Passenger growth expected at McCarran International Airport
1 October 2012
Trends in passenger traffic at McCarran International Airport are a leading indicator for how Las Vegas’ resorts will perform because nearly half the people who come to Las Vegas arrive by plane.
Experts even analyze what airline routes may provide the most bang for the buck, since long-haul routes and overseas flights bring passengers who are bound to stay longer and spend more when they arrive.
After five years of airline capacity bleeding out of McCarran and a corresponding decline in domestic passenger counts, there may now be some good news on the horizon for Las Vegas.
Two well-respected aviation analysts expect growth at the airport that serves Las Vegas over the next five years.
In a recent presentation to the Las Vegas Convention and Visitors Authority board of directors, Damon Hylton, vice president of Reston, Va.-based Seabury APG, projected 1.1 percent capacity growth at McCarran in the next year. And, Mike Boyd, the chairman of the Evergreen, Colo.-based Boyd Group International, thinks passenger counts will increase by 6.3 percent by 2017 as airlines slowly bump up their domestic capacity.
There are several moves by airlines affecting the slow turnaround that already has begun.
The growth of international capacity to McCarran with new flights by Virgin Atlantic, Volaris and WestJet and flights by new-to-Las Vegas carriers airBerlin, Arkefly and Copa have lessened the sting of reduced capacity by domestic carriers.
In the last year, McCarran has gotten eight new international routes and in the fall, British Airways will begin flying passengers from London’s Gatwick International Airport to McCarran.
The volatility of fuel costs — the No. 1 expense for an airline after operating for years as labor costs being the biggest — prevents airlines from accurately planning.
Experts say a 1-cent increase in the cost of a gallon of fuel collectively costs the airline industry $175 million.
One airline, Delta, is trying a new strategy to cope with fuel costs by purchasing a refinery. Last week, the airline began producing its first jet fuel at a facility in Trainer, Pa.
Airline consolidation is another strategy the industry is using to control capacity and minimize expenses.
US Airways is in negotiations to acquire Fort Worth, Texas-based American Airlines.
Tempe, Ariz.-based US Airways is led by one of industry’s biggest proponents of consolidation and restrained capacity, CEO Doug Parker.
As the CEO of America West, Parker led the effort to merge with US Airways, completing the deal in 2005, adopting the US Airways name and moving the company’s headquarters to suburban Phoenix.
Other airlines have taken the consolidation path. Delta Air Lines acquired Northwest Airlines in 2008. United and Continental airlines merged in 2010.
Southwest Airlines, McCarran’s busiest carrier with a 44 percent share of seats to the market, is now on a single Federal Aviation Administration operating certificate after absorbing AirTran Airways.
Discount carriers have made a habit of swooping in on cities and picking up capacity abandoned by major airlines. Now, even the discount operators are restraining capacity.
Generally, low-cost carriers work to Las Vegas’ benefit because their business models incorporate revenue derived from ancillary fees.
Hardly a day goes by that Ben Baldanza, CEO of Spirit Airlines, and Maurice Gallagher, CEO of Allegiant Air, don’t get some grief about nickel-and-diming customers with their policies of charging ancillary fees for services some airlines have offered for free in years past.
Baldanza and Gallagher say they’re offering deep discounts to customers to fly and allow customers to pick and choose what services are important to them, like selecting the seat they want and if they want any food.
But most of the irritation sets in on baggage fees. Spirit and Allegiant charge baggage fees and are the only U.S. airlines to charge for carry-on bags.
Allegiant reported collecting $210 million in ancillary fees in 2011 — 27 percent of its revenue. Spirit is raising its carry-on bag fee to $40 ($100 if purchased at the gate) on Nov. 6.
Several airlines are planning strategies to acquire larger aircraft that have more fuel-efficient engines. Some are adding seats to existing planes to increase capacity. And all are working to do everything they can to fill every seat on their planes to increase load factors – the percentage of planes filled with paying customers.
Southwest, for example, began a year-long retrofitting project on its Boeing 737 jets in March adding newly designed seats that will shrink seat pitch by an inch, but enable the airline to add a row of six seats to each plane.
Allegiant also is in the midst of seat retrofitting on its MD-80 jets. Each plane will now have 16 additional seats. Gallagher said even though the higher capacity would require the airline to have an additional flight attendant on each plane, it still would increase revenue for the company.
Southwest also has begun adding larger capacity Boeing 737-800 jets to its fleet. Each plane has 175 seats instead of the 137 on the smaller planes.
McCarran so far has an estimated 25.9 percent of Southwest’s 737-800 departures, by far the most within Southwest’s system.
Allegiant announced earlier this year that it is introducing the Airbus A320 aircraft type to its fleet that not only would produce more capacity, but will give the company more route options since the jet has a larger range and could fly nonstop from the East Coast to Las Vegas. The Airbus jets also are better than the gas-guzzling MD-80 jets because the engines are more fuel-efficient.
Las Vegas has one more advantage in the development of air service in its back pocket – the 2013 Route Development Forum.
The Route meeting brings airline schedulers and airport and city marketing forces together and cities pitch proposals to airlines to get more air service.
The 2013 meeting will be the first held in the United States. This year’s event, which wrapped up last week, was in the United Arab Emirates.
McCarran and LVCVA officials view hosting the conference as an opportunity to show airline executives first hand what the city has to offer.
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