» Fitch forecast for Southwest departure to increase costs for airlines and passengers looking accurate
Passengers at Jackson Medgar Wiley Evers International Airport may already be feeling a fare pinch from the regional airport’s loss of discount carrier Southwest Airlines.
First quarter figures from the U.S. Department of Transportation’s Bureau of Transportation Statistics show average round-trip fares rose 4.7 percent over the first quarter of 2013, going from $434.25 to $454.49. The first quarter increase landed Jackson Evers a ninth-place ranking for highest domestic fares.
Though Southwest didn’t cease service until early June, the anticipated loss of the $800,000 the Dallas-based airline generated for the airport annually led the Jackson Municipal Airport Authority to hit remaining carriers with landing fee increases of 18 percent in January and 15 percent in May. A new budget that goes into effect Oct. 1 could include further increases.
The Airport Authority hopes by next summer it can regain the A- rating Fitch Rating Service removed on the Authority’s $39 million bond issue for refurbishing the Jackson Evers terminal and upgrading security checkpoints. The Authority has delayed the capital improvements until the higher rating is restored.
In the downgrade to BBB+, Fitch said the loss of Southwest will likely lead to “measurable and potentially permanent declines” in the airport’s already small passenger counts.
The result, Fitch said, will be higher fees to airlines and higher costs to passengers.
Fitch’s prediction is correct so far.
Airport Authority CEO Dirk Vanderleest has said the airlines “do not necessarily” pass fee increases on to passengers and added airlines serving the airport incur airport costs within the 3 percent of total operating costs – a standard for the airline industry. The fee increases have not kept remaining carriers such as Delta Airlines and United Airlines from bumping up seat availability by double digit percentages to fill the void left by Southwest, Vanderleest noted.
Costs assessed carriers can vary dramatically by airport, said a spokeswoman for Allegiant Air, an ultra low-cost carrier in talks with Jackson Evers on providing non-stop service to Orlando. Some airports, for instance, provide fueling and other ground service, while others leave those jobs to individual airlines, said Jessica Wheeler, Allegiant spokeswoman.
Costs associated with operating out of Jackson Evers have caused Allegiant to so far balk at providing the twice weekly service. If costs reach a point that Allegiant can’t continue to offer its ultra low fares, the Las Vegas-based airline pulls out. Or if costs are too high at the outset, Allegiant won’t come at all, Wheeler said, which at the moment is Allegiant’s view of Jackson Evers.
“He (Vanderleest) may believe that it has not affected fares, but certainly it is part of the cost of doing business,” she said of the fees placed on carriers.
Jackson Evers’ ninth-place domestic fare ranking for the first quarter has it sandwiched between Pensacola, Fla., and Memphis. Birmingham landed a 13th-place ranking, with its fares going up 6.8 percent in Q1 over the same quarter in 2013.
In looking at the top 10 airports for average domestic fares from 2000 to the first quarter of 2014, Jackson Evers is the only one to show a net increase in fares over the period at 0.7 percent. By comparison, Pensacola’s average domestic fares fell 19.1 percent for the period and Memphis’ 15.6 percent.
The lack of a low-cost carrier such as Southwest can have a major impact on ticket pricing, The Wall Street Journal concluded in an analysis of the Bureau of Transportation Statistics’ average domestic fares for the first quarter of 2011.
In that report, the business newspaper noted the two airports with the highest fares – Houston’s Bush International and Huntsville (Ala.) International – shared the distinction of not having a low-cost carrier.
The analysis showed Bush International’s average domestic fare was $477 compared to Houston’s Hobby International’s $299, one of the lowest average fares in the country. The difference: Southwest served Hobby.
Huntsville International had an average domestic fare of $473 in 2011’s first quarter. High fares led cost-conscious travelers to drive to Birmingham or Nashville, both less than two hours away, for fares $100 less offered by Southwest, The Wall Street Journal reported.
Today, passenger traffic has fallen off at Huntsville International to the point it is no longer part of the Bureau of Transportation Statistic’s quarterly rankings.
“There’s no getting around the fact that competition from a low-cost carrier continues to be a major factor in reducing rates, said Bob Hazel, an airport expert at consulting firm Oliver Wyman, in the Journal report.