Business community asked to support new initiative
Since financial services giant Prudential Financial Inc. announced plans to open a new facility in El Paso earlier this year, company executives have become very familiar with the flight from the company’s New Jersey headquarters to El Paso.
Because there are no direct flights from El Paso to Newark Airport, what could be a one-day business trip becomes a three-day proposition. With flight changes and layovers, it makes for a full day of travel each way.
“Travel to and from El Paso is a key selling point and not having a direct flight does negatively impact the El Paso experience,” said Ciaran Harvey, Prudential’s vice president of operations. “It affects our ability to develop this location.”
Harvey’s frustration is a common one – and a long-time one – among business executives in El Paso and maquila operators in Juárez. It has also occasionally frustrated local organizations tasked with recruiting new companies to El Paso.
Travelers flying out of El Paso International Airport, which is the primary airport for El Paso and Southern New Mexico, can fly direct to 10 destinations, four of which are in Texas. There are no direct flights to Washington, D.C., San Diego, Detroit and Mexico City.
As at many other small and midsize airports nationwide, the number of seats available to passengers every day at the El Paso airport has fallen considerably over the past six years, along with airport passenger traffic.
So the Borderplex Alliance, which does business recruitment in El Paso and the region, is trying to get the local business community behind a new air service development initiative to retain and expand flights to the region.
The initiative involves surveying businesses to find out the demand for certain destinations and then offering an airline a revenue guarantee to fill a certain number of seats – if it will commit to a new non-stop route.
It’s a scheme that has been tried successfully at some other small and midsize airports as competition over flights has become fiercer.
Because of the 2008-2009 recession, higher fuel prices and mergers and bankruptcies, airlines have been reducing capacity, raising fares and making sure that they fill just about every seat, said El Paso airport director Monica Lombraña said.
“In the past, a lot of the airlines were willing to take a chance on a new route or even subsidize a route to see if it might work,” Lombraña said. “They don’t do that anymore. They want to ensure that, from day one, they are going to make money on that route.”
The more limited service in El Paso has resulted in higher fares, loss of valuable time and diminishing incentives for businesses to relocate to the region. It’s also limited the ability of local businesses to expand their market and reach, according to the Borderplex Alliance.
“What’s really important for people to understand is that, even though we have good air service, we need to make it more competitive because other communities are working really hard to make their service more competitive,” Borderplex Alliance CEO Rolando Pablos said.
In McAllen, non-stop service to Mexico City began more than a year ago, after the airport offered a package of incentives and the business community offered a revenue guarantee to any airline that would commit to the service.
Aeromar took the deal and began non-stop service to Mexico City out of McAllen-Miller International Airport in March 2013 in return for a yearlong revenue guarantee, according to Kristi Salinas, the airport’s assistant director of business management.
For every flight that fell below a passenger load factor of 50 percent, the difference was paid by the McAllen Economic Development Corporation, the city’s business recruiting agency.
“We hardly paid anything on that particular flight. It has done really, really well,” Salinas said.
The Borderplex Alliance sent a survey to businesses in the El Paso region about a month ago, Pablos said. Once the data is crunched, the next step will be to identify the most promising non-stop flights. Often mentioned are direct flights to Washington, D.C., San Diego, Detroit and Newark.
Last year, 25,510 people flew from El Paso to Washington, D.C., or 70 people a day on average; 32,260 flew to San Diego, or 90 people a day; and 34,340 flew to Newark, or 94 people a day, according to airport data.
“We’re being proactive versus sitting back and hoping we will get new flights to key markets that will support business community retention and growth,” said John Hummer, a New Mexico business owner.
Hummer, who owns Steinborn and Associates Real Estate in Las Cruces, chairs the Borderplex Alliance committee responsible for carrying out the air service initiative.
The number of airplane seats available daily to passengers at El Paso International has declined for six consecutive years, and is now more than 20 percent below its 2007 peak, according to airport data.
And as the number of seats has declined, so has passenger traffic, which continued to slip this year, down 2 percent from January to May.
The trend is similar in other airports of comparable size. One exception is Tulsa International Airport in Oklahoma, where passenger traffic has increased since airport officials and the business community there launched an air service initiative in March, according to the airport’s activity report.
While an airport cannot subsidize one airline at the expense of others, an airport can control the costs that get passed down to the airlines through rates and charges, Lombraña said.
“For some reason,” she said, “it has always been out there that El Paso has really high costs, and we don’t.”
The fees paid by airlines to use the El Paso airport are lower than the industry average for small hubs.
Last year, the El Paso airport collected $6.38 per passenger, compared to the average for airports of a similar size at $7.86 per passenger, according to Lombraña.
Come October, Southwest Airlines will cut five El Paso flights. That’s when the Wright amendment, a federal law passed more than 34 years ago, expires.
The law restricted direct flights out of Dallas Love Field to Texas and some of the surrounding states. That meant Southwest Airlines had to route some flights through El Paso.
But when the law goes away, Southwest can fly direct from Love Field without having to stop at an airport like El Paso’s.
Also in May, Fitch Ratings lowered the airport’s bond rating from A+ to A in response to “significant” traffic declines.
The rating change means higher interest rates on bonds the airport sells, although it does not impact the airport since it is not issuing any bonds right now.
The credit-rating agency added that “the airport’s very low debt level and strong liquidity position, however, should leave it well-placed to sustain continued weakness in operational performance.”
As for Harvey with Prudential Financial, he is looking forward to a time when he and other company executives can take a direct flight from their new facility in El Paso to the company’s headquarters in New Jersey. Over the next two years, they plan to hire 300 people here.
“Having a direct flight to New Jersey,” he said, “would greatly improve the El Paso experience for anyone who comes down.”*****************************************
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