Waiting for takeoff
Fewer than expected using flights to Phoenix, meaning backers must pay airline under deal guaranteeing profits
The touted nonstop airline service between the Santa Fe Airport and Phoenix is off to a lackluster start, meaning backers will have to pay a large chunk of money to American Airlines to guarantee the company a profit on the flight.
The once-a-day American Airlines flight between Santa Fe and Sky Harbor International Airport saw average loads of 58 percent in its first three months ending March 15. That was below the estimated 80 percent needed for American to generate a profit margin that is guaranteed by the Northern New Mexico Air Alliance, an affiliate of the Santa Fe Chamber of Commerce.
The Alliance has received financial backing from 45 members, including businesses and local governments, including Santa Fe city and county governments. It has so far raised $350,000 and secured state and federal grant money of $700,000 to subsidize the flight and pay for promotion and marketing.
It is likely to need every penny of that to ensure the flight’s survival. The Alliance is expecting a bill for about $300,000 in the coming weeks to cover the revenue promised to American for the first quarter of service, said Randy Randall, director of Tourism Santa Fe, the city’s tourism arm.
Randall said passenger counts for the initial months were lower than expected, in part because it is a slow season for Santa Fe and a time when Phoenix-area residents don’t leave the warm weather.
American announced the new flight in September and service started Dec. 15, 2016.
“The timing was unfortunate,” Randall said. “It’s hard to build the flight
in the wintertime out of Phoenix. That’s not when people want to leave Phoenix.”
Santa Fe Airport Manager Cameron Humphres said he wasn’t surprised that the alliance will have to initially subsidize the airline.
“I didn’t have an expectation that in the first quarter we’d be filling the airline,” he said.
The Santa Fe Airport also has nonstop service to Dallas on American and to Denver on United Airlines. Since American canceled a direct flight from Santa Fe to Los Angeles in 2015, the city had tried to recruit an airline to provide West Coast service, especially as the movie business in Santa Fe grows.
Many consider Phoenix a solid hub destination because of its regular connections to most airports in California, as well as to Seattle, Portland and the Pacific Rim.
Since the Phoenix flight started, 16 percent more passengers have departed from Santa Fe than arrived. That ratio was even more lopsided in January, with 24 percent fewer inbound travelers, said airport manager Humphres.
“We believe the disparity is related to the early departure times in Phoenix,” Humphres said. “It makes it difficult for those that are departing from the West Coast and connecting through Phoenix on their way to Santa Fe.”
Currently, the 70-seat aircraft departs Phoenix at 9:49 a.m. It arrives in Santa Fe, then departs at 11:49 for a return to Sky Harbor
But with traffic in California and a time change, that was too early for many West Coast fliers trying to get to Phoenix for the connection.
Humphres said that issue was raised with American in January, just a month into the flight, and the company has agreed to push back the Phoenix departure time to Santa Fe.
Starting June 2, the American flight will leave Phoenix at 12:15 p.m. with arrival in Santa Fe at 2:38. The return leg from Santa Fe would depart at 3:05, according to the American website.
American is promised a certain profit for each flight, but Humphres said the amount is confidential.
That dollar amount is calculated by the number of tickets sold, the cost of each seat and the price of fuel.
“Anything below that number will be supported” by the Air Alliance, he said. The total money paid by the Alliance to American is capped at $600,000, Randall said.
The Santa Fe Airport was one of nine in the nation to receive a grant under the U.S. Department of Transportation’s Small Community Air Service Development Program, started to help communities address the financial challenges of maintaining air service.
The $500,000 federal award can be used for direct payments to an airline. With a shortage of pilots, commercial carriers are hesitant to invest in unproven routes without a financial safety net.
Stuart Kirk, the part-time director of the Northern New Mexico Air Alliance, said governments that have contributed money include the Village of Taos Ski Valley, Los Alamos County, Las Vegas, N.M., and Santa Fe County.
But the city of Santa Fe is paying the largest share, and city councilors will consider a recommendation Wednesday to increase its commitment of lodgers tax revenue from $65,000 a year to $165,000. The tax is paid by those who stay overnight in a hotel or vacation rental and is dedicated to tourism services and marketing.
The tax brings in $10 million a year to the city. The state Legislature in 2016 allowed the tax proceeds to be used to support airline service, and the city recently expanded collection of the tax to all short-term rental properties, even those in private homes.
Randall said the federal grant is largely being used to pay the flight guarantees, while the local money is spent on marketing, promotion and, if needed, then for direct payments to American.
Part of the promotion effort is to get the word out about airline service in Santa Fe though a new website, flysantafe.com, which has links to all the airlines and routes to and from the city.
Paul Margetson, general manager of Hotel Santa Fe and an Air Alliance member, said promotions coming this summer will encourage people to use the airport. They will include events in hangars and perhaps a symphony concert at the airport. Many residents don’t even know Santa Fe has an airport, he said.
The Air Alliance has also met with the travel office at Los Alamos National Laboratory to encourage broader use of the Santa Fe Airport, which now qualifies for the government travel rate, Margetson said. That is an important factor for many public employees because tickets have to be fully refundable.
The Dallas and Denver flights into and out of Santa Fe are seeing passenger loads of 80 percent, and the Phoenix flight is already carrying more passengers in April, Humphres said.
“We need to use this and build that route if we value it,” he said. “At the end of the day, American Airlines is a profit business and will put that route where they can earn a profit.”