Studer Community Institute

Cost of flying out of Pensacola increasing faster than state average

March 2, 2015
/ Rick Harper
/ economy

We worked for years to bring Southwest Airlines to Pensacola. While travel volume has increased in recent years, Southwest’s eventual arrival hasn’t been enough to keep airfares low. The federal Bureau of Transportation Statistics provides quarterly data that allow analysis of air travel patterns and prices through time. The BTS data show that air travel is increasing over time. From the second quarter of 2004 to the second quarter of 2014, enplanements at U.S. commercial airports increased by about 18 percent. Over that same 10-year period, Pensacola enplanements grew by just over 14 percent. This is large relative to the size of the traveling public, as U.S. population grew by about 10 percent and Pensacola population grew 7.5 percent over those same years. Air travel has increased relative to population, both locally and nationally. If we look at the cost to the passenger, prices per mile flown have risen both nationally and locally over time, but the increase has been greater in our local market. Nationally, the average airfare paid per mile traveled rose over those 10 years from 20.5 cents per mile to 26 cents per mile, or by 27 percent. Locally, airfares went from just under 21 cents per mile in 2004 to just over 30 cents per mile in 2014. This is an increase in price per mile of 47 percent for travel out of Pensacola. During the same period the overall consumer price index rose by 26 percent. Southwest wasn’t serving our market back in 2004, but we do have information about their pricing changes nationally. In Q2 2004, the average airfare per mile for Southwest nationally was 19.1 cents, while it was 19.4 cents for Delta. In Q2 2014, Southwest’s average airfare per mile had risen to 24.7 cents nationally, while it was 25.3 cents for Delta. These were the top two domestic carriers in 2014, accounting for almost 37 percent of domestic itineraries. Florida has always been a competitively priced market due at least partly to high volume and to a large number of price-sensitive tourists. The average fare per mile for all Florida airports in Q2 2004 was 15.7 cents. At that time, Southwest charged 18 cents per mile for passengers originating in Florida, while Delta charged 16.1 cents per mile. Itineraries originating in Pensacola in Q2 2004 had average fares per mile of 20.6 cents, or 31.4 percent higher than the state average. By 2014, the average airfare per mile across all Florida originations had risen to 20.3 cents. For Pensacola, it had risen to 30.3 cents, or 50 percent above the state average. Southwest charged 23.8 cents per mile for Pensacola originations, while Delta’s price had risen to 33.7 cents per mile. A return to profitability for those airlines left standing after the post-9/11 and post-recession mergers and bankruptcies had to happen. After Southwest bought AirTran, their service to Atlanta was discontinued, leaving Delta as the only carrier connecting Pensacola with the world’s busiest airport. Lack of competition on that route has undoubtedly contributed to higher fares per mile. Delta accounted for 47 percent, and Southwest 15 percent, of Q2 2014 Pensacola originations. Communities without sufficient volume to support multiple carriers on any particular route were bound to see price increases as airlines consolidated. There was no way Pensacola could have avoided these market forces. We’re not yet a large enough market to sustain the intense competition it would take to drive down fares. We can expect to see lower world oil prices pass through to customers as a fall in travel costs, including airfares. But in the new consolidated airline environment, decreased competition will mean that those fares won’t fall nearly as fast as fuel prices have. Dr. Rick Harper serves as director of the Studer Institute, a Pensacola, Florida-based organization that seeks citizen-powered solutions to challenges the community faces. He also directs the University of West Florida’s Office of Economic Development and Engagement in Pensacola.

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Cost of flying out of Pensacola increasing faster than state average

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