- The Washington Times - Friday, June 27, 2003

WEYERS CAVE, Va.

On the airline industry map, Shenandoah Valley Regional Airport is a small and vulnerable way station. Sitting in the foothills of the Blue Ridge mountains about 150 miles west of downtown Washington, the single-runway airport has been hit hard by the 2-year-old airline industry crisis. Just one carrier, US Airways, flies in and out four times a day. Since United Airlines pulled out in December 2001, leaving would-be passengers with few choices, airport officials have struggled to preserve what little passenger demand was left.

“We’re just downstream of some overall industry trends,” airport Director Greg Campbell said recently, overlooking a half-empty parking lot that once overflowed.

Airline scheduling shrank after the September 11 attacks, business travel is down because of the weak economy and airports of all sizes are facing the “Southwest effect,” a term used to describe the willingness of travelers to go to more distant airports served by low-cost carriers such as Southwest Airlines, AirTran Airways and JetBlue Airways.

Shenandoah Valley Regional is a case in point: A study it commissioned found that 90 percent of fliers living within 30 miles of Weyers Cave are using alternate airports in Washington, Baltimore and Richmond, and local travel agents say price is a major factor.

Shenandoah’s problems are not as bad as some. More than two dozen airports have lost commercial air service in the past two years.

Still, others have not fared so poorly. For example, small airports in extremely remote locations have generally kept their routes, because travelers living or traveling there have few reasonable alternatives. Carriers, as a result, can simply charge higher fares.

“We do not see the peaks and valleys that your normal regional market might see, and it’s mainly because we have vast geographic distances to deal with,” said Cynthia Schultz, airport director of Montana’s Great Falls International Airport, which has five carriers to choose from and an average of 18 round-trip flights per day.

Airports served by the low-cost carriers have weathered the crisis well — the upside of the Southwest effect. They include Manchester Airport in New Hampshire, which is served by Southwest and Newport News-Williamsburg International Airport in Virginia, which is served by AirTran.

By and large, airports have not suffered nearly as much as the airlines because their revenue is not directly linked to airfares. The airlines, in an effort to boost sagging demand, have slashed ticket prices, and that has magnified their revenue problem. Airports, on the other hand, are affected by how many people travel through their gates, not by how much those passengers pay to fly.

Only 50 percent of airport revenue, on average, comes from the airlines in the form of landing fees as well as the rent carriers pay for their terminals, analysts said. The rest comes from parking lots, rental-car companies and airport-based retailers.

Further, many airport-lease agreements signed by airlines have contingencies whereby a shortfall in non-airline revenue has to be partially made up by the carriers, according to Dan Champeau, managing director for Fitch Ratings, the credit-ratings agency.

Although no airport bonds have defaulted, Mr. Champeau said some of the country’s largest airports have come under unavoidable financial pressure in the past two years, forcing them to lay off people, defer or cancel improvement projects, and face higher borrowing costs as a result of lower credit ratings.

Among larger airports, the ones faced with the biggest revenue shortfalls are those that depend heavily on connecting traffic, making them susceptible to service cutbacks in other markets. Proximity to markets served by low-cost carriers is also a threat, as is exposure to international travel, which has suffered as a result of war, terrorism fears and SARS.

San Francisco International Airport is considered by many analysts to be the prime example of what can go wrong in a major market, with Pittsburgh International Airport not far behind.

San Francisco, an important hub for air traffic between Asia and the United States, has suffered because of its close affiliation with bankrupt United Airlines, which controls roughly 50 percent of the market; its proximity to Oakland International Airport, which is served by JetBlue; the dot-com crash, which devastated business travel in the region; and fears of SARS, which kept many passengers from traveling to Asia in the spring.

Fitch Ratings expects the airport to report its third straight year of reduced activity, bringing the number of passengers in 2003 below 15 million, down from 20 million in 2000.

Pittsburgh is a major connecting hub for US Airways, and has felt the effects of service cutbacks made by the Arlington-based carrier, which emerged from Chapter 11 three months ago as a much smaller airline.

Major airports in the Washington area are hurting less than airports in most of the rest of the country.

Business was down about 5 percent in April from a year earlier for Washington Dulles International Airport and Ronald Reagan Washington National Airport. Nationally, airports averaged a 6.3 percent drop in business in April from one year earlier.

“This market is a very strong market,” said Tara Hamilton, Metropolitan Washington Airports Authority spokeswoman.

Worst off, though, are the hundreds of tiny airports near midsize and large cities.

A study by Back Aviation Solutions found that 27 communities lost commercial air service between August 2001 and April 2003, including Belleville, Ill.; Hickory, N.C.; Utica, N.Y.; and Worcester, Mass.

The Southwest effect is one reason for the trend. Another is that short-haul flights are less in demand as travelers hop in cars to save money and to avoid the hassles related to tighter airport screening.

At the same time, major carriers looking to reduce costs are cutting the number of flights in these markets, which often depend on small, twin-propeller planes that are expensive to operate and not always full.

At Shenandoah Valley Regional, the 19-seat Beechcrafts that fly between Weyers Cave and Pittsburgh are 30 percent full on average, said Deputy Airport Director Dennis Burnett.

“It’s a bit insidious,” said Debby McElroy, president of the Regional Airline Association, “because if passengers don’t use smaller airports, it makes it harder to continue the service. It’s a domino effect.”

• Staff writer Tom Ramstack contributed to this article.

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