all singing pretty much the same song… They’re looking ahead to see how to manage their businesses," Stone says.

The answer seems to be consolidation, according to Myers. "At $100 a barrel for oil, there’s going to be more consolidation within the airline industry," he says.

Myers says the major air carriers running out of Denver—like Continental, Northwest, United, and American—all have duplicate infrastructure and are all considering merger agreements as a way to cut costs.

But while consolidation can lower costs, Myers says it can also decrease the number of primary hub cities. Myers says TWA (Trans World Airlines) used to have a hub in St. Louis, but when the company was bought by American Airlines the St. Louis hub all but disappeared.

Frontier Airlines is also being affected by consolidation of the airline industry. Two weeks ago, Frontier CEO Sean Menke reported to the Denver Business Journal that in the face of increased competition and industry mergers, the company was forced to change its strategy.

During the RTA meeting, Gunnison-Crested Butte Tourism Association director Jane Chaney said, based on recent press articles, Frontier has not turned a profit in four years. They recently laid off 100 employees and are now looking to sell or lease some of their aircraft. "These guys are totally in survival mode, if you ask me," she said. "(Menke) talked so much about going into destinations with minimum risk. From that standpoint we don’t stack up as favorable."

With Frontier’s plight in mind, the RTA is now focusing on attracting other airlines to the valley in time for the next winter season. Myers says, "We need to pick our partners very carefully, because they may disappear in six months or become part of a conglomerate where you don’t know who to deal with." He also said the board needs to consider the impact of bringing a new airline or new destination on the current service providers.

RTA director Scott Truex says negotiations have been ongoing with airlines like Southwest and Delta to bring more flights into the area and possibly more markets as well. "Right now the airlines are making very conservative decisions. It’s an uncertain economic climate, and we have to prove ourselves to them in order to get them to come," Truex says.

Stone says the Gunnison airport is not alone in its search for additional airline service. "This is the same paradigm all the other resort mountain communities are facing," he said of the volatile state of the airline industry.

Stone says some community airports must rely on nearby ski resorts or municipalities to fund and organize an air service program. Stone says it’s refreshing to see the local collaboration between the RTA, Tourism Association and CBMR. "Here we have a clear vision that we all share," Stone says.

Truex says the RTA should hear from Delta and Continental by the next meeting in February regarding air service for next winter.

Stone says they’re considering a direct flight from Houston on Continental, and direct flights out of Atlanta and Salt Lake City on Delta. "If we can work with new carriers like Delta and Continental and have direct flights from their major hubs, that’s certainly the strongest scenario," Stone says.