ANALYSIS: US shale boom driving new air service

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Need to get to a natural gas well in the Marcellus shale formation near Elmira? One has to connect over Detroit or Philadelphia today but wait until February 2014 and United Airlines will offer a new nonstop from Chicago O'Hare.

"Elmira is near the Marcellus and Utica shale developments in northern Pennsylvania, and O'Hare is a great point to connect this traffic to where our corporate customers want to fly in Texas, Oklahoma and Colorado," says Chicago-based United in an employee newsletter on 9 September.

The carrier's new service is far from alone.

Allegiant Air, Delta Air Lines, Frontier Airlines and United have all launched multiple new flights to destinations in the USA's emerging shale oil and gas regions during the past few years.

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EIA

The Bakken formation in North Dakota and the Marcellus in Pennsylvania and West Virginia are leading the country in new production, while existing oil and gas deposits in Arkansas, Louisiana, Oklahoma and Texas have also experienced significant production growth.

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EIA

BAKKEN STORY

North Dakota has seen the most growth recently. Delta and United began service from their respective Minneapolis-St. Paul and Denver hubs to Dickinson and Williston - the two commercial airports closest to the Bakken - during the past year.

"The Dickinson market has demonstrated considerable recent growth due to oil and gas production, and our flights to the Minneapolis-St. Paul International airport will offer passengers convenient one-stop connectivity from one of Delta's largest hubs," said Joe Esposito, managing director of domestic network planning at Delta, earlier this year.

Traffic grew more than 165% to 23,729 annual enplanements at Dickinson Theodore Roosevelt Regional airport and nearly 260% to 40,658 annual enplanements at Williston's Sloulin Field International airport from 2009 to 2012, according to US Federal Aviation Administration (FAA) data.

Growth is not limited to just those airports closest to the Bakken. Minot and Bismarck have also seen new air service, especially on low-cost carriers Allegiant and Frontier.

Allegiant will add service between Bismarck and Orlando Sanford in November, complementing its existing service to Las Vegas and Phoenix Mesa. It launched service to Minot from Las Vegas in 2010 and Phoenix Mesa in 2011.

Frontier began flights from its Denver hub to Minot in November 2012 and Bismarck in May 2012.

United also launched service to Minot from Denver in June 2010.

Traffic increased 29.8% to 239,014 annual enplanements at Bismarck and 231.2% to 222,159 annual enplanements at Minot from 2009 to 2012, FAA data shows.

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FAA

North Dakota's economy grew 13.4% - the fastest of any state in the USA - with 3.26% attributable to mining, oil and gas in 2012, according to the US Bureau of Economic Analysis. Real GDP per capita growth also led the nation with an 11% increase to $55,250 during the year.

The US Energy Information Administration (EIA) attributes much of the economic growth in the state to increases in oil and gas production in a July report. It cites a five-fold increase in fossil fuel production from 2007 to 2012.

North Dakota's population increased more than 2% to 699,628 during the year ending 1 July 2012, according to the US Census.

MARCELLUS REBOUND

Airline growth to airports in and around the Marcellus play may be on the rebound. Annual enplanements increased 26.8% at Elmira Corning Regional airport between 2009 and 2012 but fell nearly 5% in 2012 after peaking at 152,582 in 2011, according to FAA data.

"We had a remarkable amount of service increase that started in the year 2008 that was attributed to the Marcellus shale, but that's tapered off a bit," says Ann Crook, aviation director at the airport. She attributes this taper partially to low natural gas prices and a moratorium on new wells in New York state.

Capacity fell by a little more than 5% at Elmira in 2012 compared to a year earlier, Flightglobal/Innovata data shows. However, it remains up more than 31% versus in 2009.

Asked why United would want to launch a new flight to Elmira if the boom is past its peak, Crook says: "There is no question in my mind that [shale oil and gas] is becoming an important source of energy for the country. To try and be the [air] service provider that links that industry is pretty smart."

She adds that the Star Alliance member may also want to tap the market before a potential merger between American Airlines and US Airways occurs. American operates a large hub in Chicago while US Airways has served Elmira for decades.

Tempe, Arizona-based US Airways is also expected to leave Star for the Oneworld alliance by the end of the year.

Allegiant also plans to launch service to Elmira. It will begin nonstops to St. Petersburg-Clearwater from 1 November.

Capacity at five airports near wells in northern Pennsylvania - Binghamton (New York), Elmira, State College, Wilkes-Barre/Scranton and Williamsport - was up nearly 9% to 430.9 million available seat kilometres (ASK) from 2009 to 2012, Flightglobal/Innovata data shows.

Elmira led the growth but Wilkes-Barre/Scranton, the largest of the five airports, also posted a 10% increase in ASKs to 176.6 million during the period.

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Flightglobal/Innovata

As oil and gas production continues to expand in the USA, Allegiant, Delta, Frontier and United as well as other carriers will likely continue to capitalise on these flows more - scheduling flights to cities where the money is.