"Colorado Springs Airport putters along as advent of Southwest has DIA roaring"

Saturday, May 20, 2006

The Springs cools its jets
Colorado Springs Airport putters along as advent of Southwest has DIA
roaring
By Chris Walsh
The Denver (CO) Rocky Mountain News 


The main conference room in the finance department at Southwest Airlines'
Dallas headquarters bears a sign with the name "Colorado Springs" printed
against a mountain backdrop.
 
It's one of roughly a dozen such rooms Southwest christened after popular
cities the airline doesn't yet serve. 

For now, at least, it will remain the carrier's only link with Colorado
Springs. 

Southwest's decision late last year to launch flights in Denver rather than
the Springs underscores the challenges Colorado's second-largest city faces
as it tries to lure passengers and new airline service, a key component for
attracting tourists, residents and businesses. 

The city's airport is financially sound and moving forward on a promising
new business park, and observers say its airline service is "adequate." 

But the Springs has struggled to grow passenger traffic and boost service
despite population gains and a nationwide expansion in air travel. 

Although city leaders say they never put all their eggs in the Southwest
basket, the airport hasn't been able to attract much discount service,
making it in many cases a more expensive option than Denver International
Airport. 

Now that Southwest has established a growing presence at DIA, the Springs
could find it even tougher to generate enough demand for new flights. 

"Colorado Springs is going to have a very difficult time getting low-cost
service," said Virginia-based airline consultant Darryl Jenkins. "It's a
perfectly good airport with good managers, but when Southwest made the
decision to go into Denver it really hurt Colorado Springs." 

Golden age 

The Springs is nearly a decade removed from its golden age of air travel. 

In 1995, upstart low-cost carrier Western Pacific Airlines set up shop in
the city, launching its first flight in April of that year. The airline
quickly made a significant impact, lowering fares enough so that even Denver
residents were making the trek south to catch flights. 

By the end of 1996, annual traffic at the Colorado Springs Airport had
rocketed by 71 percent to roughly 4.8 million passengers - triple what the
airport was designed to handle. The number of nonstop markets it served
jumped threefold, and the airport ranked as the 56th-busiest in the country.


WestPac planned a huge expansion to meet demand, promising to add five new
gates and add a host of new destinations. Meanwhile, fares at DIA, which
opened in 1995, were relatively high, because airlines had to pass on
significant airport costs to customers. 

WestPac, it seemed, had ushered in a new era of air travel in the region. 

"The competitive vitality that we are bringing to this market is a huge
benefit to the entire state of Colorado," WestPac chief Ed Beauvais told the
Rocky Mountain News in 1996. 

But the good times ended almost as quickly as they began. 

WestPac, struggling with huge losses, fell hard. The carrier moved its
headquarters and most of its flights to Denver by the summer of 1997 and
shortly thereafter joined the pantheon of failed airlines. 

Demand stagnant 

Air service and demand in the Springs have never recovered. Passenger
traffic in 2005 totaled just over 2 million - less than half what it was in
the mid-1990s - while the number of departures is down nearly 40 percent. 

In recent years, the airport's numbers have been relatively stagnant: 

   . Passenger traffic last year was lower than in 2001, when air travel
nationwide dropped off sharply after the Sept. 11 terrorist attacks. 

   . Departures are up 14 percent since 2001, yet much of the new service
involves smaller regional planes that carry fewer passengers. 

   . The airport ranks as the 89th-busiest in the nation in terms of
enplanements - down from 81st in 2000, according to the U.S. Bureau of
Transportation Statistics. 

   . Fares in Colorado Springs are higher than those in Denver and the
national average, according to the BTS. It's no wonder: Of the 14 nonstop
routes offered from the airport, just two are served by more than one
airline. 

That's all come despite 13 percent growth in El Paso County's population
since 2000 and a 4.6 percent jump last year alone in the number of
passengers U.S. airlines carried. 

Carriers also don't fly nonstop from the Springs to major East Coast
destinations such as Washington, D.C., Philadelphia and Boston. Experts say
nonstop air service to major cities is critical for attracting corporate
headquarters, which could in part explain why the Springs has a dearth of
such operations. 

"Colorado Springs lacks nonstop flights to many gateway cities, and that
makes the city less attractive" from a business standpoint, said Dennis
Donovan, a corporate relocation expert with the Wadley-Donovan Group in New
Jersey. "Executives like to get back and forth to their research and
development offices and manufacturing plants. In Colorado Springs, you can't
do too many one-day business trips." 

Several factors 

To be sure, air travel in the Springs has been influenced by factors
specific to the region. 

The rise and fall of WestPac in the mid-1990s heavily skewed numbers,
creating what some say are unrealistic expectations going forward. The city
had a thriving technology industry in the late 1990s that helped mute the
impact of WestPac's fall, supporting a higher-than-usual level of air
travel. When the high-tech economy sank in 2000, the Springs was hit
particularly hard. Colorado Springs also has a high concentration of
military personnel, making the city vulnerable to swings in air traffic
depending on deployments. 

Industry changes brought about by the Sept. 11 terrorist attacks have had a
significant impact. Large airlines, struggling to make profits, have scaled
back in smaller cities either by cutting service entirely or using regional
planes that carry fewer passengers and typically fly shorter routes. 

"Capacity was built back into the system, but it was built back
differently," said Mark Earle, aviation director of the Colorado Springs
Airport. "It's come back in the form of smaller, regional jets." 

Since 2001, regional jet operations at Colorado Springs Airport have more
than doubled, from 3,362 departures to 7,860 last year. Meanwhile, service
by larger carriers has dropped 16 percent. 

The net result: "it's roughly the same number of seats, just more
frequency," Earle said. 

Metropolitan focus 

Some low-cost carriers also changed their strategies. 

In the past, discount airlines such as Southwest typically focused on
offering service to smaller airports in or near major metropolitan areas.
So-called secondary airports often charge airlines less in landing fees and
other charges, meaning the carriers can offer lower ticket prices. The
Colorado Springs Airport, for example, has average fees of about $8 per
passenger, while Denver's are around $13. 

Recently, Southwest Airlines chose Pittsburgh and Denver as its two newest
markets, rather than, say, Allentown, Pa., and Colorado Springs - what were
once considered likely choices. At the same time, Denver has lowered its
airport costs in recent years and now has service from most major discount
carriers. That's helped DIA - where airlines once offered some of the
highest fares in the nation - become a hub for cheap tickets. 

The Springs, too, has seen fares drop in recent years, but at a much more
modest pace than for Denver and the nation. The city's only low-cost
carrier, America West, has not built the critical mass of flights necessary
for significant fare competition. 

"I think people love our airport, there's no question about it," said Dennis
Weber, a member of the Colorado Springs Airport Advisory Commission. "But
when the price differential between our airport and Denver gets to a
critical point on a certain fare, people are making the drive to Denver." 

Demand deciding factor 

Airports are limited in what they can do to lure new air service, aside from
lowering operating costs for airlines and working to make their operations
more efficient. 

In the end, the decision comes down to demand. 

With an abundance of low-cost service available an hour and a half away in
Denver, it's unclear whether Colorado Springs currently can support a
low-cost hub, observers say. 

"What people in this town get caught up in is the brief success of WestPac,"
said Randy Peter- sen, who runs several frequent flier Web sites and
publications in Colorado Springs. "They say it's a proven market, but these
are different times and different days." 

Airlines are being much more careful about where they add service given the
industry's volatility, eyeing cities with larger populations and lower
risks. 

Denver-based Frontier Airlines said it looks at the Springs "pretty
regularly." Yet it has no plans to start service there, in part because it's
doing so well in Denver, where it's been growing rapidly and increasing
market share. 

"There are separate schools of thought" at the company, said Joe Hodas, a
Frontier spokesman. "One is that if people are willing to drive to Denver,
what is the purpose of re-creating service in the Springs? The other thought
is that we could reach the other side of the Springs and areas like Pueblo
to stimulate more traffic." 

Some experts had pegged Southwest as the city's best chance of landing a new
low-cost carrier, and the airline has from time to time indicated strong
interest in the Springs. The city's current mayor even made attracting
Southwest a key part of his campaign platform several years ago. 

"I don't think a week went by where people didn't ask me about Southwest,"
said Terry Sullivan, president of Experience Colorado Springs at Pikes Peak,
the city's tourism and convention bureau. "We had concocted all sorts of
grandiose schemes about how we'd get them here hell or high water." 

Many of Southwest's own employees also want the carrier to fly to the
Springs. The question of whether or not the airline would serve the city
inevitably arises at company meetings, hence the conference room named after
the Springs. 

Southwest, though, felt the better opportunity for entering Colorado was in
Denver. 

"We announce usually on average maybe three cities a year," said Southwest
spokeswoman Paula Berg. "We have to choose the ones that have the most
growth and revenue potential and fit best into our route structure. Denver
fit that criteria." 

Convenience king 

But the airport has several major benefits that trump DIA, at least for
residents in the Springs. 

It's located just a short drive from the city's downtown area, security
lines often are nonexistent, and parking is ample and much cheaper than at
DIA. 

Convenience is where the airport is aiming its focus, pumping more than $10
million in the past two years into upgrading and expanding the main
terminal. 

"I think the passenger services at the airport and its on-time records are
very good, and that outweighs price for a lot of people," said Judy Laumann,
owner of Total Travel & Tours in Colorado Springs. 

The airport, which has strong bond ratings, also has experienced other types
of growth. Aside from enhancing services for private fliers, projects under
way include a new military complex, a Skywest Airlines maintenance hangar
and a long-planned $300 million business park. 

Greater business activity in the region, coupled with population gains,
likely will stimulate more air travel over time, experts say. 

As long as passengers fly out of the Springs. 

"The best thing the business community and residents here can do is to use
our airport as much as possible," said Mike Kazmierski, head of the Colorado
Springs Economic Development Corp. "The more people use Denver International
Airport, the less chance we have of getting low-cost service." 

Still, the airport's Earle believes the Springs can land a low-cost carrier
in the next couple of years. 

A Southwest planning official, responding to a question in the company's new
blog, expressed optimism that the airline could indeed fly from the Springs
down the road. 

"After the city grows larger, and after we're pretty well tapped out in
Denver, you could see Southwest at both airports," Bill Owen, senior
schedule planner for Southwest, wrote last month. "Wouldn't that be a Rocky
Mountain high?!!"

Attached Photo:

Passenger Tom Schmidt walks past unused check-in counters at the Colorado
Springs Airport recently. The airport expanded in the mid-1990s to
accommodate low-fare carrier Western Pacific. But WestPac quickly ran into
trouble and left Colorado Springs for DIA in a failed bid to save the
airline.

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