Improved load factors, higher fares boost Steamboat airline program reserves
May 17, 2013
New LA flight drew 14 percent international travelers
When the Local Marketing District contracted last year for direct weekend flights from Los Angeles, part of its motivation was to make it more convenient for travelers from Australia to visit Steamboat in ski season.
Steamboat Ski and Resort Corp. Airline Program Director Janet Fischer said this week that 14 percent of the passengers on the flight were international travelers, and most of them were from Australia and New Zealand. But they also came from Mexico, Canada, Germany, Spain, Switzerland, Hong Kong and Japan.
Steamboat Springs — The committee that reports to Steamboat Springs City Council on the airline contracts that secure the majority of Steamboat's and Routt County's air service received good news Friday — the past winter's ski season jet flights weren't nearly as expensive as once feared. But challenges remain.
Steamboat Ski and Resort Corp. Airline Program Director Janet Fischer told the board of the Local Marketing District that instead of seeing its reserve fund zeroed out after funding last ski season's jet program at Yampa Valley Regional Airport, the reserves could grow by as much as several hundred thousand dollars when figures are finalized.
Fischer said that because the flight program performed well in business terms last winter, it will owe the airlines $1.34 million less than the maximum revenue guarantees it promised last fall.
"We had a $2.66 million cost and total caps were at $4 million, so that's great news," Fischer said Friday. "What does that mean to the LMD reserve? The cap scenario set us up to completely deplete the rest of the reserves (of about $600,000). Now, I estimate that by the end of 2013 the reserve could be from $800,000 to $950,000."
LMD co-chairman Chuck Porter said the amount of reserves going into winter 2013-14 won't be known until the actual 2013 accommodations tax numbers are known.
The sources that will make up the $2.66 million include $100,000 in voluntary contributions from businesses through the Fly Steamboat program, $1.1 million promised by Ski Corp., $1.12 million from the 0.25 percent city sales tax and $330,000 from the accommodations tax, according to the LMD.
A mix of private and public tax revenues funds Steamboat's ski season flight program. Steamboat voters agreed by a substantial majority in November 2011 to bolster the fund by imposing a 0.25 percent citywide sales tax that went into effect Jan. 1, 2012. The monies are available this spring to meet revenue guarantees for last winter's flight program.
So far, the 2 percent accommodation tax receipts are up over last year, City Finance Director Kim Weber told the LMD board.
Fischer told the board that the number of airline passengers coming to Steamboat last ski season was down 6 percent, though capacity was down 14 percent from the winter of 2011-12. The seat reductions contributed to making the flight more economically efficient with a 68 percent overall load factor.
"Average fares were up on all flights with good performance on all of them. Also, (fuel prices) stabilized later in the winter after being up in December and January," Fischer said.
She said Ski Corp. and the LMD board did not set out to reduce arriving seats in order to improve financial performance, but they did selectively drop some Tuesday operations — in particular for routes during low-demand weeks.
"We took the money available to us and tried to match the schedule to peak demand," Fischer said.
However, Fischer told the LMD board Friday that the ongoing consolidation in the airline industry continues to reduce competition and raise the possibility that airlines will ask for higher caps on revenue guarantees.
"The cap costs, particularly with one carrier, have been presented to go up quite a bit," Fischer said. She added that one of the airlines may be shifting its ski season flights to YVRA from mainline jets to smaller regional jets next winter.
"The reality is we are seeing the same trend of challenges with the airlines," Fischer told the board. "Now it's American Airlines merging with U.S. Airways. It limits the airlines we have to work with. Our No. 1 priority right now is our core flights and getting them loaded onto airline computers. The Minneapolis and Atlanta flights should load this weekend. Our Dallas flight is right after that. The rest are a work in progress."
Increasing summer airline service?
Porter said the restoration of the LMD's reserves creates the possibility of discussing supporting air service outside ski season. However, board member Rod Hanna said he thinks there is a misconception among members of the public that funds from the 0.25 percent are eligible to be used for non-ski season flights.
"No money from the sales tax can be committed to a sumer program," Hanna said.
County Manager Tom Sullivan told the board that the airport is about to launch into a new master planning process and the new plan will devote more attention to year-round service than ever before.
Steamboat Springs Chamber Resort Association CEO Tom Kern told the board that he would continue to work with the airport commission on that aspect of the plan.
"It continues to be the second-most mentioned issue, behind broadband, for our members," Kern said. "I talked to one employer who had to make seven trips in May and all of them required going to Denver” to begin his trip.
The LMD board concluded its meeting in an executive session for the purpose of discussing negotiations regarding airline contracts.
Its next meeting is scheduled for 9:30 a.m. July 19 in Centennial Hall, 124 10th St.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com