Airline expert to travelers: Get used to changes in air travel

When it comes to subsidizing airlines, Wichita has been “kind of a maverick,” an airline industry expert said.

At the time it offered AirTran Airways, now part of Southwest Airlines, a revenue guarantee to help woo it to town, not many cities were using the incentives. AirTran began service in 2002.

“We’re going to see it more and more,” William Swelbar, a research engineer at Massachusetts Institute of Technology’s International Center for Air Transportation, said. “The idea of incentives to attract air service is a really hot topic in communities of all sizes.”

As airlines have consolidated, they also have eliminated flights. As service to cities declined, prices and fees rose, which in turn discouraged consumers from flying.

That leaves cities and their airports scrambling to find a way to reverse the trends.

“In a constrained capacity environment you want to retain what you have,” Swelbar said of airports around the country. “The differentiator is whether you’re willing to provide some cost mitigation to the airline. ... Quite honestly, a whole slew of cities are looking inward today and saying, ‘Do I subsidize or do I not.’”

Airline revenue guarantees are not a black-and-white area. Some will think it’s a good idea; others won’t.

But “I think it’s been right for Wichita,” Swelbar said.

Air service drives economic development, he said, and Wichita, which provided $6.5 million to Southwest in local and state funds for its first year of service in Wichita, understands that.

Swelbar will be a keynote speaker Thursday at the 35th annual Wichita Area Economic Outlook Conference. The conference will be held from 7:30 a.m. to 11:30 a.m. at Century II Convention Hall.

At MIT, Swelbar is affiliated with the Global Airline Industry Program and Airline Industry Consortium. He also serves on the board of directors of Hawaiian Holdings, parent of Hawaiian Airlines.

Before MIT, he was president, founder and managing partner at Eclat Consulting and has worked as a consultant to airlines, airports, investors, manufacturers and labor groups.

Swelbar first became interested in the airline industry at age 19 when he joined Republic Airlines as a flight attendant to help with college expenses.

At Republic, he was elected president of the local union and worked on one of the first employee stock ownership plans in the industry, where employees gave concessions to help the carrier.

“I was a 22-year-old kid trying to borrow $400 million to do a leveraged buyout with the other unions at Republic,” Swelbar said.

One of the biggest changes in the industry is the financial health of the airlines, Swelbar said.

After years of losses and bankruptcies, the airlines are now profitable, he said.

They’ve consolidated, cut capacity, raised fares and added charges for checked bags, preferred seating and other services, Swelbar said.

Travelers should get used to the changes as the “new normal,” he said.

“Anybody who has a long memory and believes we’re going back to the old ways, I think is clearly mistaken,” Swelbar said. “You can do the Kabuki dance, you can do whatever it is you want. They’re probably not coming back.”

High oil prices were the catalyst for the changes.

And consolidation has made the industry much less subject to competitive pressures.

“The fact that 87 percent of domestic capacity (the number of seats available) sits in the hands of four carriers today is just astounding,” Swelbar said.

Wichita’s goal should be to retain the service it has, he said.

“If I’m able to enhance that some over the next few years, then I’m doing better than many markets out there,” Swelbar said.

This story was originally published October 3, 2014 at 3:28 PM with the headline "Airline expert to travelers: Get used to changes in air travel."