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May 10, 2004

Gaining Independence? | Southern Maine business travelers hope the rumored arrival of a new, low-cost airline will free them from trips to Boston and Manchester

By Rebecca Zicarelli
Getting low-cost airfare from the Portland Jetport is a challenge for Maine businesses. Judy Paradis, the travel manager for Westbrook-based Idexx Laboratories, says she sometimes books people on flights out of Manchester or Boston "depending on who it is. Time is money," she adds. "If they have to drive two hours to save $100, it's not worth it."

But sometimes flying out of Portland can cost hundreds of dollars more. And that cost could be hurting more than individual companies' bottom lines; it could be impairing Maine's ability to attract new business. "Travel is one of the top five costs for average companies," Paradis says. "Businesses consider that when locating a [new facility] or branch office."

So when Independence Air, previously called Atlantic Coast Air, put Portland on a list of potential cities for new, low-cost service to its hub, Dulles Airport in Washington, D.C., Paradis and other travel managers throughout Maine crossed their fingers. "If it's just Portland to Dulles, it won't have a huge effect immediately," says Paradis. "But if they succeed, others may follow."

As it stands today, travelers out of Portland can get competitive fares if they book in advance, have flexible schedules and plan a Saturday-night stay. That's a good description of how leisure travelers operate; as a result, the jetport serves Maine's Vacationland crowd well. But business travelers tend to book on short notice, have strict scheduling needs and, as a general rule, want to spend Saturday night at home with the family. Those requirements can add hundreds of dollars to the cost of a trip out of Portland. Corporate travelers in Maine agree that the arrival of a low-cost carrier like Independence Air is crucial if business travel costs are to go down.

Independence spokesman Rick DeLisi says the airline won't announce its destinations, start dates or fare structure until later this month. But the Portland Jetport, he says, "is under serious consideration."

"We listen to the customer, we know that business fares are extremely high and we're always trying to correct that," says Jeff Schultes, airport manager at the Portland Jetport. He says the jetport ˆ— along with the greater Portland business community ˆ— lobbied hard to lure Southwest Airlines in 1999, but ultimately lost out to Manchester, N.H.; Schultes is still trying to attract JetBlue.

"It's all numbers driven," Schultes says of low-cost carriers' motivation for choosing one city over another. "We have a population base of 300,000 people; Manchester has 5.6 million people [including the suburbs north and west of Boston]. Our demographics hurt us; we don't have the big corporations to walk in with the money and say, 'If you come to our city, we'll give you $12 million of our travel budget.'"

There's no question that Independence Air could be a blessing to business travelers in southern Maine ˆ— if the low-cost carrier opts for service in Portland. The big question is if Independence will come to town. And if Schultes or DeLisi know, they aren't talking in advance of the Independence announcement, which is scheduled to take place any day now.

Population problems
Paradis of Idexx isn't alone in her concern about the cost of flying out of the Portland Jetport, or in her hope that a low-cost carrier could help bring prices down. Steve Hewins, president of Portland-based Hewins Carlson Wagonlit Travel, says he books travel for more than 130 corporations and organizations in Maine, averaging 50,000 passengers a year. "If you were going to Los Angeles tomorrow, it would cost more [to fly from Portland] than it would out of Boston or Manchester," Hewins says. "Every company I deal with has opted, at one time or another, to take flights out of Manchester or Boston."

While other airports with population bases similar to that of Portland have attracted low-cost carriers ˆ— JetBlue, for example, serves Burlington, Vt. ˆ— Schultes says it's not just southern Maine's population that's the problem; it's the small population in close proximity to two major airports and the presence of the major airlines already serving Portland that make the jetport a hard sell to the new wave of low-cost carriers like JetBlue, Ted and Song.

But Portland may have an advantage with Independence since the airline already does business here as Atlantic Coast Airlines, serving as the United Express carrier for United Airlines' direct service to Dulles and O'Hare Airport in Chicago. Since United filed for bankruptcy in the wake of the Sept. 11 terrorist attacks, Atlantic has been in a long, drawn-out battle to be released from its contract with United. In early April, United and Atlantic agreed to the split, freeing Atlantic to become an independent carrier. Within days of gaining its freedom, Atlantic announced its name change to Independence Air, saying it would become a low-cost carrier with 300 flights daily from its hub at Dulles. With service to 35 destinations beginning June 16, Independence says it will ramp up to 50 destinations in 2005 and 2006 as the company expands its current fleet of 50-seat regional jets with larger, 135-seat Airbuses. (The airline will continue to operate United Express flights through mid-June.)

According to DeLisi, Independence will set itself apart from the traditional airlines serving smaller markets by offering at least six flights a day instead of the one to three typically scheduled, and by keeping a consistent flight schedule throughout the year. And he promises truly low fares, on a par with those offered by Southwest and JetBlue. "We'll have a very simple fare structure," he says. "I wouldn't be surprised to see fares as low as $69 or $79 each way to Washington. The most customers would ever pay might be $140 each way for a walk-up [ticket], which is even more unheard of." He also promises that Independence will never overbook a flight.

DeLisi adds that Independence views the market for the Portland Jetport as "everyone between Portland and Manchester and everyone who lives a reasonable drive north of there." Still, he won't say whether the new service will actually fly from Maine.

All the secrecy is related to the competitive edge Independence says it gains by leaving its competition guessing. "The industry is flip-flopping," explains Hewins. "The biggest airlines are now the weakest, and the smaller carriers are driving the bus."

Whether Independence begins service in Portland or not, United Airlines will remain competitive in the market, says United spokesman Jason Schechter, with Air Wisconsin taking over the United Express flights currently run by Atlantic. "We have a long-standing commitment to the Portland area, with four flights a day to Chicago, four to Dulles," he says. "We have an unmatched global-route network, we connect to hundreds of cities around the world, we're in virtually every major city in the country, we offer a convenient schedule. It makes us an attractive carrier. Then there are the benefits like our frequent-flyer program, which customers can use on any destination that United flies to."

The competitive environment
But as Hewins points out, flying is no longer a product sold by branding perks like larger seats, meals and frequent-flyer miles. "It's a commodity," he says, "and the only things that matter are schedule and price."

"[United] will be fully competitive from a price standpoint," promises Schechter. "We maintain a low price structure across the network; we will be competitive."

Similarly, David Castelveter, a spokesman for U.S. Airways, which with three flights daily between Portland and Washington National would compete against Independence, touts perks like a global network and frequent-flyer miles as a way of maintaining customer loyalty. But when pressed on how U.S. Airways will compete on price, he says, "It's difficult to address Independence Air. They're not off the ground yet. As many people believe they have a chance to survive as believe they don't. It's much too early to be having that conversation."

Castelveter says the service U.S. Airways provides is what the market will bear; the airline has upgraded service from Portland in recent years, switching from turboprops to jets and adding more capacity. "The number of aircraft and the number of seats is the right amount of service for the demand on the route," he says. "If, when Independence enters the market, we determine that market conditions have changed, we'll have to decide if we want to deploy our assets elsewhere."

Paradis at Idexx says fares at the Portland Jetport have been improving since Sept. 11 and the subsequent economic downturn. "Airlines had to be creative to get business travelers going again," she says. In addition, competition from low-cost carriers in Manchester and Boston has helped drive prices down. But she points out that those lower fares require booking at least ten days in advance and the reservations are inflexible; if business travelers need to change their plans on short notice, doing so can be very costly.

Schedules and connections at the jetport have improved as well, according to Schultes. "One of our goals is to get every airline to fly to two different major hubs [from Portland]," he says. "Then, if there are weather problems, there's a chance passengers will still get through."

Despite lower fares from Boston and Manchester that pull customers away from Portland, Schultes says those airports are important to Maine's business community. "Looking at it holistically, I'm glad there are a couple other options so that businesses can stay here," he says. "Some cities around the country don't have those options." Still, he's optimistic that a low-cost carrier ˆ— perhaps Independence, perhaps JetBlue ˆ— will come to Portland eventually, benefiting both Maine business travelers and the Portland Jetport.

If Independence does come to Portland, DeLisi predicts that it will have an impact on the fares other airlines charge. "When a low-cost competitor moves in, two things happen. First, more people fly from the airport. Traffic stimulation occurs in every market in America where low-cost service happens," he says. "Second, in general, fares should go down at the airport; that's a common reaction. When low-cost carriers increase service and make more connections, customers fly more often. It's a positive contribution that happens as soon as the service gets started."


Independence Air

Dulles, Va.
CEO: Kerry Skeen
Holding company: Atlantic Coast Airlines Holdings Inc.
Launch date: June 16, 2004
Net income, first quarter 2004: $3.6 million
Net income, first quarter 2003: $2 million
Aircraft: 142
Employees: 4,100
Contact: www.flyi.com

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