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Overseas route push to benefit Las Vegas
 
By Richard Velotta / Staff Writer

A Virgin America Airbus 320 touches down at McCarran International Airport during an inaugural Virgin America flight to Las Vegas on Oct. 10. Virgin America flights are expected to eventually link with Virgin Atlantic flights to East Cost cities.
Photo by Steve Marcus

SARASOTA, Fla. — For years, tourism boosters in Las Vegas have made pitches to airlines to bring more nonstop flights to McCarran International Airport from overseas.

Now the development of international routes by U.S. carriers is a key strategy for survival in a new era of airline economics, according to a prominent aviation consultant.

The aviation trend is among five key metrics being watched carefully by a Colorado-based consultant who presented his 12th annual aviation forecast at a conference on Florida's Gulf Coast.

The need for new international routes bodes well for local tourism, since it is one of the strategies in play for the Las Vegas Convention and Visitors Authority to bring 43 million people a year to Las Vegas by 2010.

"You're in one of the best positions in the country," said Mike Boyd, the top analyst of the Boyd Group, on Las Vegas' chances of attracting new international lift. "Most tourists aren't going to Portland."

Boyd listed five aviation trends that would affect U.S. airports and the aviation industry in one of his conference's presentations.

The top trend is a focus on global markets for legacy air carriers, or as Boyd refers to them, comprehensive network carriers.

Boyd explained that most comprehensive network carriers have a variety of aircraft types specializing in different capabilities. While most have access to commuter operations or a fleet of regional jets to funnel passengers to mainline hubs, some are in the process of upgrading their long-haul fleets with new fuel-efficient jets being manufactured by Boeing and Airbus.

The new Boeing 787 jets — which airlines learned last week have been delayed in delivery by six months — and the Airbus A350 jets will be capable of reaching Las Vegas from Asia.

Legacy air carriers are using their fleet diversity to battle low-cost carriers that have chipped away at market share in a number of domestic markets.

But the low-cost airlines usually can't compete internationally because they don't have planes capable of flying long distances.

Boyd said a mix of aircraft types is an asset to the legacy carriers in an era when companies like Southwest Airlines have claimed advantages to single aircraft types for operational efficiency.

Boyd contends that legacy carriers are best positioned for future economic downturns — which loom among the other trends that he says lie ahead.

A Southwest Airlines plane flies over western Nevada.
Photo by Steve Marcus

Among them:

• Air traffic management. Boyd contends that the Federal Aviation Administration officials have failed to monitor U.S. airspace as it should and that U.S. airlines aren't challenging proposals to eliminate flights at busy airports like John F. Kennedy International in New York and O'Hare International in Chicago.

"In civilized countries, it's called corruption," Boyd said of the FAA's handling of the nation's air-traffic control system.

He said a satellite-based air-traffic control system scheduled to be implemented in 2001 has been pushed back to 2012 and the FAA's senior management has not been honest about its failures.

• Fuel costs. While most airlines have developed strategies to survive when oil hits $80 a barrel, they aren't prepared if it goes much higher than that — and last week, the price broke through the $80 barrier.

• Labor. Several airlines reduced costs by amending labor agreements and canceling pension plans as a part of their bankruptcy protection financing strategies.

But Boyd said unions won't be put off by $80-a-barrel oil next time, especially when airline executives rewarded themselves with bonuses and sacrificed nothing in the last round of labor talks. Boyd was particularly critical of labor management strategies at United Airlines.

"The good ship Lollypop has sunk," Boyd said. "The unions won't be denied."

Boyd said airlines can pay for their union contracts if they press the FAA on fixing the air-traffic control system. Cuts in air service, he says, means cuts in airline revenue. But if the air-traffic system is fixed, it could collectively save airlines $9 billion.

Building "global portals," Boyd said, is another part of the solution. He explained that airlines should recognize the economics of connecting certain regions of the country with compatible global destinations. Detroit is a classic example, Boyd said, of a global portal that works.

While Detroit isn't a huge destination, it is in the center of the U.S. automaking industry and is a candidate for flights from manufacturing regions in Asia.

Likewise, U.S. airlines may link Las Vegas with population centers overseas. Boyd lists Las Vegas as one of eight viable global portals west of the Mississippi River. Others include Dallas, Houston, Salt Lake City, Phoenix, San Francisco and Los Angeles.

Las Vegas hasn't been ahead of the curve already because it it doesn't serve as many business travelers as other destinations. Most airlines make most of their money on business travelers who book late and pay the highest fares. Conventioneers aren't traditional business customers in that they, like tourists, usually can book well in advance.

Laura Liu, senior vice president of international marketing and sales for Northwest Airlines, said new international routes to Las Vegas aren't a high priority for her company because of the city's lack of business customers.

Liu, who opened Las Vegas as a market from Tokyo in the late 1990s, said said she doesn't expect that route to return for Northwest anytime soon.

Richard N. Velotta covers tourism for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4061 or by e-mail at velotta@lasvegassun.com.

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