Cargo, not tourism, may drive aviation growth

Cargo, not tourism, may drive aviation growth

DENVER — The aviation industry is growing — and cargo, not tourists, may be driving it.

Mike Boyd, CEO of Evergreen, Colorado-based Boyd Group International, said Monday no major appliance, automobile or industrial equipment is made entirely in one country and shipping components will drive some route decisions for air carriers.

Increased cargo routes should, in turn, drive passenger growth, Boyd said.

Speaking at the opening of his 23rd annual International Aviation Forecast Summit in Denver, Boyd spoke about the metrics and dynamics of the industry. But historic dynamics to forecast where and how the industry will grow no longer apply, he said, because there are many new variables affecting it.

As the shipping of goods becomes more important, speed has become the new imperative, Boyd said, with companies like Amazon guaranteeing overnight delivery of products.

“The economics of air logistics will be increasingly criticaland need to be lightning fast to respond to changes,” Boyd said.

The new airliner economics will lower the cost of travel, he said, particularly for long-haul flights. Leisure travel and travel to visit friends and relatives are major segments in the expansion of passenger growth. Ultra-low-cost carriers are taking advantage.

On the 40th anniversary of airline deregulation, more people than ever are flying with projected growth at every major U.S. airport, including McCarran International Airport in Las Vegas.

Boyd said trends in the evolution of communication and globalization and airline disrupters like Spirit Airlines and Las Vegas-based Allegiant Air are changing commercial aviation.

The top ultra-low-fare carriers — Allegiant, Spirit, Frontier and Sun Country — are fixtures at McCarran.

Boyd said about 99.3 percent of seats to markets were flown by traditional mainline air carriers in 2000 with the rest flown by ultra-low-cost carriers. Today, mainline carriers provide 92.1 percent of the seats and ultra-low-fare carriers fly 6.9 percent.

Advancements in communication technology have reduced some travel as businesses take the less expensive route of conducting meetings over the internet instead of in person.

More than 300 airline, airport and aircraft manufacturing executives are attending the two-day summit at which Boyd will deliver airport and fleet forecasts and airline leaders will discuss some of their plans.

Allegiant Air

Las Vegas-based Allegiant Air is anticipating a shift in profitability next year after the company retires its gas-guzzling MD-80 jet fleet by the end of 2018.

Trent Porter, senior vice president of finance for Allegiant, told Boyd conference attendees that the airline now serves 120 cities with more than 400 routes. While Allegiant’s headquarters is in Las Vegas, it serves the most metropolitan markets — 40 — from Orlando’s Sanford International Airport. It serves 36 markets each from McCarran International Airport and St. Pete-Clearwater International Airport.

While costs will decline with the airline’s fleet transition to Airbus twin-engine jets, operational costs are increasing with new labor contracts with pilots and flight attendants.

Porter said Allegiant is optimizing flight schedules by seeking opportunities to fly more twice-weekly flights in non-competitive markets.

Southwest Airlines

Southwest Executive Vice President and Chief Revenue Officer Andrew Watterson offered few new details about the Dallas-based carrier’s highly anticipated Hawaii service scheduled to begin late this year or in early 2019.

The company already has announced that it will fly routes to Honolulu, Lihue on Kauai, Maui and Kona on the Big Island from San Diego, Oakland, San Jose and Sacramento, California.

Watterson said the airline, which is the largest operator in seven of the 10 California markets it serves, would increase its fleet to add its Hawaii service rather than reducing flights in other markets.

Eventually, Southwest plans to fly Boeing 737 MAX jets on routes.

Southwest, which is the busiest operator at McCarran International Airport, will offer more weekend and seasonal flights to Caribbean and Mexican beach cities once the Hawaii service is established.

Frontier Airlines

Another ultra-low-cost carrier, Denver-based Frontier Airlines has made a major push into Las Vegas in the past year.

Senior Vice President Daniel Shurz said the company is focusing on taking advantage of weaknesses in other airlines’ programs to generate customer loyalty.

While some ULCCs offer a list of ancillary services customers can buy, Frontier has bundled several of the most popular into two categories. The airline’s “Perks” bundle provides no cost for a checked bag, a carry-on, best available seats and priority boarding up until check-in. The more expensive “Works” bundle offers that list, plus changeability and refundability on tickets.

Frontier also is veering away from its Denver-centric scheduling and has experimented with more point-to-point flights, including the recent announcement of seasonal service between Las Vegas and Calgary, Alberta.

Contact Richard N. Velotta at [email protected] or 702-477-3893. Follow @RickVelotta on Twitter.

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