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VOL. 127 | NO. 84 | Monday, April 30, 2012

Seeking Friendlier Skies

Businesses hopeful Southwest can improve flight options, pricing

By MICHAEL WADDELL

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Local business travelers are looking everywhere for relief from sky-high airfares.

Travelers prepare to board flights in Terminal B at Memphis International Airport. Businesses are hopeful Southwest Airlines can improve flight options in and out of the city.

(Photo: Lance Murphey)

Many are hopeful that once Southwest Airlines establishes a presence at Memphis International Airport beyond a few Memphis-Atlanta flights, increased competition will result in lower fares and more options for local travelers.

The financial impact of higher fares at Memphis International on both large and small businesses is significant. Domestic airfares from Memphis rose more than 20 percent from the third quarter of 2009 to the third quarter of 2011 from $376 to $472, according to the Bureau of Transportation Statistics, an arm of the U.S. Department of Transportation.

Coming out of 2010-2011, when domestic fares at Memphis International skyrocketed 30.7 percent, Davidson Hotels & Resorts Inc. announced last October that it was moving its headquarters to Atlanta mainly because of better and cheaper flight options there.

And The Folk Alliance International announced plans to move its headquarters to Kansas City and schedule its annual conventions in cities with more affordable airfares.

Memphis-based Obsidian Public Relations recently opened a new Dallas office, and its employees have repeatedly chosen other options instead of flying out of Memphis to significantly cut travel costs. They chose to make the seven-hour drive on several occasions and also drove to Little Rock to catch less expensive flights.

Crissy Lintner, a former Memphian who is now managing director for Obsidian’s Dallas branch, said flights from Memphis to Dallas have been $600 higher than flights from Little Rock to Dallas.

“We’ve done four Memphis-to-Dallas trips in the past eight weeks. We decided to make the seven-hour drive to Dallas two times, and we drove to Little Rock airport to take advantage of lower fares twice,” Lintner said. “Southwest coming to Memphis should really change the way we approach our travel to Dallas since it should provide us a more affordable option.”

The higher fares have also been an area of concern for Memphis-based International Paper Co., whose executives extensively fly both internationally and domestically.

“Our chairman and CEO, John Faraci, has stated publicly that this issue is definitely a factor. We have operations all over the globe and scattered significantly across the South, so whenever flights are cut back it definitely impacts our company,” said Tom Ryan, spokesperson for International Paper. “The higher fares hit the bottom line of the business. The news of Southwest coming to town is welcome news, and we hope that it happens soon.”

Ryan expressed frustration over the fact that just a few weeks ago a one-way ticket from Memphis to Los Angeles was priced at more than $800.

Larry Cox, longtime president and CEO of the Memphis-Shelby County Airport Authority and chairman of the Greater Memphis Chamber, remains optimistic that better days – meaning more plentiful flights and cheaper fares – are ahead.

“We are very hopeful for the future. The airfare situation here should get better going forward with more competition,” said Cox. “We have also been very encouraged by the (new) US Airways flight between Memphis and D.C.”

Cox said the airport authority, the Memphis Convention & Visitors Bureau and the chamber are collaborating to attract more airline service, while at the same time valuing the fact that there is a hub here and Delta Air Lines is able to offer at least three flights per day to more than 50 U.S. cities.

“There isn’t a simple solution. There are many things that go into the way airlines price their flights,” said Cox. “The things that have happened are beyond our control, but there are good fares to be found, it just takes a little work.”

He cites various online pricing search engines, flying on the weekends whenever possible and making plans as far in advance as possible.

Cox has seen the ups and downs of the industry over the past 30-plus years.

“It’s been like an accordion, back and forth, since the 1980s until today as airlines made money when the economy was good but lost substantially more money when the economy was bad,” he said. “Now that American Airlines is in bankruptcy, every network carrier with the exception of Southwest Airlines has gone out of business at least once, and some have gone away permanently.”

Spiking fuel prices are also partially to blame for the higher fares, as the cost per barrel has risen from $25 to as high as $149, with pricing more recently between $100 and $120 per barrel.

“It’s been very difficult for the airlines to make a profit,” Cox said. “They have high cost of labor and high cost of fuel, and the airplanes they fly are very expensive.”

He sees a trend in the past decade and especially in the past few years of airlines reducing capacity and raising rates. Certainly Delta, which operates one of its seven U.S. hubs here, has reduced capacity out of Memphis International.

“We have to face facts. We’ve always been the smallest market in the United States to have an airline hub,” said Cox. “Over time because of the price of fuel, because Atlanta is bigger than Memphis, and because Minneapolis and Detroit are bigger and more prosperous hubs, Memphis and Cincinnati have been right-sized to between roughly 120 and 150 flights per day on average.”

Origin and destination (O&D) traffic remains low at Memphis International, although the airport is bolstered by the fact that it remains the busiest cargo airport in North America and second busiest in the world behind only Hong Kong.

In 2011, Memphis dropped to 65th nationally in number of O&D passengers, partially due to Delta’s reduced capacity. The city remains primarily a business market, where the bulk of travel is between Monday and Friday when fares have always been more expensive than excursion rates.

Cox points out that although Southwest and AirTran Airways now have permission to operate as a single airline, there is still much to be done until the transition is complete, including training employees, implementing a common reservation system, repainting the AirTran airplanes and reconfiguring them to match Southwest’s business model.

The transition is estimated to take two to three years to complete, but the city’s passenger and business travelers can’t wait that long for Southwest to beef up its presence here.

“We’re having good discussions with Southwest,” Cox said, “and we hope their service in the Memphis market will occur sooner rather than later.”

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 76 166 10,044
MORTGAGES 105 195 13,070
FORECLOSURE NOTICES 0 35 2,573
BUILDING PERMITS 216 370 23,894
BANKRUPTCIES 82 152 9,685
BUSINESS LICENSES 42 51 3,654
UTILITY CONNECTIONS 103 264 14,227
MARRIAGE LICENSES 29 53 3,116

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