November 6, 2006

High Prices Drive Local Fliers to Rival Airports

Kyle Stock  /  The Post and Courier

The get-out-the-vote buzz was building in Charleston last week, and it had nothing to do with the governor's race or the local school board elections. The name on everyone's lips was AirTran Airways. The Orlando-based discount carrier with a hub in Atlanta started collecting ballots to help decide what city it should fly to next. Charleston was one of the 49 potential destinations on the list.

The Charleston business community quickly organized a guerrilla-like, grass-roots campaign to help stack the odds in favor of the Lowcountry. Groups blasted e-mail messages - Spoleto Festival USA, the College of Charleston, Charleston Cookie Co., Charleston Metro Chamber of Commerce and scores of hoteliers - to lobby a community starved for cheaper plane tickets. Hope, it seems, is taking off again.

But so is the cost of flying, as many traveler are learning as they plan their upcoming holiday trips. In the second quarter of the year, U.S. airfares hit their highest point since the federal government started tracking them 11 years ago. The prices charged in the Holy City are partly to blame for the increase. Charleston is now the eighth most expensive city to fly out of, according to U.S. Department of Transportation statistics released last week. Cincinnati is the only major market where ticket prices are rising faster.

Last week, the cheapest round-trip tickets from Charleston to its top 50 final destinations averaged almost $400, according to That was 30 percent higher than average tickets out of Savannah and 20 percent higher than planes departing Columbia and Myrtle Beach. Flying out of Charleston, like a massage or a fancy meal, is now a splurge or completely out of reach for many residents in the region, where average wages hover below the national level.

Passenger traffic at Charleston International Airport has fallen 14.3 percent this year through September. But this renewed effort to woo AirTran could help change all that, assuming the airline's planners pay any attention to it.

A two-hour drive

When Bob Gregowicz moved to the area in 1988, he thought he would be able at some point to stop driving to Myrtle Beach and Savannah for affordable flights. But even though the Charleston economy has swelled with tourism and port traffic, Gregowicz, 53, still starts most of his air travels with a two-hour drive. When his daughter got married here in 2000, almost all of the 200 guests flew into Columbia or Myrtle Beach to save money.

"Something just tells me something isn't right," Gregowicz said. "What really bothers me about the whole thing is nobody seems to give a damn."

Gregowicz, an Air Force retiree who now works at the Medical University of South Carolina's mortuary, has come to the same conclusion as Darryl Jenkins, a leading airline analyst currently on sabbatical from George Washington University: Charleston needs to land a discount carrier. That is the one missing ingredient. It's no surprise that so many local travelers are willing to hit the road before boarding a plane. Myrtle Beach offers them two choices, Spirit Airlines and AirTran, while Savannah boasts the latter of the two discounters. And in the next few weeks, Greenville and Columbia will get flights from Allegiant Air, a low-fare carrier feeding the pleasure hubs of Orlando and Las Vegas.

Charleston had a brief encounter with discount nirvana. Traffic peaked and fares plummeted during the short 18 months that Independence Air was in business, but that ill-fated upstart and its $69 one-way seats have long since crashed and burned.

Exacerbating the fare disparities is the fact that larger "legacy" carriers such as Delta, United and Northwest don't compete on price much anymore, Jenkins said. The so-called "Big 6" win business and loyalty with frequent-flier programs, flexible flight schedules and large route networks. Price wars in recent years and the subsequent crippling losses they caused taught airline executives to play to their strengths, grab the low-hanging fruit and leave the rest alone.

For instance, Atlanta-based Delta Air Lines, Charleston's biggest carrier by boardings, has a lock on the Southeast and South America. US Airways targets the mid-Atlantic region and the Northeast from Charleston. United Airlines canvasses the middle of the country through its hubs in Chicago and Denver. "It's what the Supreme Court calls 'compliant competition,' " Jenkins said.

Heard of Moline?

But when it comes to attracting a low-fare competitor, there's only so much a community can do. Charleston International's landing fees and other charges amount to $5.14 per boarded passenger, making them among the lowest in the country. Like many communities, Charleston County offers $10,000 in marketing funds to any carrier that starts flying to a new destination, but those deal-sweeteners seldom make the difference between a route that makes or loses money. "You could almost give them the (landings and terminal space) for free, and it would probably have very little impact on their fares," said Bob Woods, assistant director at Myrtle Beach International Airport.

There is a growing group of travelers such as Gregowicz, however, who don't buy that argument. They say the Charleston County Aviation Authority and local politicians are not working hard enough to entice newcomers.

"Have you ever heard of Moline, Ill.?" Gregowicz asked, referring to a city three hours west of Chicago. "AirTran flies to Moline, Ill., but they don't fly to Charleston. It's just crazy."

Sue Stevens, incoming director of the airport authority, hears from doubters such as Gregowicz all the time: in church, at Rotary Club meetings and no doubt when she walks through the passenger terminal at work. Her response: Beyond keeping costs low and passing along Charleston's positive economic development news, there is not much she can do. "I tell them the airlines establish airfares, just like any other business," Stevens said.

Because they can

There are complicated economic factors that help keep airfares high in Charleston, aside from the lack of competitive discount carriers. But experts said the underlying reason that airlines charge so much to fly out of the Lowcountry is simple: They do it because they can.

Airline executives are no different than owners of peninsular hotels, West Ashley car dealers or real estate agents pushing homes on Sullivan's Island. They take as much as they can get, or as economists say, whatever price the market will bear. Today's air travelers are getting a real-world economics lesson. U.S. carriers flew 5 percent fewer flights this year through July. In Charleston, roughly 12 percent of the flights were cut from the schedule in the first nine months of 2006.

It stands to reason that the remaining seats would be more expensive, based on the law of supply and demand. And despite record-high ticket prices, commercial planes are now more full than they've been since World War II. Through July this year, 80 out of every 100 airline seats were full, compared with slightly less than 78 last year. With that kind of demand, carriers can afford to leave some thrifty passengers behind, said Michael Boyd, an aviation analyst at the Boyd Group in Colorado.

"Why does Delta charge $600 for a flight from Charleston to Atlanta?" Boyd said. "It's because Delta doesn't want you on that airplane to Atlanta. They want to sell that seat to someone flying on to L.A. or Tokyo."

Most larger carriers are posting their first profits in years as they continue to claw their way out of financial trouble. Mike Flack, director of the Columbia airport, said airfares needed to go up. "Whatever the airlines need to do to make money, I'm all for it," Flack said. "I don't want to lose another airline. ... At one point, I had seven airlines, six of them in bankruptcy. Now I have six airlines with only two in bankruptcy, so I think the outlook is pretty good."

A $4 million rejection

Analysts said Charleston likely will get JetBlue Airways low-fare service from Charleston to New York and Boston within the next two years. At the same time, they said the local market still is too small for other discounters, including Southwest Airlines and AirTran. Also, the mix of local passenger traffic includes a high percentage of business travelers - folks the industry knows are not reluctant to drop $500 on a ticket.

As for the AirTran campaign, this is not the first time it let travelers vote for new service. It circulated a similar online ballot a few years ago. That time around, Charlestonians not only got out the vote, they also rounded up about $4 million in revenue guarantees for the carrier, including a $1 million federal grant. Boyd's firm helped the aviation authority win the government funding. It made the case that there was a huge demand for affordable air service in Charleston. Nonetheless, it watched along with the rest of the Lowcountry as AirTran walked away from the talks and left the money on the table.

"If they came, that would have changed everything," Boyd said. "The thing to remember is that you've got excellent air service. Anywhere you want to go, you can go. ... But if you want a round-trip to Atlanta, it's still going to be call your banker in Zurich."

Email Kyle Stock or contact him at 843-937-5763.