Do You Leave Town To Get A Plane?


Corn Field
Nov 11, 2003
Group attempting to form low-fare airline in Charlotte believes it would generate a lot more local traffic


Do high air fares keep people from using Charlotte/Douglas International Airport?

"There's no question," says Jim Graziano, who -- like hundreds of other Charlotte travelers -- regularly drives to Greensboro or Raleigh for lower fares.

Graziano, area sales manager for electrical control maker Quad Plus Inc. in Fort Mill, had business meetings last week in Baltimore. He got there by driving to Raleigh and flying nonstop to Baltimore on Southwest Airlines, saving a few hundred dollars over what it would have cost to fly US Airways from Charlotte.

The group that is trying to start a low-fare airline in Charlotte bases its hopes for success largely on the belief that lower fares will stimulate more local traffic.

"Markets respond positively to low fares," says Ken Holliday, who would be chief executive officer of the proposed new carrier. "That has been proven time and time and time again."

Comparing metro-area population rankings with a ranking of the top 30 airports by number of local passengers seems to show that high fares in airline hubs can discourage travel, according to a review of the numbers last month in a Wall Street Journal story.

The story compared census data with Department of Transportation rankings of local traffic at airports. It showed that high-fare airports failed to attract a proportionate number of local passengers.

Fare Guy found that Raleigh/Durham/Cary is the 41st largest metro area, but has the 33rd busiest airport. By contrast, Charlotte/Gastonia/Concord is the nation's 34th largest metro area, but has the 45th busiest airport in terms of local domestic traffic. (The DOT does not include international traffic in its count.)

Said Holliday: "Raleigh/Durham doesn't have a lot of nonstop service, but the availability of low fares stimulates the market." Even though the area is smaller than Charlotte, local domestic airport traffic is higher by about 1.7 million people annually.

Charlotte airport traffic would increase dramatically with a low-fare airline in town, Holliday said. His group is continuing its efforts to raise $100 million to $150 million to start the airline, he said. Lower fares would likely draw people from outlying areas to Charlotte, said Gary Harig, vice president of aviation consulting firm Eclat Consulting and a former US Airways vice president of pricing and inventory management. But he noted that fares must be high enough to cover an airline's costs.

"People can get mesmerized with traffic statistics, when the lifeblood for airlines is the revenue flow," Harig said.

A few years ago, low-fare carrier AirTran began flying from US Airways' Pittsburgh hub to Philadelphia and New York La Guardia. "Fares were lowered and traffic exploded," he said. "But AirTran did not capture enough traffic at these reduced rates to cover costs." It dropped the two routes.

Harig also questioned whether all the traffic stimulated by low fares is new. When low-fare king Southwest Airlines began flying to Baltimore in 1993, some passengers were clearly inspired to fly instead of drive. But others were people who formerly used the Philadelphia airport.

"There are two groups," Harig said. "One is the `I wouldn't have made the trip without the low fares.' He's the real McCoy. Then there's the guy who lives between Philadelphia and Baltimore, who says `I can save X number of dollars.' So you have both stimulation and diversion."

Jerry Orr, aviation director at Charlotte/Douglas, said Charlotte's high fares discourage some leisure travelers, but the frequent nonstop service to 115 destinations attracts travelers, particularly business travelers. Meanwhile Graziano, like many Charlotte travelers, has mixed feelings about driving to Raleigh to fly on Southwest -- feelings that reflect the city's love/hate relationship with US Airways.

The airline's Charlotte hub has been a key factor in the city's economic growth and also a key factor in the city's high airfares.

"I don't want US Airways to fold," Graziano said. "I have friends who work for US Airways. I just want fares to be reasonable.

"I live 20 minutes from the airport and yet I have to drive two and a half hours to Raleigh," he said. "They've locked me out of that airport for a lot of travel because fares are so high."


Bookings on Lufthansa's new Charlotte/Munich route, which began March 26, are strong.

The first flight to arrive in Charlotte was 90 percent full, Lufthansa officials said, while the first outgoing flight was fully booked -- thanks partially to inaugural fares as low as $199 roundtrip.

For the next two months, business class occupancy is robust, and the flights are generally about 70 percent full, which is extraordinarily high for a flight that just started, said Hans Diessel, Lufthansa sales manager for the Carolinas. In June, the real high season begins.

Meanwhile, US Airways said it has started code-sharing with Lufthansa on 17 flights that originate in Charlotte. The arrangement allows the airlines to book tickets on each other's flights.

Among the cities involved are: Atlanta; New Bern; Greensboro; Greenville-Spartanburg; Raleigh-Durham; Phoenix; New Orleans and seven Florida destinations. More will be added.

Ted Reed
I read this article in yesterday’s paper, and I hear this from both leisure and business travelers all the time. It seems less painful to drive 80 miles to GSO, or 180 miles to RDU, to avoid being gauged and restriction after restriction. This is why CLT does not have a strong O&D market. Since U took over Piedmont, it has been gauge, gauge, and more gauge. And lets not forget, more and more restrictions. I don’t have a problem with the majority of U’s advance purchase tickets from CLT. What keeps me from flying U at all, both business and leisure and domestic and international, is the high fares for travel within 300 miles of CLT. The fare from CLT to LAX is usually cheaper than travel to ILM, RDU, MYR, etc. That is the definition of gauge. No competition, gauge. I would love for U to get smart for once. I would love to give them 100% of my business. I will be traveling international within a couple of weeks, not on U. I have an upcoming trip to TX and PA in the near future. Again, not on U. Think about how you’re pushing passengers away.

I sympathize with you. I've been in the Triad for years and seen it happening. It seems that Siegel is convinced that demand for air travel is inelastic - or inelastic enough that reasonable fares won't stimulate enough additional ticket sales to offset the lower revenue per ticket. In the case of previous management, I can't make any excuses other than to say they were doing what all network carriers did before in LCC's became a factor - charge as much as possible in monopoly or near-monopoly markets.

As I look at the numbers, I don't think US can get away with rational fares until the costs are brought under control. It'd end up being the classic case of losing money on every transaction but making it up in volume.

Ultimately, I believe the rational fare structure is critical to the survival of US Airways. But it'll only serve to increase the burn rate unless CASM is reduced.

I certanly don't have empiricle evidence to the contrary, but let's play with numbers.

Assume our average domestic flight has 140 seats. Our load factor runs betweens 70% & 85% depending on time of year, holidays, etc - round numbers. That's 21-42 empty seats on average - producing no revenue.

Seems like I remember that somewhere around 6%-8% of the passengers pay full walkup fares (the traditional business traveler that is becoming extinct), so let's round that out to 10%. Since I would expect that the number of travelers doing this is relatively constant year round (except during holidays), that means about 10 full-fare passengers on the average flight.

The question is, if we lowered walk-up fares by 20%, would we be able to sell more than 1 extra full-fare ticket per flight? If we sold 2 more, it would be break-even. 3 more and extra revenue is produced.

Admittedly, this is very simplistic. Some routes have almost no full-fare passengers while others are mostly full-fare, so adjustments would have to be made.

I did find it interesting that someone posted that a fare simplification experiment was being conducted a while back on flights to LAS - probably one of the markets with the lowest percentage of full-fare passengers we have (lots of leisure & group rates).


That analysis is way too simplistic, mostly because of the difference between peak times and offpeak times. During peak, I doubt you'll find more than one or two empties, if any. So it's all about the offpeaks, then...maybe those should have lowered walkups? I don't have enough numbers to do that justice.

"During peak, I doubt you'll find more than one or two empties, if any."

I only see what I fly, but I'd say that generally that's wrong. The time of day will affect the % of passengers on business but not the load factor (excepting possibly the Shuttle). It is normal to come out of say BUF to BOS, LGA, or PHL between 7 & 8 AM with 1/2 to 2/3 load.

Besides, nowhere is it written that you have to charge the same amount for walk-up no matter what time of day or day of the week for a given city pair.

Fair enough. It seems we're arguing over minutiae anyway. Your overall point that better pricing models should result in better load factors is on the money.

FWIW, my experience today, while not representative of the airline as a whole by any stretch, consisted of two 757s with only a handful of empty seats. Outbound was 7:30AM, and the return was (supposed to be) 5:30PM.

Just out of curiosity, what was the route? My experience is that the full flights generally involve leisure markets. Course I don't fly the Shuttle, anything west of DFW - MCI - MSP, or international.