California’s stagnant market is boosted by Virgin America and Southwest

Image: Sir Richard Branson and Virgin America CEO Fred Reid celebrate the launch of flights from its San Francisco base in August.
Sir Richard Branson and Virgin America CEO Fred Reid celebrate the launch of flights from its San Francisco base in August.

According to World Bank figures in 2006, if California were a country it would have the world’s eighth largest economy, behind Italy but ahead of Canada, Spain and Brazil. In terms of aviation activity its airports handled just over 177 million passengers in 2006, about the same number as all German airports. Among European countries, only the airports in the UK (237 million) and Spain (193 million) generated more air passenger movements.

Market stagnation in 2006

However, a closer look at the 12 airports which handled more than one million passengers in 2006 shows that traffic growth was virtually non-existent in California. However, in the first nine months of 2007 all of the top 10 airports are registering growth of up to 6%.

Airport Passengers
2005 (m)
Passengers
2006 (m)
Growth
’06 v ’05
Growth
’07 v ’06 YTD
Los Angeles (LAX) 61.489 61.040 -0.7% 1.5%
San Francisco (SFO) 33.396 33.575 0.5% 5.4%
San Diego (SAN) 17.373 17.482 0.6% 4.8%
Oakland (OAK) 14.418 14.434 0.1% 2.9%
San Jose (SJC) 10.757 10.708 -0.5% 0.2%
Sacramento (SMF) 10.203 10.363 1.6% 5.3%
Santa Ana (SNA) 9.627 9.614 -0.1% 6.0%
Ontario (ONT) 7.214 7.050 -2.3% 2.3%
Burbank (BUR) 5.513 5.689 3.2% 4.6%
Long Beach (LGB) 3.034 2.758 -9.1% 5.8%
Palm Springs (PSP) 1.420 1.529 7.7%  
Fresno/Yosemite (FAT) 1.191 1.281 7.5%  
Source: Airport websites

At seven of California’s top 10 airports (the exceptions being LAX, SFO and LGB) Southwest was the leading carrier in terms of passengers. At LAX and SFO, which contribute over half of all California’s traffic, United is the market leader, while JetBlue is dominant at Long Beach.

Southwest has quarter of market

Logo: FresnoAn analysis of which airlines handled most passengers in California in 2006 shows that Southwest was responsible for almost a quarter of all passenger movements with just over 42 million.

Chart: Leading airlines in California 2006
Source: Derived from BTS data
Image: Southwest celebrate return to San Francisco
Southwest celebrated its return to San Francisco on 26 August.

Southwest’s lead over United is likely to increase as this year the airline returned in August to San Francisco and is gradually building up a significant presence there. It has just begun flying eight times per day between San Francisco and Los Angeles where it will compete against Alaska Airlines, American, Delta, United and Virgin America.

Among the top 15 airlines only Mexicana is a non-US carrier with nearly two million passengers primarily on routes to Mexico City (610,000) and Guadalajara (840,000).

Virgin America finally flies

Logo: Virgin America

After much procrastination by the regulatory authorities Virgin America finally took to the air from its San Francisco base in August, and is now operating six routes including between San Francisco and Los Angeles, which it serves with five daily flights.

Image: San Diego route on sale

A new route between San Francisco and San Diego begins next February and will be operated five times daily in competition with United and Southwest.

ExpressJet develops own-branded network from smaller airports

Logo: ExpressJet

Another newcomer is ExpressJet, which previously focused on providing services for other airlines, primarily Continental for whom it operates over 200 aircraft as Continental Express. It is now developing a network under its own name using around 40 Embraer regional jets and currently operates from eight Californian airports, including smaller ones such as Monterey, Bakersfield, Fresno and Santa Barbara.

Mexicana is biggest foreign carrier

Not surprisingly, Mexicana is the largest foreign carrier, but it is followed in California by Qantas, Air New Zealand, British Airways, Lufthansa, Cathay Pacific, Singapore, EVA Air, Korean and Air France. It seems likely that some of the new wave of Mexican LCCs will soon start to operate more international flights and California is an obvious market.

Air fares vary considerably

Despite Southwest’s major contribution to California’s air traffic, average air fares at some airports, notably San Francisco, are above the national average. SFO suffers most in long-haul markets where air fares are 25% above the national average compared with just 7% at LAX.

Airport Fare PremiumAll Markets Fare PremiumShort-Haul Fare PremiumLong-Haul
San Francisco 21% 9% 25%
Palm Springs 9% 2% 11%
Fresno 6% 2% 9%
Los Angeles 4% -8% 7%
Santa Ana 1% -9% 7%
San Jose -3% -5% -2%
San Diego -5% -13% -1%
Burbank -7% -8% -5%
Ontario -8% -16% -2%
Sacramento -13% -20% -5%
Oakland -15% -13% -17%
Long Beach -24% -32% -21%
Source: US Office of Consumer Affairs (2007 Q1)

Logo: Long Beach AirportFor cheap fares, the best airport is Long Beach where JetBlue accounts for nearly 80% of passengers. The art deco terminal building was designated a cultural heritage landmark in 1990. ExpressJet recently began double-daily services to Fresno, Reno and Monterey using Embraer 145s. Long Beach is one of the world’s busiest general aviation airports and is also home to aircraft manufacturers Boeing and Gulfstream.

Image: Long Beach Airport Terminal


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