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November 2004
Charlotte Douglas International: Flying Steady
By Susanne B. Deitzel

      Listening to a diverse group of people talk about what they would like to see from Charlotte Douglas International Airport is similar to listening to an argument at a family reunion: everybody shares his opinion, then walks away knowing why they don’t get together more often.

     From consumers tired of paying top dollar for nonstop flights, to business travelers requiring extensive connectivity and frequency for these flights, to airline employees and airline management pointing fingers at failed contract negotiations, the atmosphere is often contentious, if not downright dismal.

     Then, of course, there is the airport entity itself. Enter Jerry Orr, the pragmatic and outspoken aviation director of Charlotte Douglas International Airport. Surrounded on all sides by the debate of what is best for the city of Charlotte and the airport he runs, Orr offers decisive opinions on the subject.

     In the wake of the security operations that have been instituted since 9-11, the downward spiral of economic distress facing major carriers, land use issues, and competition from other airports for its carriers, Charlotte Douglas has an unabashed and vocal advocate in Orr.

     Amid contract negotiations with the US Airways’ pilots union (eventually approving an 18 percent salary reduction), he shares his thoughts on the woes facing the airline industry: “Of course I am empathetic for what the legacy airlines are facing. Of the remaining six networks, two are in bankruptcy, one is probably headed for bankruptcy, and a seventh completely failed. These airlines are old, established companies who, due to their longevity, are burdened with the fact that they have unfunded pension plans, an older workforce, and a more expensive workforce. Unfortunately, their experience has brought with it financial handicaps that prevent them from being successful in the current market climate.”

     While Orr keeps a good distance from the emotions running amok in the contract talks, one gets a sense that he also commiserates with those at the bargaining table: “A job, especially the prospect of losing one, is intensely personal.”

     According to Orr, the legacies are also facing a market replete with newer ‘point to point’ airlines which ‘cherry pick’ high-density routes, a cheaper way to deliver the product. In contrast, legacy carriers like US Airways, built on a ‘hub and spoke model,’ offer the greatest number of locations, routes and connectivity options. Since some routes are more profitable than others, costs and revenues are spread across the whole system.

     As it turns out, costs are spreading faster than revenues and, as a result, US Airways must claw its way through contract negotiations and plans to transition the carrier into a workable business model. As the carrier’s biggest hub, Charlotte Douglas is now spotlighted on the national stage as a prime example of what faces the airline industry. The debate is loud and cantankerous, with lots of opinions, and seemingly few solutions.

     Although Orr has developed several scenarios to prepare his answer to the outcome of these talks, the main question is, “Will US Airways largest hub continue to operate, and what happens next?”

 

A Hub of Activity

     “The consumer of course, doesn’t really see what goes on behind the scenes with regard to the major airlines. All they know is that they want their flight at the right time, they want it cheap, and they want it now,” says Orr.

     However, Charlotte travelers be careful what you wish for. While the buzz about town is enthusiasm for lower fares, US Airways employs over 5,700 people – more than the number of jobs lost at the closure of textile giant Pillowtex. Too, the volume of travelers and employees within the airport serve to maintain the jobs of over 1,600 employees within airport shops and concessions. While a cheaper ticket certainly looks attractive to those who have emptied their pockets paying some of the highest fares in the U.S., the tradeoff could be considerable.

     Take, for example, the relocation of munitions giant, General Dynamics in 2003 from Burlington, Vermont. President Linda Hudson has been repeatedly quoted as citing the virtues of Charlotte Douglas International as a primary reason that the company chose Charlotte over other cities.

     Charlotte Douglas was also the site of the meeting of Arthur Gallagher and city leaders as they pitched Charlotte for the new location of Johnson & Wales University. Where would plans for Gateway Village be now if Gallagher hadn’t been able to get the right flight and, instead, flew straight to Charleston to sign a contract?

     Remarks Orr, “I think that the hub is a basic piece of Charlotte’s economic platform. Regardless of the outcome with US Airways, the airport will continue to be a viable and healthy entity. The risk is to the Charlotte community, and the implications of reduced non-stop and international flights.” He adds, “Of course, Nashville and Raleigh-Durham lost hubs and continue to operate, but Charlotte has been a hub for much longer and has a considerably different profile.”

     This having been said, there is little concern about the welfare of Charlotte Douglas as a whole if the US Airways hub discontinues or reduces operations. The airport’s financial stability, low-cost facilities and Charlotte’s increasing prominence among Southeastern cities provide an attractive lure to other hubs and the rising stars of low-cost carriers such as Jet Blue, Independence Air and AirTran.

     According to Orr, the airport and Charlotte city leaders are prepared to act quickly and decisively pending any outcome of the US Airways dilemma. Says Orr, “The worst case scenario is that US Airways folds, no other hubs take its place, and we gain a lot of service from low-cost carriers. The best case is that we can retain the hub and continue to provide a competitive mix of low-cost carriers. So while US Airways is very important to the landscape of Charlotte Douglas, it does not make or break our success.”

     He adds, “We have put together a financial program that is independent of the US Airways hub, or the presence of any other hub for that matter. All our financial health is based upon is carriers being interested in supplying flights to and from Charlotte, and this is a near certainty.”

     Mayor Pat McCrory echoes this sentiment, “Regardless of the outcome of the current turmoil, we are positioned to make sure that the infrastructure of the airport is strong. We are continuing with the third parallel runway, the international concourse, and expansion projects that will have a strong appeal to all airlines.” He adds, “We are also committed to continue offering these services at the low cost that has historically been a key component of the airport’s success.”

 

Charlotte Douglas Delivers

     Under Orr’s leadership, Charlotte Douglas International has seen remarkable growth and sustainability. Eschewing the pricier “build it and they will come” philosophy of many new airports, Orr says the Charlotte airport was designed to accommodate the airlines and the traveler. Says Orr, “Charlotte Douglas was created to make travel efficient and affordable. We were building an airport, not a monument. I have never seen the benefit of walking one and a half miles through a concourse to reach a gate, or having to travel five levels to get from gate to baggage claim. It may be shinier, but it certainly doesn’t help me get from my car to my seat on the plane any easier.”

     Orr says that fancy buildings also don’t help the airlines reduce their fares. “We pride ourselves on providing a very efficient, attractive and affordable situation for the airlines, which in turn can pass savings to their customers. If the airlines’ rent is astronomical, there is a necessity for the airlines to offset those costs.”

     Charlotte Douglas’ costs are certainly competitive for airlines and travelers alike. Charlotte’s $2 per passenger cost falls significantly under the $10 per passenger in Pittsburgh, and $16 in Denver. Says Orr, “While the per passenger cost is somewhat of an artificial figure since no one actually pays it walking into the airport, it is an excellent yardstick for comparison’s sake. If you multiply the savings per passenger by the ten million passengers we transport a year, that is a significant figure that hits right at the bottom line.”

     Orr says Charlotte Douglas has been able to offer affordable costs due to its high boardings and transfer traffic, and construction factors that proved very economical for the airport. “The airport was built at a time very favorable to construction, our financing was very good, and we only built what was needed. This kept our rates very affordable.”

     Despite many calls for Orr to expand marketing efforts to recruit other carriers to the airport, he rejects this concept emphatically. “I object to the term ‘marketing’ when people start talking about recruiting airlines. More often than not this means financial incentives, essentially paying a ransom to get them on board.” He adds, “I think it is a lot more practical to offer a quality product that attracts carriers on its own merits than to pay someone $2 million to bring them into the airport.”

     Instead, Orr points to market strengths that make Charlotte a fierce competitor in attracting carriers. “We have a great community, a great quality of life, growth, opportunity, a low cost airport, and space available – what else would you say to market it?”

     Orr adds that any funding that went into promotional marketing efforts would be ill-placed. “Airlines have very expensive overhead and do their own in-depth analysis of where it is practical to fly. They have people who sit at calculators all day long to figure out where they are headed next. They go where their people and their numbers tell them to go, not where I or the mayor tell them.”

 

Dealing with Turbulence

     Charlotte Douglas International, under the stewardship of the eleven-member City Council, the city planner and Orr, continue with plans to bring the airport into its new phase, hoping to complete the new runway by 2007. This demonstrates a show of faith in the resilience of the airport and the city’s commitment to the airport’s future.

     In addition to proceeding with airport development, and developing a financial strategy to address every scenario in the US Airways saga, the airport will add its name as one of the final airports in the country to implement the $3 per passenger facility charge to pay for FAA-approved facility projects and to pay off airport bonds.

     While Orr and city leaders are heavily invested in the plight of US Airways and all legacy carriers, all hold fast to the belief that Charlotte Douglas International will be one of the major airports left standing. Says Mayor McCrory, “Most businesses in Charlotte realize that while some cities are well-served by limited flights, hubs are important to the city, the nation and the world, and are steadfastly supportive of the airline. At the same time, we recognize that there are a lot of factors at play here that are out of our sphere of influence. So we are doing everything we can to position Charlotte Douglas and the city as an attractive, low cost, money-generating market that carriers will want to service.”

     As for Orr and ‘his airport,’ he is alert and poised as he awaits the major carriers to touch down, and the runways to be cleared for takeoff.

     “My bet is that once all is said and done, Charlotte will be one of two major airports left in the Southeast. It’s a great airport. I have seen none better.”
Susanne Deitzel is a Charlotte-based freelance writer.
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