Regional Air Alliance to wind down as airport performance improves

Originally posted in MiBiz on November 24, 2013

he flight plan for a nonprofit economic development organization with deep ties to the West Michigan business community is nearing its terminal destination.

The Regional Air Alliance of West Michigan (RAAWM), chaired by Windquest Group Inc. President Dick DeVos, believes that it has largely accomplished its five-part plan to improve air travel in West Michigan that it set out to accomplish in 2008.

With its work nearly done, the alliance is preparing for the day when it will wind down its operations.

“We are stepping up to the plate in the ninth inning,” said Daniel Wiersma, the organization’s executive director.

A handful of regional business interests convened the alliance with the goal of taking a “holistic approach” to improving air travel in West Michigan for the betterment of the area’s business travelers who use the Gerald R. Ford International Airport (GFIA) and other local airports. The group’s mission included reducing air fares, enhancing passenger experience and improving airport operations and financial performance.

Regional Air Alliance data show significant progress in bringing down fares and getting more passengers to fly from Grand Rapids. As a result, more passengers have been flying out of the airport. After bottoming out at less than 888,000 passenger enplanements in 2009, the airport has since maintained enplanement levels above 1 million passengers. Through October, 945,962 passengers have flown out of Grand Rapids this year, according to Kent County Department of Aeronautics data.

In part, enplanements are up because the air fares have come down in Grand Rapids, sources said. In 2008, the fare premiums in Grand Rapids were roughly 40 percent higher than at both the Chicago airports and in Detroit, but that difference has been cut in half, according to figures from the alliance.

At the time of the alliance’s founding, fares out of Grand Rapids were skyrocketing, causing a “leakage” of passengers to the larger airports with cheaper fares. A lack of passengers also led to the existing airlines cutting service, which in turn led to even higher prices.

Speaking to the Economic Club of Grand Rapids in November about the alliance’s progress, DeVos described this “non-virtuous” cycle as the impetus for the group’s founding.

Local business leaders formed the Regional Air Alliance primarily as a catalyst for economic development, DeVos said. The organization brought in many of West Michigan’s largest employers — Meijer, Steelcase, Amway and others — to make the case that the region needed more efficient and cost-effective methods for both business and leisure travel. The effects of lower cost and more frequent air travel would also make West Michigan more competitive in the lucrative convention and hotel business, sources said.

“The economic realities of commercial air service were absolutely compelling,” DeVos said at the Economic Club meeting.

Over the last five years, the Regional Air Alliance has had conversations with all the major carriers at GFIA about lowering their fares to be more competitive with airports in Chicago and Detroit. The legacy airlines, however, were largely disinterested in adding any seat inventory that would help lower prices, sources said.

That led to the alliance starting to talk with low-cost airline carriers, such as AirTran and Southwest Airlines.

“(AirTran) was the only airline that said yes,” DeVos said.

In January 2010, AirTran officially announced that it would begin service from Grand Rapids starting in May of that year. On the day that the airline released its cheaper fares, the entire market was recalibrated, Wiersma said. At the time of AirTran’s debut into Grand Rapids, the carrier commonly listed fares as low as $79, forcing the other carriers servicing the Ford airport to lower their prices — a recalibration dubbed the “Southwest Effect” by airline industry insiders.

Southwest Airlines eventually purchased AirTran, which led up to Southwest’s launch in the West Michigan market in August of this year, with direct flights to Denver, St. Louis, Baltimore and Orlando.

Since Southwest began its local service, executives have said that “Grand Rapids has been performing above expectations,” Wiersma said, recalling a conversation with airline officials.

“The acquisition of Southwest Airlines was a huge win for the entire region,” said Brian Ryks, executive director of Gerald R. Ford International Airport. “The airport, working in partnership with (the alliance), had been working on that for seven or eight years. Those deals take a long time to complete, especially because traditionally Southwest has not gone into markets this size.”

Southwest Airlines spokespeople did not respond to requests for comment as of press time.

However, the addition of low-cost carriers and more passengers to fly out of Grand Rapids isn’t coming at the expense of the bigger airports, according to officials at Detroit Metropolitan Airport.

“What little data we have to reflect where our traffic comes from actually indicates that our draw from Western Michigan is at an all-time high” and has been throughout the summer, Scott Wintner, public affairs manager for the Wayne County Airport Authority, said in an email to MiBiz. The authority operates both Detroit Metro and nearby Willow Run Airport.

“We suspect … that the overall market for air travel has just grown” likely because of the entry of additional flights and options into the market, he said.

However, a report last week by The Detroit News noted passengers trends at Detroit Metro have been flat in recent years. The airport has been averaging about 32 million travelers annually since 2010, down from a peak of 36.5 million in 2005.

Much of the Regional Air Alliance’s focus has been in Grand Rapids, although the group has been working with other regional airports in Kalamazoo, Lansing, Muskegon and Traverse City to increase their viability.

While Grand Rapids is the hub for West Michigan air service, alliance executives said they don’t see it as a zero-sum game where gains in Grand Rapids translate into losses for the rest of the region.

For example, Kalamazoo/Battle Creek International Airport has experienced recent gains in passengers, mainly for business travel, said David Reid, the facility’s interim director.

“Airlines don’t serve the airport. They serve the community,” Reid said. “I think the (Regional Air Alliance) has been great because it’s a private-sector initiative.”

By leveraging DeVos’ background in the hotel business, the Regional Air Alliance has also worked with airport executives in Grand Rapids to improve customers’ overall experience at the facility.

“An airport is a hospitality experience,” Wiersma said. “We wanted to provide the same experience as Woodland Mall or Disney World.”

To improve the overall flying experience, the Grand Rapids airport commissioned a large, covered parking ramp that was completed in 2009. Plans are also underway to add new gates, create a unified security checkpoint and add new concessions at the airport. Bell’s Brewery opened a location in GFIA over the summer.

While the Regional Air Alliance plans to come to an end, Ryks said that he expects West Michigan business leaders to form an informal group in place of the alliance, although the exact makeup of the new advisory panel remains unknown at this time.

“I need the business community involved,” Ryks said. “Airlines want to hear from that demographic.”

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