Improved airfare numbers have led to more passengers flying out of the Des Moines airport. Can the city get even more competitive with surrounding airports?
Friday, October 18, 2013 7:00 AM
More than 2 million passengers traveled through Des Moines International Airport in 2012, the most in the history of the airport.
Airport authority creates change
The Des Moines City Council’s decision to go from an airport board to an airport authority has paid dividends, said Ed Hansell, chairman of the Des Moines Airport Authority Board.
The authority is set up to be run more like a business, with decisions going through one five-member group, rather than a board and the City Council like in the past. The airport made that transition toward the end of 2011.
According to Hansell, the decision has been a good one in the following ways:
• Airlines like to deal with one specific entity. Airport Executive Director Don Smithey said having the authority made it easier to land Southwest Airlines.
• It allowed the airport to cut some nonessential staff, streamline operations and save money. Consolidating staff functions and offices has saved the airport about $1.7 million per year, Hansell said.
• The airport was able to upgrade its Standard & Poor’s credit rating to “A” from “A-.”
• It has been easier to add improvements, such as adding checkpoint lanes and reconstructing the parking garage.
Site plan study underway
Des Moines International Airport has contracted with LeighFisher Inc. to develop a site plan for future airport development.
At the rate the airport is growing, said Executive Director Don Smithey, the current facility will be too small in seven or eight years. The airport will likely require a new terminal, rather than adding on to the current one, in part because the current one was built in the 1940s.
“We need to know where we’re going, and we didn’t know that before. You can’t just go on a whim,” Smithey said. “If you put something in the wrong place, you may screw it up for the next 20 years.”
The plan should be ready by the spring, he said.
If that wasn’t reason enough to celebrate, this was: Southwest Airlines launched nonstop service to Las Vegas on Sept. 29. Vegas showgirls were on hand to help the airline and airport commemorate the new service, which is now Southwest’s second nonstop destination from Des Moines.
The glitzy event happened almost two years to the day after a 2011 Business Record article painted a much more somber picture of the airport. Ticket prices were, on average, higher than those at The Eastern Iowa Airport in Cedar Rapids, and every other major airport within 250 miles of Des Moines.
“We knew we were losing our customers to Omaha and Kansas City, because they had lower fares than we did,” said Ed Hansell, chairman of the Des Moines Airport Authority Board. “Those fliers have come home in that respect, so we’re getting them now.”
The reason for more competitive fares is pretty self-explanatory, airport officials say. Southwest came into the market in September 2012 with service to Chicago Midway International Airport, which provided competition from a low-cost air carrier. The announcement itself led to more competitive fares even before the service started.
The result? Not only is the airport on pace in 2013 to set a new record and surpass 2012 passenger numbers, but its average ticket price ranking among the largest 150 airports in the country improved 25 spots to 104 in 2012 from 129 in 2010.
Des Moines is improving in the rankings, but business leaders and airport official aren’t yet satisfied. The question: What, if anything, can be done to leverage the momentum to increase service and keep airfares in check?
We used publicly available airfare data from the U.S. Department of Transportation’s Bureau of Transportation Statistics, and sorted it by the largest 150 airports by outgoing passenger volume. We then compared Des Moines’ airfare rank in the top 150 to the ranks of surrounding airports. The latest full-year numbers available show that Des Moines’ average itinerary fare has gone up from 2010 to 2012, but fares have improved relative to those of other surrounding airports, and relative to the national average. Itinerary fares consist of round-trip fares unless the customer does not purchase a return trip.
Notes on the numbers:
· In 2010, it was $97.25 more expensive to fly out of Des Moines than Kansas City, on average, and $72.27 more expensive than Omaha. In 2012, it was only $64.02 more than Kansas City, and $39.83 more than Omaha.
· Des Moines passed Cedar Rapids and Minneapolis in the rankings.
· In 2010, Des Moines airfares were $59.76 higher than the national average. In 2012, they were only $30.27 above the national average.
· Things have improved even more in the latest quarterly numbers. In the first quarter of 2013, Des Moines was No. 90 in the rankings, with an average fare of $407.65. That was only $44.33 more expensive than Kansas City, $17.42 more expensive than Omaha and $19.64 higher than the national average.
· Southwest Airlines announced in January 2012 that it would begin service in Des Moines, and launched its first flight in September 2012. Airport officials believe the “Southwest Effect” moderated fares before service even began.
Passenger numbers rank:
City 2010 2012
Minneapolis 16 16
Kansas City 28 29
Omaha 59 58
Des Moines 87 83
Cedar Rapids 115 110
Quad Cities 107 122
Ranked by total number of domestic passengers.
Can prices get lower?
The answer to the question is a bit tricky.
Nationally, airfares in 2012 were up 11 percent from 2010. Des Moines’ airfares are higher than in 2010 as well, but, the airfares only increased 2 percent, a significantly slower rate than the national rate and other Midwest airports. (see chart on page 11)
The most current available numbers from the first quarter of 2013 show that airfares actually decreased in Des Moines by 6.9 percent from the same quarter in 2012.
Don Smithey, the airport’s executive director, said he doesn’t necessarily put a lot of stock in the average fares defined by the U.S. Bureau of Transportation statistics for two reasons: One, the figures are always out of date – the latest full-year numbers are from 2012, and the latest quarterly numbers are from the first quarter of 2013. Two, the numbers are an average, but fares can vary so much day to day on specific routes. For example, fare prices on the routes to Chicago have gone down, Smithey said, but that doesn’t help a traveler who wants to go to Dallas.
He does put stock in passenger numbers as an indicator of fares, and those numbers lead him to believe that fares have been lower.
So, perhaps the better question is whether Des Moines can continue to become more competitive with surrounding airports.
Smithey said he has heard, anecdotally, that people are flying out of Des Moines for business and leisure when they weren’t doing so before. He suspects that the airport is getting “incremental business,” or passengers who weren’t flying before due to high fares.
Can those fares get lower still? Maybe, but there’s only so much airport officials can do. Forces such as the economy and industry consolidation affect fares in ways that officials in Des Moines can’t have any influence on, he said.
Ticket prices are “strictly the airlines’ prerogative,” Smithey said. “The only thing we can do is influence other carriers, say, ‘Look, there’s a market here for you as well,’ and that’s it. It’s that element of competition that we strive to attain, and that’s the only influence we can possibly have.”
That competition often causes fares to be lower along a specific route than they would be otherwise.
What businesses want
As a company that spends between $4 million and $4.5 million annually on commercial air travel, Meredith Corp. hasn’t seen much of a “Southwest Effect,” said Art Slusark, the media giant’s vice president of corporate communications and government relations. Overall, the company’s average trip cost is up slightly this year.
For Meredith, the addition of a direct flight to Las Vegas helps, as the company owns a television station there, but Meredith could benefit from more competition on flights to other markets. The message of more service was echoed by Greg Edwards, president and CEO of the Greater Des Moines Convention and Visitors Bureau (CVB), and Mary Phillips, general manager of International Travel Associates, a West Des Moines-based travel management firm.
It’s a message heard loud and clear by airport officials. Smithey has made a point to speak at business events around the state to tell people what is happening at the airport and gather feedback. He hears that business people want more direct flights and lower fares.
Airlines are private businesses, Smithey points out, and there’s only so much he or anyone can do to talk them into coming to Des Moines. But he can keep the information in front of the airlines, and that’s exactly what he does.
“I know people within the industry, they analyze the markets completely. And it’s based upon mathematical models that I couldn’t even begin to understand,” Smithey said. “But I do understand one thing: When there’s a large amount of people wanting to go to a certain destination, they are going to take a look at it.”
So Smithey, on a monthly basis, sends the airlines traffic statistics so they can see what the market is like in and around Des Moines. He also sends them origin and destination information so the airlines can see the top 25 destinations from Des Moines. Of note, he said, the numbers showed that Las Vegas is one of the most-visited destinations from Des Moines. It is impossible to accommodate what every business and leisure traveler wants, but seeing the numbers can help the airlines make decisions on what new routes could be successful.
“They are a business that has to make a profit, so what we do is simply show them, very simply, that there’s a market here,” Smithey said. “And I keep it in front of them.”
Smithey believes a Southwest flight to Dallas could be possible in coming years, which would fill the void of a low-cost carrier to the south. He also believes a flight to St. Louis that would connect to Orlando would be supported by the Des Moines market.
No doubt, things have improved at the airport in the past two years in regard to fares and destinations, Smithey said. In addition to the Southwest flights, U.S. Airways added a nonstop flight to Charlotte, N.C., and Washington, D.C., and Delta Air Lines added a nonstop flight to LaGuardia Airport in New York.
Des Moines is more competitive with surrounding cities, said Edwards, who in his role with the CVB said he has seen Des Moines become more of a “major air transport city” with the addition of Southwest. But is it competitive enough?
“I think we are really close,” Edwards said.
Smithey said the airport’s job is not done yet.
“No matter what, you keep looking at the markets and keep encouraging (the airlines) to do so,” Smithey said. “I don’t think you ever stop. I don’t think you ever really get there.”