Re: [MLUG - DISCUSSION] another pie in the sky Columbia airline plan...

["Jonathan King" <EMAIL:PROTECTED>]

On 3/3/06, Nathan Odle <EMAIL:PROTECTED> wrote:
> Jonathan King wrote:
>
> >Now, the problems with this proposal are obvious:
> >
> >1) Using Jeff City's airport is just not a very good idea; it isn't
> >approved for this use, and it's a 30 mile drive for the majority of
> >your customers, who are coming from Columbia, and not Jeff City.
> >
> Agreed.  It did seem though that they would be running STL flights
> natively from Columbia, with MCI flights stopping off at COU to pick up
> passengers before moving on.  Might have read that wrong though.

The article was weird in that the guy did seem to claim he would be
running flights out of Jeff City as well.  You might have misread it
because that idea is just completely whacko.

> >2) It's unclear that turbo-prop service is the way to go at this
> >point, although I guess it's your only decent choice if you're doing
> >the KC-midMo-StL loop.
> >
> R-Jets are beginning to overtake turboprops in efficiency, at least in
> general aviation circles.  Not sure about the ~20-30 seaters they're
> running Part 121 service with though.

My guess is that your initial investment is lower on the turboprops,
but that the notion of investing in that technology right now is going
to make you feel really sorry insdie of 10 years.  After all, COU is
losing their current carrier because their leases were up on the
turboprops they had, and the R-jets were just too expensive for the
current runs.

> >3) $80 one way reduces enthusiasm, especially if you are only using
> >19-seater aircraft.
>
> For $160, it might be worth having someone local drop you off at COU and
> fly to STL/MCI rather than drive to STL/MCI and pay for auto expenses +
> parking + more hassle with security.

Clearly MOx is doing well because price/time point is more in line
with what people want to pay.  Part of that is probably due to carrier
flexibility, which would be shared by the presumptive start-up, but
some of it is raw cash.  Since the shuttle is about half the cost of
the postulated $160, the attraction should be obvious.

>  I wonder though, if $80 one-way
> will pay the bills.  Let's see...

OK, so I think there are a few soft spots in these numbers, but I
don't think you're off by more than $10-$15 either way, so it does
probably come down to demand (I'm not sure I saw maintenance or ground
crew in KC and STL in your numbers, for what it's worth).  On that
front, we have a potential problem.  In 1993, COU had 37,172
boardings, which was down to just about 20,000 last year.  Using your
355 days divisor, we can see that the 1993 numbers work out to 105
passengers per day, while the 2005 numbers are 56 passengers per day. 
Even if we succesfully wishcast the 1993 numbers, we've only got 105
people leaving Columbia per day from COU.  Presumably, that means
we've got 105 people arriving, too.  That's 210 passengers per day on
4 flights/plane * 2 planes = 25 passengers per flight; right now,
we've got the equivalent of 15 per flight.  Adding another semi-useful
destination could boost this, but I'm not sure by how much.

Now, clearly, a *lot* more than 105 people from mid-Mo fly out of
Missouri every day, so the big problem is that COU has a crappy market
share.  You can wonder why that is, but not with the fact *that* it
is.

> The grand total at this point is ~$43.50/seat in costs.  With a ticket
> price of $80/seat this leaves us $36.50, or $259,150 per plane in annual
> profit.  If we're running 2 planes in each location, that's about
> $1M/year in profit.

Ah--you've got 4 planes running, then.  In that case, you're hoping
for a significant gain from the 1993 numbers.  That's not impossible,
but it's not going to be easy, either.

> The real question I see then, is the demand.  I've assumed 2 round-trip
> flights from each location (one each to STL and MCI from both COU and
> KJEF) with 20 passengers per plane.  If the idea caught on, I could
> honestly see this happening.  If these assumptions change though, then
> the picture does too.  Double the flights with the same passengers per
> plane (one morning flight, one evening) and your *fixed costs* (a
> relatively low proportion) become lower per seat and profits go up.  At
> the same time, if you fail to average 20 passengers per plane and only
> get half that, then *all* your costs go up significantly and now all of
> the sudden you aren't making money anymore.

Bingo.  I really think (for starters) that you're better off
concentrating on one airport.  That way, you get 2 round trips per day
from COU to both places.  The problem is that I'm pretty sure you
really want more than that to keep people out of their cars.  If your
best flight from STL is (say) a 1 pm flight, you're talking about
flying in the morning (probably early) and then hanging out in STL for
3-4 hours worst case, or probably 2 hours on average.  I don't know if
that will fly.  If you had 4 flights per day out of COU to STL, then
your expected hang time is down to 1 hour, and now I think you
dominate the car/shuttle alternatives time wise.

> So what does this analysis tell us?  That potential investors need to
> focus MUCH more on the demand side of the equation.  Costs are
> relatively easy to nail down, but the question of whether or not people
> use the service is pretty big.  I would want to see major big-time
> market research before putting good money into this deal.

I'd want to go further.  I'd want agreements from the 3 affected UM
campuses, the state government, and one top employer in each of KC,
COU and STL that they would use this shuttle service for their
KC-COU-STL travel.  Then I know it would work even if I had to offer a
significant discount.

> >4) Neither KC nor StL are major hub airports, so it's unclear why you
> >would target them for your service unless it somehow meant you could
> >use fewer planes or something.
>
> I agree wholeheartedly.  If you're looking to 'catch' the most
> travellers out of Columbia, you need to pick a hub that people can use
> to get anywhere else with preferably no stops and low ticket price.  ORD
> (Chicago O'Hare) is the perfect candidate in my book for everything
> going east,

Note that Southwest flies out of Midway, though.  I honestly think
that would be acceptable as a substitute.  There are, for example,
*11* flights per day from Midway to BWI (that's DC, Southwest style)
and even 7 daily flights to La Guardia.

> but actually MCI actually works pretty well for going west
> because you really don't get to another decently-sized airport until you
> hit Denver and that takes you out of 'regional-class' service.

I'm not sure I buy that last sentence.  My last two flights to the
east coast were both out of MCI and both were on regional jets.

> You might wind up with some more layover flights but I'd say price controls for
> most people, not stops.

Price is pretty key, but the point of this exercise when you get down
to it is to reduce the amount of time it takes to get from COU to
either coast.  Right now, that's essentially one whole day.

> My guess is that they picked STL/MCI because they're the airports that
> most Columbians travel out of, and it might not be obvious for people to
> hop to ORD instead.  On the other hand, there's actually a decent number
> of flights that might actually terminate in ORD so that might outweigh
> some of this.

I don't follow the last point.  Don't you want to capture all of the
Chicago-bound traffic here?

> Either way, it's EXTREMELY important that they get the destinations
> right, as we've proved above that demand is what's really going to
> make-or-break this thing.

Withouth any objective evidence, I'd guess that the best 3-city system
including COU is
either DEN-COU-ORD/Midway or MCI-COU-ORD/Midway or maybe Dallas.  The
annoyting thing here is that I'm pretty sure the best 2-city system
would be something like COU - DCA, but the chances that you could get
a gate at Reagan (even to share) would be either slim or none unless
there was a federal mandate for such a thing.

> >And there are others.  At some point, I suspect somebody will
> >seriously make a go of it with a carrier that goes between Columbia
> >and (say) Chicago, but it could take a while.
>
> See above.  ORD, or even Midway would be my dream come true as I think
> that Chicago is pretty much an ideal weekend trip if someone's just
> looking to do some big-city sightseeing.

If you're going *to* Chicago I think Midway would be even better than
ORD.  I think the inspired choice of routes would be to get a decent
route between two major hubs that happened always to stop at COU to
let the locals do their thing.  In that case, either DEN - COU - ORD
or DEN - COU - {BWI/DCA} could do really well since you could take
advantage of the fact that the full route has intrinsic value that's
much higher than MCI-STL.  (Also note that Southwest already offers 6
flights per day between MCI and STL.)

OK, so here's a psychotic idea.  Southwest desparately wants to be
allowed to do more with their Dallas flights out of Love Field.  Let's
get Kit Bond to broker a deal so that Southwest gets to do whatever
they want there in return for doing 2 round trips per day that are
BUR-COU-BWI.  It's corrupt as hell, but that way we in Columbia get 2
flights out per day to each coast.  Plus, I would undoubtedly also get
a free pony! :-)

jking

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