Toledo Express Airport

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Toledo Express Airport
Air Service Issues Challenges
February 2008
TheBoydGroup
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What Well Cover
The Airline Industry Situation
Oil prices driving costs up, changing economics
of the industry shifting airline strategies
materially
Where Toledo Stands

• Current air service situation
• Whats happened in the past year
• What can be expected in 2008
• What the Airport is doing
• Community support partnership

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Measure of Air Service

• Air service is an economic generator the
  purpose is to get people and business into Toledo
  thats what creates maintains jobs
• Nonstop, low fare service to Florida is great.
  But it isnt the whole picture
• The goal is to increase connectivity to the rest
  of the nation and the world
• Question can Mr. Chiang get here from Shanghai?
  (Actually, yes on American over Chicago
  Northwest over Detroit. )
• Question whats the access from Los Angeles?
  (Four airlines, actually)

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Whats Affecting Air Service

• Oil prices the cost of fuel has changed airline
  economics.
• Airlines now looking more for revenue quality
  than just high volumes no longer market share
  its revenue share
• Declining major airline interest in traffic to
  low-fare destinations
• More interest in business traffic
• Major airline systems Northwest, Delta,
  Continental, et. al are seeking better
  applications of limited and non-expanding
  resources. Not any additional airplanes coming on
  line at these carriers

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Particularly Affected Smaller Jets

• 50-seat jets are now facing a higher hurdle to
  make a profit
• Jets under 50-seats are now being retired as
  quickly as their leases allow
• Delta is now strongly reviewing where small jet
  routes are to be eliminated
• Targets RJ markets with low fares (i.e., lots of
  Florida traffic) and markets that are very long.
  Targets service to airports with low
  connectivity and high air traffic control delays
  Like, JFK. Like, LaGuardia. (A growing challenge
  to getting NYC service from Toledo)
• Delta eliminated already at least eight small
  jet markets, most with strong (70 load factors)
• Examples Binghamton-Atlanta, Erie-Atlanta both
  successful before fuel prices jumped 50

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The Reality of Toledo Air Service

• The main value is to facilitate people and
  businesses to get to Toledo.
• Its mostly about them. The people in Los
  Angeles, Tucson, London.
• Local consumer needs are important, but its
  traffic coming from other regions that spends new
  money here, creates new jobs, and makes economic
  investment.
• Point low-fare Orlando service is great. But
  access to Osaka Shanghai is more important to
  the economy of Toledo

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So, Whats Happened To Toledo Air Service

• AirTran could not repeat the Flint Experience
  at Toledo. Monroe, Michigan isnt like Oakland
  County
• AirTran entered Detroit, causing more fare-based
  traffic diversion from Toledo
• One semi-charter carrier serving Toledo went out
  of business
• Fuel prices caused Allegiant to re-think Las
  Vegas potential
• Easy ground access to Detroit/Metro, combined
  with strong nonstop schedules by Northwest at
  Detroit
• Current service levels are not in danger of being
  lost. But dont expect Detroit to be eliminated
  as a co-terminal to Toledo, either

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Clearing The AirSome Myths That Pop Up

• The airport is responsible for fare levels. Nope.
  Airport costs have very little to do with fares.
• Toledo has high airport costs. Wrong again.
  Compared to other airports, very low. (Allegiant
  proves it.)
• Its easy to get more service. Its not. The fact
  is that Toledo Express is one of the most
  aggressive airports in this regard.
• Lets Just Dump Express Use Metro. Great. Then
  Toledo will be relieved of that pesky economic
  development stuff. Fort Wayne, Lansing, and
  Detroit will be thrilled. For Toledo No
  scheduled air service is no economic
  competitiveness.

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Toledo Realities
Its Not All Bad News

• Strong, globally-focused economy
• Not a rust belt region
• Great international domestic air access(Yes, a
  lot if it is via Detroit/Metro. But thats better
  than what Rochester or Buffalo or Syracuse have)
• Strong business market the travel segment
  airlines want.
• The proximity to Detroit wont change. The size
  and scope of Northwests hub there will change
  itll get bigger

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What Detroits GotThat Toledo Doesnt.
Northwest Airlines nonstop destinations from
Detroit operated on Tuesday, February 12, 2008

• Source AirportsUSA DataMiner On-Line Schedule
  Access

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Current Toledo Air Service Access

• American Great access to global hub at
  Chicago/OHare
• Continental is upgrading service to Cleveland
  gateway
• Northwest Excellent connectivity to
  Detroit/Metro international connections
• Delta Access to Cincinnati/No. Ky
  International may be cut back further.

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Criticality of Hub Access

• Almost 90 of all Toledo passengers are
  connecting to or from points other than the
  connecting hub airport.
• Point increasing hub access, either via existing
  carriers or additional carriers, is paramount

• Source AirportsUSA DataMiner 4Q2006 3Q2007

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Toledo Top Markets Does Not Necessarily Reflect
Top Demand Markets

• Source AirportsUSA DataMiner 4Q2006 3Q2007

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Toledo Traffic Average Fare Paid

• On a raw dollar basis including taxes, fees and
  other tribute paid to the Feds, average fares are
  comparable or less than at other regional
  airports not served by full-schedule low cost
  carriers

• Source AirportsUSA DataMiner 4Q2006 3Q2007

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Toledo Traffic Average Fare Paid Per Mile

• On a per-mile basis, Toledos consumers are in
  the middle of the pack as far as per-mile cost of
  air travel
• Going forward, do not plan on this going down
  at any mid-size city in the region

• Source AirportsUSA DataMiner 4Q2006 3Q2007

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New Airline Industry RealitiesThese Affect New
Service Recruitment At Toledo

• Problem oil at nearly 100 changes the economics
  completely
• Regional jets viable mission applications are
  declining due to costs. Over 1,000 to be retired
  from US fleets in next 10 years
• Hubsite airport access getting constrained. Feds
  want to have congestion pricing, not fix the
  system
• Air Traffic Control. What if I-75 were 2-lane
  blacktop? Thats todays air traffic control
  system. (And theres no viable plan at the FAA to
  fix it, federal hype notwithstanding)
• Bottom line the requirements for
  economically-supportable air service are going up

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New York?

• Huge market for nonstops from Toledo. Over 90 of
  Toledo - NYC traffic now is using Detroit
• Challenge it would be almost all NYC traffic,
  w/o much support from connecting traffic
• Reason? jetBlue doesnt really connect. And
  Continental Delta really dont have much to
  offer in terms of connecting Toledo passengers
  beyond NYC
• Some international potential with Continental and
  Delta
• Problems Newark congestion. JFK flight caps.
  Move to limit small aircraft. High costs. Other
  options for jetBlue are first

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One More Point

• Santa May Be Coming to Town
• But these guys wont

They need 400.000 annual passengers to attract
new service That means Denver, San Francisco,
Philadelphia, Washington Not Toledo
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So, Wheres That Leave Toledo
A Mixed Picture, But Better Than Most

• Toledos Situation
• Excellent easy access to Northwest global hub
  at Detroit
• Still, for businesses consumers in the rest of
  the nation, access to Toledo is excellent
• High reliance on 50-seat and other small jets.
  The good news likely increases coming in
  per-flight capacity
• A global-centric industrial base essential to
  attracting access to more hubsite air gateways.
• Detroit is close, but it is not a replacement for
  Express Airport

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Toledo Traffic Coming In More Than Going
OutOpportunity?

• Over half of all Toledo passengers are coming in
  from another destination, and returning home
• That indicates there is room for much more local
  support for the local air service

• Source AirportsUSA DataMiner 4Q2006 3Q2007

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What You Can Do?Plenty.

• Recognize that Express Airport is an economic
  asset. Its like buying a Jeep to help the local
  economy. Protect it. Use it.
• Goal Express Airport as the preferred gateway.
  Detroit Metro Think Motel 6. Express Airport
  A boutique hotel. Easier to use, more convenient.
  More efficient
• Anything that threatens Express Airport threatens
  jobs, economic growth, and the future of Toledo
• As a smaller airport, consumers will give it less
  slack when something goes wrong
• Any substandard airline service do not tolerate.
  
• Point At Express Airport, its everybody on the
  same team. Airlines, airport employees,
  concessions, local consumers.
• Point Express Airport is no different than Dana
  or Chrysler. Its a part of the communitys
  job-generation base
• .

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Summary of Toledo Issues

• Airline industry is in flux
• Small jet fleets being re-structured
• Markets being re-strategized due to higher fuel
  prices
• Toledo is an important revenue-generator
• Toledo contributes over 800 million to the local
  economy. Sort of like another Jeep plant
• Airline economics do not indicate declining fares
  
• Size of Toledo market is stable. Larger markets,
  particularly those peripheral to major metro
  areas can support larger airliners, and larger
  airliners can provide more discount seats
• Toledo Express is in on-going contact with
  current and potential carriers. It is a process.
  One that is dynamic and changing. One that
  changes constantly

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Thank You!
February 2008
TheBoydGroup