TRAVELERS’ CHECK : L.A. flight too costly to continue
Posted on Monday, November 17, 2008
L. A. flight too costly to continue
American Eagle’s decision to end its daily trip from the Northwest Arkansas Regional Airport to Los Angeles would surprise no one familiar with the term “money pit.”
An L. A. flight brings revenue of about $ 21, 000 to American Eagle.
That amount sounds profitable, but it’s never so simple when jet fuel, pilots’ wages, bargain-hunting passengers, travel-weary businessmen, government security fees and federal taxes are involved.
The Guru this week aims to figure out why XNA to LAX didn’t work financially and why the airline will eliminate the route after April 6.
He got help from Michael Boyd, a Colorado airline consultant, and James Rice, chief of China operations for Springdale-based Tyson Foods Inc.
“I’m disappointed in the cancellation because it will mean an inconvenience for those of us coming to Arkansas from China,” Rice writes in an e-mail. “This was a great connection to direct flights from Hong Kong, Shanghai and Guangzhou. I’m surprised, too, since the XNA-LAX flight was always full when I was on it. Given the tremendous China growth plans for Wal-Mart and Tyson, the need for the direct flight to Los Angeles could only get bigger.”
Yep, it was the gateway to the West and Far East for two of Arkansas’ biggest companies.
The money wasn’t working for the airline, though, and American Airlines directed regional partner American Eagle to cut its unprofitable routes. The flight to L. A. went bye-bye.
Established in 2003, the Los Angeles route was given a healthy chance. Yet, airlines these days refuse to take financial lumps on routes, moving planes to profitable routes more quickly than in the past.
Boyd’s analysis of U. S. Department of Transportation data shows the flight to Los Angeles on the 70-passenger CRJ-700 s weren’t full. Passengers occupied 64. 7 percent of the seats last year, Boyd said. That’s 45 passengers per trip, and the average passenger paid about $ 466 round-trip.
It’s 1, 504 miles to L. A., too, meaning more jet fuel flows through the engines. The distances must be doubled because it’s round-trip.
“In raw numbers, AA was taking in about $ 10, 500 per one-way flight,” Boyd writes. “They needed $ 16, 750 to break even. That was a flight into a financial black hole.
“ Bluntly, the XNA-LAX market wasn’t a loser for American. It was a raging disaster.”
Break even would mean an average fare of $ 760 or so round-trip if 45 people were on each plane. The airline doesn’t get all that, either. There are security fees and taxes to subtract.
The impact on Tyson Foods and Bentonville-based Wal-Mart Stores Inc. could be significant, Rice believes. The planes from Los Angeles to Arkansas often carry Chinese vendors headed to Wal-Mart “with their product samples and presentations in hand,” hoping to convince the world’s largest retailer to carry their goods.
“This will not reduce the need to get between Northwest Arkansas and China, just increase the effort to do so as we will have to fly through Dallas or Chicago,” Rice writes.
More effort. More travel time. Less convenience.
It’s all bad for Northwest Arkansas. Robert J. Smith’s column about people on the move in Northwest Arkansas appears each Monday. He can be reached at rsmith@arkansasonline. com.
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