The airline industry has experienced major changes over the past 10 years, including radical consolidation of the U.S. carriers, resulting in the Big Four airlines – American, Delta, United, and Southwest – controlling about 85% of the domestic seating capacity. Excess airline seating capacity has been removed and profits are more consistent now. Additionally, the pilot shortage has adversely impacted industry growth, and made it particularly difficult for start-up airline activity.
In other words, the potential airlines to recruit for new service, especially for smaller airports, are much more limited than in the past. Nevertheless, Baton Rouge Metro Airport officials are consistently attending conferences and meeting with airline planners to solicit new service for BTR. Airline Planning Departments determine where an airline flies and what aircraft it utilizes on the routes.
Even though airlines have access to a plethora of data to assess markets, BTR provides data and route analyses to make the case for new service. The airport supplements its own data with assistance from consultants who have extensive experience working as airline planners. Consultants used by BTR have held top management positions in the planning departments at some of the largest U.S. airlines.
Airlines are more risk averse today and do not want to return to the days of adding excess capacity that impedes profitability. New routes are a major investment. Airline planners look at passenger traffic trends, and they follow the passengers. Although air service can be something of a chicken and egg thing, today’s airlines are much less likely to risk a “build it and they come” approach. They want to see that the current airport service has strong community support with a clear need based on existing load factors (% of seats filled).
Other key determinations in air service include the size of the market, both for inbound and outbound travel. For instance, major “destination markets” such as Orlando and New Orleans have high “inbound” passenger demand due to tourism and conventions which inflates the demand of the market. Geography is also important. A smaller airport near a larger airport is in a more challenging position than one more isolated.
“U.S. airlines have become able to match seat supply and demand with razor-sharp precision—assuring profits and giving them unprecedented power over how to price and where to fly. Today, airports hold virtually zero power in their relationships with the carriers. Just 37 percent of airports on the U.S. mainland generate 97 percent of domestic air service demand, according to data compiled by Bill Swelbar, an aviation researcher at consulting firm InterVistas. Airlines can pick and choose the most profitable cities to serve, and even midsize destinations are struggling to compete. If Nashville or San Antonio must hustle like mad for air service, and both do, where does that leave a town like Lansing, Mich.?
The industry’s concentration means each airline now has its own well-defended turf and can deploy airplanes to where they earn the most money. That puts medium and smaller markets at a distinct disadvantage—even those that have proved solidly profitable for decades—because their decent performance may be worse than a carrier’s opportunity at another airport.”
Justin Bachman - Bloomberg