RTA seeks relationship with United

Potential new strategy spurred by suggestion from public

In an airline game that is continually stacked against small resort communities, the Gunnison Valley Rural Transportation Authority (RTA) is again looking to try something different. This time, the suggestion comes from the public: have elected officials from the RTA meet directly with United Airlines in the hope that a better relationship will benefit future negotiations over air service and minimum revenue guarantees (MRGs).

 

 

The idea was raised in a letter to the editor of this newspaper by Crested Butte attorney David Leinsdorf, suggesting that Crested Butte Mountain Resort (CBMR) be responsible for winter air service (including any revenue guarantees to the airlines) and the RTA focus on year-round service as its mission dictates.
Leinsdorf’s letter suggested that “although the RTA claims that United demands too much money to provide more flights, we’ll never really know what’s feasible until the county commissioners, mayors and councilmen on the RTA board meet with United and genuinely pursue a major recalibration of our air service priorities.”
RTA executive director Scott Truex brought up the letter as a point for discussion at a June 28 board meeting of the RTA. Commissioner Paula Swenson added, “I’ve had conversations with Leinsdorf on this and articulated to him just how much more expensive year-round service from United would be, but he does believe a contingency of elected officials instead of sending [airline consultant Kent Meyers] would make a change.”
Jeff Moffett, CBMR director of Crested Butte Vacations, confirmed that the most recent price tag for year-round direct United Airlines service from Denver to Gunnison was $2.4 million. That is significantly higher than the RTA’s projected 2012 fund balance of approximately $489,594. Still, the board was intrigued by Leinsdorf’s suggestion.
“Is there any merit to that?” asked Crested Butte Mayor Aaron Huckstep.
“Certainly, whenever elected officials show up there is a very different tenor to the conversation. I have had several people present this idea to me, and I believe it could be effective. It certainly wouldn’t hurt,” said Commissioner Phil Chamberland.
Moffett agreed, pointing out that United continues to serve the Gunnison market during the shoulder seasons in spite of losing money because the airline sees it as one of the markets they serve—not a seasonal market. Moffett said he thinks they value their relationship with Gunnison.
“So to have elected officials go and really thank them for making that commitment and sticking with Gunnison through tough times and good times, it would absolutely be beneficial,” Moffett said. “But at the end of the day they’re turning out MRG quotes down to the single dollar… There’s going to be a loss adding capacity to Denver and they’re not going to be willing to lose money,” Moffett said.
“I don’t see any harm in it,” Meyers added. “You could clearly see for yourself the culture of the company and who you are dealing with and who we talk to on an ongoing basis. I don’t see a downside at all. Whether you get any further is really a business decision.”
In light of the board’s interest in pursuing a meeting with United, RTA board chairman Chris Morgan said it would be important to bring a long-term plan to the table. Board member Bill Nesbitt wondered if they should pursue a new aircraft that will soon be on the market—a 75-passenger plane with lower operating costs and reportedly coming to the Colorado market in coming months.
The board directed Meyers and Moffett to put their heads together on possible strategies before the next meeting in August. But while the RTA has heeded Leinsdorf’s suggestion to build a relationship with United, it doesn’t look like they will sever their relationship with CBMR anytime soon. Individual board members are still pursing contributions from the county and the municipalities to put toward a contract with United for direct service from Houston during the 2012-2013 ski season.
Mt. Crested Butte has committed $20,000 from its admissions tax, the county has agreed to look at contributing around $20,000 during its 2013 budgeting process and the city of Gunnison is looking at committing $10,000. The town of Crested Butte has not yet settled on an amount but each entity has made it clear that they want their money to be last-in and first-out should the service perform well enough to get a refund at the end of the winter season.
“It is a stopgap measure to make sure we had the same level of service as last year,” Gunnison Mayor Jonathan Houck said. “The citizens are already paying money into air service… If we need to plug the gap we’re willing to go there but this can’t be permanent funding from year to year because that’s not the role of the municipality.”
The municipalities asked for the special conditions after CBMR learned in May that it would not need to pay the full 2011-2012 revenue guarantee of $1.3 million to American Airlines for service out of Dallas.
The resort had to pay only $564,000, due in part to how the flight performed and high ticket prices at the end of the season. The unexpected boon, however, did not negate the possible need for third-party contributions for 2012-2013 service. When CBMR committed to the Houston MRG last year, they budgeted for the payment to come in between $900,000 and $1.1 million.
“Technically to budget we did save a little under half,” said CBMR general manager Ethan Mueller,  “but those weren’t real dollars recognized as a company and we also recognized one of the most catastrophic seasons on record for the ski industry.”
The MRG for Dallas service is again $1.3 million, of which CBMR has committed to contribute $865,000. The resort has been quite vocal that it could not commit the full guarantee, and the RTA, Mt. Crested Butte Town Association Center, West Wall management and Wells Fargo have committed to helping cover the remainder. Mueller also cautioned that the American flight might not perform as well this winter.
“I wouldn’t necessarily expect the same amount of savings,” said CBMR general manager Ethan Mueller. One group that booked on American last winter opted to go to Steamboat this year because there was greater frequency of flights and airline carriers. “That was a large group, the majority of which were on the American flight and they’re not coming. That needs to be backfilled and filling two to three seats at a time versus hundreds is more challenging,” noted Mueller.
He added that while the ultimate goal is for the resort to contribute less to the air program over time, CBMR is committed to supporting it. “When I got here eight years ago, we were in a position where the resort didn’t have to contribute and obviously that changed over time and got to a high level, and now it seems to be going the other way a little bit. That’s a good thing for us… but we know that for at least the next few years we’ll have to contribute to this program and we are committed,” Mueller said.

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