COS seeing strongest growth in years

COS Aviation Director Greg Phillips.

For more than a decade the Colorado Springs Airport was the object of negative statistics and bleak outlooks; but after a year of positive growth  — capped with several economic milestones — the long-belegeured enterprise is beginning to stabilize.

On March 7, Denver-headquartered Frontier Airlines  — a company that returned service to the Springs in 2015 following a years-long operations hiatus — announced seven new seasonal flights from Colorado Springs, including nonstop service to Chicago, Los Angeles, San Diego, San Francisco, Fort Myers, Tampa and Washington, D.C. The airline was already offering service to Phoenix, Las Vegas and Orlando.

On March 10, American Airlines made a similar announcement: That the company would immediately begin offering two daily nonstop flights to Chicago (the third company to offer that destination out of Colorado Springs). Mayor John Suthers said the announcement came after the airline found success in its daily flights to Dallas/Fort Worth International Airport, where the company is headquartered.

The announcements of added air service in Colorado Springs come at the end of a period in which the airport has experienced its first sustained growth in nearly a decade — a decade in which airlines mergers and consolidation of services to large international hubs has made for an increasingly difficult climate for many airports of similar size.

“A lot of the smaller regional airports have really suffered, because [the airlines] know they can put an airplane between Chicago and Denver all day every day — and it will probably fill up,” Suthers said. “They know they can fill airplanes out of those airports; they don’t know they can fill an airplane flying out of Colorado Springs.”

Greg Phillips, who was hired as aviation director after the departure of predecessor Dan Gallagher last October, said many of his duties thus far have been dedicated to just that: assuring airlines that Colorado Springs is worth it.

“We’ve got to convince them — even before they bring an airplane here — that there is a pretty darn good chance that it will work,” Phillips said. “But the real question is: ‘Will you stimulate the market enough so that you have planes full enough, on an ongoing basis, to make the flights work?’ … What I think the airlines are saying is that they have some confidence in this community that we’re up for the challenge — and I want to believe we are too. But it is a lot of seats that we’re adding to the market.”

The additional flights account for a total of 148,000 new seats (beginning in July), to be exact.

Historically, COS has fought an uphill battle in convincing airlines to invest in and maintain operations locally. The downward trend started in the ‘90s, when the Colorado Springs-based Western Pacific Airlines propelled the airport’s enplanements (the number of passengers departing) to an all-time high of more than 2 million before moving its hub to Denver and subsequently going bankrupt in 1997.

“When they went under, things just started declining fairly significantly and we’ve been on kind of a small decline ever since,” Suthers said. “It wasn’t until 2015 when things really started to turn around, and last year was the first uptick, and we’re bound to have more upticks in the coming years with these new flights that we have.”

According to the Bureau of Transportation Statistics (a division of the U.S. Department of Transportation), the number of enplanements at COS sustained a gradual decline from around 1.1 million in 2005 to 582,000 in 2015 — minus a slight uptick in 2012 — before the tide was stemmed by a series of marketing campaigns and financial strategies under Gallagher’s oversight.

“We changed how we were doing business, because you’ve got to do more than just talk the talk,” Gallagher said. “We modified our business model to incentivize that growth and lower costs for those businesses. We had been losing Cessna 172s, but then we started landing Boeing 747s.”

Enplanements finally began to trend upward in late 2015, and ended 2016 with 651,000, according to BTS data. During that time, COS fell in DOT’s airport traffic rankings from 87th in 2005 to 109th in 2015, before ticking up to 105th last year.

“In 2017, until Frontier and American announced these additional flights, we were projecting 739,000,” Phillips said. “Now, with these flights … I would suggest it could be more than that.”

“Even without the additional flights, we’d probably be up another 10 percent next year,” Suthers said. “But the fact is that now we’ll probably be up another 25 percent next year, and we’re really on our way back to seeing at least a million enplanements, which is really good news.”

Phillips said a large part of the recent turnaround can be attributed to a period of debt and cost restructuring that occurred under Gallagher, who now serves as director of aviation business and finance for the Massachusetts Port Authority (based at Logan International Airport in Boston).

“[Gallagher] did a very good job in addressing the airport cost issues,” Suthers said. “The guy masterminded what we needed to do to get more business out there and what we needed to do to lower our costs.”

Fitch Ratings recognized efforts by COS to pay of a series of 2007 bonds — as well as traffic stabilization and the execution of a new hybrid airline use and lease agreement that successfully locked its tenants into five-year commitments — and in September upgraded the airport’s rating to BBB+ and revised its outlook from negative to stable.

“A strength noted in this rating includes the Airport’s modest capital program which has no plans to issue additional debt and is fully funded with grants and a structured PFC plan of finance,” according to an airport news release published in September.

At the time, and still, the airport was expecting a continued decline in the cost-per-enplanement fees it charges to airlines “due to the addition of a residual revenue sharing component in the new five-year AULA, the diversification of non-airline airfield revenues with ground leases on newly built hangars, and continuance of management’s progressive deleveraging strategy,” according to the release.

Suthers said that, under Gallagher’s leadership, the cost-per-enplanement fee for airlines dropped from more than $13 to just $6.28, which has resulted in an 8-percent increase in 2015 operating revenues and incentivized growth in commercial activity.

He said that in 2013 as the city and airport undertook a combination of efforts aimed at revising the COS long-term capital and financing plans, as well as an effort to begin paying off the remainder of bonds leftover from construction.

Phillips said that the drop in cost, as well as external markers such as population growth and a strong local economy, has made it much easier to appeal to airlines that may consider adding additional air service at COS. In the past year, these moves have attracted 12 new flights and bolstered activity at the aeronautic zone, Suthers said.

“That’s very important, because we now have four dailies to Chicago on four different airlines — that’s obviously going to affect pricing and be a very attractive flight for people, as I’m sure the prices are going to go down considerably,” Phillips said.

Phillips added that growth is a very positive indicator for Colorado Springs, and that the airport has plenty of room to support it. That room comes by way of a five-gate east concourse that has remained almost entirely unused — except as office space for TSA — since WestPac’s demise.

“If we grew to significant demand, we would look at building — but I don’t want to build to bet on the come,” Phillips said. “When that happens, we could easily just use the east terminal. But I think it is more reasonable to expect incremental growth.”

Gallagher agreed, but encouraged airport proponents to remain realistic about the expectations they have for future growth.

“The catchment area of Colorado Springs cannot actually maintain that growth,” Gallagher said of the days when WestPac drove a boom in the market. “[Colorado Springs Airport] will continue to grow as long as it is cost effective for the airlines … but I hope people will not always look in the rearview mirror in order to benchmark against something that was an artificial high.”

Despite the optimistic news of expanded services at COS, city and airport officials said they will not try to compete with the giant to the north — Denver International Airport, which is the four-largest in the country. Instead, Suthers said he wants to focus on taking advantage of DIA’s overflow traffic.

“We’re not going to compete with Denver on most of the air travel, but we wanted to eliminate that leakage created by people driving to Denver while they could fly out of Colorado Springs to get to the same place,” he said. “Now, with the amount of competition we’ve got and how inexpensive our parking is and how easy our access is, the chances are a lot better that someone from southern Colorado is going to fly somewhere like Chicago from Colorado Springs. … I think that now, with the number of flights we have available, we’re going to become increasingly competitive.”

Officials at DIA agree with the unspoken non-compete, and Air Service Development Vice President  Laura Jackson said that the additional service is welcomed in order to meet demand created by a stronger tourism economy and ongoing population growth.

“We do not consider COS to be a primary competitor,” Jackson said. “We know that statewide Colorado is experiencing both tremendous population growth, as well as record levels of inbound visitors, and any additional air service to Colorado airports is welcome to serve this growing demand.” n CSBJ