America West: Lack of demand, not planes, hurting LV

Friday, March 20, 1998 | 9:56 a.m.

America West Airlines executives say aircraft capacity isn't the problem facing the city's resort industry -- it's selling people on Las Vegas over other potential leisure destinations.

That viewpoint is a departure from the arguments of tourism and airport officials and Wall Street experts. They say airlines are backing away from the Las Vegas market in favor of more profitable business markets.

The issue is crucial to Las Vegas, where the airline passenger count is not keeping up with a 6 percent increase in hotel room inventory from last year.

"The planes are out there," Doug Parker, chief financial officer for Phoenix-based America West, told the Las Vegas SUN editorial board Thursday. "It's more a matter of whether they can be flown profitably."

Parker said America West reduced Las Vegas service from five cities over the past five months because those routes were unprofitable. The airline scaled back late-night operations between Las Vegas and Albuquerque, N.M.; Austin and San Antonio, Texas; Colorado Springs, Colo.; and Vancouver, British Columbia.

In those cases, Parker said it made more economic sense to park planes in those cities overnight than to make an extra run to Las Vegas. Parker said Albuquerque, Austin and San Antonio are heavily served by Southwest Airlines and that passengers from there often would take advantage of comparable fares operated during the day. He cited a similar circumstance with low-fare competitor Reno Air in Colorado Springs and he said charter service, Alaska Airlines and Canada Airlines are strong competitors in Vancouver.

"The seats are available. The equipment is available. There is capacity," said C.A. Howlett, vice president of public affairs for the company.

But William Mahaffey, manager of transportation for the Las Vegas Convention and Visitors Authority, isn't convinced airlines can't turn profits on Las Vegas runs.

"Any airline, regardless of who they are, should allocate their planes where they will make the most financial gain for their stockholders," said Mahaffey. "But an aircraft sitting on the ground generates nothing."

The fewer America West operations are at least partially responsible for the airline's dismal passenger counts so far this year at McCarran International Airport. So far this year, traffic on America West is down 14.3 percent from the first two months of 1997. Overall, passenger counts are down 4.3 percent for the year on all carriers at McCarran. Three other leading carriers -- Southwest, United and Delta -- also are down for the year.

Despite the discouraging passenger counts, America West remains profitable in Las Vegas, thanks primarily to increased fares. Parker said 30 percent of the company's revenues are generated in Las Vegas, a secondary hub for the airline, and Howlett said America West "is absolutely committed to Las Vegas."

Parker said the airline "is doing a better job of charging the right fare here" this year and the company continuously monitors loads against fare revenues to strike the right balance between keeping the cost of flying competitive while maximizing profits for the company.

The U.S. Department of Transportation lists Las Vegas as having the lowest average yield among 30 top U.S. destinations. In the second quarter of 1997, the most recent quarter for which statistics are available, airlines made 10.5 cents per mile on routes to Las Vegas -- arrived at by dividing the average fare ($104) by the average passenger trip length (984 miles).

The 10.5-cent yield compares with 23.6 cents for Minneapolis at the top of the list and the average of 16.5 cents. It's also 8.2 percent more than it was in the second quarter of 1996 (9.7 cents).

Parker said loads to Las Vegas run at about the national average of 65 percent. But unlike some destinations, the loads run highest around the weekend and planes run emptier during the middle of the week.

How is America West addressing the reduced passenger volumes? Parker said the company hopes the restructuring of night routes beginning May 4 will increase counts. The airline intends to schedule late-night departures and arrivals about two hours earlier than the current schedule. In many cases, that will mean the difference between a 2 a.m. trip and a midnight flight. Officials are hoping the earlier hours -- particularly on the East Coast -- will be more palatable to visitors.

In addition, America West will start up direct service between Las Vegas and Fort Lauderdale, Fla., in May -- a destination that isn't served directly from the airline's major hub in Phoenix. The company believes a leisure market of Florida retirees will use the service based on research showing hundreds of passengers making one-stop flights from Fort Lauderdale on other airlines.

In the meantime, airline executives said Las Vegas should get busy marketing the city more aggressively. They pointed out that it may be difficult to match double-digit increases in the number of hotel rooms with double-digit increases in the number of visitors.

In addition to competing with a number of travel options around the world, Las Vegas must consider the number of new gaming venues in operation, said Steve Johnson, vice president of corporate affairs for America West.