Air Service Strategic Development Plan Gainesville Regional Airport

Air Service Strategic Development Plan
Gainesville Regional Airport
Airline Consolidation and Profitability
The Big Four Have 86% of All US Capacity
1978
1990
2000
Today
Page 3
A Cyclical Economy Hurts Airline Profitability
US Airlines Profit by Year
Calendar Year 1948 – Calendar Year 2014; in Millions of US Dollars
$20,000
$15,000
$10,000
$5,000
$0
-$5,000
-$10,000
-$15,000
-$20,000
-$25,000
Since 1948, US Airlines Have
Lost $4.8 Billion
The Longest Profitable Stretch
Was Six Years (1995 – 2000)
-$30,000
Page 4
Source: Sixel Consulting Group Analysis of IATA Data
Fuel Has a Huge Impact on Profit Margin
Spot Price of Jet Fuel per Gallon
January 2000 – July 2015
$4.00
$3.95/Gallon
$3.50
$3.00/Gallon
$3.00
$2.50
$2.00
$1.50
$1.50/Gallon
$1.00
$0.50
$0.74/Gallon
Airlines Want to Be Prepared
for Next Fuel Spike
$0.00
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Page 5
Source: IATA Jet Fuel Price Monitor
Airport Fees Are 7% of Airline Cost
Analysis of Airline Cost Centers
Calendar Year 2015
Fuel, 18.9%
Other, 25.5%
Marketing,
0.7%
Maintenance,
2.1%
Airport Costs,
7.0%
Employees,
39.0%
Aircraft
Ownership,
6.8%
Page 6
Source: Airlines 4 America
Margins Are Tight Even With Low Fuel Prices
Average Seats Filled on an 88-Seat Regional Jet in the US
Breakeven: 63 Seats
Profit: 11 Seats
With Fuel Below $2 a Gallon, Airlines Still Needed:
72% of Seats Filled to Break Even, or 63 Seats on a 88 Seat RJ
13% of Seats Represented Profit, or 11 Seats on a 88 Seat RJ
84% Average Load Factor for a 13% Overall Margin
Page 7
Source: Sixel Consulting Group Analysis of Airline Financial Reports,CY15
Margins Are Tight Even With Low Fuel Prices
Average Seats Filled on a 50-Seat Regional Jet in the US
Breakeven: 36 Seats
Profit: 6 Seats
With Fuel Below $2 a Gallon, Airlines Still Needed:
71% of Seats Filled to Break Even, or 36 Seats on a 50 Seat RJ
11% of Seats Represented Profit, or 6 Seats on a 50 Seat RJ
82% Average Load Factor for a 13% Overall Margin
Page 8
Source: Sixel Consulting Group Analysis of Airline Financial Reports,1Q15
Pilot Supply vs. Demand
Supply is Affected by Various Factors:
Qualification Guidelines
1,500 Minimum Hour Rule
Mandatory Retirement
Age 65
Job Perception
Low Earning at First
Training Capacity
Demand Affected By:
Staffing Rules
Increased Required Rest
Retirements
Schedule Growth
Page 9
Source: Regional Airline Association (RAA)
US Fleet Size is Down 11% Since 2000
US Airline Total Fleet Size
Calendar Year 2000 – Calendar Year 2015
6,900
6,800
6,762
6,763
6,700
6,600
6,500
6,400
6,300
6,200
6,100
6,050
6,000
5,900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Page 10
Source: Airlines 4 America
Smaller Airports Have Faced Severe Cuts
Change in Scheduled Flights and Available Seats by Airport Size
Calendar Year 2007 vs. Calendar Year 2014; US Airports
0.0%
-5.0%
-6.8%-7.1%
-10.0%
-25.4%
-28.5%
-15.0%
-22.8%
-24.4%
-31.1%
-20.0%
-43.0%
-25.0%
-30.0%
-35.0%
-40.0%
-45.0%
Flights
Seats
-50.0%
Large Hub
Page 11
Medium Hub
Small Hub
Source: Sixel Consulting Group Analysis of OAG Airline Schedules
Non-Hub
Airlines Are Cutting Costs by Upgauging
Average Domestic US Aircraft Size
Change in Scheduled Departures
2010 – 2015
2010 – 2015
30.0%
108
106
20.0%
104
26.9%
10.0%
102
5.5%
0.0%
100
107
98
-10.0%
102
96
94
97
98
-33.9%
-20.0%
99
95
92
-30.0%
90
-40.0%
2010
Page 12
2011
2012
2013
2014
2015
Source: Boeing Company
< 51 Seats
51-100 Seats > 100 Seats
The Current Situation at Gainesville
224,410 People Live Within 30 Minutes of the Airport, 638,291 Within
60 and 2,288,049 Within 90 Minutes
Gainesville also has a significant amount of inbound tourist traffic
Page 14
Today, Gainesville Regional Airport is Served to Atlanta, Charlotte
and Miami
Service to other Florida cities such as MCO and TPA has recently ended
Page 15
Page 23
Overall Gainesville Has Been Trending Very Well
with Increasing Load Factor on Generally Flat Capacity
Passenger trends continue to increase despite the loss of Silver Airways
Overall loads have gone from approximately 77% to 82% since 2013
Atlanta has the best load factors at 85.8% for 2015
Charlotte is next at 83.2%
Miami trails at 69.7%, but has been improving over the years
Onboard PDEW, Available Seats, and Load Factor at Gainesville Regional
Airport
January 2013 – December 2015
900
71%
800
80%
77% 77% 78%
77%
754
719
740
752
71%
732
74%
77%
85%
75%
79%
81% 81% 78%
80% 81%
76%
804
760
747
812
787
736
726
726
701
755
740
84%
755
757
79% 81%
841
75%
84% 85%
80% 79% 81% 81% 82% 82%
732
728
756
747
697
669
700
636
500
496
400
491
549
568
533
508
537
472
544
573
541
701
682
684
601
553
544
562
531
538
631
627
559
580
530
518
625
599
561
556
606
572
560
525
487
447
300
200
100
0
Page 16
714
618
600
575
80%
763
614
565
89% 89%
799
668
656
700
80% 81% 82%
Available SDEW
Onboard PDEW
Load Factor
GNV Has Just Completed a Record Breaking Year for
Passenger Traffic
Gainesville Domestic and International Annual (O&D Passengers)
Year-End Fourth Quarter
Annual Domestic O&D
Annual International O&D
Origin and Destination (O&D) Passengers
450,000
400,000
37,162
41,854
350,000
38,484
44,110
34,155
300,000
28,932
21,838
25,013
250,000
24,690
25,203
200,000
150,000
304,944
267,662
323,092
333,200
2012
2013
355,022
373,590
275,302
246,059
239,810
2007
2008
100,000
222,893
50,000
0
2006
Source: DOT via Database Products
Page 17
2009
2010
2011
2014
2015
This Translates to 519 Domestic PDEW,
and 54 International PDEW
Gainesville Domestic and International Passengers per Day Each Way (PDEW)
Year-End Fourth Quarter
Domestic PDEW
International PDEW
600
Passengers per Day Each Way (PDEW)
51
57
500
60
53
47
400
40
30
34
34
35
300
200
418
441
456
2012
2013
486
512
377
367
337
328
2007
2008
305
100
0
2006
Source: DOT via Database Products
Page 18
2009
2010
2011
2014
2015
Orlando International Seats Have Grown 65% Since 2006
Orlando (MCO) International Annual Seats
Year-End Fourth Quarter
4,000,000
3,500,000
3,000,000
Annual Seats
2,500,000
2,000,000
3,724,132
1,500,000
2,864,458 2,950,084
3,963,791
3,154,329
2,434,411 2,456,212 2,548,074
1,000,000
1,897,926
2,065,600 2,161,393
500,000
0
2006
2007
2008
2009
Source: OAG – 2016 is scheduled seats and is subject to change.
Page 19
2010
2011
2012
2013
2014
2015
2016
GNV Has More Int’l Passengers as a Percentage of Total Vs. Peer
Airports Except for Tallahassee, Even More Than Jacksonville
Gainesville Florida Peer Cities (+JAX) International Passenger Percentage
Full Year 2015
10%
9.3%
9.0%
9%
8%
7%
7.4%
7.4%
7.0%
6.0%
6%
5%
4.4%
4.0%
4%
3%
2%
1%
0%
Source: DOT via Database Products
Page 20
0.0%
GNV Ranks Near the Bottom in Florida Compared to Cities of
Similar Size. But GNV Does Not Have a Beach!
Gainesville Florida Peer Cities MSA Population and Passengers
Full Year 2015
0
Lakeland-Winter Haven 634,638
400,000
1,200,000
599,022
430,737
1,522,820
Pensacola-Ferry Pass-Brent 474,081
Port St. Lucie 444,420
No Scheduled Flights
636,942
Tallahassee 375,751
Naples-Marco Island 348,777
No Scheduled Flights
Ocala 339,167
No Scheduled Flights
Gainesville 273,377
Crestview-Fort Walton Beach-Destin 258,042
Page 21
410,752
729,940
Panama City-Lynn Haven 194,929
852,483
Punta Gorda 168,474
835,043
Source: DOT via Database Products
1,600,000
No Scheduled Flights
Deltona-Daytona Beach-Ormond Beach 609,939
Palm Bay-Melbourne-Titusville 556,885
800,000
Looking at Georgia and Alabama (Mostly Non-Beach), GNV Has
a Strong Passenger Base Relative to Peers in Those States
Gainesville Vs. Georgia and Alabama Peer Cities MSA Population and Passengers
Full Year 2015
0
500,000
Augusta, GA 590,146
546,452
1,905,891
Savannah, GA 379,199
339,776
Montgomery, AL 373,141
Page 22
78,524
410,752
Tuscaloosa, AL 237,761
No Scheduled Flights
Macon, GA 230,096
No Scheduled Flights
Athens, GA 203,189
No Scheduled Flights
Gainesville, GA 193,535
No Scheduled Flights
Source: DOT via Database Products
2,000,000
1,006,223
Mobile, AL 415,123
Gainesville, FL 273,377
1,500,000
532,661
Huntsville, AL 441,086
Columbus, GA 313,749
1,000,000
Current Airport Projects
Apron Expansion
Parking Expansion Plans
ARFF Building Design
Page 23
Terminal Expansion Concepts
Page 24
Terminal Expansion Concepts
Areas of Potential Expansion
• Departure Lounge
• Inline Bag Screening System
• Mezzanine Level Concourse
with Passenger Bridges
• Ticketing Lobby
• Aircraft Apron (current)
Page 25
• Holdroom Restroom Expansion
Terminal Expansion Concepts
Page 26
However, the Domestic Fares Have Increased
Even as Traffic Has Reached Record Levels
Gainesville Domestic Passengers per Day Each Way and
Average One-Way Fare
Year-End Fourth Quarter
One-Way Domestic Fare
Domestic PDEW
250
800
$215
Average One-Way Fare
$222
700
$206
$201
$199
$182
$188
600
$183
512
486
150
441
500
456
418
400
367
377
100
337
328
300
305
200
50
100
0
0
2006
Page 27
2007
2008
2009
2010
2011
2012
2013
2014
2015
Domestic PDEW
$196
200
$217
New York, Washington, D.C., Atlanta, South Florida and Chicago
Are the Largest Travel Destinations for GNV Passengers
Gainesville Top 25 Domestic Origin & Destination Passenger Markets
Year Ended Fourth Quarter 2015
New York (LGA/JFK/EWR) -1
33,141
Washington (DCA/IAD/BWI) -2
Atlanta -3
15,761
South Florida (MIA/FLL/PBI) -4
Boston -5
12,153
Charlotte -6
11,893
Chicago (ORD/MDW) -7
17.8
16.6
16.3
11,823
16.2
11,307
LA Basin (LAX/SNA/ONT/BUR/LGB -9
15.5
11,009
Dallas / Ft. Worth (DFW/DAL)-10
15.1
9,190
Philadelphia-11
12.6
8,766
12.0
Denver-12
8,090
11.1
Houston (IAH/HOU)-13
8,053
11.0
Raleigh / Durham-14
7,140
Detroit-15
9.8
6,771
9.3
Las Vegas-16
5,864
8.0
Nashville-17
5,783
7.9
Phoenix (PHX/AZA)-18
5,677
Indianapolis-19
5,361
7.8
7.3
San Diego-20
5,126
Columbus-21
4,818
6.6
Minneapolis-22
4,801
6.6
7.0
St. Louis-23
4,635
6.3
Pittsburgh-24
4,571
6.3
4,488
6.1
Seattle-25
0
35.9
21.6
12,974
SF Bay (SFO/OAK/SJC) -8
Page 28
45.4
26,235
5,000
Annual Passengers
10,000
15,000
20,000
25,000
30,000
PDEW
35,000
True Market Study for Gainesville
An Airport’s Catchment Area
Catchment areas depend
on several variables. The
most important variable is
the proximity to other
airport(s)
GNV Catchment Area
Darker areas
represent greater
use of GNV
airport
The larger the competing
airport(s), the smaller the
catchment area is going to
be for the airport in
question.
Lake City
Alachua
Some airports are very
close to larger ones and
have smaller catchments
GNV’s catchment area is
thin towards JAX, but
expands to the west and
northwest as there is no
competing airport to draw
passengers
Page 30
GNV
Palatka
Ocala
Cedar Key
Dunnellon
Combined, Orlando, Tampa and Jacksonville Capture 68.5%
of the Traffic Generated in Gainesville's Catchment Area
More distant Orlando (MCO) has a larger effect on GNV than closer JAX due to
the vast number of non-stop flights and strong presence of LCC airlines
0.4%
18.2%
27.5%
0.4%
1.9%
17.8%
1.4%
Page 31
32.5%
1,507 Passengers per Day Each Way (PDEW) Leak to Other Airports
Including 1,390 Domestic PDEW and 117 International PDEW
With only 3 destinations and no low cost airline, GNV’s passenger traffic leaks
to larger airports in larger communities with more flights and lower fares
Gainesville Catchment Area Passengers per Day Each Way (PDEW)
Captured at Gainesville and Surrounding Airports
Year-End Third Quarter 2015
Retained at GNV
Leaked From GNV
Passengers Per Day Each Way
2,500
2,000
1,500
1,507
1,390
1,000
500
573
0
521
117
52
All Domestic + International Traffic
All Domestic Traffic
International Traffic
Page 32
Washington Baltimore, New York/Newark, Chicago, Philadelphia
and the Los Angeles Basin Are Gainesville's Largest True Markets
Passengers per Day Each Way (PDEW) in the 25 Largest True Markets at Gainesville
Year-End Third Quarter 2015
New York / Newark - 1
Washington / Baltimore - 2
Chicago - 3
Atlanta - 4
Philadelphia - 5
Boston - 6
Dallas / Ft. Worth - 7
Los Angeles Basin - 8
South Florida - 9
Detroit - 10
Denver - 11
San Francisco Bay Area - 12
Houston - 13
Minneapolis - 14
Charlotte - 15
Nashville - 16
Las Vegas - 17
San Juan - 18
Hartford - 19
Pittsburgh - 20
Indianapolis - 21
Raleigh / Durham - 22
Phoenix / Mesa - 23
Providence - 24
St Louis - 25
48
97
17
71
22
46
13
51
17
44
13
41
16
35
19
31
8
34
11
30
16
22
11
27
6
28
16
13
8
21
8
20
2
26
5
23
6
20
7
19
10 13
8
15
3
20
6
16
0
Page 33
164
34
50
Retained at GNV
Leaked from GNV
100
150
200
250
Airlines without Service at Gainesville Capture 44.3%
of the Traffic Generated in Gainesville's Catchment Area
GNV is unlikely to capture traffic from airlines such as Southwest, JetBlue, and
Allegiant as these airlines rely on high volume leisure traffic to Florida
Market Share by Carrier of Gainesville Area Traffic
Year-End Third Quarter 2015
Allegiant
Spirit 2.1%
3.4%
United 7.9%
JetBlue
8.3%
All Others
2.6%
Delta 31.3%
Southwest
19.7%
American
24.8%
Page 34
Airline
Delta
American
Southwest
JetBlue
United
Allegiant
Spirit
All Others
PDEW
650.7
516.0
409.7
173.0
164.8
69.8
42.7
53.3
Challenges of NYC and DC
Non-stop Service to Newark from Gainesville on United Could
Reasonably Connect to 77 Destinations
Page 36
Non-stop Service to JFK from Gainesville on JetBlue Could
Reasonably Connect to 30 Destinations
Page 37
Non-stop Service to JFK from Gainesville on American Could
Reasonably Connect to 28 Destinations
Page 38
Non-stop Service to Washington (IAD) from Gainesville on United
Could Reasonably Connect to 64 Destinations
Page 39
Non-stop Service to Washington (DCA) from Gainesville on
American Could Reasonably Connect to 39 Destinations
Page 40
ATL and CLT Are By Far the Biggest and Best Hubs on the East
Coast
Page 41
Airline
Hub
Cities Served
Average Daily
Departures
Average Daily
Seats
DL
ATL
214
971
131,698
AA
CLT
145
656
69,507
UA
EWR
143
404
46,555
AA
MIA
125
324
48,420
AA
DCA
65
235
20,842
DL
LGA
58
232
21,367
UA
IAD
96
209
22,221
B6
JFK
67
159
22,892
Many Constraints Work Against Our Efforts to Attract An Airline to
Fly to NYC and DC
Many of the airports in NYC and DC are slot restricted. Airlines have a
finite number of slots and adding more sometimes requires an “Act of
Congress”
Longer haul flying beyond ATL and CLT is more
expensive for the airlines and thus, more risky
Customer loyalty to Delta and American will make
a new entrant to Gainesville difficult
Longer distances typically require a larger aircraft that
may not be suitable for GNV
Gainesville has only a limited amount of inbound
tourism
Page 42
Today, You Can Depart GNV All Day Long and Connect to All 3
Airports in DC or NYC on Dozens of Flights
Page 43
Objectives and Opportunities
Gainesville - Chicago
Page 45
Gainesville – Chicago Is Now at a Record Level. Local Fare Is
Near Record Levels. True Market Study Indicates 66 PDEW Leaked
Gainesville – Chicago Area (ORD/MDW) PDEW and Average One-Way Fare
Year-End Fourth Quarter
GNV - ORD/MDW PDEW
GNV - ORD/MDW One-Way Fare
30
$250
$214
$217
$199
$200
$187
$192
20
$181
$179
$160
$161
$150
14.9
14.4
15.6
14.7
16.2
13.0
11.9
13.9
9.0
10
$100
12.3
$50
0
$0
2006
Page 46
2007
2008
2009
2010
2011
2012
2013
2014
2015
Average One-Way Fare
Passengers per Day Each Way (PDEW)
$216
Non-stop Service to Chicago from Gainesville on American
Could Reasonably Connect to 82 Destinations
Page 47
Non-stop Service to Chicago from Gainesville on United
Could Reasonably Connect to 106 Destinations
Page 48
Gainesville – Dallas / Ft. Worth
Page 49
Gainesville – Dallas / Ft. Worth Traffic Is about 13 PDEW at $200
Each Way. True Market Study Indicates 32 PDEW Leaked
Gainesville – Dallas / Ft. Worth (DFW/DAL) PDEW and Average One-Way Fare
Year-End Fourth Quarter
GNV - DFW/DAL PDEW
GNV - DFW/DAL One Way Fare
$250
18
$212
$209
$197
16
$184
$207
$200
$202
14
$201
14.2
$191
$163
12
12.6
$152
10
10.7
9.1
9.0
7.9
8
7.1
6.9
$100
6.7
6
5.4
4
$50
2
0
$0
2006
Page 50
$150
2007
2008
2009
2010
2011
2012
2013
2014
2015
Average One-Way Fare
Passengers per Day Each Way (PDEW)
20
Non-stop Service to Dallas / Ft. Worth from Gainesville on American
Could Reasonably Connect to 112 Destinations
Page 51
Gainesville – Houston
Page 52
Gainesville – Houston Traffic Is about 11 PDEW at $200 Each Way.
True Market Study Indicates 28 PDEW Leaked
Gainesville – Houston (IAH / HOU ) PDEW and Average One-Way Fare
Year-End Fourth Quarter
GNV - IAH/HOU PDEW
GNV - IAH/HOU One Way Fare
$350
18
$300
16
14
$289
$250
$261
$206
12
$211
$195
$224
$190
$197
$200
$175
10
11.1
$150
9.6
5.7
6
4
7.7
$169
8
11.1
3.0
3.1
$100
6.5
4.5
5.0
$50
2
0
$0
2006
Page 53
2007
2008
2009
2010
2011
2012
2013
2014
2015
Average One-Way Fare
Passengers per Day Each Way (PDEW)
20
Non-stop Service to Houston Intercontinental from Gainesville on
United Could Reasonably Connect to 101 Destinations
Page 54
In Conclusion:
GNV Objectives
Grow existing services to reach critical mass required for further
expansion
Attract a significant additional airline (i.e. United, JetBlue, etc.)
Continue to monitor opportunities for non-stop service to New York
and Washington, D.C.
Access Western oriented traffic with a hub in Houston or Dallas / Ft.
Worth
Pursue additional service possibilities such as Chicago
Some Last Thoughts
Chicago, Dallas or Houston present optimal connections for GNV
travelers without over-flying an existing hub
An additional airline could improve fare competition, especially for
western connections
American and Delta already serve Gainesville, a new airline faces
investing in employees, facilities etc.
While the area generates strong numbers to NYC and Washington,
DC, GNV is not an attractive revenue generator for the airlines which
would have to replace an existing route in a slot-constrained airport
Page 55
Thank You For Your Time
Prepared by
Sixel Consulting Group, Inc.
Martin Kammerman
Director, Air Service Strategy and Development
martin@sixelconsulting.com
sixelconsulting.com