Wyoming Air Service
WYDOT Capacity Purchase Agreements
Given the incredible beauty of the state of Wyoming, one would expect that the air service to the Cowboy State would be robust. While its land mass ranks 10th among the states, its population is last (smaller than Washington, DC).
With the decision of Allegiant Air to cease service to Las Vegas and presumably with the prospect that the US DoT’s Essential Air Services will
be terminated, the Wyoming Department of Transportation has made a bold, commendable proposal—
The agency wants to contract with airlines to provide regular service to airports in the state, similar to how large airlines like United contract with smaller carriers like GoJet to provide regional air service.
That would be a different approach than the revenue guarantees currently used to subsidize commercial air service in most Wyoming airports where the local, state and federal government chip in to the tune of $46 million per year to guarantee carriers a minimum amount of business each year by covering any shortfall.
WYDOT’s idea is to start entering what are known as CAPACITY PURCHASE AGREEMENTS. Those deals give the entity commissioning the contract more control than by offering revenue guarantees alone. WYDOT and local airports in Wyoming would dictate the frequency of flights, number of seats, price and destinations while paying the contracted carrier a set amount.”
WYDOT has taken a cold, analytical basis for its proposal. It recognizes that the airlines are more likely to reduce their service to its population. The airlines must charge higher fares for frequent services to markets with small population base; so, the impact on WY passengers is that they are more likely to drive to airports which offer lower fares. “ ‘The average air fare to or from Wyoming airports is nearly 30 percent more expensive than the national average, while southern neighbor Colorado has fares that are 20 percent below the national average, leading to a gulf that makes it hard to persuade state residents to fly out of local airports rather than driving to Denver or Salt Lake City,’ [WYDOT director] Panos said.”
To grow traffic with WY as a destination and/or origin, the air service must start with flights well timed for the Cowboy State passengers. [One approach would be to have a dedicated fleet of aircraft operating within the WY service pattern.] WYDOT’s vision is to offer three daily round-trip flights to Denver to all nine Wyoming airports. The initial flights may have to be priced below fully allocated costs to allow for fares closer to the national average. [i.e. the State may have to subsidize the early flights to prime the pump.]
By contracting for the capacity under a wet lease, WYDOT can be more involved with the cancelations and delays; the carrier must have the final say, but the State can be aware of the airline’s explanation [oversight] (while rare, flights have been cancelled for other than 100% safety considerations).
Currently, four carriers service eight Wyoming airports — Casper, Cheyenne, Gillette, Rock Springs, Riverton, Laramie, Cody and Sheridan — all with their own schedules. WYDOT’s goal is to transition to a single carrier with regular Denver service.
Wyoming-centric schedules, for a hypothetical WYAir, will not be as influenced by problems at the destination hub. The WYDOT planes, if contracted properly, would not be subject to delays of aircraft operating outside of the Wyoming system.
If the State controls the prices and assumes the risk of the flights losing money, it would have to apply to become an indirect air carrier under 14 CFR Part 380. The application is not burdensome and the requirements are designed to protect the consumer, which the State would likely accept. The DOT might regard this “devolution” of the EAS to a state as such a positive that some of the Part 380 requirements might be relaxed.
The State might consider involving its educators to develop Wyomingites as employees for the new carrier. Universities and community colleges could prepare pilots, mechanics, ground handlers, customer service agents, reservation staff, etc. to work for WYAir.
The state is in a unique position to assure that its employees fly WYAir. With its contacts with the businesses and communities, WYDOT will have the pulpit from which to reinforce the need for Wyomingites to fly their airline. Such consumer response, loyalty, adds to the likelihood that WYAir will succeed.
By assuming the indirect air carrier status, the state will own the passenger records, fare strategies/results, scheduling lessons, advertising approaches, etc. that constitute the essential information to operate successfully in this market. Airlines, if WYAir works, will be quick to copy success and will indicate interest to replicate its model. WYDOT could then get out of the air transportation business, sell that intellectual property to the interested entrants and recoup the expenses of WYAir. Having proved the viability of a properly designed market, Wyoming could get out of the way of the stimulated free market.
GREAT IDEA WYDOT!!!!
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