Business History Books » Business Plans » Headaches of a Startup at DTW
Headaches of a Startup at DTW
Question:
> What about Willow Run? <snip> > KRC
I think Willow Run is now a private airfield operated by Ford… I might be wrong, though. –Rolando
Response:
–cut– >I think Willow Run is now a private airfield operated by Ford… I might >be wrong, though.
I did some looking into this, and I think I know why there are no passenger operations at Willow Run – like Metro, it’s operated by Wayne County. I know Willow Run has a lot of cargo ops and business traffic. I think it may even have a few passenger charters from time to time as well – the FAA does track passenger enplanements at YIP, and there are less than 1,000 a year on average – sounds like charter ops and maybe some air-taxi, if you ask me. However, the ownership of Willow Run by Wayne County might mean it is closed to scheduled passenger traffic. Meacham International in Fort Worth has had scheduled ops at times over the years, but the City of Fort Worth actively discourages any airline operations that might jeopardize DFW (like that will happen) – Wayne County may take a similar attitude towards Willow Run and DTW. KRC P.S.: There is a small site about Willow Run that might be of interest, the address is: http://www.waynecounty.com/airport/willowrun/default.htm
Response:
>Detroit Metro says it wants to help >all it’s airlines Sure, if the designation begins with NW…. Maryanne
Response:
–cut– >For one thing, DET is not as "convenient" to a great majority of leisure >travelers who live in Detroit’s west suburbs -read, many would rather >drive an hour or more away than go into the city (statistics >notwithstanding, many suburbanites have an innate fear that crime is >rampant in the city of Detroit, and the minute they cross Eight Mile >Road, they’re going to be mugged.) >Secondly, the runway at DET is probably too short for a fully loaded >DC-9 bound for Florida.
What about Willow Run? It was used for passenger services in the 1950’s, and I would think that whatever terminal facilities out there would probably need work, but it might be cheaper in the long run for somebody like Spirit to operate from YIP than DTW. KRC
Response:
- Hide quoted text — Show quoted text – > <snip> > Interestingly, there is no mention of why Spirit doesn’t move to DET. > For one thing, DET is not as "convenient" to a great majority of leisure > travelers who live in Detroit’s west suburbs -read, many would rather > drive an hour or more away than go into the city (statistics > notwithstanding, many suburbanites have an innate fear that crime is > rampant in the city of Detroit, and the minute they cross Eight Mile > Road, they’re going to be mugged.) > Secondly, the runway at DET is probably too short for a fully loaded > DC-9 bound for Florida. > –Rolando
More like Seven mile road since the majority of city workers who HAVE to live in the city live between 7 and 8.
Response:
– Hide quoted text — Show quoted text -> FWIW, the reason that Midway Airport in Chicago has become such a haven > for low fare carriers (Southwest, ATA, National, Vanguard, Frontier(?), > etc.) is precisely its gate situation. Although Midway doesn’t have > that many gates (and thus is expanding), its leases (according to a > newspaper article I read in early June) go beyond even "Use it or lose > it" clauses. Those clauses still allow an airline like American (grrr) > to effectively forestall competition merely by paying the gate rental at > an airport and putting in a flight or two a day on a gate. They’re > still "using" the gate. While it would appear to make economic sense > for such an airline to rent its gates out at times when they are unused, > sometimes one’s rented turf can used to keep those pesky startups out of > one’s backyard. Midway’s leases *require* the primary gateholder to > share its gates with any airline who wants them at any point at which > the gate isn’t actually (and, I assume, legitimately) in use by the > lessee. This means, for example, that airlines like TWA, which once was > a substantial gate lessee at most major airports, don’t face any > internal strategy disputes about whether it’s better to rent out their > gate or not: they *have* to. I understand that the Chicago Department > of Aviation isn’t afraid to get in the face of any carrier who resists > or doesn’t act in good faith. That’s an example of a governmental > entity which is acting properly in the best interests of all potential > competitors in an industry, and, of course, of its citizens. > Also, although Spirit was at one recent point one of the fastest-growing > airlines in the world, it has received relatively little attention from > the national media. Perhaps this is because of the markets it serves or > because it is privately owned and thus doesn’t have the same financial > disclosure requirements or analyst interest. (Or, perhaps, because its > public profile wasn’t enhanced by its commercials, which plainly [and I > do mean "plain"ly] featured actual employees. They were incredibly > lame, giving no information which would lead one to think about picking > up the phone and calling them.) I’m curious, though, whether the > ValuJet experience (not the accident, the apparent inability of the FAA > adequately to stay on top of its expansion) has taught the FAA anything > that has been put in place in monitoring Spirit. I note that Spirit > appears to have a similar business model to ValuJet: buy up any old DC9 > you can find, regardless of series, engines, etc, repaint it and put it > in service. The FAA, in cracking the whip on ValuJet, required it to > limit itself to one model of DC9, sell the MD80s, train the hell out of > its mechanics, limit outsourcing of maintenance, request permission to > add aircraft in service, etc., etc. [AirTran, I note, now regularly > wins Diamond Awards from the FAA for the training of its maintenance > personnel.] Spirit has both DC9s and MD80s, and from their SDRs, they > appear to have the kinds of problems that you could expect a dispersed, > older, varied fleet to have; I wonder how many of the things that the > FAA suddenly decided were "problems" at ValuJet also exist at Spirit. > And, if they are not problems at Spirit, why were they suddently > problems at ValuJet? (Politics, perhaps?) > A penny for my compatriots’ thoughts. > –Bill Candee in NYC
It was worth lots more than a penny to me, Bill. Excellent perspective.
Response:
<snip> > Interestingly, there is no mention of why Spirit doesn’t move to DET.
For one thing, DET is not as "convenient" to a great majority of leisure travelers who live in Detroit’s west suburbs -read, many would rather drive an hour or more away than go into the city (statistics notwithstanding, many suburbanites have an innate fear that crime is rampant in the city of Detroit, and the minute they cross Eight Mile Road, they’re going to be mugged.) Secondly, the runway at DET is probably too short for a fully loaded DC-9 bound for Florida. –Rolando
Response:
FWIW, the reason that Midway Airport in Chicago has become such a haven for low fare carriers (Southwest, ATA, National, Vanguard, Frontier(?), etc.) is precisely its gate situation. Although Midway doesn’t have that many gates (and thus is expanding), its leases (according to a newspaper article I read in early June) go beyond even "Use it or lose it" clauses. Those clauses still allow an airline like American (grrr) to effectively forestall competition merely by paying the gate rental at an airport and putting in a flight or two a day on a gate. They’re still "using" the gate. While it would appear to make economic sense for such an airline to rent its gates out at times when they are unused, sometimes one’s rented turf can used to keep those pesky startups out of one’s backyard. Midway’s leases *require* the primary gateholder to share its gates with any airline who wants them at any point at which the gate isn’t actually (and, I assume, legitimately) in use by the lessee. This means, for example, that airlines like TWA, which once was a substantial gate lessee at most major airports, don’t face any internal strategy disputes about whether it’s better to rent out their gate or not: they *have* to. I understand that the Chicago Department of Aviation isn’t afraid to get in the face of any carrier who resists or doesn’t act in good faith. That’s an example of a governmental entity which is acting properly in the best interests of all potential competitors in an industry, and, of course, of its citizens. Also, although Spirit was at one recent point one of the fastest-growing airlines in the world, it has received relatively little attention from the national media. Perhaps this is because of the markets it serves or because it is privately owned and thus doesn’t have the same financial disclosure requirements or analyst interest. (Or, perhaps, because its public profile wasn’t enhanced by its commercials, which plainly [and I do mean "plain"ly] featured actual employees. They were incredibly lame, giving no information which would lead one to think about picking up the phone and calling them.) I’m curious, though, whether the ValuJet experience (not the accident, the apparent inability of the FAA adequately to stay on top of its expansion) has taught the FAA anything that has been put in place in monitoring Spirit. I note that Spirit appears to have a similar business model to ValuJet: buy up any old DC9 you can find, regardless of series, engines, etc, repaint it and put it in service. The FAA, in cracking the whip on ValuJet, required it to limit itself to one model of DC9, sell the MD80s, train the hell out of its mechanics, limit outsourcing of maintenance, request permission to add aircraft in service, etc., etc. [AirTran, I note, now regularly wins Diamond Awards from the FAA for the training of its maintenance personnel.] Spirit has both DC9s and MD80s, and from their SDRs, they appear to have the kinds of problems that you could expect a dispersed, older, varied fleet to have; I wonder how many of the things that the FAA suddenly decided were "problems" at ValuJet also exist at Spirit. And, if they are not problems at Spirit, why were they suddently problems at ValuJet? (Politics, perhaps?) A penny for my compatriots’ thoughts. –Bill Candee in NYC – Hide quoted text — Show quoted text – > July 12, 1999 > Airlines’ Lock on Leases in Detroit > Leaves Out Low-Fare Rival Spirit > (snip) > The daily struggle shows why it is so difficult for fledgling carriers > to make it at hub airports, where most of the gates are controlled by a > dominant airline, or at airports where most of the takeoff and landing > rights are held by a few carriers. It also underscores the reluctance of > many U.S. airports to pressure major airlines to relinquish unneeded or > underused gates and other facilities.
Response:
What’s really bad (at least for Spirit) is that all that snafu with the gates will only cost them any repeat business they hope for. Customers (as they are in any business) are very fickle, and don’t have time, even if they save money, for a small startup’s problems. I wish Spirit well, though. Those two ladies have their jobs cut out for ‘em. — . ."Flying is easy… buying the tickets, that’s hard." .-MikeyB . . > July 12, 1999
(great big SNIIIIIP!!!) – Hide quoted text — Show quoted text -> As the skies darken over Detroit, the afternoon snafus ripple through > Spirit’s evening slate of seven returning flights. The last flight home > — the plane that left so late for Fort Lauderdale — doesn’t straggle > in until 12:30 a.m. Saturday, one hour and 40 minutes late. The score > for the night is dismal: One flight on time, six not. > END > Interestingly, there is no mention of why Spirit doesn’t move to DET.
Response:
July 12, 1999 Airlines’ Lock on Leases in Detroit Leaves Out Low-Fare Rival Spirit By BRUCE INGERSOLL Staff Reporter of THE WALL STREET JOURNAL ROMULUS, Mich. — It’s a Friday afternoon at Detroit Metropolitan Airport, and Nancy Hardy faces a dilemma: Five flights are due to land in a one-hour span, and she has nowhere to put them. What to do? "Get on the phone and beg," says Ms. Hardy, station manager for Spirit Airlines, one of low-fare aviation’s few survivors. She and her operations manager, Macarena "Mickie" Bravo, will make dozens of calls to other carriers over the next few hours, hoping to rent enough gates to bring those flights in on time. They are used to such chaos, because Spirit is, in effect, homeless in its hometown. In seven years of operating from Detroit, a huge Northwest Airlines hub, Spirit has been unable to acquire or sublease gates from any of the entrenched carriers. Thus, it flies at the convenience of its larger rivals, paying $250 to $400 per turn to rent their spare gates, for a total of about $1.3 million a year. That’s more than twice the amortized cost of owning two gates with jetways, Spirit says. The daily struggle shows why it is so difficult for fledgling carriers to make it at hub airports, where most of the gates are controlled by a dominant airline, or at airports where most of the takeoff and landing rights are held by a few carriers. It also underscores the reluctance of many U.S. airports to pressure major airlines to relinquish unneeded or underused gates and other facilities. Partly as a result, travelers pay stiff premiums to fly from "gate-constrained" hubs, a congressional audit shows. Average fares on short-haul flights last year were 46% higher at Detroit Metro, 90% higher at Delta Airlines’ Cincinnati hub and 120% higher at US Airways Group’s Pittsburgh hub than at non-hub airports of similar size. Spirit’s plight in Detroit and that of other low-fare carriers in Dallas, Denver and Atlanta, have spurred the Transportation Department to investigate whether established airlines hoard gates and tie up ground facilities to deter competition; thirteen airports are under scrutiny. Spirit has repeatedly approached other carriers about subleasing or buying gates at Detroit Metro, where Northwest Airlines controls 74 out of the 100 gates and a few other airlines have the rest under exclusive lease through 2008. But nothing ever came of these overtures, says Mark Kahan, Spirit’s vice chairman. Its best opportunity may have come five years ago when Delta, Northwest and US Airways engaged in a complex series of gate swaps and other transactions. In September 1994, Spirit offered to buy two US Airways gates for $950,000, says Mr. Kahan, but Spirit never heard back from US Airways management. Only later did it learn that the gates had been acquired by Northwest and then sold to Trans World Airlines. ‘The Most Favorable Offer’ A Northwest spokesman denies that the airline’s aim was to foil Spirit, and US Airways says it accepted the best offer. Northwest, the most dominant hub carrier in the U.S., says it subleases two gates to Southwest Airlines in Detroit. It was the first carrier to rent Spirit a gate at Detroit Metro. Northwest also handles aircraft maintenance for Spirit, which has a fleet of 22 jets serving 15 cites. Indeed, the Northwest Airlines Corp. unit says offering gates and ground services to other airlines is in its best interest. Despite its nomad status at Detroit Metro, closely held Spirit has managed to thrive. Last year, it led the nation’s airlines in average percentage of seats sold on all flights — 76.4%. Spirit, which reported net income of $6.7 million in 1998, on revenue of $130.6 million, says it has been profitable every year, except for 1996, thanks to a conservative growth plan, niche marketing and employees with a talent for improvising. That skill is crucial in Detroit, the hub of Spirit’s system. Today, the 32-year-old Ms. Hardy is preparing to orchestrate the crucial "afternoon bank," after a morning in which only three of seven Spirit flights departed Detroit on time. Arriving flights are due at 2:20, 2:30 and 2:35, and another two at 3:20. They are all supposed to turn around and take off by 4:10. If the choreography breaks down, there will be costly delays throughout Spirit’s system. Ms. Bravo, 24, first dials her counterpart at UAL Corp.’s United Airlines. Call back later, United says, a refrain she will hear all afternoon. On her next call, Northwest, citing delays in rainy Chicago, tells her the gate situation is "looking bad." Seizing an Opportunity At 12:29, Ms. Bravo decides to nail down an American Airlines gate, B-15, the only semi-sure perch available. B-15 isn’t in much demand, because it lacks a jetway to span the gap between jetliner and the concourse; passengers have to trudge across the tarmac and use stairs to board or deplane. Even so, she smiles when AMR Corp.’s American lets her have the gate for much of the afternoon. But next comes a rebuff from TWA, followed by an update from Spirit’s dispatcher: As of 1:23, all five birds are winging toward Detroit. Ms. Bravo has just one gate in hand. At 1:38 p.m., she reaches Northwest again, and asks, "How’s it looking for anything around 2:20?" She is put on hold briefly. "OK!" she exclaims into the phone. A gate is available on Concourse C for an hour, enough time for an arrival from Orlando and a departure to Tampa. For the fourth time, Ms. Bravo phones United. Would it be possible to borrow a gate for a plane that arrives at 3:45 and leaves at 4:20? She beams as she hangs up. "We can use A-3!" she announces. At 2:30, the afternoon’s first flight pulls in 10 minutes late at Northwest’s Gate C-20, just as Spirit’s baggage conveyor jams. More than 500 people throng its counter, trying to check their bags or find out where they should go to board flights. Ten minutes later, disaster strikes. Ms. Bravo phones United to borrow Gate A-3 earlier than the agreed-upon time. "We’ve got A-3 for 3:25 to 4:05," she says. "Would it be possible to put a flight in at three o’clock, instead?" Her face pales at the reply. "Out of curiosity," she inquires, "if I hadn’t called, would you have called to let me know the gate was no longer available?" She hangs up the phone. "So now we don’t have A-3 for Flight 698," she tells Ms. Hardy. With three planes due to land in 20 minutes, Spirit is down to two gates: B-15 and C-20. The latter already is occupied by the afternoon’s first flight, and Northwest intends to reclaim it in less than an hour. At 2:42, Flight 698’s pilot radios in en route from Tampa: "We’re 20 minutes out. We need three wheelchairs." Ms. Bravo snatches up her radio mike: "I don’t have a gate yet." The pilot’s sarcasm crackles back: "I’m very surprised." Overlooked Reality Spirit’s quandary stems in part from an overlooked reality of commercial aviation: Many airports effectively ceded full control to their airline tenants during the 1950s and 1960s when carriers pledged to pay off billions of dollars in airport revenue bonds. "The only way you got new facilities built was to get on your knees and beg airlines to pay for them," says David Katz, director of Detroit Metro, which is operated by Michigan’s Wayne County. "They said, ‘Sure, if you give us a 50-year exclusive-use lease.’ " Such agreements put the airlines in a position to forestall new competition. So-called majority-in-interest clauses gave the incumbent airlines virtual veto power over big capital projects. Some airlines could — and at most hubs, still can — veto or delay expansion plans. Since 1993, Spirit has tried periodically to enlist Detroit Metro officials in a gate project. The airport’s initial suggestion — that Spirit build a multimillion-dollar pier of six or eight gates — so exceeded the airline’s financial reach that Spirit deemed it insincere. Subsequent talks went nowhere. The airport’s Mr. Katz says Spirit failed to "show up with cash" and blueprints. In contrast, the airport has arranged financing for two expansion projects for Northwest — seven new gates in 1989 and six more in 1996 — while rebuffing Spirit and hanging out a no-vacancy sign for Pro Air, a start-up based here. Pro Air opted for Detroit’s downtown City Airport, in order to cater to business travelers who demand on-time service. Detroit Metro says it wants to help all its airlines. "We don’t have it out for anybody, and we don’t prefer the big carriers over new entrants," says Robert Murphy, the airport’s general counsel. The airport helped Spirit lease a Delta hangar coveted by Northwest, and recently it arranged for Spirit to lease two of six temporary gates being built by Southwest Airlines while an enormous midfield terminal, part of a $1.8 billion expansion, is under construction. That would make Spirit a "signatory" airline, which would exempt it from landing-fee surcharges. Spirit now pays $331 to land a loaded DC-9, $66 more than Northwest and other signatory carriers. Spirit officials hope the temporary gates will be completed by October. Use-It-or-Lose-It Terms By the end of 2001, Northwest and its partners KLM Royal Dutch Airlines and Mesaba Airlines expect to move into the new 99-gate midfield terminal. Most of the gates will be leased on a use-it-or-lose-it basis, with the rest reserved for common use. Plans to demolish four of the aging airport’s concourses and renovate the remaining three will leave other airlines with 35 domestic gates. Once the work is done, Detroit Metro officials say, Spirit will get two gates of its own. However, that seems like a distant dream to Ms. Hardy and Ms. Bravo this afternoon as they scrounge around for gates. At 2:55 p.m., Ms. Bravo scores. Asking Northwest for "anything, even a gate on F Concourse," a long walk from Spirit’s counter, she gets E-8, which isn’t as far. Ten minutes later, Flight 698 lands, and Ms. Bravo tells its pilot to stand by. … read more »