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VOL. 6 | NO. 34 | Saturday, August 17, 2013

‘It Will Get Better’

Airport leader confident Memphis airfares set to improve

By Jennifer Johnson Backer

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On a recent July morning, a full room of local business leaders gathered in a FedEx Corp. training facility on Airways Boulevard to learn more about Memphis International Airport and its operations.

Fewer direct flights and high airfares at Memphis International Airport have sparked widespread criticism, leading the Memphis-Shelby County Airport Authority to step up public relations efforts.

(Memphis News/Andrew J. Breig)

Attendees peppered airport officials with questions.

A local hotel manager wondered why fares in Memphis remain higher than at other airports in the Mid-South, while a financier asked if the Memphis-Shelby County Airport Authority is an entity that can be sold.

The “Airport World Class Tour” is part of the Airport Authority’s public relations offensive to counter widespread criticism over fewer direct flights and persistently high airfares. The public grievances come as Delta Air Lines Inc. has moved to close its Memphis hub and cut the number of direct flights to and from Memphis International.

Some local critics have said airport management has moved too slowly to aggressively recruit competition to the market after Delta began communicating its plans to scale back its Memphis operations.

Direct Delta flights from Memphis International are expected to decline to about 65 flights a day this fall, down from a peak of about 225 prior to the 2008 Delta and Northwest Airlines merger.

The Delta-Northwest merger created new realities for Memphis International, a former Northwest hub, which now has to contend with its much larger rival in Atlanta, the global headquarters and hub of the combined Delta-Northwest airline.

“When we were a Northwest hub, we were a key strategic asset to their hub system,” Scott Brockman, the Airport Authority’s executive vice president and chief operating officer, explained to tour attendees. “With that hub in Atlanta, our hub became redundant. Delta is making business decisions to be more profitable.”

Jack Sammons, chairman of the Airport Authority, resurrected the monthly tours in January after a more than decade hiatus following the Sept. 11, 2001, terrorism attacks. The first tours included elected government leaders like Memphis Mayor A C Wharton Jr. and Shelby County Mayor Mark Luttrell, while subsequent tours have expanded to include dozens of business and civic leaders spanning a broad range of industries.

John Greaud, vice president of operations for the Airport Authority, outlined the airport’s challenges and assets to tour attendees in a fact-filled slide presentation. He pointed out Memphis has a smaller population, fewer local passengers and a lower median household income than all other failed or declining hubs except one – a key remaining barrier to recruiting new commercial air carriers to Memphis.

“Airport World Class Tour” attendees also learn about everything from the airport’s debt profile (which is declining) to Memphis International’s economic impact, which was estimated at $23.3 billion in 2012 by researchers at the University of Memphis. Then they board a coach bus to take a tour of the airport, FedEx’s World Hub, and the Tennessee Air National Guard base.

The tour is just one piece of the Airport Authority’s recent push to improve communication outreach to the Memphis public. Board commissioners have encouraged staff to do a better job of explaining the airport’s operations, the reasons behind Delta’s flight service cuts and what airport officials are doing to aggressively court new air carriers.

There are also plans in the works to hire a full-time public information officer to help communicate with the public.

“We are trying to be more understanding of the need to inform the public of the things that we are doing and what’s really going on here,” said Brockman, who was tapped last week to become the Airport Authority’s next president and CEO. “While communication is a large part of any executive’s job, it’s not always in the context of explaining business decisions to people outside of that operation.”

Leaders like Larry Cox, current president and CEO of the Airport Authority, have said it’s unlikely that Memphis will regain its previous level of flight service.

But there are some bright spots. It’s likely that the Delta flight cuts will create new opportunities to lure new air carriers, bringing more competition and lower airfares, Brockman told tour attendees.

“As Delta has pulled down, we have become very attractive,” he said. “Airlines like Frontier and Southwest aren’t as enticed to enter the market when there is so much competition from a hub carrier.”

Already, Southwest Airlines Co. has announced the discount air carrier will enter the Memphis market Nov. 3. The Dallas-based airline will operate daily nonstop flights to Houston, Tampa, Fla., Baltimore, Chicago and Orlando, Fla. Airport officials have encouraged the Memphis public to embrace the new carrier warning that the Texas airline could exit the market as quickly as it arrived if the new routes aren’t profitable. The Greater Memphis Chamber also is in the midst of a campaign, #MEMLUV REWARDS4REWARDS, to enroll 50,000 Memphians in the air carrier’s RapidRewards program by Nov. 30.

Brockman reminded tour attendees about Frontier’s arrival to the market when Memphis still was a Northwest hub. Northwest moved to match fares on Frontier routes and offered additional frequent flier miles to customers who remained loyal to Northwest. Within a few months, Frontier had exited the Memphis market – and Northwest hiked fares again.

“That’s why we need to utilize these carriers as they offer good fair service,” Brockman said. “I am not telling you who to fly, but I am telling you the reality of how this equation works. If the planes aren’t filled, they will go away and we will get what we deserve.”

Promotional fares offered by Southwest and its AirTran subsidiary, coupled with Delta moves to match pricing on routes with increased competition, have already resulted in cheaper fares from Memphis International.

Memphis’ average airfares declined 9 percent during the three-month quarter ended March 31, the biggest fare drop in the nation, data from the U.S. Bureau of Transportation statistics shows.

Still, Memphis’ average airfare of $478 remained about $100 more than the nation’s average airfare of $378.69. Airfares at Memphis International are the seventh highest in the nation.

Memphis International’s high fares remain a key driver to solicit new air carriers. Sammons has frequently said the board and airport officials need to be “relentless” in their push to court new competition.

Sammons and other airport officials are hopeful that a never-before-used economic incentive program designed to bring new service to the airport soon could have its first customer.

In late July, airport officials moved to approve a measure that will bolster financial incentives offered to commercial airlines offering flights at least four days a week to new cities not served today by the airlines. Previously, the program required air carriers to offer flights to new cities at least five days per week.

The $1 million air service development program offers air carriers landing fee, terminal building rent and marketing incentives in exchange for adding new flights at least four days per week for at least 12 months.

Officials have said they have courted Allegiant Air, Frontier Airlines, JetBlue Airways, and Spirit Airlines as well as existing airlines serving Memphis.

“It may get worse before it gets better, but I can stand before you with all the confidence in the world and say, it will get better,” Brockman reassured tour attendees. “It will – trust me.”

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