As Airlines Cut Back, Smaller Cities Offer Cash for Flights

By Robert Struckman, 5-30-08

Horizon Air announced cutbacks in its fall flight earlier this week, citing pressures from fuel prices and a transition to a fleet of 76-seat Q400 turboprops.

The announcement detailed the latest in a string of cutbacks and cancellations of service that have small cities scrambling to package sexy deals to lure airlines.

“It’s not only something we’re talking about. It’s something we’re doing,” said Missoula International Airport manager Cris Jensen.

Lots of communities, said airline analyst Mike Boggs of Mead and Hunt in Eugene, Ore., have fronted big money for air service. “We’re talking about six- and seven-figure proposals,” he said.

Jensen said the airport gave a $45,000 revenue guarantee to United Airlines for one of its flights. That’s not the end of it. He has applied to the Federal Aviation Administration for a grant to get $500,000 for more incentive packages. Helena has packaged similar deals for flights.

To understand what’s going on, it’s worth taking another look at the recent news from Seattle-based Horizon.

“With fuel prices hitting record highs, it’s never been more important to ensure every single Horizon flight is as productive as possible,” said Horizon spokesman Dan Russo. Russo’s press release detailed the elimination of flights to Butte and the trimming of service to Billings, Idaho Falls, Lewiston and other cities in the West. The regional airline will also add a few flights to select cities. The changes will go into effect from June 1 to Aug. 25.

“The problem is not in the Northwest. It’s nationwide,” Boggs said. “This is… you could call it a sea change. In terms of how it plays out, it does not bode well for small-community service throughout the United States.”

News of flight changes from Horizon came alongside word of a shift from smaller aircraft, some of them 37-seaters, to larger planes, Boggs noted. That’s part of a very important trend: There are no new aircraft with 50-seats or fewer on order or on option by any commercial air carrier in the United States through 2017. An airplane has to be sized right for a market, he continued. The larger the airline, the larger the market has to be to support it.

The fuel issue has pushed the process along, but the “airline industry has been unhealthy for a long time,” Boggs said.

“Remember that old ad, ‘Where’s the beef?’ For the airlines, the beef has not been in the smaller communities,” he said. Air service to smaller communities across the country is in trouble. Remember Billings-based Big Sky Airlines? It closed earlier this year. Just last week Mesa Air announced plans to shelve Air Midwest.

The question for smaller markets is if their service is going to continue to atrophy or if will collect regional air travel. Missoula and Boise, Boggs noted, have been adding flights in recent years, while smaller towns such as Butte have been on the losing end.

Boise Airport, Larissa ter Veer, a spokeswoman for Boise’s airport, said air service there has grown as a natural function of the burgeoning economy there.

“Boise has a great story to tell the airlines. That’s our number one marketing tool: the growth,” she said.

Not all cities are content to paint rosy pictures, through. They’re ready to put cash on the table. Expect to see more competition—and more incentives—for air service.