"New Orleans airport business hasn't taken off, and that means fewer seats coming, going"

Monday, July 24, 2006

Airport business hasn't taken off, and that means fewer seats coming, going
By Jaquetta White
The New Orleans (LA) Times Picayune


When the American Library Association brought its annual conference to New
Orleans last month, tourism officials praised the return of the city's
convention business. But while the 18,000-person conference was largely
regarded as a success, the event also exposed the limits of the city's
post-Hurricane Katrina air service. 
 
One attendee had to drive to the conference from Houston after her flight
from San Antonio was delayed, causing her to miss a connecting flight to New
Orleans. There wasn't another available seat for two days. And some
conference sessions were canceled when speakers couldn't get flights into
the city. 

The challenges illustrate the difficulty in getting the tourism industry up
and running while there are only two-thirds the number of flights and about
half the number of seats there were before the storm. 

It's a chicken-and-egg dilemma: If there were more visitors, including
conventioneers and tourists, there'd be more flights, but the reduced air
service is making it harder to attract these travelers. 

Interestingly, business travel to Louis Armstrong International Airport, an
important source of airline profits, has jumped since Katrina, as a result
of what interim airport director Sean Hunter calls "artificial citizens" of
the city -- government and corporate employees who are regularly in and out
of the New Orleans area as part of the recovery effort. 

Nearly a year after Hurricane Katrina grounded air travel into and out of
Armstrong Airport, there are 107 daily departures to 33 cities, compared to
166 departures to 42 cities before the storm. 

But the sheer number of post-Katrina flights can be a deceptively optimistic
measure because many airlines are using smaller planes on their New Orleans
routes. The airlines now offer 12,000 daily seats on flights through New
Orleans, slightly more than half the 21,000 seats available on an average
day before the storm. 

Air service to New Orleans -- vital before Katrina -- is even more important
now as local officials work to convince leisure travelers and conventioneers
that New Orleans is indeed capable of accommodating them. 

Stephen Perry, president of the New Orleans Metropolitan Convention &
Visitors Bureau Inc., said the recovery of air service to the city since the
storm has been "positive but incremental." Nonetheless, it's still "not
sufficient with where we want to be with some of the larger conventions that
want to come here later in the year," Perry said. 

What's more, abundant air service is also necessary to retain and attract
the corporate businesses that will help to put the local economy back on its
feet. At least one company says limited air service was a factor in its
decision to relocate from Metairie to Atlanta. 

It could be a while before air service to New Orleans returns to pre-Katrina
levels. And it'll take more than loyalty to the city to bring airlines back,
industry leaders say. 

Partly that's because Katrina's aftermath has coincided with a second
calamity: skyrocketing fuel prices. 

"It would be a bad decision for them to come back to New Orleans just
because you feel bad for New Orleans," said Terry Trippler, an airline
expert at myvacationpassport.com. "In years past, airlines might have done
that; now you can't do that with oil at more than $80 a barrel." 

But experts agree that air service to the city eventually will improve. 

"This is not the time to panic. You're New Orleans for crying out loud. This
is not some backwater," said Michael Boyd, an airline expert and president
of aviation consulting firm The Boyd Group. "There may be this fear that air
service will never come back to where it was. That's crazy. It certainly
will." 

Industry tightens belt 

The slow return of air service to New Orleans is in part a symptom of larger
business challenges in the industry. With record high jet fuel prices and
several airlines either in bankruptcy or on the brink, carriers are
operating more efficiently than ever. Their goal, at least for now, is to
put fewer airplanes in the sky, not more. 

Also working against New Orleans is that it is "geographically situated in
the center of many hubs," Hunter said. 

Many of the flights in and out of New Orleans are to the larger airports of
Dallas, Atlanta or Houston, for instance. It is much more fuel-efficient to
fly a smaller jet on those short routes, Hunter said. 

"With a jet, by the time it reaches cruising altitude, it's time to descend.
That burns more fuel," Hunter said. "So they use smaller planes, which means
fewer seats." 

Before Katrina, Perry said, airlines that flew into New Orleans did so with
planes only 70 percent full, and now they are 90 percent full on average.
When conventions come to town, there is little room for the additional
travelers. But full planes aren't always enough to overcome industrywide
economics that discourage airlines from adding flights. 

"Though we're obviously working hard to change it, those are business
decisions that the airlines make," Perry said. 

New Orleans is in a precarious position. The city desperately needs to
increase air service so that convention and leisure travelers are not turned
off by limited flights into and out of the city. But the airlines want the
city to prove that it has the demand to justify any increase. 

"This is a situation where a lot of things have come together that don't
really enhance air service right now," Boyd said. "The challenge you've got
is carriers are not in a position to add more airplanes. They are improving
their financial position by not flying as much." 

Carrier choices 

To be sure, there are airlines that are close to reaching pre-Katrina load
capacity. American Airlines, for instance, has direct service between New
Orleans and five of the six cities it flew to before Katrina and has
increased seating capacity to those cities to 89 percent of its pre-Katrina
offerings. Meanwhile, Continental Airlines is at nearly 100 percent in both
categories. 

But several of the largest carriers at the airport have been slow to return.


Delta Airlines, the city's second-largest carrier in New Orleans before
Katrina, has slipped to fourth since the storm. The airline, which filed for
bankruptcy protection in September, has returned only 46 percent of the
seats available last year. 

"A year ago, obviously, we were not in bankruptcy. We've had to retire some
aircraft since then," said Anthony Black, a spokesman for the airline.
"We've had to look and see where we are going to continue service. We've had
to do these things regardless of Katrina." 

Delta is not alone. Across the board, airlines have been replacing large
planes with smaller ones, increasing "load factor," or the number of people
aboard each flight, and in some cases raising rates. 

The adjustments are in response to the record high price of jet fuel, which
has climbed along with the price of crude oil. The price of jet fuel
averaged about $89 per barrel in June, up from about $71 per barrel in the
same month last year, according to the Energy Information Administration. 

"What we're doing in this environment is more responsible flying," Black
said. 

The same goes for Southwest Airlines, the city's leading carrier both before
and after Katrina. While Southwest used to be the largest carrier at the
airport by a long shot, it's now ahead of its competitors by a much smaller
margin. The airline is offering just 42 percent of the seats it had
available before Katrina, 3,258 seats on daily service to 10 cities,
compared with 7,809 seats on service to 17 cities before Katrina. 

In the weeks following the hurricane, Southwest used some of the planes it
had been flying to New Orleans to launch new service in Denver. That service
has proved wildly popular, and as a result, Southwest is in the enviable
position of having more demand than planes. 

But that doesn't mean New Orleans is about to get an infusion of Southwest
service, spokeswoman Paula Berg said. 

"We'd love to grow in New Orleans. We'd love to be bigger than we were in
New Orleans," Berg said. "Our desire is there, but it will be conservative
growth." 

Southwest's diminished role in the New Orleans market has proved especially
costly to travelers. Southwest is known as a discount airline, and its
presence in a market usually forces competitors to lower their fares. Now
that it has fewer local flights, the airline is less of a price leader in
the New Orleans market. 

Trippler said Southwest's measured response is the best gauge of how quickly
air service will return. 

"Southwest is not one to pass up an opportunity. They are not one to give up
this dominance they have in New Orleans," Trippler said. "The only thing
that would cause them to back off is lack of business. This is an extremely
well-run airline." 

Business traveler is key 

The visitors bureau is putting together a task force to work with airlines
to increase service to New Orleans, Perry said. The group will provide the
airlines with the city's convention schedule in an attempt to "show them the
steady increase of our visitor base." 

That could lead to improvements sometime in the spring, Perry said, but for
now the only way air service will improve is if airlines see a significant
increase in demand. 

"The reality is that it is a demand-driven issue," Perry said. 

While there are spurts of significant demand in New Orleans during major
conventions and events, such as the Sugar Bowl, there is little sustained
demand, particularly from business travelers, to justify maintaining
stepped-up service between special events. It's a problem the city has had
for years. 

"What would happen is planes would fly in full with convention-goers but
then they would fly out empty or with reduced occupancy because there was no
business travel going out," Perry said. "That's why we are so involved with
GNO Inc. and the chamber (of commerce) and the mayor's economic development
office." 

The problem, a perennial one, was only exacerbated by Katrina. Mark Drennen,
president and CEO of GNO Inc., said air service is one of many issues the
economic development agency is addressing right now. 

"The business traveler is critical. You've got to have the business
traveler. If you don't have a core number of business travelers, you've got
a tough row to hoe," Trippler said. "It's one thing if you're an Orlando or
a Las Vegas. They are year-round destinations. New Orleans has its ups and
downs. The economic development department has to be working overtime to get
that business traveler to come to New Orleans to stabilize the air service
there." 

The airport is trying to convince airlines that New Orleans is closer than
it has ever been to providing them with steady business traveler demand. The
frequent traveling of workers in town to help with the city's rebuilding,
Hunter said, has altered the New Orleans market. 

"We've created an artificial citizen, someone who temporarily has become a
citizen of New Orleans," Hunter said. "So we have more business travelers
than ever before." 

Those travelers represent an especially lucrative market for the airlines
because they are more likely than conventioneers to pay a higher rate
because they book flights at the last minute using expense accounts, Hunter
said. 

But it has been a challenge getting airlines to agree with that assessment,
Hunter said. 

"They're watching." he said. "But right now everyone is taking a
wait-and-see attitude." 

There's no real hard-and-fast formula for calculating how great that demand
would have to be before the airlines start adding service, he said. 

"You and I could get into Fort Knox and play with the gold bars before we
could find out the formula the airlines have," Trippler said. "When those
load factors get to the point where I want to get to New Orleans but I can't
get there or I want to leave New Orleans but I can't leave, so I'll stay
home," then airlines will add seats here, Trippler said. That is not yet the
case. 

Waiting for an improvement became too much for Safeguard Storage Properties
LLC of Metairie, which announced in May that it was relocating to Atlanta.
The company said limited air service was one of the reasons for its move. 

"Our biggest problem is that there are limited flights to New York from New
Orleans," said Angel Tetrick, who books the company's flights. "I fly
Gulfport (Biloxi Regional Airport) whenever I can." 


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