Myth - Mobile Bay Times



What determines air fares?

1. Can airports influence air fares?

2. Do Airlines at Mobile always charge higher fares than they do at Pensacola or Gulfport?

3. How can a community improve its air service?

4. Does the Airport Authority have a role in improving air service?

5. Is there something Mobile can do to convince Southwest Airlines to serve Mobile?

6. Could Mobile recruit another low-cost carrier?

7. Would moving the Airport to Brookley help Mobile’s air service?

8. Would one large combined airport be better than Mobile and Pensacola alone?

9. How often do local travelers drive to other airports to fly at lower fares?

10. How long before my scheduled departure time should I be at the airport?

11. Is the Mobile Airport Authority a part of the City of Mobile?

1. What determines air fares?

Competition. Airlines compete for passenger with air fares. The most intense price competition occurs when a low cost carrier enters a market. Absent that, competitive intensity will depend on how many airlines are fighting for passengers and whether or not one dominant airline can set market prices. More competition means lower fares. Four airports illustrate this factor:

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This chart compares Ft. Wayne IN, Cincinnati OH, Denver CO and Mobile AL. Ft. Wayne has fewer passengers and higher airport fees compared to Cincinnati OH, yet airlines charge much lower fares at Ft. Wayne than at Cincinnati, where there is less competition - one dominant airline captures 81% of Cincinnati passengers – than at Ft. Wayne, where the largest carrier captures only 34% of passengers. While Denver International Airport has some of the highest airport fees in the nation, airlines charge low fares there because Denver’s largest carrier has only a 42% share of passengers.

The level of competition between airlines determines Mobile’s fares. Competition increases when the number of passengers is more evenly distributed are among carriers at the airport. As this chart shows, competition has increased in recent years:

So why did the passenger next to you pay less than you? Airlines spend millions of dollars on computer models to set ticket prices. But the goal is simple – charge enough to cover costs and as much as competitors and customers allow. If airlines charge too much, passengers don’t fly; if airlines charge too little, they can’t cover their costs.

Airlines don’t sell seats; they don’t even rent seats. They sell transportation, which is moving a customer between two airports with a mix of different levels of comfort, convenience and flexibility. Airlines charge more for the convenience of last minute purchase, international service, frequent flights, first class luxury, flying on busy days, frequent flyer programs, larger seats or the right to a refund. A non-refundable weekend Mobile – New York City ticket costs considerably less than a refundable, midweek ticket. It is illogical to expect them to cost the same.

Except for low cost carriers like Southwest, most airlines aren’t covering their costs. They’re losing billions of dollars a year; some “network” airlines (those that rely heavily on large hubs to connect passengers to their destinations) are bankrupt.

Customers usually pick the lowest fare. At airports with low cost carriers, other airlines match low fares or lose customers, even if they lose money at the low fares. They offset the losses by charging as much as possible at airports without low cost carriers. Airports without low cost carriers can have lower fares if several airlines compete intensively for passengers. Mobile travelers can increase competition by flying on all five airlines serving the airport, not flocking to just one.

Airline pricing is a pure example of free market economics at work. All day, every day, customers tell airlines what to charge by which tickets they buy. Airline computer models adjust prices minute by minute to get the most revenue from each flight. More competition makes airlines drop fares; less competition lets them raise fares.

In a very real sense, Mobile travelers decide what kind of fares and service we have every time they buy a ticket.

2. Can airports influence air fares?

No. The Mobile Airport Authority is, as with all airports, the landlord for the Airport. Fees charged by airports average less than 5% of airline expenses. Labor and fuel are airlines' largest expenses. Airports have no more influence over air fares than the owners of Colonial Mall Bel Air have over the price of power tools at Sears.

If a discount store moved into a mall, other stores would tend to match prices. But, if customers continued to shop at the other stores, now with lower prices, and not shop at the discount store, it would close and prices would rise. So it was when too few Mobile passengers chose to fly AirTran and they left. Any new store or new airline will shut down if they do not get enough customers to succeed in a market.

Yet, some would blame airports if an airline charges more from one airport than from another. It would be irrational to hold the owners of the mall responsible if Dillards charged more for a shirt in Mobile than at an outlet mall or a Dillards in another city.

3. Do Airlines at Mobile always charge higher fares than they do at Pensacola or Gulfport?

Airlines at Mobile sometimes charge less, sometimes the same, but too often, they charge more. By purchasing tickets more in advance of the travel date and checking alternate schedules, travelers can often find comparable fares. A weekly survey of fares airlines offer in Mobile to our top fifty destinations is available at the Mobile Regional Airport’s website: .

4. How can a community improve its air service?

Support competition. Fly on all airlines and use your airport. Airlines launch, change or eliminate air service to a city based on passenger numbers (demand). They add service when demand increases and cut service when demand drops. Since hurricane Katrina, American Eagle, Continental Express and US Airways Express added five new daily flights at Mobile to meet increased demand.

The nation’s largest low-cost airline, Southwest Airlines, recently announced Denver service, one of the most expensive airports, illustrating how demand is most important regardless of airport fees.

Overall demand for air service grows when the local economy grows. Mobile’s economy is experiencing its greatest economic expansion in its history. Airlines will add service to meet it. However, if passengers choose to fly from Pensacola or Gulfport, that is where airlines will add service.

Only passengers, particularly business travelers, can improve Mobile’s air service, by choosing to fly from Mobile. Similarly only passengers, particularly business travelers, can influence air fares by flying on all airlines at Mobile, especially new service, thereby increasing competition and lowering fares.

We keep the air service passengers use and lose what they don’t. This community’s greatest challenge for better air service is convincing business travelers that they decide Mobile’s air service and fares through their choice of which airport and which airline to use. If the business community had embraced that responsibility, we would still have AirTran’s low-fare service to Atlanta and United’s non-stop flights to Chicago and Washington DC. More important, the airlines we now pursue for new service would not seriously question Mobile travelers’ willingness to fly on new service. If passengers flock to other airports or fly on only one carrier, other airlines will leave. Competition increases and fares come down when passengers fly from their home airport on all carriers.

5. Does the Airport Authority have a role in improving air service?

The Mobile Airport Authority doesn’t create new air service, but it can and does communicate new service opportunities to airlines. The Authority, with support from one of the leading international aviation consulting firms, SH&E, identified demand for and recruited new service to Charlotte, Birmingham, New Orleans, Orlando, Cincinnati, Dallas/Ft. Worth, Tampa, Chicago and Washington, DC. We recruited new airlines, including AirTran, UltraAir, Conquest, Gulfstream International, Continental Express, US Airways Express, United Express & American Eagle. Mobile competes for this service with cities across the country.

The Authority works to build community support for competition and for new service. We asked former Mayor Dow to appoint 27 respected civic, corporate and elected leaders to the Mayor’s Air Service Task Force in September 2004. Along with Mayor Sam Jones, they include Cooper/T. Smith CEO David Cooper, Springdale Travel Co-owner Bob Bender, CPSI, Inc. CEO David Dye, Mobile Gas CEO John Davis, MCVB CEO Leon Maisel, Page & Jones CEO Mike Lee, Mobile Chamber President Win Hallett, Marshall Biscuits CEO Harris Morrissette and others. It is companies like these that decide what kind of air service Mobile has.

The Authority encourages passengers to choose Mobile. The “Fly Smarter/Fly Mobile” campaign reminded travelers that increasing passenger numbers helps bring new air service, more competition and lower fares. We created the first airport frequent flyer/loyalty program – the Passport Program - to thank travelers for choosing Mobile, regardless of which airline they fly.

The Authority has lowered start-up and operating costs for new Mobile air service by establishing the first low-cost airport-operated airline station, for which airlines pay on a per-landing basis. US Airways Express and American Eagle use our station.

6. Is there something Mobile can do to convince Southwest Airlines to serve Mobile?

No. Southwest offers low fares because it has low costs, in part because they operate one type of airplane and fly them more hours each day, carrying more passengers, than other airlines. (Apologies to our friends at Southwest, we don’t mean to diminish the contribution of creative marketing, distribution, scheduling and above all, the employees) That number of flights requires ~750,000 potential passengers in a new market. The Mobile market does not come close to meeting that requirement. However, we have worked closely with Southwest for 10 years. And, if they ever begin serving smaller markets like Mobile, we hope to be one of the first.

7. Could Mobile recruit another low-cost carrier?

The Airport Authority recruited several low-cost carriers to serve Mobile. But when Mobile travelers did not support the new service, they left. Now, low-cost airlines fear Mobile passengers won’t fly on them.

We are too small for low-cost airlines like Southwest or Spirit. AirTran gave Mobile three chances to support them and is not inclined to give us a fourth. AirTran says it is serving Mobile now, except through Pensacola and Gulfport. JetBlue is buying 100-passenger jets, which may represent an opportunity for low-fare service.

8. Would moving the Airport to Brookley help Mobile’s air service?

Relocating the Mobile Regional Airport to the Brookley Complex has significant implications for passengers and airlines at the current Airport. While Brookley is closer to South Mobile County and Baldwin County, the current location was chosen because it’s closer to current and future population centers. Brookley offers better access to interstates 10 and 65, though internal complex roads would require a complete restructuring. Noise over densely populated areas surrounding Brookley was a primary factor in the FAA’s opposition to moving the airport. As Mobile grows, the airport will require more land for terminal, runways and parking, which is available at the current location and not at Brookley.

It is uncertain whether a Brookley airport would have more flights or lower fares than the current airport. Carriers don’t care about location unless is effects passenger numbers. Southwest declined Mobile’s offer of Brookley because there are not enough potential passengers to support the service.

Airport’s charge fees to airlines based on expenses and debt service. The cost to build new facilities and infrastructure improvements at Brookley would significantly increase airline fees.

Regardless of a move, Mobile Regional Airport must remain open to serve existing tenants: USCG; National Guard; Fixed Base Operators; Charter Services; EADS-CASA and general aviation.

Relocating the airport raises a number of issues affecting Brookley’s development and Mobile’s economic development. 4,000 employees (over 2,500 directly attributable to the airport) work at 120 companies at Brookley, many of which would be forced to leave if the airport were moved. A Brookley airport would do away with the unique intermodal logistics advantages that enabled the Mobile Airport Authority to bring MAE and Airbus to Mobile and eliminate Mobile as a candidate for future such projects. In simple terms, a Brookley airport could eliminate 3,000 jobs without improving air service. Brookley’s proximity to the Choctaw Point Container Terminal now under construction offers a unique mix of intermodal facilities attractive to manufacturing and distribution firms.

9. Would one large combined airport be better than Mobile and Pensacola alone?

Probably. It is plausible that a large airport in Baldwin County would support better service and fares than two smaller airports could alone. The Mobile Airport Authority initiated discussions with representatives from Pensacola to explore the idea. Pensacola withdrew from the project, voicing an aversion to having their airport in Alabama. We are prepared to pursue the concept; but it will require two communities working together.

10. How often do local travelers drive to other airports to fly at lower fares?

20% to 30% of local travelers drive from Mobile to other airports for lower fares or more convenient flight schedules. Conversely, approximately 10% of Mobile Regional Airport passengers drive here from Mississippi and Florida for better fares and service.

11. How long before my scheduled departure time should I be at the airport?

Airlines have different policies, so check before flying, but most recommend travelers arrive at the airport at least one and a half hours before a domestic flight and two hours before an international flight. Also, travelers who need to check in at the ticket counter must do so by 30 minutes before departure. You should be at the gate by 15 minutes before departure, and on the plane by 10 minutes before departure. We completely understand how some of these rules could be seen as arbitrary, especially when it’s 29 minutes before departure and the ticket agent refuses to check you in or it’s 9 minutes before departure and the gate agent refuses to let you on the plane that you can see out the window. But while the Airport might do things differently, it has absolutely no influence on airline rules. And it’s very unlikely that yelling at the ticket agent will get them to change their rules or get you on the plane.

12. Is the Mobile Airport Authority a part of the City of Mobile?

The Mobile Airport Authority was created in 1982 to own and operate the Mobile Regional Airport and Brookley Complex. Its mission is to improve the quality of life in our community through economic development, air service development and real estate development at its two facilities. It is not a part of the City or County and receives no local taxes, and like most airports, must live on its income and Federal Grants. The Authority’s five board members are appointed by Mobile’s Mayor, approved by the City Council and serve staggered six-year terms. Led by the Executive Director, 130 total employees work at both facilities.

The Authority is the landlord for Mobile Regional Airport, where it is responsible for maintaining a safe and customer-friendly facility, which it does with rental income from airlines, car rental companies, food service providers and its parking lots. The Authority provides police, fire protection, maintenance, customer service, airport shuttle service, airline stations, air service development, aviation operations and engineering.

The Authority is a leader in developing Mobile’s aviation industry. EADS-CASA located a support and delivery facility at the Regional Airport for the CN-235 aircraft it sold to the U.S. Coast Guard. EADS-CASA and partner Raytheon recently announced that they will build up to 145 small cargo aircraft for the Army and Air Force at Mobile Regional Airport if they win the contract.

With over 100 companies and 4,000 employees on 1,700 acres, Brookley is the region’s largest industrial and transportation complex. The results of the Authority’s economic development at Brookley include Mobile’s largest private employer, Mobile Aerospace Engineering (MAE) locating their aircraft maintenance facility at Brookley, a new Airbus engineering center and the KC-30 advanced tanker aircraft assembly facilities for Northrop Grumman and EADS-NA.

The Authority created an aerospace workforce development program to meet the increasing need for trained workers in these aviation businesses.

We encourage those concerned about air service to get involved. We welcome input, suggestions, questions or concerns about the airport. Please e-mail us at maa@; or regular mail to Mobile Airport Authority; 1891 Ninth St.; Mobile, AL 36615; attn: Marketing. We encourage those with questions or concerns about airline fares or air service to contact the airlines directly.

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