HIGHFILL — Ultimately, it all comes down to business.
Northwest Arkansas Regional Airport serves the needs of three of the nation’s most influential companies - J.B. Hunt Transport Services, Tyson Foods Inc., and the world’s largest retailer, Wal-Mart Stores Inc. Combined, the companies booked $485 billion in revenue their last fiscal years.
Workers for these three companies, and the thousands of businesses that deal with them, jet to and from Northwest Arkansas in a steady stream.
Northwest Arkansas Regional Airport was the 112th-busiest airport in the United States in 2010, according to the Federal Aviation Administration. It has daily nonstop flights to 12 cities, and Washington, D.C. will become the 13th whenU.S. Airways begins flights to Reagan National Airport in July. It also has flights a few days a week on low-cost carrier Allegiant Air to Las Vegas, Los Angeles and Orlando, Fla.
The vast majority of people who fly out of Northwest Arkansas Regional Airport are doing so for business reasons, with airport officials estimating that figure at upwards of 70 percent. All of that business travel carries a big price tag.
The airport’s position as a business hub means airlines demand, and receive, much higher fares from all travelers. While business travel remains brisk, many price-conscious local residents flying out for a vacation are choosing smaller airports like Branson or driving to a larger, less businessfocused airport such as Tulsa International Airport, where fares are cheaper.
Airfare is up all over the country, with a 10 percent increase nationwide from the fourth quarter of 2010 to the same time in 2011, a jump from $335 to $368, according to the Bureau of Transportation Statistics. However, the high cost of airfare is something that has plagued Northwest Arkansas Regional Airport since it opened in 1998.
In April 2011, the airport was ranked the “most expensive” midsize airport in the country by New York Times statistician Nate Silver, after Silver analyzed fare data from the third quarter of 2010. He determined that the average fare of $527 was $158 more than a “fair fare” (expected fare) of $369.
No other midsize airport came close to matching Northwest Arkansas Regional Airport in Silver’s analysis. The second-most expensive midsize airport, Memphis, had an average fare that was $99 higher than would be expected, according to Silver’s report.
“I hear [complaints about prices] from my own family. I hear it everywhere,” said Philip Taldo, a member of the Northwest Arkansas Regional Airport board of directors. “Unfortunately, we just don’t have control over that aspect of it. We provide a place for the public to come and board the planes and a runway for the airlines to use, but we have no control over what they charge.
“Speaking for myself, I want us to serve the whole broad spectrum of citizens of Northwest Arkansas. That includes leisure travelers who shop a lot harder for fares. We don’t want to restrict it just to maybe business travelers or individuals where it’s not a factor what the cost is.”
Airports that have a high percentage of business travelers often have higher fares, said air travel expert George Hobica of New York, founder and president of airfarewatchdog.com. This is because leisure travel is predominantly discretionary, Hobica explained, whereas business travel often is not.
This is the same reason why the three most “competitively priced” midsize airports in Silver’s 2011 rankings were Atlantic City International in New Jersey, Southwest Florida International in Fort Myers, Fla., and Myrtle Beach International in South Carolina. All three are popular travel destinations.
“No one is forcing you to take a vacation,” Hobica said. “You can stay home.”
SUPPLY AND DEMAND
On Sept. 1, Northwest Arkansas Regional Airport unveiled a new $21 million concourse that clearly serves the needs of all those business travelers. Planning for the concourse was in the works for close to a decade, and when it opened, Northwest Arkansas Regional Airport went from a tiny, cramped facility to one where valuable commodities such as personal space, electrical outlets and dining options are plentiful.
The airport has done customer-satisfaction surveys in the past in which flierswere asked whether they were traveling for business or pleasure. Historically the result has been “usually 63-65 percent” business, said the airport’sexecutive director, Scott Van Laningham, but he estimates it’s even higher right now, approaching 70 percent business travel.
By comparison, 54 percent of passengers at nearby Tulsa International Airport are business travelers.Those who are responsible for daily operations at the airport see the cause and effect of the higher rates.
“It’s a double-edged sword,” Van Laningham said.“The same thing that lets us have service to 16 direct destinations [after service begins to Washington, D.C., in July] tends to mean higher prices.”
Newport News/Williamsburg Airport in Virginia, the 114th-busiest, flies to five cities daily, while Lubbock Preston Smith Airport in Texas, the 115th-busiest airport, is scheduled to be down to six cities before the end of the summer.
“Daily” is defined as having flights scheduled at least six different days a week.
“The thing that lets us have 50 flights a day is the business travel,” Van Laningham said. “It gives us the frequency and destinations.”
Business travelers generally favor convenience above all else, Hobica said. This explains why, on a typical weekday, there are 10 direct flights from Northwest Arkansas to Chicago’s O’Hare International Airport, the nation’s second-busiest airport. Business travelers don’t want to wait and are willing to pay more to do so.
The “load capacity” for flights at Northwest Arkansas Regional Airport is good, Van Laningham said, which means that the planes that are taking off tend to be filled at or near their capacity, particularly on weekdays. Indeed, the number of boardings at the airport increased 3.6 percent from 2009 to 2010, although the first three months of 2012 were down 6.7 percent from 2011.
So the high cost of travel from Northwest Arkansas Regional Airport isn’t proving detrimental to airlines, with prices so high thatplanes aren’t full.
American Airlines, the carrier that has the most traffic out of Northwest Arkansas Regional Airport, declined to comment about its pricing, while the secondlargest, Delta Air Lines, did not return phone calls seeking comment.
Still, those who run the airport want fares to come down to make it easier for leisure travelers to fly out of Northwest Arkansas. Art Morris of Siloam Springs, chairman of the airport’s board of directors, said board members routinely hear from frustrated travelers, and they are sympathetic to their complaints.
“We can talk to [the airlines] and even fuss at them, but we really have no input into the prices,” Morris said. “I think the airlines realize they have a captive traveling class here, so if they can get it, they will charge it.”
AIMING FOR LOW FARES
Branson Airport LLC, about a two-hour drive northeast of Northwest Arkansas Regional Airport, has just a fraction of the flights of the Highfill airport. As recently as March, the Branson airport had just three flights a day, two to Atlanta on Air Tran Airways and one to Denver on Frontier Airlines.
On April 16, Air Tran began once-daily service to Chicago-Midway and Houston-Hobby. And in May, Branson AirExpress launched flights to Austin, Texas, Milwaukee and Nashville, Tenn. - four times a week for the first two cities, and three times a week to Nashville.
That brought the airportto eight flights on its busiest day, to a total of seven cities. All of them are on low-cost carriers.
“We’re really excited for the nonstop flights to Chicago and Houston,” said Beth Outz, media specialist for Branson Airport. “It’s going to give people a lot more options.”
Located a few miles south of downtown Branson, Branson Airport opened in 2009. It was privately financed and cost $155 million to build.
Because it was not built with federal funds, the airport has a greater control over which companies operate there, and it has targeted low-cost carriers.
Although Branson Airport has far fewer flights, it routinely defeats larger airports on price, including Springfield-Branson Municipal Airport, located about a 1-hour, 20-minute drive north. According to the Bureau of Transportation Statistics, the average 2011 fourth-quarter fare was $274.91 out of Branson, compared to $519.94 out of Northwest Arkansas Regional Airport.
In January, the nation’s largest low-cost carrier, Southwest Airlines, announced it would continue providing service to Branson after its planned merger with Air Tran is completed.
Southwest hopes to finalize its integration with Air Tran by 2015, said Southwest spokesman Chris Mainz of Dallas. At that point, Branson will be opened up to the entire Southwest system.
“That’s proven to be a successful market for Air Tran,” Mainz said, referring to Branson. “As we’ve evaluated where they’re flying, especially into cities we don’t, we take into account many things - demand, the market, what the competitive landscape looks like. If they’ve been able to make that work, then we should be able to do the same.”
The Branson airport targets fliers in a 90-mile radius and has run advertisements in Northwest Arkansas.
“We have people drive from Tulsa and St. Louis because the fares are cheaper here,” Outz said. “We get tons of people from Harrison and Eureka Springs.”
The airport has four gates and a single runway. When flights are about to leave the airport, employees rush outside and wave goodbye to passengers.
“It’s very rustic, the Ozarks at its finest,” Outz said. “The ‘Branson wave’ is typically [done] by our ramp agents, about seven or eight of them that go out and wave as they’re leaving.It’s our way of saying, ‘We’ll see you soon.’”
LOSING OUT
Northwest Arkansas Regional Airport is undoubtedly losing a sizable percentage of travelers to other nearby airports, although it does not know the exact numbers. A market study done a few years ago indicated the airport was losing 12 percent of its potential traffic to other airports, but Van Laningham said that number may be much higher now.
Most of those travelers, he said, are flying out of Tulsa International Airport, which is a larger airport and less than a two-hour drive away.
Other smaller airports may benefit as well, such as Fort Smith Regional Airport, whose February 2012 numbers were up 20.8 percent from February 2011. (The number was aided by 2012 being a Leap Year, and thus February lasting a day longer.)
Fuel prices have driven up airfares nationally, Van Laningham said, but Northwest Arkansas Regional Airport’s percentage of area residents leaving for lower fares has gone up more than for other airports.
“I’m guessing right now it’s 30 percent, and it’s the high cost of airfare,” he said.
The airport has recently begun to lose some passengers to Joplin, Mo., which has twice-daily flights to Dallas-Fort Worth that are federally subsidized through American Airlines, Van Laningham said.
“We’ve asked American to look at this,” he said.
The airport’s inability to make much of a dent into the cost of airfare isn’t for a lack of trying. In recent years, it secured low-cost carrier Allegiant Air, which brought with it inexpensive flights to vacation destinations.
Allegiant doesn’t allow for connections to other cities, though - and as the number of airlines shrinks due to mergers, the chances of getting the airlines to lower their prices gets worse. So long as they are filling the planes that leave Northwest Arkansas, Hobica explained, it makes sense for them tokeep charging high prices.
“There’s fewer competitors today, and it’s hard to fight airline consolidation,” Hobica said. “They could lower landing fees, but that doesn’t help much; the airlines could then just raise their fares.”
In an ideal world, Northwest Arkansas Regional Airport would be able to attract Southwest Airlines. That would undoubtedly bring cheaper airfares to Northwest Arkansas, both from Southwest and from its competitors.
But Southwest has said it isn’t coming to Northwest Arkansas, at least not in the foreseeable future. It already has flights out of Tulsa, as well as both Little Rock and Kansas City, Mo.
Mainz, Southwest’s spokesman, said the airline has frequently found that its passengers are willing to drive significant distances for a lower airfare. For example, he explained, Southwest chose not to fly out of Atlanta for years because so many people were willing to drive from there to Birmingham, Ala., to fly Southwest. It was only after it became clear that both markets were viable that Southwest expanded to Atlanta.
Similarly, if Southwest were to ever expand into Northwest Arkansas, it would have to know that doing so would not harm its service in nearby cities.
“If you’ve already got a market covered, you don’t want to get cannibalized [by expanding service],” Mainz said. “We’ve found that there are several different regions of the country, especially if a particular airport does not have low-cost/low-fare service, and people save substantially where they drive an hour or two, they absolutely [will do so].”
Front Section, Pages 1 on 05/27/2012