OST-97-2557 / AirTran Airways / High Density Rule / Response of Moline / November 18, 1997

Application of :

AirTran Airways, Inc.

For an exemption from Subparts K and S of 14 CFR Part 93

(Slot Restrictions at New York LaGuardia Airport) as to provide nonstop service between: Bloomington/Normal, IL / Moline-Quad Cities, IL & New York LaGuardia (combination service)

The Moline/Quad Cities International Airport wishes to add its comments to the docket in regard to DOT Order 97-10-17.

The Airport makes official note of its disappointment with the decision denying LaGuardia slots for AirTran service to Moline/Quad Cities and Bloomington/Normal, and would again point out that, contrary to the comments of the Department, such service would be a highly efficient use of such slots, and generate substantial passenger traffic. The denial of AirTran's proposal is unfortunate, and the Airport herein respectfully request to the Secretary to revisit the Department's analysis of the impact such service would have on the region.

Furthermore, the Moline/Quad Cities Airport wishes to put on the record and in the docket that the Department's estimates of traffic generated to New York by its service area are based on both unreliable data and outdated forecast methodology. Even a cursory review of the traffic dynamics of the Moline/Quad Cities market prove that the Department's estimate of only 7,000 annual passengers in the MLI-New York market is embarrassingly inaccurate. If these traffic estimates used in Order 97-10-17 are allowed to go unquestioned and uncorrected, they will cause material harm to the economy of the region by misleading airlines regarding the ability of the region to generate strong traffic to expansion markets such as New York

The Department states that origin and destination data for 1996 show that the traffic generated by the service area of Moline/Quad Cities would be approximately 7,000 passengers annually. This data is entirely inaccurate.

With due respect to the Department, the Airport would point out that DOT ODD data does not reflect demand, per se, but instead reflect traffic as reported within a system that does not fully reflect all the traffic between city pairs. With the hub and spoke system, the reporting system can and does often result in data which are neither reflective of the total traffic in the market, nor of the total demand the may exist or be developed in a given market. At best, DOT origin and destination data are only reflective of the traffic that may be experienced based on existing airline routines, fares, aircraft used, and several other factors, all of which affect the levels of traffic that may be seen in a given market.

In the case of the AirTran Airways proposal, it is not possible that this sophisticated carrier would have gone to the considerable expense of filing a slot request if they believed that the Department's origin and destination figure of 7,000 passengers was even vaguely representative of the true New York traffic potential at Moline/Quad Cities. The addition of nonstop service would have certainly generated substantial new traffic, as well are capturing a portion of the existing traffic that is not reflected in reported origin and destination data.

Analyses conducted by the Moline/Quad Cities International Airport indicate that its service area currently generates between 60,000 and 75,000 annual ODD passengers in the New York/LaGuardia market, between nine and ten times the number cited in Order 97-10-17. When reported traffic in other cities which have direct and nonstop LaGuardia service is analyzed, these estimates are highly credible.

In the absences of clear nonstop or direct jet service, there are a number of approaches that can be used to generate estimates of the true traffic in markets such as MLI-LGA. One approach is to compare existing traffic in markets that now have nonstop LGA flights. The following data indicate the ratio of LGA passengers to populations, based on reported 1996 data:

Using these data, if we apply the population of Moline/Quad Cities' service area of 770,000, the range of expected LGA traffic is between 61,000 and 123,000, not using the Buffalo ratio, which would result in an estimate of 177,000.

If we assume that the MLI service area would be invaded by similar service at Peoria, the population base would be reduced to a conservative 500,000. If the above ratios were applied, the average of .142 would indicate a traffic base to LGA of 71,000.

It is noted that there are dozens of variables that would affect these estimates. However, it is still clear that the real - and current - traffic generation between MLI and LGA is far more than the 7,000 that the DOT data indicates.

We can cite several other examples of where origin and destination data, if relied upon, as the Department has done in this case, would have been fatal to airlines in developing markets that are today highly successful.

In the case of Denver-Bloomington/Normal, Frontier Airlines is now generating approximately 26,600 passengers annually, with a single one-stop flight. Analyses of this traffic indicate that approximately 17,000 of these passengers are local Denver-BMI traffic, with the remainder being passengers connecting to other points on the Frontier system. If Frontier had relied on DOT origin and destination data in making its decision to enter the BMI market, it clearly would not have done so, for the reason that such dam represents that only about 10,000 passengers - total, all airlines - are in the market. Yet this one airline, with a weak marketing identity in the BMI market, operating a single one-stop frequency that departs prior to 6AM and arrives back to BMI, depending on time of year, near or after midnight, now generates 70% more traffic than the DOT data would purport to represent as the entire market. Note also that there are three other carriers which also offer service to Denver from Bloomington/Normal, in addition to Frontier. This again makes it clear that origin and destination data are not reliable in estimating the true size of the Moline-New York market.

We can also point to the Moline/Quad Cities - Phoenix market as another example. prior to initiation of direct service to Phoenix by America West, DOT origin and destination data indicated less than 8,000 annual passengers. After entry of America West, traffic jumped, according to DOT data, to over 35,000 - a 4 fold increase over earlier reported origin and destination data. Again, reliance upon historical O&D data - even if from year 1996 - is not a valid methodology of determining demand in a city pair.

New low fare service has a clear track record throughout the nation in generating traffic that O&D tables are woefully inept at predicting. In the case of Birmingham - New Orleans, historical data in the mid 1980s indicated that less than 25,000 passengers were in the market, clearly insufficient to support any level of jet service, which is the conclusion of the Department in the case of MLI/BMI - LaGuardia.

It is fortunate for the consumers in both Birmingham and New Orleans that Southwest Airlines did not rely upon historical origin and destination data, as has the Department in denying AirTran's recent MLI/BMI-LaGuardia request. Today, there are over 140,000 passengers reported in the Birmingham-New Orleans market, a growth driven by the entry of a low fare carrier. It is noted that this city pair accesses far fewer people than does the AirTran proposal. The Birmingham market is smaller than the combined MLIIBMI service area, and, obviously, the New Orleans market is much smaller than that accessed by New York[LaGuardia.

While it is understood that no two sets of city pairs are identical, these examples irrefutably make the point that in determining the traffic that can be generated by Moline/Quad Cities, the Department was remiss in using reported origin and destination data as a basis for rejecting the AirTran proposal.

In light of this information, Moline Quad Cities International Airport would again request the Department to revisit its decision regarding use of LaGuardia slots for service to Moline/Quad Cities. The following points are summarized:

1. The application of slots for this use would result in significant benefits. Opening New York LaGuardia to the vibrant region served by Moline/Quad Cities International Airport would have enormous economic impact and would be an exceptionally efficient use of slot exemptions.

2. Service to LaGuardia from Moline/Quad Cities, particularly if combined with another city in the region, would certainly be economically viable. While the traffic forecasts developed by Moline/Quad Cities International Airport are estimates, they are based on reasonable assumptions and upon experience elsewhere in the nation, and there are many examples on which to draw to support numbers within this range.

3. The Department's contention that only 7,000 passengers are available to utilize LaGuardia would use the service is inaccurate, and is not consistent with air service realities, nor with experience seen elsewhere in the nation.

With these points in mind, the Moline/Quad Cities International Airport respectfully requests that the Department reconsider its findings, and look favorably upon granting slot requests for service to New York/LaGuardia, either by AirTran or by other interested carriers.

Respectfully Submitted

KENT GEORGE, A.A.E.

Director of Aviation

Metropolitan Airport Authority

Of Rock Island County, Illinois

Moline Quad Cities Airport

Michael J. Boyd

President, The Boyd Group

78 Beaver Brook Canyon Road

Evergreen, Colorado 80439

(303) 674-2000