Building Columbus Air Service Community Strategy for Growth Agenda - PowerPoint PPT Presentation

Building Columbus Air Service Community Strategy for Growth

Agenda State of the Airline Industry Changes in Non-Hub Air Service Airline and Alliance Consolidation The Journey in Columbus Travel Trends and Data Passenger “Leakage” Developing Additional Service Service Targets Mitigating Airline Risk

State of the Airline Industry

Jet Fuel Prices Are at the “New Normal” Spot Price of Jet Fuel – U.S. Gulf Coast January 1, 1994 – November 1, 2014 $4.00 Current Price: $2.65 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Source: US Energy Information Administration Page 4

Increasing Costs Have Spurred Consolidation 1978 1990 2000 Today Page 5

Non-Hubs Have Lost More Seats Than Others Change in Scheduled Flights and Available Seats by Airport Size Calendar Year 2007 vs. Calendar Year 2013; US Airports 0.0% -6.8% -7.1% -5.0% -10.0% -22.8% -24.4% -25.4% -28.5% -15.0% -31.1% -20.0% -43.0% -25.0% -30.0% -35.0% -40.0% -45.0% -50.0% Large Hub Medium Hub Small Hub Non-Hub Source: Sixel Consulting Group Analysis of OAG Airline Schedules Page 6

Small Regional Jet Capacity is Down 16% Small Regional Jet Capacity Index in North American Markets Calendar Year 2004 – Calendar Year 2013 AA DL/NW UA/CO US Industry 1.50 Domestic Regional Jet Capacity Growth Index 1.40 1.30 1.23 1.21 1.17 1.16 1.20 1.13 1.10 1.08 1.07 1.10 1.05 1.05 1.03 1.03 1.00 0.95 1.04 0.91 0.89 0.88 0.96 0.86 0.95 0.90 0.84 0.87 0.80 0.79 AA is Growing Small RJs 0.78 0.70 0.74 DL is Reducing Small RJs 0.60 0.64 0.58 0.50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Page 7 Page 7

The Journey in Columbus

Columbus Offers a Large Metro Area Columbus MSA: 491,852 The Columbus Airport catchment area: 610,924 Inside yellow line The greater Columbus area: 1.2 million Inside blue line Page 9 Source: Sixel Consulting Group; US Census Data

Most Passengers Come From Immediate Columbus Columbus Auburn Columbus MSA: 55% 910 Pax/Day Auburn CSA: 24% 397 Pax/Day Page 10 Source: Sixel Consulting Group Columbus True Market Study

Columbus Has the Highest Fare in the Region Average One Way Fares at Regional Airports in the Southeast Region Year Ended First Quarter 2014; No Adjustment for Ancillary Revenue Columbus, GA $344 Dothan, AL $305 Valdosta, GA $256 Albany, GA $254 Montgomery, AL $248 Mobile, AL $246 Huntsville, AL $246 Columbia, SC $231 Brunswick, GA $229 Tallahassee, FL $227 Hilton Head, SC $215 Gainesville, FL $215 Valparaiso, FL $214 Savannah, GA $214 Southeast Region Average: $164 Augusta, GA $207 Pensacola, FL $198 Key West, FL $197 Birmingham, AL $197 Florence, SC $196 Panama City, FL $184 $150 $170 $190 $210 $230 $250 $270 $290 $310 $330 Page 11 Source: US DOT Table OD1A

Columbus Retains Just 9% of the Region’s Pax ATL: 90% BHM: 0.5% CSG: 9% MGM: 0.3% Page 12 Source: Sixel Consulting Group Columbus True Market Study

Columbus Reliability Has Returned to “Good” Flight Cancellation Percentage at Columbus January 2013 – June 2014 15.4% 16% 14% 12.0% 12% 10% 8% 6% 5.1% 4% 2.7% 2.1% 1.9% 1.7% 1.6% 1.5% 2% 1.1% 0.8% 0.8% 0.8% 0.5% 0.0% 0.0% 0.0% 0.0% 0% 2013-01 2013-02 2013-03 2013-04 2013-05 2013-06 2013-07 2013-08 2013-09 2013-10 2013-11 2013-12 2014-01 2014-02 2014-03 2014-04 2014-05 2014-06 Page 13 Source: US DOT Table T100

Developing Additional Service

Our Primary Service Targets Charlotte Columbus Orlando/Florida Page 15

Our Secondary Service Targets Chicago Washington, DC Charlotte Columbus Dallas/Ft. Worth Orlando/Florida Page 16

“[The] FAA allows promotional incentives to air carriers for new service to increase travel using the airport and/or promote competition …” Page 17 Source: Sixel Consulting Group Analysis of FAA Air Carrier Incentive Handbook

Mitigating Airline Risk Due to Drive Diversion, New Routes Forecast Poorly in Airline Models Models Have Trouble Adjusting for Passengers Who Use Atlanta New Routes Are a Major Investment A Columbus – Charlotte Service Costs $3,600 Each Way A Daily Flight is an $2.6 Million Annual Investment Large Markets with More Traffic Seem Less Risky Consumer Behavior is Difficult to Change Frequent Flier Loyalty Corporate Contracts Airport Preference Airports Are Limited in What They Can Offer FAA Competition Regulations Business Commitment to Use New Service is Paramount Commitment Can Be Leveraged to Save Money Opportunity to Reduce Drive Costs Employee Time Lost to Ground Transportation and Connections Page 18 Source: Sixel Consulting Group Analysis

We Have a Head Start… But Need Partners This Fall Columbus Airport Won a Small Community Air Service Grant Provides a Revenue Guarantee for New Service Targeted Charlotte on American (US Airways) Columbus, Georgia Incentive Overview American-Coded Service to Charlotte As of November 2014 Incentive Guarantor Amount Year One Total Notes 2014 SCASD Grant DOT $750,000 $750,000 MRG Local Match Local Contributors $200,000 $200,000 Marketing Total Incentive Value, Year One $950,000 The Airline Will Also Want Local “Skin in the Game” Grant Requires Local Matching Funding (Non-Airport) Can Be for Marketing or Revenue Guarantee Any Participant is Welcome Page 19

Building Columbus Air Service Jack Penning Richard Howell, AAE Executive Director, Strategy and Development Airport Director jack@sixelconsulting.com rhowell@flycolumbusga.com sixelconsulting.com flycolumbusga.com