Airports in Dogfight to Win Lucrative Passenger Business

Forget about the air wars between the nation's airlines. Another commercial dogfight is flaring on the ground between airports fighting over the booming market in air travel.

Airline passenger volume has expanded 94 percent since 1980, the year federal deregulation kicked in full force. In the past five years, passenger traffic has swelled 27 percent, according to the Air Transport Association (ATA) in Washington.

The growing competition between airports "mirrors the kind of aggressive marketing that cities in general are doing to promote economic development," says Mary Rose Loney, Chicago's aviation commissioner. She says "Airports have become valued economic jewels in communities."

Airlines disgusted by delays and high service costs at old mega-hub airports in the Northeast and Midwest could shift a greater portion of their operations to newer, cheaper airfields in the South and Southwest. A loss of hub service from an older field would sap local economies, especially in lucrative businesses related to air travel like tourism and convention services, say transportation experts.

O'Hare's challenge

That possibility is especially disturbing for the nation's busiest airport - Chicago's O'Hare - where average fares are 23 percent higher than those at 33 other large fields, according to a recent study by the US General Accounting Office (GAO).

"These higher costs are causing Chicago to lose its geographic air transportation advantage to competing convention industries in Florida, California, Nevada, and Arizona," says Illinois Transportation Secretary Kirk Brown.

Indeed, Chicago might soon lose an annual convention gathering worth more than $64 million to its economy. The Radiological Society of North America is considering moving its conclave to Orlando, Fla. The comparatively rapid rise in air fares at O'Hare is one of many reasons, says Michael O'Connell, the society's director of meetings and convention services.

Why costs are rising

O'Hare is one of nine major airports where, despite deregulation, barriers to competition have kept fares high. Major airports at Chicago, New York, and Washington are constrained by federal limits on takeoffs and landings. Long-term exclusive leases on airport gates and rules that limit flights exceeding a certain distance from New York's LaGuardia and Washington's National Airport also inhibit competition. Kennedy airport in New York and Dulles in Washington have an effective monopoly on long-haul flights from those markets.

Moreover, marketing practices by dominant airlines at O'Hare and other big airports squeeze out new carriers. They pay bonus commissions to travel agents, promote frequent flier plans, exploit their ownership of the computer reservation systems, and arrange to have their flights listed in the reservation systems of other carriers, says the GAO.

Such barriers, along with the crowded tarmac at older fields, could encourage airlines to transit passengers at airports such as Atlanta, Dallas/Ft. Worth, Denver, and Indianapolis, experts say.

Warning of just such dim prospects for O'Hare, a group of politicians, state officials, and business interests have revived a campaign to build a third major airfield for Chicago 37 miles south of the city.

The group readily describes a litany of blemishes on O'Hare:

* Passengers who used O'Hare in 1993 paid a fare premium of 7 percent, according to a US Department of Transportation study.

* Some 400,000 jobs will be lost in the six counties of northeast Illinois without an expansion of airport capacity.

* O'Hare and Chicago's smaller Midway Airport would be unable to handle a more than twofold rise in air travel demand by 2015.

The proposed new airport in Peotone, Ill., faces broad opposition, including from City Hall, the airlines, and the ATA. Opponents say fares at O'Hare should not be compared with those at airports serving longer average flights that offer a lower cost per mile.

"Those statistics show that you can do whatever you want with statistics," says David Fuscus, spokesperson at ATA. "From an aviation business standpoint, Peotone doesn't make any sense."

Still, smaller, cheaper air fields such as McCarran International Airport near Las Vegas are attracting new business. There, passenger traffic has grown 200 percent since 1985.

McCarran charges airlines low service fees in part because it takes in a sizable part of its revenue from slot machines, says airport spokesman Adam Mayberry.

Though McCarran today largely serves a "leisure" market with point-to-point service, it hopes to take on a hub role. The airport has stepped-up its promotion efforts, Mr. Mayberry says, because "we want travel folks and airlines and business people to know that Las Vegas has an outstanding airport, and it will never be an impediment to growth."