Northwest National flyers return with gusto, fuel recovery

Emri Luther of Springdale (right) carries her son Ishmael Luther, 2, as she waits to have her luggage checked, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. 
(NWA Democrat-Gazette/Charlie Kaijo)
Emri Luther of Springdale (right) carries her son Ishmael Luther, 2, as she waits to have her luggage checked, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. (NWA Democrat-Gazette/Charlie Kaijo)

HIGHFILL -- Northwest Arkansas National Airport officials were coming off a record year when flights were cut and customers evaporated last April as a scary new virus ravaged the world.

A year on, covid-19 vaccines have rolled out, people are itching to travel again, airlines are pulling planes out of mothballs and airport officials, lessons learned, have created what they say is a stronger, more diverse business model.

"It's been a rough year for sure, but it looks to be rebounding now. It was pretty much a virus event, pure and simple, and as soon as the vaccines were widely available I think we anticipated there'd be improvement in the numbers and we're seeing that," said CEO Aaron Burkes. "The CDC guidance now is if you've been vaccinated you're safe to travel and we're seeing people book flights and the numbers are starting to show that."

January and February passengers were down 62% compared to the same two months in 2020 and almost 38% from 2019.

"We're preferring to benchmark against 2019 numbers because 2020 was such a weird year," Burkes said. "Really strong January and February, then it just went south from there."

Numbers for March show passengers down 52% from 2019, and April is trending about 48% shy of this month in 2019.

"The trend is continuing to improve; of course, in March we get a little bit of a spike from the travelers during spring break," Burkes said.

Burkes said he's expecting big travel numbers for the summer.

"Everybody that I know is planning on traveling this summer. They've got extra money because of all the stimulus funds in their pockets. They're got extra vacation time because they haven't been able to go anywhere," Burkes said. "And, they've just been feeling cooped up for a long time, so they are ready to get on a plane and go someplace. I think we're going to see a really strong leisure travel market this summer. Really strong."

That leisure travel segment is important because Northwest National has traditionally been a business-heavy airport, with 60% or more of passengers traveling for work. During the pandemic, leisure travel, while low, largely sustained the airport.

Burkes and Tim O'Donnell, chief financial officer, said anecdotal evidence suggests business travel is starting to come back.

"We haven't gotten an official policy from the bigger businesses, but we are definitely seeing business travel return, slowly," Burkes said. "I think the national numbers are that about 20% of the business travel is back now, which is a pretty big improvement from where it was because it was almost zero for a while."

Airline employees say they're seeing frequent travelers from some businesses, Burkes said. The University of Arkansas is traveling again as well.

"Not only from the airlines, but the rental car companies as well, they obviously have certain groups of people that are their heavy travelers they used to see every week or every two weeks," O'Donnell said. "They've been coming in more and more frequently than they have for a long time."

People are ready to travel

Frances Mayo, who owns Around the World Travel in Springdale, said there's a lot of pent-up demand for leisure travel and people in Northwest Arkansas are booking trips, mostly to warmer climates.

"It looks like as soon as school's out, everybody's leaving Northwest Arkansas. I'm getting so many inquiries for the first week of June. But, a lot of folks have put it off until a little bit later to save $400 or $500 on airfare," Mayo said. "I would say in the last 30 days there's a huge difference in the amount of inquiries, the number of bookings. I think as more and more people are getting vaccinated, the numbers are going down, they're feeling more comfortable and people are just ready to travel."

This month's gradual uptick in travel is coming on the heels of the Centers for Disease Control and Prevention announcing those who are fully vaccinated against covid-19 can safely travel in the U.S. without having to get tested or quarantine. The agency urged all travelers to continue social distancing, wearing masks and washing hands.

Mayo said the top two destinations lately are Mexico and the Dominican Republic.

"Those two are not requiring any covid testing prior to arrival. Most of the other spots, there's a whole ritual you have to go through online, registering, downloading a covid test," Mayo said. "And the demand for Florida has been crazy ever since the CDC started requiring a negative test to get back into the United States."

All air passengers coming into the United States, including U.S. citizens and fully vaccinated people, are required to have a negative covid-19 test result no more than three days before travel or documentation of recovery from covid-19 in the past three months before they board a flight to the U.S., according to the CDC.

Mayo said several customers booked trips to Mexico but changed their plans and booked trips to Florida because they don't want to deal with testing requirements.

Mayo said she's expecting high demand for cruises this summer. Folks who like to cruise a couple of times a year have been stuck on dry land for over a year.

"A lot of the cruise lines are coming back this summer -- they still can't sail from the U.S. ports, but they're sailing from ports like St. Martens, Bermuda and Nassau," Mayo said. "You're going to have to have proof of your vaccination. My one concern with that is that until those under 16 are able to be vaccinated, you're eliminating bringing your kids with you."

Mayo said she and her husband went to Cancun in September and the Dominican Republic in January.

"On both those trips, I felt safer there than I do in a local store," Mayo said. "They were religious over the masks and temperature checks. Every restaurant, you got your temperature checked before you could walk in. You got your temperature checked in the lobby, at the airport, hand sanitizer."

Mayo said she'll be interested to see how things go for people who have credit for trips canceled during the pandemic and refuse to get vaccinated.

"It'll be interesting to see how those scenarios work out when all the rules are in place," Mayo said. "I think the vaccine is going to become a necessity if you want to travel."

Kelly Syer and her husband, Scott, were frequent flyers before the pandemic but stopped because she works with retirees and did not want to chance exposing them to the virus. Now that most everyone living and working at the facility is vaccinated, Syer said they're ready for a break and feel better about traveling.

"Oh, yes, so ready. I don't feel like that by any stretch of the imagination the world is out of the woods, but I think the people we're coming into the most contact with are safe, amongst ourselves," Syer said. "As far as traveling by air, our feeling is that we'll just mask up and do the same kind of protocol that we've been doing but, we feel like we're safer now."

Demand pushes prices

The cost of one-way fares remained low at the end of 2020, said Mike Lum of Volaire Aviation, a consulting firm that advises Northwest National officials.

"The average domestic one-way fare at XNA in fourth quarter 2020 was $152, a decline of 32.2% versus the average one-way fare of $224 in fourth quarter 2019," according to Lum. "Denver, Las Vegas, Orlando, Dallas/Fort Worth and Atlanta were the five largest domestic markets at XNA in fourth quarter 2020. We can attribute the success of the Denver market to Frontier's XNA to Denver service at an average one-way fare of only $33."

Mayo said she's seeing tickets to Destin, Fla., on Allegiant in May for about $177 and to Cancun for $600, but prices are going up.

"Allegiant is all about supply and demand. These prices just keep getting higher and higher, particularly for summer travel," Mayo said. "As a rule of thumb, the earlier you purchase tickets, the better because as the plane gets fuller, the price goes up. And, we are seeing high, high demand for summer travel from that first week in June until about mid-August."

Burkes said he would not be surprised to see airlines increase ticket prices to recover some of their losses from the pandemic. Ticket prices are set by the airlines, not the airport, he said.

"These planes are going to be very full and ticket prices may go up," Burkes said. "Obviously, if they're able to fill these planes up, they're going to maximize their profit."

On Thursday, Delta Airlines was the first major carrier to announce first-quarter 2021 results, a $1.2 billion loss.

Several airlines have reported bookings began to pick up in February and gained speed in March. Delta's bookings doubled from January to March, with U.S. leisure travel sales recovering to 85% of pre-pandemic levels.

American Airlines said Wednesday it expects to run about 90% of its U.S. pre-pandemic schedule this summer.

More people are flying

The Transportation Security Administration reported it screened about 1.5 million travelers nationwide April 2 -- the most since March 12, 2020.

Northwest National officials watched the disaster unfold over the first three months of 2020 as passenger traffic dropped 95%. That crash mirrored almost perfectly the national numbers.

The airport was coming off a record year with passengers up 17% in 2019 over 2018, which far exceeded projections and expectations. Another record year was eagerly anticipated. January and February were up solidly.

"Then, that first week of March, that's when everything just kind of fell off a cliff," Burkes said. "It happened very quickly. I think we feared what was coming, but I don't think any of us anticipated we'd be down 95%."

Airport administrators get passenger numbers from the airlines monthly and daily numbers from the federal Transportation Safety Administration of people passing through the security checkpoint. Those numbers differ slightly because flight crews and employees also go through checkpoints.

Northwest National hit a low of 80 people going through the checkpoint in one day and when flight crews were subtracted it was fewer than 50 passengers. The airport averaged 2,000 to 3,000 travelers a day in 2019, depending on the day of the week. In late March 2020, some flights left with fewer than a dozen passengers and one flight left empty.

Northwest National went from 329 flights the last week of February to 19 a few weeks later, according to U.S. Department of Transportation data. The airport averaged 302 flights a week in 2019.

American Airlines, the largest carrier at the airport, went from 167 flights a week in late February 2020 to five. United dropped from 96 flights a week to five, and Delta plunged from 55 to five. Allegiant cut flights from eight to three, and Frontier went from three to one, according to the federal data.

Federal aid was needed

Airport revenue comes from parking, rental cars, concession agreements and landing fees. Northwest National also receives money through the federal Transportation Department and the state. XNA had operating revenue of $20.8 million in 2019. O'Donnell said operating revenue was about $11.1 million in 2020.

Northwest National received an $8.2 million grant from the Federal Aviation Administration in mid-April as part of the Coronavirus Aid, Relief, and Economic Security Act. The money was used to cover the shortfall in revenue for payroll, utilities, maintenance and debt service.

Officials also had an ace in the hole some other airports did not: $29.3 million in unrestricted cash reserves as of January 2020.

"From a cash perspective, we're still in a good position thanks to the CARES Act Grant that we received," O'Donnell said. "We obviously spent a great deal of time trying to cut costs as much as we could during 2020, the day-to-day operating expenses and things like different maintenance projects that could be delayed without harming anything at the airport, as well as we've slowed down capital expenditures as much as possible. We've been very proactive."

O'Donnell said the airport's cash position is still north of $30 million.

"I think we're at $32 million right now, which is a pretty good number for us," O'Donnell said.

Business related to the airport was also hit hard, including rental car companies and food and beverage vendors. With almost no one flying, they had almost no business.

Airport officials reduced or deferred many fees and charges for vendors and airlines as the pandemic intensified.

"None of our major tenants seem to be at risk. All of them are still here," Burkes said.

Paradies, the primary food and beverage concessionaire, cut staff early on in anticipation of what was going to happen, and now they're ramping back up and hiring, Burkes said.

"All the airlines are still operating out here, the rental car companies are all still here and all the tenants are unchanged, which is great, now looking forward to a busy summer," O'Donnell said.

Burkes said he's expecting more than $8 million in federal recovery aid this year that can be funneled to tenants to offset pandemic-related losses.

"It won't apply to all concessionaires, but some will get the benefit of some of this federal relief fund. It'll pass through us basically," Burkes said. "We're actually still working on the details, on how we allocate that. There are some specific rules on who it applies to, who's exempted from it, what kinds of expenses as far as rent and minimum annual guarantees, things like that."

Lessons learned

Airport officials said they learned a hard lesson during the pandemic about revenue diversity and their heavy reliance on business travel. They want to change that imbalance.

"I think our big push right now is to really try to capture the leisure market. We have probably not fully served that market here," Burkes said. "We know we have traditionally lost some of those customers to other airports within driving distance, so we're trying really hard to capture those leisure travelers because that's one thing we can do right now while we're waiting for businesses to allow their employees to travel again."

Officials are working with airlines on developing routes. Allegiant recently added a flight to Austin, Texas.

"It was a big deal for us to get that. We're trying hard to get as many routes back in service as we possibly can," Burkes said. "At one point we had 19 routes, if you consider the seasonal routes, and we are back up to 12 routes right now in a given week."

They expect to get a Los Angeles route back after July and hope New York City, Newark, N.J., San Francisco and Minneapolis will come back not too long after.

"Obviously, we're always trying to recruit airlines and new routes to the airport, so that's where our focus can be at this point," Burkes said.

Airports across the country compete for a limited number of planes the airlines have available, Burkes said. He and other airport officials are working to make those carriers understand that Northwest Arkansas can outperform similar sized markets because the population is younger, more mobile and more affluent than many metropolitan areas our size.

Northwest National added a fifth carrier, Frontier Airlines, in 2019, Burkes said. That was the first new airline since adding Allegiant Air 10 years earlier in 2009. Both are low-cost carriers and both have added routes since coming to the airport.

"When people choose XNA over other options -- driving or flying out of another airport -- our enplanements go up and airlines are attracted by that passenger growth," Burkes said.

Burkes said there's actually an issue now with the airlines meeting demand.

"We know that a number of planes have been permanently retired and completely taken out of service. We know that a lot of pilots have retired and some airlines are setting up pilot training programs, trying to get pilots back in. There's a fear that the big, legacy carriers are going to be stealing some of the regional carriers' pilots and those regional carriers are going to be struggling to meet pilot needs," Burkes said. "So, it's a little bit worrisome, looking forward, if demand rebounds the way we think it could. These planes are going to be very full and ticket prices may go up."

O'Donnell said the surprising speed of the recovery seems to have caught the airlines off guard.

"Trying to find pilots, getting planes out and getting routes, they let lots of people go and all that stuff takes time to regroup," O'Donnell said.

Andrew Branch, chief development officer, said officials are looking at other ways to make more money.

"The covid pandemic has shown the XNA Board and management just how much we rely on commercial passenger traffic to support XNA operations," Branch said. "Airports like Little Rock have cargo operations, Dassault Falcon, and other tenants. As you can imagine, this is a big advantage."

A firm was hired last year to do a feasibility study for cargo operations at the airport. Both UPS and FedEx expressed interest, Branch said.

Another firm is evaluating types of tenants for airport property that's not adjacent to the terminal. Branch said airport officials are getting areas ready for development and will then market those parcels to attract new revenue producers.

Marielle Mincey, 4, (from center left) helps her mom Lydia Mincey of Wilmington, N.C. pick up a package from baggage claim, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. 
(NWA Democrat-Gazette/Charlie Kaijo)
Marielle Mincey, 4, (from center left) helps her mom Lydia Mincey of Wilmington, N.C. pick up a package from baggage claim, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. (NWA Democrat-Gazette/Charlie Kaijo)
Patrons hangout as they wait for their party, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. 
(NWA Democrat-Gazette/Charlie Kaijo)
Patrons hangout as they wait for their party, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. (NWA Democrat-Gazette/Charlie Kaijo)
Hunter Woodhall of Fayetteville (right) books a ticket, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. 
(NWA Democrat-Gazette/Charlie Kaijo)
Hunter Woodhall of Fayetteville (right) books a ticket, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. (NWA Democrat-Gazette/Charlie Kaijo)
Joey Hall of Pea Ridge (from left) and Jessica Hall walk through the terminal, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. 
(NWA Democrat-Gazette/Charlie Kaijo)
Joey Hall of Pea Ridge (from left) and Jessica Hall walk through the terminal, Thursday, April 15, 2021 at the Northwest Arkansas National Airport in Bentonville. A year after passenger traffic at Northwest Arkansas National Airport dropped by 95% due to the covid-19 pandemic, airport officials say vaccines and pent up demand are likely to make for a busy summer travel season. Check out nwaonline.com/210418Daily/ for today's photo gallery. (NWA Democrat-Gazette/Charlie Kaijo)

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