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'We did not meet their expectations'

Delta exit a surprise, aviation director says

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Delta

Delta employees help passengers at the Killeen–Fort Hood Regional Airport on Thursday, Nov. 30, 2017.

Delta Air Lines will cease operations effective Jan. 15 at the Killeen-Fort Hood Regional Airport, bringing an end to nearly 12 years of service and leaving the area without direct access to an East Coast hub — unless travelers want to drive to Austin, Waco, Dallas or other airports farther away.

The company headquartered in Atlanta last week cited a sustained decline in air ridership as its reason for abandoning an interest in Killeen that it has continuously held since 2006.

The severing of Delta’s service is amid a backdrop of record profits in the airline industry, but those come as a result of increasingly cutthroat business tactics to remain competitive, according to the latest Federal Aviation Administration forecast highlights.

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Delta

A Delta jet sits at a terminal for maintenance at the Killeen–Fort Hood Regional Airport on Thursday, Nov. 30, 2017.

“The great recession of 2007-09 marked a fundamental change in the operations and finances of U.S. Airlines. Since the recession, U.S. airlines have fine-tuned their business models to minimize losses by lowering operating costs, eliminating unprofitable routes, and grounding older, less fuel-efficient aircraft,” the report said. “The U.S. airline industry has become more nimble.”

Delta declined to comment directly about the numbers behind its decision, but data furnished by the city of Killeen could be the best underlying indicator of what happened.

WHEELS UP

The Herald reported in February that last year’s inbound and outbound passenger activity was the weakest in more than a decade. Although the airport’s executive director has been consistent in conveying what plans are underway to correct problems, data depict a dire condition.

“This took us by surprise,” Matthew Van Valkenburgh, Killeen’s executive director of aviation, said in an email.

Even with November and December numbers left to report, 2017 is projected to extend a year-over-year slide in total passenger activity to four consecutive years. If the numbers hold, it would be the most anemic performance in more than 12 years.

Chart - Passengers

Click here for a high-resolution image of the chart above

It’s something airlines such as Delta are always watching, Van Valkenburgh said in August, and “if you don’t use it, you can very well lose it.”

The announcement made Monday by Delta, one of three airlines that serve the airport, will leave ticket holders scrambling to find alternative travel plans. American Airlines and United also use the Killeen airport.

The announcement comes just before December, when airline travel is typically at its highest. Although Delta will continue to provide flights for travelers into January, it is short notice for those who made plans long in advance.

George Hobica, founder and editor-in-chief of Airfarewatchdog.com, said airlines can stop service from an airport without notice or explanation, which puts passengers holding tickets on that airline in a precarious position.

“They will get a refund on future flights, but may end up having to buy a much more expensive ticket on the remaining airlines,” he said in an email. “The only good news is that when a major airline abandons an airport it’s an incentive for a smaller airline like Spirit, Allegiant or Frontier to step in.”

WHAT’S THE DAMAGE?

For now, the financial effect of Delta’s departure on the airport is somewhat unclear, but it’s not looking good.

“Basic airline economics are simple,” Van Valkenburgh said. “Fill their seats and they make money. … Bottom line, unfortunately, is we did not meet their expectations.”

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Killeen airport

The Killeen-Fort Hood Regional Airport is seen at 8101 S. Clear Creek Road in Killeen.

The estimated decrease in fiscal year 2018 revenue is $75,000-$105,000, but the exact number will vary depending on how long the airline is required to pay its contractual fees, he said. Until the end of the fiscal year, it is unknown what the impact will be on the Airport Fund.

Killeen City Manager Ron Olson, during an Aug. 1 budget presentation, told the council about the airport’s declining financial health, saying it was in the process of “bleeding itself dry.”

The city’s adopted 2018 budget shows a projected drop in total expenses of 29 percent, from $3.76 million to $2.66 million, but also a decrease in total revenue of 19 percent, from $3.17 million to $2.56 million.

The airport makes most of its money from rental cars (31 percent) and airport parking (23 percent), but air carrier operations and fees paid to load fuel into aircraft each make up 12 percent of the revenue pie. Landings fees are a separate 6 percent of the budget.

As of Thursday afternoon, city airport officials still had not been officially notified of Delta’s plans. The Herald confirmed the airline’s decision to leave directly with Delta.

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Delta

A Delta jet taxis toward the runway as it departs Killeen-Fort Hood Regional Airport on Friday, March 29, 2013.

The approximate income from American Airlines last year was $372,340; United brought in $128,274, and both remain committed to the market and community, Van Valkenburgh said, adding that he spoke to representatives of both airlines subsequent to the news from Delta.

The Waco airport, which has had just American Airlines since 2012, is on the hunt to regain United service, but the search certainly isn’t limited to that, according to Joel Martinez, Waco’s director of aviation.

“Both legacy and low cost carriers” are currently being sent information about the market with the hope of spurring interest, he said in an email.

That would mean steeper competition for Killeen, if successful.

When Van Valkenburgh was asked whether he sees a decline in the Killeen-area market, he acknowledged the drop in ridership and was aware of Austin’s draw to the south.

While domestic flights are “certainly healthy” within the United States, municipal airports have seen their share of struggles, Hobica said.

In 2007, the Salem, Oregon, airport had just one airline offering commercial flights. One year later, Delta pulled out, leaving travelers with no direct flights into the state’s capital. In 2011, Seaport Airlines tried to establish itself in Salem, but left just months later, according to the Salem Statesman Journal.

Similarly, United Airlines pulled out of Atlantic City, New Jersey, after just a few months. The airline had direct flights to Chicago and Houston, offering one flight to each city per day. Seven months later, it pulled out, leaving just Spirit Airlines.

Spirit bills itself as an “ultra-low cost carrier,” and contributed to the low airfare in America, Hobica said. More and more people, especially millennials, are willing to get in their cars and drive to cheaper flights. In Canada, many residents will drive from Toronto to Buffalo or from Vancouver to Seattle seeking cheaper flights.

With Austin and Waco just an hour away, and two Dallas airports about 2 ½ hours away, there are options for travelers.

PILOT PERSPECTIVE

Paul Ryder is the national resources coordinator for the Air Line Pilots Association and has been a commercial pilot for 13 years. He said pilots are often excited to fly to underserved markets and rural areas. While at one time, there might have been a shortage of pilots willing to fly to these smaller airports because of lower wages and less-than-ideal working conditions, that’s changed, as carriers saw the market negatively affected and made deliberate changes. Now, there’s a “healthy, sufficient number” of pilots.

Ultimately, however, business decisions made by individual airlines are about bringing the money, Ryder said.

“It’s always the goal to serve those communities. You want to help throughout the nation and throughout the world,” he said. “But you (have) to make business decisions. If the route doesn’t have sufficient traffic, we have seen airlines come in and out of service.”

MONEY MATTERS

Throughout the airport’s decline in ridership, officials have maintained that flying from Killeen is about the same cost or cheaper than competitors, but year after year, government data show the math doesn’t add up.

The latest available data from the Bureau of Transportation Statistics show a continuing trend spanning more than a decade documenting higher than average airfare in Killeen.

Travelers in 2016 paid an average fare of $482 to fly from Killeen round-trip, which is about $200 more than Love Field in Dallas ($278) and $100 more than Austin ($372). Southwest Airlines is headquartered at Love Field (airport code DAL) and also flies from Austin (AUS); American’s base is Dallas/Fort Worth International Airport (DFW).

Chart - Airfare

Click here for a high-resolution image of the chart above

Going back as far as 2006, the trend is typically the same — local prices exceeded competitors.

Van Valkenburgh said in August the airport is working on airfares with airlines to get closer to prices Austin and Dallas offer. Other core areas of improvement include: aircraft size to accommodate bags and people (airlines are downsizing fleets); working with airline schedulers to offer more flights in the Killeen market (filling current flights will help drive this); air service development to sustain and add flights; and upgrading airport equipment.

From January through September 2016, 503,981 passengers boarded planes at Austin-Bergstrom International Airport, according to Austin airport figures for one-way travel. During that same stretch of time in 2017, there were 546,957 passengers boarding. Part of that could be attributed to population growth, as Austin has had an increase of about 20,000 residents per year since 2005.

Delta also added three nonstop routes from Austin in 2017: to Seattle, Boston and Raleigh-Durham, North Carolina. The Austin airport added 17 nonstop routes in 2017, and will add another 13 in 2018, according to airport spokesman Derick Hackett.

The Killeen City Council is moving forward with several capital improvement projects at the airport using passenger facility charges ($1.3 million) and customer facility charges ($1.6 million). Projects using passenger facility charges include upgrades to the flight information and common use system ($750,000) and rehabilitating Terminal Access Road ($291,000). Projects using customer facility charges include covered parking for the rental car parking lot ($1 million) and car wash facility improvements ($600,000).

There is no negative impact to the Aviation Fund balance because the projects are fully funded with grants or facility charges, Van Valkenburgh has said.

He remained hopeful about airline service.

“Sustaining air service has always been our primary goal with increasing service next,” Van Valkenburgh said. “We continue to meet and talk to our airlines about our existing service and the possible routes the airlines could potentially add to Killeen.”

asierra@kdhnews.com | 254-501-7463

(2) comments

SnowWhiteNthe7Thieves

I hope American and United leaves, too. The airport was another KILLeen unique scam. Waco is an hour away, so is Austin. KILLeen is a nothing little town 25 miles off a REAL Interstate, I35. Cretaing Interstate14 (even though it remains US 190) doesn't make US190 aka HIGHWAY of Death am Interstate than me calling myself a lion makes me a lion. ONLY in KILLeen does this bizarre stuff happen, buying churches, exotic water parks, rec centers, two useless football stadiums (if the betters get their way).

Hacksaw

Flying out of Killeen has always been expensive compared to other cities. My own personal experience was from buying tickets from Killeen to Little Rock, Ark. Even in the days of Rio Airlines flying out of Skylark Field and continuing over to the joint use facility at Robert Gray AAF, we could always fly from Austin to Little Rock cheaper than we could fly from Killeen to Dallas. I don't know whose to blame for that. Probably not the fault of any one player but nevertheless, its still a factor travelers take into consideration when they plan their trips. Is it any wonder why ridership numbers are down when cost comparisons are so divergent? I hope Killeen can get what ever their problems are figured out. Its so much easier flying from here than driving two or three hours to catch a flight.

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