Flying Blind: Is CAP on a Quixotic Quest for Low-Fare Airline Service?

An effort to attract low-fare airline service to Knoxville to lower the cost of business travel and draw more tourists is a windmill-tilting exercise.

That's the view, at least, of leading consultants who advise airports, local governments, and booster groups on such matters.

The City of Knoxville has pledged $170,000 and Knox County $200,000 in their budgets to a Competitive Airfare Partnership organized by the Knoxville Chamber to offer incentives to airlines for low-fare service. Together with $200,000 pledged by the Convention and Visitors Bureau (aka Visit Knoxville) and commitments from area businesses, CAP has so far raised some $1.2 million toward a $3 million goal. The money would go for waivers of airport landing and terminal rental fees as well as advertising and other promotional support for airlines that commit to bring low-fare service to McGhee Tyson Airport (TYS).

A CAP brochure claims that "The Knoxville region has the population and tourism volume to support and sustain increased low-fare service at TYS." However, a renowned aviation consultant, Michael Boyd of Colorado-based Boyd Group International, asserts that, "Whoever's telling you that is selling you a bill of goods."

Three airlines—Southwest, Jet Blue, and Spirit—have been identified as prime candidates for CAP's recruitment efforts. But Boyd says, "Your chances of getting any of them are about as likely as turning Knoxville into a deep-water seaport."

Jamie Kogutek, an Orlando-based air service strategy and development consultant with the Sixel Consulting Group, is more circumspect in his comments. But he basically concurs with Boyd that neither Jet Blue nor Spirit are candidates for Knoxville services. "Jet Blue and Spirit are both targeting larger markets with a fleet of larger plans than are suitable for Knoxville," he says.

Where the much larger and most coveted Southwest is concerned, Kogutek observes that, "Southwest is not in an expansionary mode, and their fleet of Boeing 737s [with 137 to 143 seats] is also much larger than the regional jets [mostly with 50 to 70 seats] that primarily serve Knoxville." He also says "the jury's out" on several smaller markets such as Branson, Des Moines, and Grand Rapids in which Southwest elected to continue service offered following its acquisition of AirTran Airways last year. By contrast, Southwest discontinued what had been AirTran's service from Knoxville to Orlando.

Both Boyd and Kogutek also agree that Southwest should no longer be considered a low-fare carrier as it once was. "To its credit, Southwest pays its people well and offers superior service. They're not in business to give you a low fare," Boyd says.

That suits the CEO of the Branson Airport, Steve Peet, just fine. "We don't want suicide fares, two or three airlines bashing each other over the head until one of them says uncle and leaves. We want to build real, sustainable service," Peet has been quoted as saying on behalf of what's believed to be the only privately owned commercial airport in the country, in which he is a major investor.

CAP's propaganda also claims that "Low fares have proven to stimulate growth in our region and directly impact the bottom line for both business and leisure travelers." But the only low-fare carrier to enter the Knoxville market in head-on competition with the majors (or legacy carriers as they are known), and with incentives from a predecessor to CAP, was Independence Air in mid-2004, and it shut down in bankruptcy at the end of 2005. So any benefits from reduced fares were short-lived at best.

Along with pricing, another tool the legacy carriers have used to ward off low-fare competition has been exploitation of their frequent-flyer awards programs. Kogutek believes these are an even bigger competitive factor today than in the past because of the shrinkage in the number of legacy airlines due to mergers from six in 2008 to the three or four that will remain depending on whether consolidation of American and U.S. Airways goes through. (Delta and United being the other two.) "With fewer airlines, you can get just about anywhere on any one of them, and people become all the more vested in their frequent-flyer awards," he says.

It's true that one low-fare airline, Allegiant, has seemingly carved out a niche for itself with flights from Knoxville to four Florida resort destinations, but its attempt to provide direct service to Las Vegas didn't work, and it isn't even on CAP's prospect list. Frontier's off-again, on-again three-times-a-week service between Knoxville and Denver is almost neither here nor there.

Perhaps the most alluring aspect of CAP's case for landing a low-fare carrier here is that both the Charleston and the Greenville-Spartanburg airports in South Carolina have succeeded in getting Southwest service with big incentive packages, and Charleston has gotten Jet Blue as well.

When asked why he doesn't believe Knoxville can emulate their success, Boyd responds that "Charleston has a much different economic base. It's the second-largest container port on the East Coast. It's got a big Boeing aircraft plant and an enormous amount of international trade, all of which generate a lot of traffic that Knoxville can't match." As for Greenville-Spartanburg, he points to its BMW plant and the fact that the 1.2 million population of its metropolitan area is half again larger than Knoxville's.

At the risk of sounding like a shill, Boyd insists that "Knoxville's air service is about as good as it can be. You have service to every connecting hub and all the direct service you can support with good load factors so that as carriers connect to larger planes, you're going to get more traffic."

His advice to Mayors Rogero and Burchett, which I find persuasive, is "Don't waste your money on a mirage."

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