From: Fredrick Piccolo
Sent: Tuesday, January 24, 2012 4:32 PM
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Cc: Michael Walley; Martin Lange; Bob Mattingly
Subject: Southwest Airline Announcement
RE: SOUTHWEST/AIRTRAN DECISION AT SRQ:
I am writing this email to provide some information and background to you as one of the leaders in the
community. Given the announcement on Friday by Southwest Airlines that they were pulling AirTran airline
service from the Sarasota Bradenton International Airport (SRQ) effective August 12, 2012. Please feel free to
share this communication with your friends and associates.
First, some background;
AirTran started service at SRQ in December 2004 with three daily flights, two to Atlanta (ATL) and one to Baltimore
(BWI). In their first year of service (2005) they carried 296,580 passengers. Passenger growth continued reaching
a peak in 2007 of 460,263 passengers before the economic collapse. In CY 2011 AirTran carried 360,671
passengers. In September 2010, Southwest Airlines purchased AirTran and made application to FAA to merge their
Operating Certificate. The U.S. Department of Justice approved the acquisition on April 27, 2011 and Southwest
has been moving forward with the end result that AirTran will cease to be an operating entity and all employees
and products will be Southwest. When the merger was first announced the airport communicated on a regular
basis with Southwest providing market information and sought the opportunity to meet with them as was many
other airports. In September 2011 we were invited to Dallas and met with Southwest. We presented detailed
market information and left the meeting on a very positive note.
All indications were that Southwest would keep service at SRQ. Just last month the airport reimbursed $125,000
of marketing funds for the Milwaukee service and partnered with local businesses to spend $50,000 advertising in
the December in-flight magazine. I think you would agree that accepting marketing assistance in December for a
destination you are announcing a closure of in January is at best disingenuous, at worst downright unethical.
When I received the call from Southwest I was told there were three reasons for their decision.
1) The Sarasota Bradenton market has some significant seasonal swings. I pointed out to the caller that this is
true to a certain extent but all Florida airports have that although some more than others. In addition, the
seasonality at SRQ is driven somewhat by the airlines that have chosen to cease service to places like Boston,
Indianapolis or Detroit despite high demand in the summer.
2) Southwest has a sizable presence at Tampa International (TPA) and Ft. Myers Airport (RSW). Again I pointed
out that while that is true the experience has been that carriers that serve SRQ actually see an increase in market
share at surrounding airports because the SRQ flyer becomes a member of the local airline's frequent flyer
program and then uses SRQ and TPA/RSW interchangeably on that airline.
3) Cost to operate as Southwest versus AirTran. I was informed that the cost to perform ground services was
about 60% higher with the Southwest product versus the AirTran product. Nearly 90% of Southwest's employees
are members of a bargaining unit, one of the highest percentages in the industry. Their labor agreements require
that all aircraft servicing such as baggage handling and aircraft cleaning be performed by southwest employees.
Presently AirTran uses a third party to perform those services. When that contractor doesn't have an AirTran flight
those same employees can service a Delta, USAir or JetBlue flight thereby making them cost competitive. This is
one item I had no solution for given the airport does not control the airline's operation but it is ironic that
Southwest's more expensive cost structure, is in my opinion, the driving factor in their decision. This information
also was never published in their press release announcing the pulling of service from 6 cities bringing their total to
16 closures since the acquisition.
In the end, you have 16 communities that have been hurt by this merger. It calls into question the due diligence of
the U.S. Department of Justice who approved it, and the intentions of Southwest in the first place. Longer term
residents may recall that SRQ also had a very successful level of service from ATA Airlines back in 2003-2005 until
Southwest bought a large part of their stock. Within about 2 years ATA no longer existed.
I know that many of you will hear that the reason that airlines leave SRQ is due to the higher fees the airport
charges. That is simply false. Here are the facts.
1) SRQ's landing fee is 50% lower than TPA's. (In FY 2012 SRQ is charging the lowest landing fee in the history of
the airport)
2)
SRQ's rental rate is 40% lower than TPA's.
3)
SRQ's landing fee is 74% lower than RSW's
4)
SRQ's rental rate is 28% lower than RSW's
Airport
Sarasota Bradenton Int'l
Southwest Florida Int'l
Tampa International
Terminal Rent 2012
$62.74 sf
$87.58
$103.97
Landing Fee 2012
$0.69 per thousand lbs.
$2.64
$1.395
The airport has no taxing power and derives no local tax support. SRQ does qualify for capital construction grants
which come from a Trust Fund that is derived from user fees on aviation fuel and airline tickets. We compete with
airports across the country for those grant funds. The airport has agreements with our carriers that obligate them
to pay any budget shortfall and conversely they get to receive any operating surplus. In my 16 years here at SRQ
the airport has generated a surplus every year except 2001 after the terrorist attacks. This year SRQ will rebate
$1,065,231 to our airlines. The ironic thing is the day of the call from Southwest was the same day we sent out
notification to them that they would be receiving a $250,000 rebate.
The Airline Agreements go through September 30, 2014 which is the end of our fiscal year therefore Southwest
will continue to make sizable rental payments to the airport for a couple of years. The airport terminal was
opened in 1989 and principal and interest on the bonds totaled about $150 million or about $5 million plus per
year. That debt will be paid off in FY 2014, the same time that the Southwest rental payments expire. Over the
last 15 years in addition to paying the debt service, the airport has invested over $150 million in various capital
improvements without taking on any new debt. This means our infrastructure is in relatively good shape and no
major capital improvements are presently anticipated that would require new debt.
The airport has had a very robust air service incentive program in place for ten years that allows an airline to
operate new service for free for a year and provides hundreds of thousands of dollars of marketing support. At
yesterday's Airport Board meeting that incentive program was increased even more. We have already been in
contact with five carriers and have received positive inquiries from all five. Two have scheduled meetings with us
already.
I hope this information provides you with a clearer picture of why Southwest made the decision; how the airport is
financially structured; and how proactive we are being given this announcement. While I believe the conservative
fiscal policies over the last 16 years have positioned SRQ to weather these types of events, there is no denying that
the airline industry has changed drastically over the last five years as carriers consolidate more and more and drop
smaller cities as evidenced by Southwest dropping a total of 16 AirTran cities over the last year. The airport will
need the support of community leaders as we fight to compete in a global marketplace. I would like to suggest
that as a starting point you all take the time to do the following:
1) Write a letter to Southwest and express your disappointment in a respectful manner. Just hurling insults does
nothing to bolster our market. The address is provided below. If you don't want to write a letter go to the
Southwest website and submit a comment I have put the mailing address of the Southwest CEO at the bottom of
this email for easy reference..
2) Try to use SRQ more and support our remaining carriers (Delta, JetBlue and USAirways). Look for SRQ flights
first. We understand that sometimes we may not have the price or schedule you need, but we ask you to try.
There has been much discussion since the recession about the need to support local business and the airport is
truly a local business operation that has a profound effect on the economic health of the community.
Thank you all for taking the time to read this rather lengthy email and all the support the airport has received from
you all over the years. I hope it has provided some additional context to the developments of last week and also
provides you with some reassurance that the sky is not falling.
Sincerely,
Fredrick (Rick) J. Piccolo, AAE
President, Chief Executive Officer
Sarasota Bradenton International Airport 6000 Airport Circle Sarasota, FL 34243
Tel: (941)359-5200 ext. 4200
Fax: (941)359-5054
Mr. Gary C. Kelly
President and Chief Executive Officer
Southwest Airlines Co.
2702 Love Field Dr.
Dallas, TX 75235