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MEM Passengers Match Increased Supply with Demand
Friday, November 9, 2018

In this day and age, it’s easy to oversimplify things, and it’s no different in the airport industry. Growth is often described in very broad terms, such as flights or passengers. While there’s nothing wrong with that, there’s often a lot more to it.

FY2019 1st Quarter Adds 37,500 Enplanements

First quarter Fiscal Year 2018-2019 (July 1-September 1) numbers from Memphis International Airport revealed a 5.1% increase in the number of enplanements at compared to the 1st quarter of FY2018 (“Enplanement” is a common airport industry term that refers to a passenger getting on a plane. The number of enplanements is approximately half the total number of passengers, since it does not account for passengers who are deplaning, or getting off a plane). MEM’s fiscal year runs July 1-June 30. That 5.1% increase represented more than 37,500 additional enplanements during that time period. These numbers illustrate a continued growth trend for MEM, which exceeded 2.15 million enplanements during its Fiscal Year 2017-2018, numbers that rival those of the Delta hub-era years.

O&D vs. Transfer

Those familiar with our Delta hub years may be scratching their heads at that, but there’s a simple explanation. These numbers represent origin and destination (O&D) traffic. That is, passengers who are beginning or ending their trip in Memphis. During the hub years, the vast majority of our passengers – 75-80%-- were transfer passengers. They were only stopping in Memphis to get on another flight. MEM’s traffic now features more than 99% O&D traffic. For this reason, we are now a supply and demand airport. Because airlines are dependent upon local traffic rather than transfer passengers to fill planes, local passenger trends drive the availability of destinations, frequencies and capacity.    

Because our O&D traffic is increasing, we’ve seen airlines respond with increased service in the form of flights, frequencies and larger planes. One possible reason for passenger growth is that the average fares have dropped by more than $170 since the hub days. Hub airports typically balance significant connectivity with high fares since one airline dominates the market. There’s a lot more competition at MEM now: since the de-hubbing, American and United have increase service, and we’ve added Air Canada, Allegiant, Frontier and Southwest to the mix of airlines.

Capacity

Flights per day is actually not a very good way to measure airport growth, because a flight could mean a 50-seat aircraft or a 175-seat plane. Total available seats is a more accurate measure, though to get a full picture you really need flights, destinations and seats. One key indicator of strong demand to a particular destination is when an airline increases capacity. That could come in two forms: “upgauging” an aircraft (switching to a larger plane) or adding a frequency. Capacity is increasing at MEM. In September 2017, there were 7,431 available seats per day, and 75% of those seats were occupied by passengers. Move forward to September 2018, when there was an average of 7,942 seats per day, an increase of more than 8%! Even more telling is that the load factor (occupied vs. available seats) was 74%. That means that frequencies increased and planes got larger, but passengers still filled them at roughly the same rate. The supply increased, and the demand increased to match it. It’s a great trend for the Memphis market as we continue our efforts to increase air service. 

Air Service

One of the most common things an airport hears is “We need flights to <insert desired destination>.” We understand that, and we are continually meeting with airlines in an effort to expand options for passengers. Air service is a complex process. Profitability is always going to be the top factor in an airline’s decision to offer new service, which means they have to see a significant, sustainable passenger base before they’ll consider it. They don’t add routes on potential, either: “If you build it, they will come” worked for Kevin Costner in “Field of Dreams,” but it doesn’t translate to well to the airline industry.

Thus, the strongest case we can make for additional air service is demand, and if these latest numbers are any indication, MEM passengers are doing their best to make a statement.

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