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 Travel & Outdoors | September 2006 
Charter Flights Becoming Rare
 Chris Walsh - Rocky Mountain News
| | Andrea Warfield, a Frontier Airlines employee, pulls the chocks from the tires of a Champion Airlines flight to Cancún, Mexico, at Denver International Airport recently. Champion, like other charter operators, is finding it difficult to compete in the new high-volume, low-fare environment at DIA. (Todd Heisler) |
Charter airlines once attracted a solid following in Denver by offering dirt-cheap flights to popular vacation destinations such as Las Vegas and Mexico.
Today, though, a dwindling number of charters are struggling to attract customers here amid a surge in new low-cost service.
During the first seven months of the year, charter and limited-schedule airlines have posted a 39 percent drop in passengers at Denver International Airport. In fact, charter traffic is on pace to hit its lowest level in the past decade, continuing a rapid decline that began in 2002, according to airport data.
Several carriers have reduced service or canceled flights in Denver altogether. One Florida-based charter that served DIA even folded this year because of shrinking demand nationally.
Chalk it up to an explosion in service from discount carriers and large airlines alike to some of the top leisure destinations for charter airlines. It's a trend playing out in some other large cities, too, forcing charters to consider new markets and strategies to survive.
"Major carriers have taken over a lot of the routes that charter companies focus on, such as Las Vegas and Cancún, Mexico," said Ron Priddy, president of the National Air Carrier Association, an Arlington, Va.-based industry group that represents 17 carriers, many of them charters. "Those carriers are capturing a large segment of the charter market now, especially there in Denver."
The shift isn't exactly good news for consumers, as fewer charter operations means fewer ultra-cheap fares. But the charter business is cyclical, and it could rally in Denver by finding new, underserved routes, experts say.
Charters filled budget niche
Charters, including those that fly only for large groups such as sports teams, have always made up just a fraction of passenger traffic at DIA, often less than 1 percent.
But the consumer-oriented ones have long filled a niche among budget-conscious, flexible travelers looking for cheap vacations.
"These companies and their ilk pretty much operate off the radar screen," said Douglas Abbey, a Washington D.C.- based partner with the Velocity Group, an aviation consultancy. "They usually come in once or twice a week and develop niche leisure and discretionary markets. Obviously they're after travelers who don't have an allegiance to a frequent flier program, as they don't offer one."
Charters such as Allegiant Air and Champion Air typically offer service only on certain days of the week, often on the least popular ones to travel. They usually sell tickets through chosen tour operators such as Apple Vacations, which often package the flights with hotel nights and other services.
Sure, you have to travel during the middle of the week on a carrier with slightly more brand recognition than a child's lemonade stand. But you can save hundreds of dollars over a major airline.
Two round-trip, nonstop tickets on Champion Air from Denver to Cancún, for travel Oct. 11-14, were recently going for $506.98 through MLT Vacations. A package including hotel started at $646.98, taxes and fees included.
That's substantially less than what larger carriers offered on those dates. Frontier Airlines, for example, charged $800.88 for two passengers, with a layover on the return flight, according to a recent Internet search. American Airlines offered the next-lowest price, charging $804 with a layover each way.
Rapid growth, then decline
Charter airlines grew fast in Denver during the late 1990s, benefiting from a dearth of service to Mexico and few low-cost options to Las Vegas. Their traffic doubled from 1997 to 2000.
A rapid rise followed as larger airlines scaled back service in the wake of the Sept. 11, 2001, terrorist attacks. Charter traffic at DIA rose nearly 70 percent in 2001, hitting a record 727,151 passengers. It was the only airline group at DIA that posted gains.
Aside from cutbacks at larger carriers, charters also benefited from people looking for cheaper ways to travel amid an economic slowdown.
The rapid spike in charter traffic proved to be short lived, though.
In late 2002, homegrown Frontier Airlines decided to branch out, launching service to two Mexico resort destinations - Cancún and Mazatlan. It followed that up in 2003 by starting flights to Cabo San Lucas and Puerto Vallarta, while at the same time rapidly increasing its domestic capacity.
The moves devastated charter operations, which until then offered one of the only cheap nonstop options to Mexico. Charter traffic at DIA plummeted nearly 80 percent in 2003, hitting its lowest level since 1996. Three charters pulled out of Denver completely.
"There's obviously a parallel between our growth, particularly in Mexico, and a decline in charters," said Frontier spokesman Joe Hodas.
United Airlines, Frontier's main competitor and the largest airline in Denver, also added service from DIA to Mexico.
Stiff low-fare competition
After falling off sharply, charter traffic settled down and even began to recover slightly.
Allegiant Air began flying from DIA to three cities in Mexico for Apple Vacations. It also added flights to Las Vegas that year.
But the same forces spurring more people to travel now - lower fares, more flight options between any given route, new service - are actually working against the charter companies.
Charter airlines thrive on underserved routes with little competition, where they can provide a much-cheaper alternative. But DIA has been able to lure a wealth of new low-cost service, and some of the larger carriers are growing in charter markets as well.
"The low-priced, discretionary travel provided at DIA has historically been filled by public charter operations," said Stuart Klaskin, a Florida-based aviation consultant. "That's obviously changing."
Frontier, for instance, continues to expand in top charter markets, growing its international traffic by 25 percent this year through July and adding flights to several new Mexico destinations. United emerged from bankruptcy in February and also has made further inroads into Mexico.
"We always had a pretty big charter program out of Denver," said Ray Mathes, vice president of revenue management at Apple Vacations, which sells some package deals involving charters. "The difference now is that Frontier and United have added lots of service to beach resorts, which duplicates everything the charters are doing."
This year, charters have felt even more competitive pressure with the arrival of Southwest Airlines, which started service at DIA in January. One of its first routes: Las Vegas. The carrier's initial prices were significantly lower than what other airlines had been charging, rivaling the charter services. Frontier and United, fighting for market share, quickly matched Southwest's fares and bolstered their service to Las Vegas.
Both Allegiant and Champion, which did not return calls seeking comment, no longer fly between Denver and Las Vegas, in large part because of the new competition in recent years.
"In the charter business we make our living serving destinations and days of the week that have a lot more demand than what can be served by scheduled carriers," said Ken Pomerantz, president and chief marketing officer of MLT Vacations, which offers package deals involving Champion Air flights. "But in the Denver-Las Vegas market we've seen a huge increase in scheduled service, making it uneconomical for us to operate that route."
Pomerantz estimates carriers have added half-a-million seats on the Denver-Vegas route.
"It just became saturated," he said.
Larger airlines also have taken some of the charter business away in a more direct manner, increasingly accommodating large groups of travelers that want to book a chunk of seats. Frontier, for instance, likely will start a charter flight in February for Apple Vacations between Denver and Huatulco, Mexico, an emerging resort destination.
Overall, DIA traffic soaring
Charters are the only airline group missing out on a golden age for air travel in Denver.
The number of overall airline departures at DIA is up 11.2 percent this year through July, correlating closely to a 10.4 percent increase in traffic.
Regional airlines such as Horizon and Great Lakes have posted a 17.6 percent rise in traffic. Majors such as American, Southwest and United have seen a 10 percent increase, while traffic for midsize carriers such as Frontier, JetBlue and AirTran rose 6 percent.
If those airlines continue to grow, the downward spiral for charters in Denver could continue for the foreseeable future, observers say.
"I don't know how much longer the charters can continue in Denver," said Jim Olsen, the chief operating officer of Sun Country Airlines, which operates limited flights from Denver to Minneapolis. "I don't think charters can hold their own against 10 or 12 flights a day on the schedule, which is what's been happening in some of these markets."
Sun Country doesn't consider itself a charter, although DIA lumps it with charter airlines in traffic reports because of the airline's limited service.
Still, the carrier has seen a 25 percent dip in passengers in Denver this year, which it attributes largely to a decision to cut some of its service to Minneapolis, an early response to Southwest's arrival here. Sun Country, though, plans to restart some of that service and launch twice-a-week flights to Laughlin, Nev., a small gambling town about 95 miles south of Las Vegas.
Nationally, charters have looked more toward sports teams and other types of private-charter business.
In Denver, charter airlines likely will look for new underserved markets, perhaps places such as Costa Rica, observers say.
"These are clearly some of the most nimble carriers in the business," said Abbey of the Velocity Group. "They can enter and exit markets as quickly as necessary. They may disappear from Denver, but there likely will be others that replace them eventually, as there have been since time immemorial."
Champion and its partner MLT Vacations already see a new opportunity.
Although it pulled out of Vegas, Champion is starting once-a-week service between Denver and Cozumel, Mexico, next spring. The new flight comes despite the fact that Frontier and United have both added service to Cozumel.
Charters also are seeing strength in areas just outside Denver. Allegiant recorded a 9 percent boost in passenger traffic on its Colorado Springs-Las Vegas route so far this year, according to airport data.
And some Denver travelers are now making the trek north for charter deals.
Randy Russo did just that recently on a business trip to Las Vegas, opting for an Allegiant flight departing from the Fort Collins/Loveland Airport. His $800 package included two round-trip tickets and four nights in a hotel during a busy convention week - the same type of charter deal he used to get out of DIA.
"It all boils down to price," the Denver-area resident said. "It was actually kind of nice flying from that airport. It wasn't as busy, and the parking was cheaper than at DIA."
walshc@RockyMountainNews.com or 303-954-2744 |
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