This question has been on my mind for the last few days after a trip to FAT. I saw the construction on the terminal and the airside complex and I saw the potential for some sort of successful FAT based carrier in the future.

Allegiant is still flying, but they are obviously hemmoraging cash, as they only have one remaining route in service to Las Vegas (even then, they are remaining oddly quiet about the whole situation).

They survived longer than any other carrier that tried to make FAT it's home. Air 21 and Winair didn't last a quarter of the roughly 2 (?) years that Allegiant has been in service. In fact, before the fuel charges started skyrocketing, Allegiant was seeing good loads on FAT-PDX, LAS, and the other routes, despite the newness of the service.

Allegiant was obviously doing something right. They managed to find markets in a city that is notorious among large corporations for being fickle and difficult to please or impress. And in fact, this small town airline with the fleet of a handful of old DC-9's was able to influence the actions of large airlines and their subsidiaries. Horizon started operations to Portland, Delta Express started operating to SLC again, UAX started operating jet service to Denver, and AA started another flight to DFW with an MD-80. This would have been impossible had Allegiant not uncovered the potential of the country's largest one horse town.

Each time there has been an airline at FAT, they have lasted a little longer. Soeven though there are few people here with an interest in FAT, I have to ask due to the number of "experts" on the site: is there potential for success at a FAT based airline?

FAT is nothing more than a spoke city meant only for the new RJs and an occasional 737 or MD-80. The population base would not support anything else.

From the way the passenger load looked on Christmas Eve going on the last United Express flight to Fresno, I swear China Airlines could make a profit if it ever initiated a Taipei - Fresno route (a continuation of the service to SFO perhaps?  

Kai

FAT, while the center of a population area of 1.5 million, will probably never support a large startup. Midway is just the latest example of the problems with secondary market startups. But I believe that niches exist for a small startup (not necessarily based at FAT) that can avoid some of the mistakes of others.

Air 21 may have had a good model but was handicapped by attempting to start service immediately after the Valujet crash. Investment capital for new airlines had dried up so Air 21 attempted to start with only $3 million in capital and grow from revenues. Delivery of leased aircraft did not occur as scheduled. They then spread themselves thin by not developing a core system first. For example, besides operating out of FAT they added routes such as Grand Junction to LAX because they found incentive money to begin service. While the loads were good, the stage length was long for a low fare startup, limiting aircraft turns, and also spread marketing dollars thin into too many markets.

Allegiant has found a few good niches combined with income from charter flights. But their expansion away from FAT into LGB and TVL was too soon, not supported by strong marketing, and then became a drag on income when they continued service in the face of light loads hoping to develop the markets.

I don't believe that FAT will remain an opportunity for a startup much longer. Fresno is probably among the top 5 to 10 opportunities for Southwest based on size and several other factors. I think WN could start service at FAT as early as 2003 which would eliminate potential routes for a startup or any other airline.

I currently live in Tracy, CA and used to live in Bakersfield, CA and so I have a few thoughts on Fresno-
Fresno is big enough to support much better service than it currently has. And so lets us ask ourselves why does Fresno not have better service? I can give you the answer in six letters—LAX, SFO. Fresno is stuck smack in the middle of two of the best served airports in the world. As a former intern for a major carrier in the revenue management department I can say with some certainty that the major carriers look at Fresno and see a high yield market that they can serve with small aircraft. You are to far away from LAX and SFO for your business travelers to drive off, but you are close enough to them that your leisure travelers will always drive off. Consequently, your fares are high and you lose one half to two thirds of your market. But I can also tell you with some degree of certainty that your airlines that currently serve you are quite happy with their profits there. The real kick in the pants is that there is no carrier out there that can change those dynamics other than Southwest. Startups are doomed to failure. America West is the only post-deregulation carrier that has survived for any appreciable amount of time, and they look to be on the ropes as it is. Air21 was undercapitalized, and that is why they had to take the incentive money from Grand Junction, even though it was a poor route.

I’m sorry to tell you AerLingus that there is little hope for FAT outside of Southwest, and I don’t see them opening a new city out west for quite some time. But if they ever do go to FAT, they will triple there pax numbers in two years

Interesting thoughts by all, but I must take issue with Deltaflyertoo's comment that the population base is to small for anything but RJ's. Fresno is actually the 37th largest city in America. It is larger than Atlanta, Sacramento, Oakland, Tulsa, Omaha, Minneapolis, Honolulu, Miami, St. Louis, and Pittsburgh and they all seem to support large aircraft quite nicely. But I have to agree with Charlieduke that as long as the fares are high here, we will never see a significant increase in passenger numbers. The really amazing thing is that since 9/11, the fares that I've been paying from FAT haven't gone down much at all. I guess the airlines figure they have to make money somewhere, it might as well be Fresno.

To finish my previous post (I had to go do some work for awhile. You know the old saying: I pretend to work, and they pretend to pay me)-I disagree with Charlieduke that a startup can't make it. FAT is the perfect market for a startup. That's why we've had a bunch of them. The problem is that most startups are run by amateurs, not seasoned airline professionals with a solid management team. And they also tend to be cash-strapped from day one. Now JetBlue, there's a different story for you. They are a startup that will make it. If you had that type of management and that kind of cash, a startup could make it in Fresno. To answer the original question, a FAT based startup, created in the JetBlue model, could make it. It would need to be a low-cost, low-fare airline that utilized FAT as a hub rather than a strictly point to point operation a la Southwest. It would connect medium sized markets throughout the far west that depend primarily on RJ's and turboprops with the large markets. The equipment would be 717's. Your initial routes would be the large ones: LAX, SAN, SFO. The Fresno local market is large enough to support these routes. Once you've established your identity and loyalty, you would open LAS, RNO, and SMF. These are markets that can only be operated by a startup after they have overcome the frequent flyer loyalties and driving habits of the local market. Now that you have established stations and a strong local market, you will start connecting medium sized markets to the larger markets with mainline jet service. SBA, RDD, PSP, EUG, MRY, BFL (That's for you Charlieduke), SBP, etc.

My final point to Charlieduke-- Southwest IS coming to FAT. It is not a question of if, only when.

"It is larger than Atlanta, Sacramento, Oakland, Tulsa, Omaha, Minneapolis, Honolulu, Miami, St. Louis, and Pittsburgh"


Most of the cities you mention are very low O & D airports, while connections make most of the traffic. OMA for instance would be a good camerison however.



Eric

Fatboy-

The problem I see with your startup's second-stage strategy is how it would make money on routes like LAX-FAT-SMF when a potential customer could simply take Southwest and go non-stop. I think it would be difficult to get costs down to a point where you could make money on the connecting traffic. I do agree that routes from FAT to LAX, SAN, SFO, PDX, SEA, PHX, LAS, DEN, etc. are potential moneymakers. According to the 2000 Census, the metro population of Fresno is 922,500 - 20% smaller than MEM which is itself a very small hub. I suspect it would be quite difficult to generate any traffic to small markets like SBA, PSP, MRY, etc. - and you'd be competing with AA, UA, HP, and DL on a good number of connecting routes.

I can see Southwest at FAT in several years; however, it won't happen until after WN has taken advantage of its bigger opportunities on the East Coast and after East Coast markets realign as a result of US Airways imploding. It's also going to have to wait on gate availability for WN at LAX and OAK.

Fatboy-

Let me explain myself a bit. I’m not insinuating that Fresno is not a good market and that a startup can’t make it in Fresno. I’m saying that startups can’t make it anywhere. And for the convenience of my argument, I’m going to leave JetBlue out of it. They may make it, but that is only because the management and capital was attracted to a New York startup. If the JetBlue business plan had been anywhere else I doubt that they would have attracted either the capital or management necessary to pull it off. So leaving them aside, you are looking at the Allegiants of the world. Your FAT based startup is not going to get $130 million and a Neeleman type CEO. Scottb hit the nail on the head—why would anyone fly your airline when they already have established loyalties? Those FF plans are death to startups. If UA ever decides to offer double miles on the FAT-LAS route, Allegiant is dead. And don’t think they won’t. If Allegiant starts to cut into their expected revenues for that market they’ll take out Allegiant in a heart beat.

Yes, while FFPs are killer for startups, consider the possibility of a startup starting small on one or two heavily trafficed routes and starting their own FFP with higher value placed on mileage. This will not only draw new passengers with the promise of low fares, but it will draw repeat passengers who want the mileage awards. On a short flight to LAS, double mileage doesn't matter when the mileage needed for even a small reward, like a free ticket or upgrade is astronomical.

UA can't completely overhaul a FFP in order to take out an airline that only operates on two or three routes, so they have to resort to lowering fares, and when there are already passengers that are loyal to the new carrier (more rewards, faster=repeat patronage). In my opinion, cutting into expected revenues, if you can hack it, is worth the future returns. It would require alot of agression and marketing to prove that as soon as the airline is taken out, the big guy will either raise fares substantially or pull out all together , having made a few quick bucks on the back of near-sighted passengers.

First, to CD: United is unlikely to go after Allegiant since UA does not serve FAT, SkyWest operating as UAX does. You may think that is a small point, since Skywest flies for UA on a "fee per departure" basis, meaning that all the revenues from those routes go directly to UA. But FAT-LAS is different. It is one of just two or three routes that SkyWest flies in UA livery that is in fact "at risk" which means that SkyWest gets the profit, not UA. The reason that it makes a big difference is that while UA might give away miles in their FFP to protect their own profits they are not going to do so to protect SkyWest profits, especially in these difficult times. As a general rule, airlines do not undertake any sort of predatory action to protect their feeders, or regional partners. That is just one more reason that FAT is the perfect startup market. It is served almost exclusively by regional partners and not the majors themselves.

To Scottb, I didn't really explain myself very well now that I re-read my post. I was not saying that this startup would capture any of the LAX-SMF traffic. What I mean to say is that once you have created a local market here in Fresno you will be able to attract FAT-SMF traffic that would be sufficient to sustain the route. Two or three years ago we had SMF service on Trans States, before they pulled out of the west altogether. Three flights a day on 19 seaters, always very full and always very expensive. If you offer one flight a day on a 109 seater you will achieve a good "equipment stimulation." Throw in a strong "fare stimulation" and you've got a good route. No, they won't be full at first, but when you start connecting the smaller markets they will fill up quickly. As for the problem of competing with the majors in the small markets, they tend to be even more overpriced and underserved than FAT. Offering equipment and fare stimulation is a recipe for success. If you're in Monterey and want to go to Palm Springs you are on a Brasilia the whole way, and you're going to pay as much as $600 for the privilege. Now if you had the option of flying that route on a 717 for let's say $400, you'd forget your FFP loyalty in second.

Delta Express flys where from SLC??

Allegiant is doing quite a few 'scheduled' charters for Harrahs Hotel & Casino in Laughlin from all over the place. There's even weekly service from SAN, LGB, MRY & SMF on the Jan schedule....but not FAT.

http://www.harrahs.com/our_casinos/lau/plan_your_trip/index.html#charter

It seems odd that every city thinks they could have an airline based there. It just isnt feasiable to do so , and FAT is obviously not a market for a based carrier if the current airline has 1 route, 1 aeroplane and still losing money. Not a good sign!

If every city got there way and had an airline there would ne so many bankrupcies it wouldnt be funny. RDU is one example of how it goes wrong when Midway died, and its new reincarnation isnt going to do much better IMO. American saw what RDU held, and left....

What is FAT's market anyway? And its location please?

ciao

Here's a map of Fresno, CA

Fresno always seems to incite more discussion both pro and con than most cities its size.

The map helped place FAT for those who didn't know but as far as market, there is a potential market of over 1,630,552 people broken down as follows:

The Census Bureau places the Fresno MSA at 922,516. Additionally beginning roughly 25 miles to the south is the Visalia/Tulare/Porterville MSA with 368,021. The only air service in that MSA is UAX with VIS-LAX twice daily, meaning passengers drive to FAT or BFL (70 miles south of VIS) or further. Also to the south the same distance is Kings County, home to 129,461 people with no air service. To the north 60 miles is the Merced MSA with 210,554 as well as several rural mountain counties. The only air service in the Merced MSA is on Scenic to LAS. Thus pax drive to FAT or MOD or further.


Larger airports within a 4 hour drive of FAT include SMF, SFO, OAK, SJC, LAX, and BUR.

Charlieduke is probably right about the size of the FAT driveaway. In 2000 FAT handled roughly the same number of passengers as in 1980 even though area population doubled in those 20 years.

I believe that FAT and other similiar markets will begin to recover some of their driveaway in 2002. The additional 2 hours to clear security versus the days prior to 9/11 will cause some to question the benefit of driving 3 hours to a larger airport. That is beginning to appear to be the case as FAT is only 5-10% below normal pax numbers while many airports remain 20% below normal. Probably one reason that AA will add an additional FAT-DFW in April.

Allegiant lost money in LGB and TVL not at FAT. They appear to be reorganizing themselves quite well with FAT-LAS combined with charter income. In fact they just added MD87s to replace their DC-9-51s.

Allegiant's service to Laughlin is determined by Harrah's not by Allegiant itself. The reasons will have as much to do with where Fresno travellers prefer to gamble as anything. Apparently not enough choose Laughlin over LAS or even local reservation casinos.

As far as WN, I think they have some surprises up their sleeves for 2002 to 2004. We'll see you all on a Southwest flight out of Fresno sooner than you think. 

Three daily flights on 19-seaters gives you a total of 57 daily seats in each direction. But you propose to use a 107-seat jet instead - nearly double the number of seats. I'll agree with you that a larger aircraft will draw more passengers from a comfort standpoint, and lowering fares also helps draw traffic. But the problem is, you'd still only be offering one daily flight. That makes it difficult to offer the business traveler the frequency he/she desires. If you're taking a day trip to Sacramento, do you really want to wait until the next day to fly back, or do you just suck it up and drive the 3+ hours each way? In order to make a business-oriented route work, you'll need at least a morning and evening flight in both directions.

When you operate a connecting hub, you have to make sure that your markets can actually connect to each other. If you're trying to serve smaller markets with one daily flight, it's generally likely that most won't be able to connect to each other in both directions. By way of example: you send your 717 from FAT to MRY at 0630. Block an hour for the flight and 30 minutes for the turnaround, sending the 717 back to FAT at 0800. Have the aircraft continue to PSP at 0930, again with an hour block time and 30 minutes to turn it. Your flight leaves PSP at 1100 and arrives FAT at 1200. Now, if you're offering one daily flight to each, how do you get passengers from PSP back to MRY without making them spend 18 hours in Fresno?

The small markets will kill you. They work for carriers hubbed in SFO and LAX simply because they offer a much broader array of destinations from those hubs.

I think because of its geographic location, FAT will primarily stay an airport served mostly by regional jets. In fact, I wouldn't be surprised that within a few years SkyWest will choose FAT as a major hub flying a mix of EMB-120's and CRJ200's out of that airport.

I actually doubt SkyWest will try to develop a hub in Fresno unless there's an airline partner like DL or UA behind the effort. SkyWest is trying to move their flying toward the fee-for-departure model and away from the revenue-sharing model. I can only see a regional like SkyWest going after Fresno if they're unable to achieve acceptable growth rates through their partnerships with UA and DL.

I think WestAir tried to use both FAT and SMF as alternate connecting cities for UA but they didn't work out.

One factor not mentioned is FAT has served as maintenance for WestAir, TransStates, Mesa, and now SkyWest. Relocating that type of operation and its employees would not be easy. The ability to operate large numbers of revenue flights in and out for Maint must also be a factor for FAT to see mainly regional not mainline services.

Of course if proximity to major hubs is a factor in FAT not seeing more service, then the same must be said for COS, DAY, and other cities to the east of the same approximate size.

Omaha and Fresno are NOT good comparisons...Sure, they have similar population in the city proper, but Omaha's metro area is MUCH larger than Fresno's, plus it is a much more important city. Same goes for Minneapolis, which only has 360,000 in the city, but almost 3 million in the metro, not the same........

According to the Census Bureau, the 2000 population numbers for the Omaha Metropolitan Statistical Area were 716,998. The Fresno Metropoliatan Statistical Area was larger with 922,516.

Source: Table 3 on this page at the Census web site.
http://www.census.gov/population/www/cen2000/phc-t3.html

It's demographics friends..just lok at our area..un-employment rate is always in the mid-teens..transient nature of a good part of the population...we do not have the industrial/executive base that like sized cites have to drive more/better service.All things considered, ours is not bad when you look at how many carriers map we are on..you can get darn near anywhere with one-on line( 2 max) connections. And, AA is adding a second MD-80 flight to DFW on April 7.(I thought they might make it to STL to increase connection possiblilites there)..they must see some potential. Airline service is not as bad as many think it is, a bit expensive at times, but no worse than cities such as EVV, FWA, GRR, OMA, MLI and others.

As a 50,000 mile a year traveller, I am fairly satisfied with the service from FAT..My current wish would be for more RJ's to LAX/SFO that can go when our fog cancels/delays the Saabs and Brasilias.

Have a great New Years..

Fatboy-
Tan Flyr hit the nail on the head. It's all about demographics and with the fact that Fresno has a high transient population, the market for air travel is significantly reduced. Although Fresno may be the 37th largest US city, you can't use that to determine potential airport traffic. For example: within a 30-mile radius of FAT there are 880,000 residents.....within a 30-mile radius of MSP there are 2,650,000 residents. Also, the per-capita income of those residents near MSP is more that 45 percent higher than that around Fresno which would create an even greater mrket for air travel. Numbers for Atlanta are even greater.... 3,600,000 people with a per-capita income similar to MSP.

Just to let everyone know...

as of January 1st, SkyWest operates completely on a "fee-per-departure" basis on all SkyWest/United Express and SkyWest/Delta Connection flights. It has been this way with United for several months, it was only Delta that we still did some revenue sharing with.

Kai
your friendly SkyWest CSA  

Yeah the only problem why we pulled out of the markets was because we had people in marketing not doing a good job. They would not spend much money to advertise, especially down here in Long Beach. They are not hemmoraging for cash, they have a shitload of charters blocked for 2002 and they are getting two MD-87s this month. They only DC-9 they still have is N127NK(DC-9-21). They are also looking for 1 MD-82 and 2 MD-83s.

Stephen
-Former Allegiant Air LGB employee

Of course back in the good old days, FAT had lots of jet service. Lots of PSA, Air California, UAL 727's & 737's. Once in the late 70's I even flew a UAL DC8 from FAT to SFO. I think it was an ORD-FAT-SFO flight.

Yes, the Fresno area has a significant Asian population... in particular, it has become a haven for Laotians (!!!)

Anyhow, I could definitely see an ORD-FAT service in the future, that is if UA ever orders the A318 (ha!), or bites the bullet and sends in an A319. Heck, AA has been successful with 2 MD-80s...

Increased service to SFO and LAX is almost assured.

LATE

SFO

Back in the good old days, UAL had a bunch of 1 stop SFO-ORD flights that all left first thing in the morning. There was SFO-MRY-ORD, SFO-SMF-ORD, SFO-FAT-ORD and SFO-RNO-ORD that all left SFO basically at the same time (0600-0700) and all arrived at ORD at the same time. There was also an SFO-ORD non-stop that left SFO around 0800 that got into ORD at the same time.

flygga,

Don't forget some of those other "good old days" jet flights at FAT. The old AirWest FAT-SCK-SMF was just one interesting one.

In 1988, I remember seeing a Continental 727-200 on approach to FAT. I think it was a part of a SCK-FAT-DEN routing

Of course my favorite was the UAL 737 "milk run" from SFO down to LAX stopping at all the valley cities. I think it went something like SFO-SCK-FAT-Visalia-BFL-LAX.