Sunday, July 25, 2004

Airtran Quits Tallahassee - Whither Bay County? AirTran announced this week they are quitting Tallahassee, both north to Atlanta and south to Tampa.  I thought AirTran had survived the competition in TLH, but apparently Delta swamped the market and made it too painful to continue.  Back in April 2002, I expressed doubt in this blog that AirTran could make money in Tallahassee.  Subsequently, they leased some R-jets, reduced their service in Tallahassee to all R-jet, and announced that "At last, supply and demand are in balance in the Tallahassee market...".  That seemed to work until this year, when AirTran announced the R-jet costs were too high and cancelled the leases.   Then they tried to serve Tallahassee with their mainline Boeing 717, whereupon Delta piled four more mainline "loss leaders" into the market.  This was the last straw and AirTran capitulated, as they did earlier in Eglin/Okaloosa.  This leaves the only discount service in NW Florida at Pensacola, and again it is AirTran.  Pensacola's airport commissioned an excellent traffic study in 2003, which concluded that AirTran was setting the price level in Pensacola and even influencing Delta and Northwest to compete on price in Eglin/Okaloosa to prevent "leakage" to AirTran. At Tallahassee, AirTran was capturing a portion of the Bay County market, but Delta was not competing on price from Panama City/Bay County airport, choosing to limit seats instead.  AirTran's departure from TLH probably means higher fares in both markets, although Delta will have to discount some seats in TLH until they can unwind the oversupply they used to defeat AirTran. Whither Bay County?  This cannot be good news for the new "regional" airport, because it confirms that somewhere north of 500,000 enplanements are necessary to attract a discount airline (Tallahassee had 512,000 last year including AirTran, and will relapse to less for now.  Pensacola has about 800,000.) Bay County is  struggling  to approach  200,000 enplaned, and will probably not reach 500,000 before 2030-2035.  What about Southwest?  Pensacola's traffic study concluded that Pensacola could not attract Southwest yet, but PENSACOLA HAS THE ATTRIBUTES SOUTHWEST WILL SEEK WHEN THE TIME IS RIGHT ( Interstate highways to collect regional passengers, over a million potential enplanements, of which Southwest could expect to get 400,000).  Southwest will probably replace AirTran in Pensacola someday, but not for a long, long, time. It appears to me that Bay County is still the "odd man out", too small to attract a discount airline and too close to more competitive airports (Eglin/Okaloosa and Tallahassee).  If the construction of a West Bay/St. Joe airport is fast-tracked, it will face all these competitive pressures with no effective strategy.  Better relax and try to get a better deal from St. Joe because the only near-term purpose for the new airport is window-dressing for the Sector Plan.  We are on track to squander $400 Million in grants, relocate all the jobs at the airport away from Panama City, commute 50 miles for the same air service, kill much of General Aviation, and MAYBE attract 10 new charters per year.   The only people pushing for the new airport are the Chamber of Commerce and St. Joe - what are THEY bringing to the table, if not passenger traffic? 9:14:18 PM    comment

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