By Ashley Frampton
aframpton@scbiznews.com
Originally published Oct. 26, 2009

One business owner has already seen the impact of AirTran’s plans to leave Charleston International Airport.

Earle Buckley, who was planning to book a business trip from Charleston to Sarasota, Fla., said fares went from $190 to $270 in the days after AirTran Airways announced it would leave the market.

Buckley, who is an environmental consultant based in Charleston, flies regularly for his work and builds airfare into his contracts with universities and states in other parts of the country. He’s always tracking fares, he said, because the better the rate, the more money left in his contract.

“This is real,” Buckley said. “AirTran pulls out and my fares have gone up. That is very real.”

Buckley said he checked fares from Charlotte to Sarasota and found them to be about $130. But he said he’s not likely to drive to Charlotte unless the savings hit $200 or $250.

“It’s so nice to get off an airplane and be home in 25 minutes,” Buckley said. “But for $200 or $250, I would think about it.”

Even with AirTran, Charleston had the 11th-most-expensive average domestic airfare among the nation’s 100 busiest airports in the first quarter of 2009. The average fare was $382, according to the U.S. Bureau of Transportation Statistics.

Now that the low-cost carrier is leaving the Charleston market, local officials expect ticket prices here to become even more expensive.

Nearby Columbia and Greenville airports are not included in the list of the 100 busiest airports.

AirTran announced in early October that it would end its service from Charleston on Dec. 3 because it was not capturing enough business travelers. Community leaders recruited the airline to Charleston International Airport several years ago in an effort to decrease air travel costs among all airlines in the market. At the time, Charleston did not have a discount airline.

The strategy worked: Prices came down significantly after AirTran began local service in May 2007.

Charleston’s domestic fares averaged $492 in the first quarter of 2007. Average fares dropped to about $403 in the first quarter of 2008, and they dropped further, to $382, earlier this year, according to federal statistics.

The drop in average fares from the first quarter of 2007 to 2009 was 22%. During the same period, the average national fare dropped by less than 1%, to about $315.

Business and government leaders attribute the drop to AirTran’s competitive rates. Without that downward pressure on prices, they warn that businesses and residents will pay more for the convenience of flying out of Charleston — and that luring new firms and tourists to the area could be more of a challenge.

Decision to go

AirTran said its decision to leave the market was based on a lack of business travelers on Charleston flights.

The airline’s profitability depends on the right mix of business and leisure passengers, AirTran spokesman Christopher White said. Leisure travelers typically book tickets far in advance and at lower rates, making last-minute business passengers who are willing to pay higher rates important to AirTran’s business model.

“Even though the airport and the Convention and Visitors Bureau and the local community have greatly supported AirTran, we are just not able to capture enough of the business-traveling public,” White said.

David Jennings, chairman of the Charleston County Aviation Authority, which oversees the airport, said AirTran told local officials it wasn’t making any profit here, even though its flights had been about 80% full this summer.

AirTran started its Charleston service with two daily flights and expanded to four shortly thereafter. Those flights all took passengers to Atlanta, where they could connect to planes flying to other destinations.

About a year ago, AirTran went back to two daily flights to Atlanta for several months, said Mary Graham, senior vice president of public policy for the Charleston Metro Chamber of Commerce. Although the chamber encouraged businesses to use AirTran to avoid losing its service, Graham said the limited flight options made it difficult for some businesses to do so.

“If you had eight flights on Delta to choose from and two on AirTran, from the business traveler’s perspective, even though they wanted to support AirTran, they couldn’t justify going and sitting in the Atlanta airport for five hours” to wait on a connection, Graham said.

That was especially true when Delta offered the same price for a more conveniently timed flight, Graham said.

Graham said the economy also played a role in business travel decisions. Some companies told the chamber they had been forced to cut back on air travel or eliminate it. Others were cutting costs by cashing in frequent-flyer points with other airlines.

Although AirTran had only about 8% market share at the Charleston airport, Graham said the chamber’s airline consultant has calculated that the discount carrier has saved the community $125.5 million in fares since starting service here.

“I think it’s a reasonable assumption that AirTran leaving the market will cause prices to rise,” Jennings said.

Impact on business

Rising rates would hit local businesses and residents at a time when most can’t afford to pay more. They could also be a negative for Charleston — or at least one less advantage — in luring new firms and tourists to the area, local officials say.

“From a business travel perspective, it is a huge advantage when trying to recruit new businesses to this area, having moderately priced airfare available,” said David Ginn, CEO of the Charleston Regional Development Alliance.

But competitive pricing isn’t the only thing businesses look for in a community. Ginn said they also look at overall “ease of access” to an area by air, and Charleston still scores fairly well there.

“For example, how many nonstop flights per day does your market have?” Ginn said. “You know, 10 years ago we probably were nine, 10, 11 nonstop flights. And today, we are probably 13 or 14 nonstop flights, and adding a few cities all the time.”

Charleston also has good service to two nearby hubs, Atlanta and Charlotte, he said. And local corporate jet facilities have been expanded and upgraded during the past decade.

Some business and leisure travelers headed from Charleston to other regional cities will be more likely to drive now, as they might have done before AirTran entered the market, said Perrin Lawson, deputy director of the Charleston Area Convention and Visitors Bureau.

As for tourists heading to Charleston, Lawson said the area is fortunate that about 80% of its tourists already drive here.

“But we’re always looking to expand our reach to other markets, and many of those other markets are ones that are going to be more inclined to fly,” Lawson said.

Higher airfares don’t necessarily take Charleston out of the running for faraway leisure travelers, Lawson said. But “Somebody’s going to have to make a firm decision that this is absolutely somewhere they have to visit,” he said.

Lawson said AirTran was a bigger coup for Charleston than Independence Air, the now-defunct low-cost carrier that served the market several years ago. Although Independence Air probably also made local airfares more competitive, Lawson said, it was sort of an experiment — a startup without an established reputation — and flew smaller regional jets.

In contrast, AirTran has a track record, a loyal customer base and a frequent-flyer program, and it flies full-size jets.

“We certainly were able to utilize that from a sales perspective in attending trade shows and calling on other cities that AirTran served,” Lawson said. “When we told them that AirTran flew to Charleston, that information was always very well-received.”

Subsidy considered, rejected

In the month before AirTran decided to cut its Charleston routes, local officials say the airline asked whether the community would be willing to offer subsidies to keep it here.

AirTran said it would take $500,000 to keep operating locally until January, said Teddie Pryor, chairman of Charleston County Council and a member of the Charleston County Aviation Authority.

“They were looking at $2 million for a year,” Pryor said.

Pryor said community and local government leaders decided against the subsidy, in part because they didn’t want to set a precedent or be unfair to other carriers.

“We told them we weren’t willing to do that because, if we did it for them, we’d have to do it for everybody,” Pryor said.

Some other communities do subsidize AirTran, including Wichita, Kan.

Graham said the business community was part of the talks about a subsidy, but neither business interests nor the area’s local governments knew where the money would come from.

“It wasn’t there, no matter where you looked,” Graham said. “And I think, philosophically, if we had the money sitting around, is that the best place to put it right now with the economy?”

Though its Charleston routes might not have been profitable, AirTran is not losing money on the whole. At the end of the second quarter, the company announced record year-to-date operating income of $113.9 million, resulting in an operating margin of 9.9%. AirTran called it the company’s best first-half performance since 2001.

AirTran reported $78.4 million in earnings in the second quarter. The airline was scheduled to release third-quarter earnings on Oct. 21, after press time.

Jennings said the airport is in constant contact with other low-cost carriers about the possibility of serving Charleston.

“We are optimistic, now that word is out that AirTran is interrupting service, that what have heretofore been casual conversations with other carriers will get a little more serious,” he said.

Reach Ashley Fletcher Frampton at 843-849-3129.