Joe Gelardi with United States Management (USM) and the ESG Company (the arena developer) shares some of the key takeaways from the Hampton Roads Chamber-sponsored Air Service Forum:
BLUF: Our air access is solid enough to keep us very competitive against peer set regions with regard to attracting regional/national events and business, however it’s unlikely that we’ll develop the type of robust direct flight access that would be required to compete “up” against larger regions with hub airports.
· Airline mergers/contraction and a focus on optimized operations across the industry has kept air service flat based on seats flown, however Norfolk has experiences significant growth (approx.. 13% annually) due to market forces that are driving traffic from smaller airports to regionals.
· Norfolk’s service is expected to remain strong while NN/Williamsburg’s is falling, although don’t expect new direct flights to non-hub cities in the foreseeable future.
· With the pilot shortage now well developed, airlines are forced to optimize pilot usage as well as airframes and fuel. As a result, they are applying their resources against only their most profitable routes. They won’t use resources on a route unless it’s the best and highest use.
· Don’t expect any new direct routes from Norfolk to non-hub cities. Airlines won’t provide service on any route that’s feasible if there’s a better place to use the resources. (i.e. there might be enough demand for a Norfolk direct to City X route – but they still won’t offer it if they can make more money with the resources in another market.)
· For a regional market, Norfolk is doing comparatively very well with direct flights to 13 hub cities and new direct routes coming soon to Denver and Boston.
· The most important economic metric for air transport is access from other markets. Norfolk has very strong access from all major international and national markets, even if it requires an additional connecting flight. Other regional markets and smaller markets are beginning to lose access as the airlines prioritize their routes to the best use of resources. The driving base for ground transportation to regional airports is growing in many locations, including Norfolk’s, as smaller airports lose access due to consolidation. More people have to drive farther to get to outbound flights.
· The Norfolk International Airport Authority is still pushing to add the parallel runway. The FAA stopped the environmental study and they are lobbying to have it restarted. The current runway is long/wide enough to accommodate every airframe in the airlines’ inventory, but the new runway is needed for safety/redundancy and will make the airport more efficient/profitable for carriers.
· ORF has a strong financial status, have been able to pay for capital improvements themselves with no grants and maintains a AAA bond rating.
· Key revenue drivers for airports are on-airport business. ORF is looking to develop more land including approximately 40 acres that lies in VB. As I shared at the event, I think this could present an opportunity for VB to mend some fences with Norfolk – and leverage the VB land use to get them to change the airport’s name to the Norfolk-Virginia Beach International Airport. The land is in VM Jones’ Burton Station district.
· Expect small aircraft to be phased out and replaced with larger airframes (>150 seats). The good news is – seats are going to get a bit wider on newer airframes.
With regard to marketing the Arena, CC and Beach as a whole, we’ll need to do a good job pitching the benefits of our air access, because you have to look just below the surface to see our strengths when compared to major hub markets.