RTA holds steady course in air service discussion

Current funding method is unsustainable

At a board retreat on Friday, March 2 the Gunnison Valley Rural Transportation Authority (RTA) decided to hold off on asking voters to increase its tax revenues. Citing concerns about the economic climate, they opted to hold off until 2013 to consider equalizing sales tax collection between Gunnison and the rest of the valley, or increasing it all together.

But even though the RTA won’t be scrambling to launch a public relations campaign, it’s still faced with a bleak financial reality. It has approximately $400,000 to put toward airline revenue guarantees during the 2012-2013 ski season. Minimum revenue guarantees (MRGs) have surpassed the $1.5 million mark, and Crested Butte Mountain Resort (CBMR) cannot sustain its current level of funding—$1.3 million of this year’s $1.7 million in MRGs.
“The broader decision here is what we want this program to look like and what that means to us as a county, recognizing that if we’re only going to spend half a million dollars as the RTA, what that’s going to mean?” said CBMR general manager Ethan Mueller. “Eventually the businesses will right-size themselves. Two real world examples—I’ve had to let go of two year-round, full-time employees because the volume wasn’t there. I couldn’t justify those positions.”
For more than four and a half hours, the RTA and CBMR brainstormed the best way to move the air program forward. In the end, they walked away with a plan that looks a lot like this year’s Gunnison Valley air service—direct winter service from Houston, Denver and Dallas, but cutting some January flights in the hopes they can use the savings to secure more flights from Denver.
“You guys as a resort have told us that consistency is something we can build on, and that’s what we’re going to try to provide,” said commissioner Phil Chamberland.
It’s a relatively new strategy for the air program. Until recently, direct air service into the Gunnison-Crested Butte Airport changed annually. Newark, Atlanta, Salt Lake City and Chicago all made the mix. But with consistency and time, the hope is that the flights will begin to pay for themselves, freeing up funds to secure better Denver service.
“When we jump in and out of markets, we end up losing skiers,” Chamberland said.
“We also lose credibility,” Commissioner Paula Swenson said.
The decision to keep Dallas and Houston service came after much debate, as the board and the public discussed the RTA’s mission to “improve air transportation to and from the Gunnison-Crested Butte Regional Airport on a year-round basis.” Attorney David Leinsdorf argued that the RTA hasn’t been delivering on that mission.
“You’ve done pretty much the same thing for the last eight or nine years. The fund balances go up, you throw some new markets in the mix, bump up against the caps and withdraw. I think you need to focus on going to United and getting year-round service,” Leinsdorf said.
He pointed to changes in the RTA’s sales tax revenues as further evidence that the RTA needs to support year-round service. Data provided by RTA executive director Scott Truex showed that over the last four years RTA sales tax revenues have dropped twice as quickly in the winter as they have during the summer—a 28 percent drop in the winter and a 14 percent drop in summer. In other words, summer is becoming a bigger piece of the pie.
Businessman Rocky Kimball (who has earned 2.4 million frequent flier miles, not the 200,000 reported in the February 24 issue of the Crested Butte News) and former ski resort executive John Norton agreed with the need for year-round service. Norton said his time as a resort vice president in Aspen showed him there are multiple ways to populate an airport.
“In Aspen I saw the power of that Denver hub,” Norton said. “I was ready to say, ‘How are we going to get long haul flights in here?’ But Aspen is a big tub filled with a bunch of teacups. Pretty soon you’re full.”
“It’s a little like Moneyball. These are statistics [like skier visits] but they might not be the right statistics,” Kimball said. “There’s a study in Sun Valley. If they lost year-round service, 20 percent of the business would close down. My guess is we’ve lost businesses, and there are businesses that haven’t moved here.”
No one in the meeting argued with the need for year-round service; the problem lay in the price tag. Expanding the overnight flight from Denver to a year-round service in 2012 would have required an MRG of $1.9 million. And the day before the retreat, United Airlines quoted airline consultant Kent Meyers an MRG of $2,409,676 for approximately 32,000 winter seats from Denver if the RTA chose to forego Dallas and Houston service in favor of Denver.
“They do not think we can fill these planes,” Meyers said. “They will never say no, they will just raise the cap.”
Jeff Moffett, CBMR’s director of Crested Butte Vacations, said he looked into the possibility of partnering with a regional airline like Great Lakes Air for Denver service. But that raised concerns from the board about the quality of the flight and unsuspecting tourists boarding such small, uncomfortable planes.
The RTA also discussed throwing their chips in with the Montrose airport, partnering on bringing Dallas or Houston service into their airport and improving shuttle service to Gunnison and Crested Butte. But that raised questions about giving Gunnison County tax money to Montrose, and a new CBMR survey suggests it’s not a viable option for visiting skiers.
“We’ve been doing a lot of research this year about transportation to Montrose,” Moffett said. “It’s surveying skiers on the mountain, and they’re saying, ‘We don’t want to fly to Montrose.’ Only 20 percent might consider it if the frequency, rate and airfare were right.”
Moffett also said that Houston bookings are down 64 percent—the same decrease in available seats into the Gunnison airport. That raises concerns for Mueller; the Dallas service brings about 12,000 passengers to the resort.
“If we see anything close to what we saw with Houston this year, that’s thousands of visitors who wouldn’t be coming here next year. That concerns me. I also think in a better snow year we could see that flight succeeding a bit more,” Mueller said.
There was a small silver lining in the discussion. In spite of the season’s slow start, load factors are tracking closer to their targets. If fuel prices stay stable, payments to the airline could come in under the MRGs by as much as $100,000 for American Airlines and $10,000 to $15,000 for what was Continental and is now United.
“Five out of the first six years, payments were less than the caps and that’s how we built up the budget. But for the past three years, the airlines’ losses have exceeded the caps,” said Truex.
Coming in under this year’s caps is a step in the right direction, and something the RTA and CBMR believe they can build on. The RTA agreed to stay in Dallas and Houston, cutting some underperforming flights in January to free up funds for more Denver flights. The big question that remained was how to fund the program, particularly given the board’s reluctance to pursue a sales tax increase for the RTA.
“This year is going to be a tough year to pass any tax,” said Chamberland. “Having said that, this is a critical issue. CBMR has been great, dipping deep into their pockets to keep this level of service that we have. I don’t see that being financially viable for them, so at some point we have to find relief.”
“I think an off-year election is better because the people impacted are the people that get out and vote,” said board member Bill Nesbitt.
“We need $1.5 million to $1.8 million just to do what we’re doing now… Next year we can go for the full increase and show consistency, show our continued efforts and show our community that we have three or four years of a track record,” Swenson said.
“I sincerely would like to maximize the potential for success and I think that would be to wait until a year from now,” said Mt. Crested Butte Mayor William Buck.
“We have all the elected leaders from the municipalities and the counties… We need, if not unanimity on the board, close to it in support of getting on the ballot, because all of us will be spokespersons,” said Crested Butte Mayor Aaron Huckstep.
In the absence of a referendum, Mueller said CBMR would continue funding the air program to the best of its ability.
“We’ll do what can but we can’t assume we’ll be prepared to pony up $1.3 million again… but if we find savings on the Houston flight, as well as some additional funds, we can maintain what we have and add a Denver flight. I think it’s reasonable for this year.”
He did say, however, that it would be critical to find every bit of extra funding available, even $10,000 or $20,000 donations. The RTA will take up that discussion at its April board meeting.