Kirsti Marohn ST. CLOUD TIMES
Seeking Air Service: Worthwhile Effort or Futile Quest?
February 8, 2015
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  • It was a major coup: A regional airport snagged a major airline to provide daily service to a major hub, all in an era when most airlines are scaling back service at small airports.

    So the announcement that the twice-daily flights from St. Cloud to Chicago O’Hare will end just 10 months after they began was a major disappointment.

    Now, city officials and business leaders are regrouping to plan a new effort to keep daily commercial air service in St. Cloud. They aim to form a regional airport authority and secure a $2 million state loan to subsidize flights until they become self-sustaining.

    But some airline industry experts said the effort is unlikely to succeed. While St. Cloud bucked the odds in the past, it’s not likely to do so again due to its proximity to Minneapolis-St. Paul International Airport and seismic changes in the industry, they said.

    “I don’t know of any community in America that has tried harder and had more civic commitment to make this work,” said Michael Boyd, president of Colorado-based aviation consulting firm Boyd Group International. “You did the best you can, and now you’ve learned. There is no other airline.”

    For St. Cloud residents seeking access to the rest of the world, “your airport is Minneapolis. That’s not going to change,” Boyd said.

    Instead of focusing more time and resources on attracting another commercial carrier, St. Cloud leaders should work on finding other ways to make the airport profitable, as a handful of other regional airports around the nation have done, experts said.

    It’s time to do a deep think before raising a few more million dollars to approach another airline, said King Banaian, economics professor at St. Cloud State University.

    “I think you pause and assess what happened,” Banaian said. “We thought we had the success.”

    Success story, sad ending

    St. Cloud managed to lure United Airlines with a combination of public and private money to subsidize the Chicago flights.

    The city received a federal grant of $750,000 from the Small Community Air Service Development program, and raised a local match of $250,000 from area counties and cities and pledges from businesses through the Greater St. Cloud Development Corp.

    The intent was to subsidize the flights until they are self-sustaining. A load factor of at least 75 percent likely would be needed to reach the break-even point, according to SkyWest.

    However, the United flights never came close to meeting that critical mark, with the flights averaging 55 percent full in 2014. The high point was August, when about 61 percent of the seats were sold.

    SkyWest, the United partner airline that operated the flights, announced on Christmas Eve that it would be discontinuing the flights at the end of February.

    Boyd said St. Cloud should pat itself on the back for securing the United service, even if it only lasted 10 months.

    “That’s an achievement,” he said. “You attracted the best regional airline … You don’t do any better than that.”

    The problem is, experts say, the odds are stacked against a city this size to find another airline interested in providing service. St. Cloud is not alone.

    “When smaller airports lie in the shadow of a much larger airport, they’re finding it increasingly difficult to attract and retain air service, and St. Cloud certainly fits that mold,” said William Swelbar, research engineer in the Massachusetts Institute of Technology’s International Center for Air Transportation and an airline industry analyst.

    The nation is in the early stages of what promises to be a significant and widespread change in the airline industry, Swelbar said.

    Swelbar noted that 40 percent of American airports serve 97 percent of the demand, which leaves 60 percent of the airports with the remaining 3 percent of the business.

    Providing air service requires an expensive investment in people and equipment, Swelbar said. The question is whether all of the more than 450 commercial airports in the nation will be able to survive in the next five years, he said.

    Swelbar said St. Cloud did everything right when it came to attracting United. SkyWest is a good operator, and flying to a hub like Chicago was the right strategy that he thought had a real chance of working.

    “The difficulty here is I just really believe the highway is going to become the access to the air transportation system for many, many airports that have commercial air service today over the next five years,” he said.

    Airlines are scaling back their use of the 50-seat aircraft like those SkyWest uses for the St. Cloud-to-Chicago flights because they’re expensive to operate.

    “The smaller airplane is going away,” Swelbar said. “There’s no replacement in the pipeline.”

    And there’s another complicating factor for small communities: Regional airlines are having a harder time attracting pilots due to low wages.

    “There are just so many forces working against them,” Swelbar said.

    Too close to Twin Cities?

    But perhaps St. Cloud’s biggest challenge is the fact that it’s only 80 miles north of Minneapolis-St. Paul International Airport, a hub with hundreds of daily flights to destinations all over the world.

    Because of its location and its lack of commercial air service when the airlines were deregulated in the 1970s, St. Cloud isn’t eligible for a federal Essential Air Service grant.
    he program was created after deregulation to ensure rural communities didn’t lose vital air service.

    Other Minnesota airports, including Bemidji, Brainerd, International Falls, Thief River Falls and Hibbing, do receive EAS grants.

    St. Cloud Mayor Dave Kleis has visited congressional representatives in Washington, D.C., to ask that the essential air service program be expanded to include communities like St. Cloud

    But even for those airports that receive federal funding, the subsidies are “a mixed bag,” Swelbar said.

    “The bottom line is you need the market demand and you need a strong local economy that’s willing to use the service,” he said.

    So how do you convince airline passengers to fly out of St. Cloud instead of jumping in their cars and driving to Minneapolis-St. Paul?

    Backers of local air service point to the rising cost of parking at MSP — now $16 to $24 a day depending on the terminal — and traffic as reasons why it makes more sense to fly out of St. Cloud.

    However, St. Cloud typically has two flights a day while MSP has 500, Boyd said. For a business traveler heading to New York, sometimes it’s more efficient to drive to Minneapolis-St. Paul than to wait for a flight to Chicago, he said.

    Being limited to two flights a day hurt St. Cloud, experts say. Travelers who couldn’t afford to get stranded by a delayed or canceled flight eschewed the regional service after SkyWest struggled with its on-time performance.

    If a flight gets canceled and it’s 12 hours until the next one, “that might deter you from ever using the service,” Banaian said.

    “Is two flights enough to actually provide enough reliability for people to actually use the St. Cloud airport for their takeoff and landing place?” he asked.

    St. Cloud leaders have said there are enough people in the airport’s catchment area, or the population area it serves, to fill 20 flights a day.

    However, Banaian said it’s critical to ask why people chose one airport over the other. Even when Northwest Airlink was operating six flights a day out of St. Cloud in the late 1990s, there were still people who drove to Minneapolis-St. Paul, he said.

    And while the recent lower gasoline prices are good for airlines’ bottom lines, they also make it more attractive for people to drive longer distances rather than fly.

    “If gas prices stay where they are, the automobile becomes a significant alternative mode of transportation,” Swelbar said.

    Other options

    City leaders and air service backers have said they plan to approach area county boards in the next few months about creating a regional airport authority, which could levy taxes and spread out the operational and marketing costs beyond St. Cloud. The airport’s operating budget this year is $1.08 million.

    A state lawmaker has authored a bill for a $2 million loan that could be used to keep SkyWest flights operating until the flights become self-sustaining and the airport authority could pay it back. City leaders say they’re also looking at other airlines.

    However, some analysts say it’s unlikely that St. Cloud will be able to lure another airline, especially given the departures of Delta and SkyWest.

    “Another airline is looking at why did this happen?” Swelbar said. “Am I going to be willing to take a risk when it didn’t work for them?”

    Analysts say St. Cloud leaders should look to other cities that have faced similar situations and found ways to keep their airports thriving, even with limited or nonexistent commercial service.

    The Naples Municipal Airport in Florida is 40 miles from Fort Myers. Naples hasn’t had scheduled commercial air service since 2007, but remains a busy general aviation airport with business jet traffic, said Sheila Dugan, deputy executive director.

    The sunny weather and golf courses attract people with private jets who have homes in Naples or are attending corporate events, Dugan said.

    “Luckily, we’re a destination,” she said.

    While St. Cloud doesn’t have Florida’s beaches or winter sunshine, it has seen success with flights to warmer climes.

    Allegiant Air has been flying from St. Cloud to Mesa, Arizona, twice a week, and those planes have been close to 90 percent full. The airline is adding a third seasonal weekly flight this week.

    Boyd advises St. Cloud leaders to look at ways to generate jobs by attracting new investment. He points to the Golden Triangle Regional Airport in Mississippi, which has found success due to several nearby international and domestic industries.

    “Airports are more and more logistical centers for international investment,” Boyd said.

    St. Cloud City Council member Jeff Johnson, who teaches aviation at St. Cloud State, said he wants to see a business plan developed for the airport, including new ways of generating revenue apart from commercial service.

    He suggested a range of ideas: promoting the airport industrial park, developing a fly-in residential community, using St. Cloud as a training school for smoke jumpers training to fight forest fires or attracting a drone training facility.

    “I’m not saying totally discount the airline,” Johnson said. “But we’ve put a lot of time and effort and resources in just the airline, and I think really at the expense of other opportunities.”