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Fuel Prices, Storms Dim Small-Airport Prospects

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By TED JACKOVICS

The Tampa Tribune

Published: May 16, 2008

CLEARWATER - Hollywood could not have created a more daunting movie script for airlines serving Florida today, says Angus Kinnear, chief operating officer of USA 3000.

There are recessionary fears, leisure travel budget woes, rapidly rising jet fuel prices, the onset of hurricane season and a presidential election year that typically means less travel, he said.

That's how Kinnear sized up the airline's prospects before deciding this week to cease service in late summer to three Florida airports, including St. Petersburg-Clearwater International. USA 3000 will trim 15 percent to 20 percent of its service with the Florida cuts, including a decision to not resume seasonal service at Sarasota-Bradenton International Airport.

If a profitable operation with its young fleet of fuel-efficient Airbus A320s must trim flights, the outlook for other carriers is equally dicey or worse, industry officials agree.

In recent weeks, Frontier Airlines has filed for Chapter 11 protection. ATA, Aloha, Skybus, Eos, Champion and Air Midwest stopped flying, while four major carriers - Delta and Northwest; and United and US Airways - announced merger plans that raise flyers' fears of reduced flights and increased fares.

"It's simple," Kinnear said in a telephone interview Thursday from USA 3000s' suburban Philadelphia headquarters. "We were one of the three airlines, along with Southwest and Allegiant, to be profitable in the first quarter. But we are selling tickets today for people who want to fly in August, and we do not know how much fuel will cost then."

Kinnear said USA 3000 would honor tickets through St. Petersburg-Clearwater through Aug. 18 - the date that the airline has said will be its final local flight.

The two other profitable airlines quietly have announced precautionary steps in recent weeks.

Southwest Airlines said Monday that it borrowed $600 million from eight banks in mortgages against 21 of its aircraft to bolster its cash position in an uncertain economy. Some industry observers believe the money could go toward an acquisition of a weaker competitor, such as Frontier.

Allegiant Air, which serves 15 small-city destinations from St. Petersburg-Clearwater, among other routes, has cut schedules in four separate rounds since November.

"One that St. Petersburg will notice this year is that we're doing much less flying in the 'slack' period in September and October," said Robert Ashcroft, Allegiant's vice president of planning.

"Once kids go back to school, there is much less demand for leisure travel to Florida. We're doing our best not to fly at times when few people want to. That means we won't be doing a whole lot of flying at PIE in September or October, but you'll see us come roaring back in November and December, leveraging Thanksgiving and the winter holiday."

Allegiant will try to fly more at the peak times and less at the troughs, more tightly tailoring supply to demand, Ashcroft said.

It has profited by charging people separately for things like bags, advance seat selection and keeping the base price of its fares quite low.

"That keeps people coming to our Web site," Ashcroft said.

Another factor serving the airline well is that it cost Allegiant relatively little to acquire its older MD-80 fleet, and little debt remains, so the airline is free to fly only when it makes money.

"That means we are much more free to cut unprofitable flights than other airlines," Ashcroft said.

Allegiant's successful strategy signifies what others say is in store for airlines and passengers alike, even for major airlines at large airports.

"We have been seeing capacity cuts here already, 1 percent fewer seats scheduled in May than a year ago," said Tampa International Airport director Louis Miller. "I think we will continue to see reductions of capacity at airports; planes will be more full and fares will be higher."

Noah Lagos, Miller's counterpart at St. Petersburg-Clearwater International, faces the loss of 300,000 annual passengers and about $1.35 million in revenue with the loss of USA 3000. Fortunately, 80 percent of the airport's revenue comes from sources beyond commercial aviation, including general and business aviation operations.

"Our airport has had its ups and downs along with the cyclical nature of the airline industry," Lagos said.

Business reporter Ted Jackovics can be reached at (813) 259-7817 and tjackovics@tampatrib.com.

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