The Relentless Pursuit of Frequent and Affordable Air Service
Thursday, February 27, 2020
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 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 that the biggest influence on new service is a significant, sustainable passenger base. 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. Bringing in the aircraft, staff and other factors associated with a new route is a multimillion-dollar venture for an airline, and they are very deliberate in making these decisions. The strongest case we can make for additional air service is demand, and while that element is largely out of the airport’s control, we try to complement that data with additional information to help solidify our case.
MEM literally has discussions every month with airlines about air service. These can come in the form of phone calls, in person meetings and conferences devoted to connecting airlines and airports. Our goals for Memphis International Airport (MEM) vary, depending on the airline. Sometimes we’re working to maintain existing service. Sometimes we know that MEM is being considered for a route and we want to move up the list and re-emphasize the importance of that route. And sometimes we are making a case for a particular route. In short, our goal is to see how MEM can fit into the short-, medium-, and long-term business plans of various airline companies.
O&D vs. Transfer
Air service has become an especially crucial focal point for MEM since Delta Air Lines removed its hub operations here. In a hub market, one airline normally dominates the available flights and destinations, and uses its hub airport to connect passengers from one city to another. An origin and destination airport has more competition and features primarily passengers who are coming in and going out. In our case, passengers who are beginning or ending their trip in Memphis.
When we look back at some of the routes that were offered during the hub era, it’s important to consider that the vast majority of our passengers – 75-80%-- were transfer passengers. They were only stopping in Memphis to get on another flight. So, not only did Delta move its planes, it also moved the majority of the passengers that were filling many of the planes.
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 additional destinations, more frequencies, and larger aircraft.
One possible reason for passenger growth is that the average fares have dropped by nearly $200 since the first quarter of 2012 during the hub era. 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 increased service, and we’ve added Air Canada, Allegiant, Frontier and Southwest to the mix of airlines.
Fares are controlled by the airlines and not the airport and while the airport’s impact on fares is minimal, we try to keep the airlines costs as low as possible in order to remain an attractive market. As you can see in the graph below, MEM’s average cost per passenger for the airlines has steadily dropped, making it increasingly easier to do business here.
The good news is that this is a period of unprecedented growth in the aviation industry, and MEM is no exception. A total of 4.64 million passengers passed through MEM in 2019, an increase of 5.09% compared to 2018 and the 5th straight year of growth. In addition, the airlines responded to this increased passenger demand by adding more flights and seats: flights increased by 10.1% and seats increased by 9.5%. These increases are even more positive when taking into consideration the grounding of the Boieng 737 MAX aircraft, which has impacted the fleets of many major airlines.
Beyond the Passenger Data
Because the airlines have extensive passenger information, our goal is to provide additional information about potential routes: to share data that the airlines don’t already have. To that end, we’ve established partnerships with Memphis Tourism, Greater Memphis Chamber, and other regional chambers and business development groups. This allows us to share extensive information about tourism spending, business travel needs, and corporate connections to other markets. That type of information can be crucial in recruiting new service.
As highlighted earlier, air service at MEM is trending in the right direction, with strong passenger growth paving the way for new routes this year from Allegiant, Delta, Southwest, and hopefully more to come. But the job is never done, and with each city we mark off of our “unserved destinations” list, another one replaces it. 2020 will be another year defined by MEM’s relentless pursuit of frequent and affordable air service! Have questions about this article or air service in general? Please email us at firstname.lastname@example.org.