Hard to believe, but fewer people are flying to Las Vegas these days. Perhaps the slot machines and gaming tables are losing their appeal. No, say the casinos, people still want to come to the Nevada resort, they just cannot find the flights or the fares they want.
The major airlines, it appears, are redeploying their aircraft from the leisure-dominated routes to the gambling mecca to higher-yield services elsewhere in the USA. Las Vegas' McCarran International Airport, accustomed to operating through the night, saw traffic drop slightly last year - and more so this year - as airlines have cut back on services to free up scarce resources.
This is alarming for the casinos, which have committed to adding 21,000 new hotel rooms in Las Vegas by the year 2000, only to see available airline capacity decline rather than increase by the 11,000 additional daily seats needed to fill all those extra rooms - not to mention feeding all those slot machines and rolling all those dice.
Two of those casinos have reacted by pumping a total of $30 million into new low-fares carrier National Airlines. Together with other investors, they have given National almost twice the start-up capital of any previous new low-fares airline.
Gambling on a start-up carrier in the current US air transport climate may seem an appropriate activity for Las Vegas, but investing in National may not be such a spin of the roulette wheel as at first appears. Firstly, there is all that capital - more than $50 million of it so far. Then there is that market - 80% leisure traffic and with no other carrier having more than a 20% share. It looks like a recipe for success - but does it hold out any hope for a resurgence of the beleaguered (Southwest Airlines excepted) US low-fares airline industry? Or is it simply a jackpot only one lucky carrier can claim?
Las Vegas may be a unique market, but the behaviour of the major airlines is not - and it is this behaviour that is ringing alarm bells in Washington DC, where Congress is backing efforts to improve the ability of the low-fares carriers to compete with the hub-entrenched majors. And, while Las Vegas might have some trouble winning sympathy on Capitol Hill, all those mid-sized Middle America cities facing a reduction in flights (or downgrading to regional airline service) as the majors chase more lucrative routes do wield considerable clout in Congress.
The problem is that the low-fares carriers are against the ropes, admittedly put there by the passengers who deserted them after the ValuJet crash, but held there by the marketing muscle of the majors. There are few, if any start-ups ready to come to the aid of Middle America, and no cash-rich casinos ready to put up the capital needed to stage a Las Vegas-style rescue.
But there are plenty of companies struggling daily with sky-high business air fares, and even some which are forcing employees to make long drives to the nearest major hubs in an effort to secure more reasonable ticket prices.
It is to the US Department of Transportation (DoT), however, that passengers and politicians alike have turned in the hope of securing a better deal for low-fares start-ups. The DoT has responded by drawing up a document describing what it believes would constitute predatory behaviour by a major airline - behaviour such as adding seats and cutting fares to the extent that the low-fares start-up is forced out of the market.
Predictably, the majors are vehemently opposed to the document, branding it as reregulation - 20 years after deregulation freed the US airline industry to become the economic powerhouse that it is today. The majors argue that existing anti-trust legislation is sufficient to protect the start-ups from unfair competition. Patently, the DoT and its Congressional backers do not believe this to be true.
In support of their case, the majors have wheeled out analyses showing that start-ups have failed - 129 in all since deregulation - overwhelmingly because they had bad business plans. Here they may be on firmer ground. If National succeeds, it will be because the gamble that people do still want to fly to Las Vegas has paid off, and not because the DoT has protected it from predation.
Source: Flight International
