Wednesday, February 12, 2020

Oklahoma City: No Longer a Fly Over City

For those that know me professionally, I lived in Oklahoma City for nearly three years. In the first year and a half, I was commuting mostly daily between Dallas and Oklahoma City by air or by car. In April 2018, Southwest reduced DAL-OKC from 4x to 3x which, for a commuter, made daily commuting difficult. For the next six months, I drove weekly to Dallas in a crashpad. I would finally throw in the towel in September 2018. And yes, if you were wondering, it was my team that decided to reduce DAL-OKC (which I entirely supported).

This post, however, is not about me. Instead, I want everyone to understand why I am digging much deeper into Oklahoma City. One of my biggest pet peeves as a planner and a general aviation dork was airlines and planners focusing on what is currently sexy. Most of my followers may consider Oklahoma a flyover state. Cities such as OKC often do not get the headlines on national releases nor the attention they deserve, but it appears at least one airline is seeing growth opportunities in Oklahoma City.

For fourteen years (2004-2017), OKC seat capacity was mostly flat outside high blimps in 2008 and 2012. However, in 2018 and beyond, the city has returned to a positive seat growth rate, which we will discuss shortly. During the same time, however, scheduled commercial flights into and out of the airport were down 17.5% (-1.4% annual growth rate). Industry gauge growth trends largely offset the decline in flights out of the airport.



While the decline in capacity could be seen as alarming, OKC's flight decline can be explained by Delta's network realignments following their DFW and post-Northwest merger hub closures. In total, Delta reduced its footprint in the city from 24 daily departures in 2004 to 10 daily departures in 2017.


While seats and originating passenger growth largely remained stagnant, the Oklahoma City economy did not. Strength in the local Oklahoma City economy helped drive airline revenue originating from Oklahoma City on relatively flat capacity growth. This revenue growth came almost entirely from higher fares and excludes baggage fees or other ancillary product fees.



A city with a strong economy and growing revenue on flat passenger growth, to me, is indicative of an airport needing new service or fare stimulation. This may not always be the case at every airport; however, here in Oklahoma City, it appears to be at least one of the indirect drivers to recent capacity moves.

After years of stagnant seat growth at OKC, American began to increase their OKC footprint. American's average daily seats between 2017 and currently scheduled 2020 seats are forecasted to be up 41%.  During the same time, American started or has announced nonstop service to all of their previously unserved hub cities. For those counting, yes, I include JFK and LGA as part of a single metro even though the airports serve very different missions on the AA network.



American's impressive growth within the city started in early 2018. Phoenix and Philadelphia were added to the city within two months of each other, followed by new DCA six months later. Now in 2020, American has rounded out its hub service with new service to Miami and New York. It should not be lost that even with American's growth, total seats by all other carriers have primarily remained flat. This could means other carriers are not seeing negative pressures from the additions to warrant capacity reductions. 



With service to all nine of American's hub cities, Oklahoma City is now one of only nine American Airlines non-hub cities (4% of all cities) that has nonstop service to all hub cities. OKC is also batting far above its weight to get here. Of the eight other cities with full hub city coverage, the average American Airlines daily departure count is over twice as large as Oklahoma City. There are 30 other American cities with more daily departures than OKC who do not have full hub coverage.



While Oklahoma City should celebrate this accomplishment, I do not believe all is well on the home front. When I worked in the industry, I repeatedly preached for communities to use their service or lose it. To me, it feels like the Oklahoma City community better start using the Philadelphia service or they are going to lose it.

What do I mean? Well, let's first take a look at all of American's flown performance for the last year. Unit revenue and load factors on the PHL flight have been soft since its launch.



Soft load factors dragged on the OKC-PHL's revenue performance during the 2018-2019 winter quarters with load factors dropping as low as 50% during the first quarter of 2019. American has quickly reduced the route throughout 2019 and early 2020 to just a single daily frequency during the off-peak months. During the second and third quarter, the performance of the route, aided in part by capacity reduction, performed near system-level RASM target for the route. 

While published 2020 schedules show second and third quarter capacity returning to twice-daily service, given the historical revenue performance, I wonder if this will hold. After I developed the graph below, American reduced their May OKC-PHL route back to a once-daily flight pattern. 




To complicate matters, American's new LaGuardia service will put further pressure on Philadelphia’s performance. Philadelphia’s top flow markets include Boston and LaGuardia, and the new LGA service duplicates itinerary options.    

While most of Oklahoma City's love has come from American, there appears to be some experimentation by other carriers to non-traditional cities. After Southwest departed the DAL-OKC market in November 2019, they backfilled the reduction with increasing Houston, Phoenix, and new daily service to Nashville. (Note: These capacity discussions and decisions were had after I departed Southwest).

Frontier has also experimented within Oklahoma City. During late 2017 and 2018, the carrier launched Orlando, San Diego, and San Antonio. Today, only Frontier's Denver and Orlando service remain, however, the experiment did point to potentially untapped demand in the San Diego market. When Frontier entered the OKC-SAN market with 3-4 times weekly service, they were able to stimulate the market to nearly 160 PDEWs. Interestingly, OKC-SAN was also part of the failed ExpressJet experiment. ExpressJet operated 1-2x daily service during almost the entirety of their experiment.


Other carriers such as Alaska and United also have increased their investment in the city. At the end of last year, Alaska up-gauged its E175 service to A320 service (doubling seats in the market). United is also investing additional capacity in the market with flight increases to Dulles and Denver. This is on top of United's Chicago product enhancements with the CRJ-550 over the CRJ/ERJ flights.

It is great to see Oklahoma City getting the attention it deserves. We are clearly batting above our size with American's hub service. But it is clear. Some risks have to be addressed if we hope to keep the impressive product offering in place. We need to support all of our carriers, whenever possible, to make sure the service that we have at our airport stays and grows with our city.

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Thank you all for swinging by the blog. There will not be a post on 2/19 (unless an airline does something interesting). The following week, I am planning a deep dive into Breeze's DOT application. 

1 comment:

  1. Does the deal between American and Alaska regarding Seattle count as something interesting?

    ReplyDelete