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Passenger Airline Service Demand Study and Investment Attraction Strategy

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Passenger Airline Service Demand Study and Investment Attraction Strategy Passenger Airline Service Demand Study and Investment Attraction Strategy Final Report February 13, 2007 Prepared by: Bruce Schollie, MBA, CMC President, Schollie Research & Consulting Elan Buan, B.Comm Research Analyst, Schollie Research & Consulting Elizabeth Scotton, BA Principal, Aviation Marketing 4603 50th Street Red Deer, AB T4N 1X1 Ph: (403) 346-9849 Fax: (403) 346-7263 E-mail: [email protected] Website: www.schollie.com Passenger Airline Service Demand Study and Investment Attraction Strategy A. Executive Summary A.1 Objectives and Background The Red Deer Regional Economic Development (RDRED) Marketing Partnership together with RARD commissioned this study to provide information and guidance to attract needed investment and funding to the Airport. A.2 Methods Methods for this study were chosen to yield the required data and information for investment attraction but also suggest guidelines for presentation to prospective business investors. The following methods were used for this study: A random telephone survey of 1,000 Central Alberta residents to assess the potential demand for passenger airline service. Survey topics included: o Flights taken and origins/ destinations in past year. o Use patterns for RARD. o Estimate of future demand for air service. o Trip purpose, season, duration, carrier used. o Ticket purchase behaviour (business and leisure). o Degree of interest in and perceived advantages/ disadvantages of air service from RARD. o Intention to use RARD passenger services. Two focus group meetings were convened with the travel agent community in the Red Deer trade area. One group consisted of agency owners and the second group was primarily agents. 16 agents attended the group and 6 agencies were represented. Discussion topics included perceptions of central Alberta travel demand, challenges, industry trends, issues and barriers for local air service providers. Intercept survey of RARD passengers. 31 Airline passengers (charter and scheduled) completed an intercept survey at RARD. Questions were similar to the telephone survey but focused on the passengers’ experience with RARD. A brief comparative analysis of RARD and other regional airports to identify potential business attraction targets/ opportunities for RARD’s industrial park. An airline attraction marketing framework that includes an outline and guidelines for creating a proposal for specific airlines. Schollie Research & Consulting Page 1 Passenger Airline Service Demand Study and Investment Attraction Strategy A.3 Study Results A.3.1 Market Overview Red Deer is at the heart of one of the strongest economic regions in North America according to a report released by TD Economics in 2003. An October 2005 update to this report confirmed that the region’s lead on other areas is gaining and states “the Corridor’s positive economic momentum is likely to continue over the next few years.” 1 By all traditional measures such as building permit growth, population growth, employment, and business investment Central Alberta’s economy continues to set records. Central Alberta is in the enviable position of having a vibrant tourism industry sector in addition to Alberta’s traditional economic pillars: oil & gas, agricultural processing, manufacturing, and primary agriculture production. Regional manufacturing is anchored by a world-scale petrochemical facility in nearby Joffre. Several international companies such as Nova Chemicals, BP Canada, and Dow Chemical operate there. Other positive market characteristics include: Private sector workforce exceeding 100,000 people . Strong public sector workforce that includes Red Deer College and three other colleges with a total enrolment exceeding 18,000 students. Red Deer is also home to the head office of David Thompson Health Region that employs over 4,200 people. Central Alberta is home to several large school boards with employment in excess of 4,000. The trade area for the Regional Airport Red Deer (RARD) is estimated to be over 200,000 people and approximately 80,000 households. The City of Red Deer accounts for nearly half of this count (83,000 people). In Census Division 8, which is all areas within a 30-minute drive of Red Deer, the population increases to approximately 170,000. A.3.2 Travel Profile The following table profiles Central Albertans’ flying behaviour: Market Characteristic Sample (n=1,000) Households reporting a flight1 in the past year. 613 or 61.3% of households Households not reporting a flight1 in the past year but 169 or 16.9% of households intending to take a flight in the next year. Number of airline tickets1 purchased by the sample in 2,902 t ickets or 4.73 per household that reported a the past year. flight. Estimate of total tickets1 sold in Central Alberta 232,160 80% Calgary; 16% Edmonton International; Departure airport 3% Red Deer 68% Personal 16% Business (as an employee) 8% Business (as the owner) Trip purpose 8% Combination business/ personal 60% Domestic 23% Transborder (U.S.) Destination overview 17% International Note 1: Refers to flights originating in Alberta. 1 TD Economics Corridor Report, April 2003: See www.TD.com/economics/special/alta03.pdf. Schollie Research & Consulting Page 2 Passenger Airline Service Demand Study and Investment Attraction Strategy The table below summarizes the key findings from the telephone survey. Market Characteristic Leisure Traveler Business Traveler 1.Vancouver/ Victoria/ Abbotsford 1. Northern Alberta 2. Toronto/ Hamilton 2. Vancouver/ Victoria/ Abbotsford Top domestic destinations 3. Kelowna/ Kamloops 3. Toronto/ Hamilton 1.Las Vegas 1.Houston/ Dallas 2. L.A./ San Francisco/ San Diego 2. Seattle Top U.S. destinations 3. Florida 3. Orlando 1. Cancun 1. U.K./ London 2. Europe 2. Europe Top International destinations 3. Hawaii 1. Online directly with the airline 1. Online directly with the airline Preferred ticket purchase method 2. Travel agent 2. Booked by employer Travel booked an average of 46 Travel booked an average of 25 Advance booking behaviour days in advance days in advance Similar patterns for both traveler types: More flights in summer, fall, Seasonality winter; fewer in spring Preferred airline WestJet preferred by both traveler types 1. Ticket price Factors important for choosing 2. Minimizing connecting flights airline 3. Schedule flexibility Awareness of services at RARD 32% are aware 40% are aware Intention to use RARD if flights of 95% or higher for both business and leisure travelers interest offered Desired destinations from RARD 1.Vancouver/ Victoria/ Abbotsford 1. Calgary 2. Calgary 2.Vancouver/ Victoria/ Abbotsford 3. Toronto/ Hamilton 3. Kelowna/ Kamloops 4. Kelowna/ Kamloops 4. Northern Alberta 5. Edmonton 5. Edmonton 6. Northern Alberta 6. Toronto/ Hamilton 7. Saskatoon 7. Houston/ Dallas 8. Las Vegas 8. Las Vegas 9. Winnipeg 9. Winnipeg 10. L.A./ San Francisco/ San Diego 10. Other U.S. destinations Willing to pay premium to fly from 71% willing to pay premium 74% willing to pay premium RARD? Amount of acceptable premium on a $300 flight that could be taken from $92 $105 Edmonton or Calgary Perceived advantages for RARD centered on the major themes of convenience and cost. Several advantages related to convenience (saving time, closer to home, don’t have to drive to/ from cities) were mentioned to a greater extent than cost related items such as fuel expense. Half of respondents suggested that there were no disadvantages to fly ing from RARD. The most common theme relates to limitations regarding connections, scheduling, and destinations. Cost factors were mentioned by a relatively small number (10%) of respondents. Schollie Research & Consulting Page 3 Passenger Airline Service Demand Study and Investment Attraction Strategy Survey respondents indicated a high level of agreement with statements regarding support for RARD. Agreement ranged from 7.59 to 7.96 on a scale of 1-10 where 10 was strongly agree. The statements are: Expansion of passenger flight services at the Red Deer Regional Airport is critical to support economic growth (mean agreement = 7.54) Red Deer needs scheduled passenger flight services (mean agreement = 7.79) I support efforts to expand the passenger flight services available at RARD (mean agreement = 7.89) Provincial politicians in the region should do more to help get funding to improve RARD (mean agreement = 7.79) The travel agent focus groups served to substantiate much of what was learned in the phone survey. They indicated the same key markets as common destinations for their clients and as targets for air service in the future. However, the travel agents were also able to provide insight into the airlines and how the market has changed in recent years. Their comments included concern over the lack of direct airline contact, customer service challenges and changes in the booking practices of the public. These insights are useful in designing air service proposals and marketing programs to attract new air services. A.3.3 Recommendations Recommendation Area 1: Determine a long- term strategic air service development plan Based on the studies conducted, the following list of destinations and target airlines are the strongest opportunities for the Red Deer region. Figure A1: Target Airlines and Destinations Estimated Airline Breakeven Destination Market Aircraft Frequency at 90% Vancouver1 33,958 EMB 175 4-5/wk 34,164 CRJ/Dash 5/wk 23,400 SAAB 340 5/wk 14,040 Beech 1900 daily 11,794 Kelowna/ Victoria 17,600 Beech 1900 2-4/wk 6,739 Jetstream 2-4/wk 7,114 SAAB 340 2-4/wk 11,232 Toronto2 28,128 EMB 175 2-3/wk 20,498 Seattle/Salt Lake City 23,395 Q200/CRJ -100 2-3/wk 11,232 Las Vegas3 7,891 737-600 1/wk = 21 weeks 4,498 Note 1: After examining total market potential, the recommendations for Vancouver are based on the combined results for Vancouver, Abbotsford and all other B.C. locations with the exception of Kelowna and Victoria. It is believed there is potential for service to both markets. However, passengers traveling to Vancouver are not likely to travel backwards, geographically, to reach Kelowna, which is why these numbers have been broken-out.
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