San Diego Airport Hopes Recovery Fuels Airline Business
Friday, July 1, 2011
SAN DIEGO Nearly 17 million people got on or off a plane at San Diego’s Lindbergh Field last year. That’s a little more than a sellout crowd at Petco Park flying every day. A busy airport is widely considered a positive indicator that a region’s economy is doing well. The San Diego Convention and Visitors Bureau said visitors who arrive by air pump $2.3 billion dollars into the local economy.
“They visit our attractions. They eat and drink in our restaurants and bars. They shop in our stores and stay in our hotels,” said Robert Gleason, Chairman of the San Diego County Regional Airport Authority. “Each inbound passenger spends and average of $500 per visit.”
The Regional Airport Authority works at making sure San Diego gets its share of the flying public’s dollars. That’s a difficult haul in the current economic climate because airlines are very sensitive to economic turbulence. Current passenger totals are down more than a million a year from the pre-recession peak.
“American has been reducing,” said Hampton Brown, the authority’s director of air service development. “United, most of the legacy carriers, the older carriers from deregulation, have been reducing capacity to get those margins up so they can pay for the cost to operate the flights.”
Full flights improve an airline’s chances of being profitable, so the big carriers are squeezing the supply. A University of San Diego marketing professor says crowded planes help the bottom line, but make the customer experience less pleasant.
“This is a business that has very high labor costs. It's very high in capital costs. And its barely profitable. And that’s not a business that certainly attracts shareholders,” said Tygarajan Somasundaram, marketing professor at the University of San Diego.
Global airline revenues in 2006 topped $450 billion, but the collectively airlines made a net profit of $5 billion. U.S. airlines lost $40 billion dollars that year.
“While an airline can address some supply and demand issues for themselves, the big picture issues, I think, are very complicated for any airline to address independently,” said Somasundaram.
Those big picture issues include fuel costs, security, competition, and a difficult regulatory environment. But industry watchers are starting to see hopeful signs. Ticket prices rose 10 percent nationally in the first quarter.
“While we hadn’t seen the full recovery, post-recession in 2010, we are seeing that the first quarter rates are at, or above, the most recent domestic high-average paid in the U.S.,” according to Christa Degnan Manning of American Express Business Travel.
That may not be what passengers want to hear, but it is an indication the airlines are making money.
The San Diego County Regional Airport Authority says there are also some promising signs locally. Three new airlines are flying in and out of Lindbergh Field. Spirit Airlines will serve Las Vegas, British Airways flies direct to London, and Volaris Airlines flies to Mexico City and Guadalajara.
“We will have more inbound international seats than, I believe San Diego’s ever had -- 70,000 seats per month,” said Hampton Brown.
Local officials are also casting an eye toward Asia.
San Diego is the largest U.S. airport without nonstop service to Asia. Newer planes that are being developed, like the Boeing 787, may allow Lindbergh Field to compete for passengers that currently fly in and out of Los Angeles. That could push passenger traffic up if the domestic airline market continues to struggle.