BELLINGHAM — The skies over Western Washington are about to get more crowded.
That could soon mean competition for Bellingham International Airport.
Commercial air service at Paine Field in Everett is set to begin this fall. Alaska and United airlines will serve an under-construction, two-gate, 27,000-square-foot terminal. And Southwest Airline announced last month that it, too, would serve the terminal.
“The announcement essentially exceeds that capacity of what Paine Field was intended to be,” said Sunil Harman, director of aviation at the Bellingham airport. “They’re going to be operating at a level that is two times what we do on a daily basis, at a facility that’s a quarter of our size.”
Its effect on the Bellingham airport, just now recovering from a four-year downturn in which it lost a big chunk of passengers, is unknown.
Alaska announced its routes from Everett: eight nonstop flights to Las Vegas; Los Angeles; Orange County, California; Phoenix, Portland, Oregon; San Diego; San Francisco and San Jose, California.
In Bellingham, Alaska’s service primarily consists of connecting flights. Apart from seasonal service to Kona and Maui in Hawaii, Alaska’s only routes are to its hubs in Seattle and Portland.
“Alaska has also been very careful in telling us that they view the Seattle market as very different from the lower British Columbia, northern Washington market,” Harman said. “So if that’s true, Paine Field is really serving as a supplemental airport to the capacity constraints at Sea-Tac.”
However, the destinations Alaska announced it will be offering out of Paine Field are similar to the ones low-cost carrier Allegiant Airlines flies now out of Bellingham. Allegiant also flies to Phoenix, Las Vegas, Southern California and the Bay Area.
This competition could mean a 3 to 5 percent loss of Bellingham’s market share, Harman said. Which won’t be too bad for the airport.
“We view north Seattle, which is within an hour, hour and a half drive of Bellingham, to be within our market catchment area,” Harman said. “We don’t think we’re going to lose all of those customers, because they come here for Allegiant Airlines.”
What could really hurt Bellingham, is if another low-cost carrier started service to Paine Field.
Regular airlines no longer compete with each other like the low-cost airlines do, Harman said.
“The airlines have learned that rather than competing for market share, they compete for their own niches or segments in the marketplace. Because of that, American and Alaska will hang on to their passengers, Delta will hang on to its passengers and so on,” he said. “That doesn’t exist among the low-carriers.” Low cost carriers compete purely on price point. There’s no loyalty program, there’s no club. It is bare bones,” Harman said.
There’s a limit to how much market share Paine Field can take from Bellingham, because it has a much smaller terminal. Its capacity is about one-sixth of Bellingham’s, and the already-announced flights will max it out. Meanwhile, the population is going to keep growing, and demand for flights is expected to increase 8 to 9 percent a year, Harman said.
“You will see Paine Field capacity will get really saturated with Seattle’s own demand, because that demand is far outpacing the capacity that Sea-Tac can provide,” he said. Metro areas of Seattle’s size can support two or even three airports, Harman said.
Even as demand for flights has been growing, there are fewer passengers flying from Bellingham than there were a few years ago. But the reason why has less to do with locals’ travel plans, and more to do with the changing ways airlines do business.
Commercial flights in Bellingham date back more than 50 years. Whatcom County originally built the runway, but right as construction was completed, the U.S. entered World War II, and the military took over the airport to support the war effort.
After the war, control of the airport went back to the county, but the county decided that running the airport was more in the purview of the Port of Bellingham’s mission. It turned over the control to the port in the late ‘50s.
The first commercial terminal was built for United Airlines to service routes to and from Bellingham. Service really took off in the ‘90s, when for a little while Alaska, Horizon, United and Frontier all flew out of the airport.
What really accelerated growth was the advent of the new ultra-low cost airline business model in the early 2000s. In 2004, Allegiant set up at the Bellingham airport.
“Allegiant sort of became the reason for the cross-border tourism traffic,” Harman said. “It was serving leisure, discretionary travel markets.”
Allegiant’s business model is that it’s not just an airline, Harman said; it’s a travel company.
“They do the air travel; they do the hotel packages, rental cars. A lot of their revenues are derived from the back end — from hotels and rental car companies and tour bus operators and so on,” Harman said. “They’re in the business of providing affordable vacations, that’s the branding.”
Since Allegiant is selling the vacation, they don’t necessarily need to make a profit on the plane ticket to get customers to that vacation.
“I think it was a surprise to everybody just how successful Allegiant was when they started service to Las Vegas in 2004,” Mike Hogan, public affairs administrator for the port, said. It started with just a few flights a week. Allegiant now flies from Bellingham to Las Vegas every day.
That business model was new to the airport, and as soon as Allegiant arrived, Alaska tried to compete, offering more leisure destinations, copying Allegiant’s route to Hawaii.
“From 2004 to 2013, Bellingham International Airport saw an extraordinary rate of growth,” Harman said. “From serving less than 100,000 passengers a year to serving 1.2 million.”
Allegiant became the main airline flying out of Bellingham.
Seeing more growth on the horizon, the port made massive upgrades to the airport, completing a $30-million renovation to the airfield in 2010, another parking lot costing $1.5 million, and a new, $38.5-million terminal in 2013. (The port didn’t pay for all of that itself. Some of the money came from the federal government.)
“That $71-million investment was based on the growth that had been experience prior to 2013,” Harman said. “The anticipation was the facility that was constructed in 2013 would have its capacity exceeded in 10 or 15 years.”
Now, it looks like that probably won’t happen. Starting in 2013, airlines started offering less service to Bellingham — despite demand still being strong.
Frontier pulled out of the airport because it changed its business model. Instead of pulling in passengers from smaller airports to its hub in Denver, it was going to ditch the hub model altogether and just offer service point-to-point. And Bellingham wasn’t one of the points.
At the same time, two new ultra-low cost carriers popped up in Canada, competing with Allegiant for Canadian passengers.
Meanwhile, Alaska switched to just offering its routes to Honolulu and Las Vegas in the winter, and Allegiant phased the Boeing 757 — the plane it used to fly to Hawaii — out of its fleet, and cut service to Honolulu completely.
From 2013 through 2017, the airport lost 44 percent of its commercial traffic.
“That is a significant downturn, and it’s primarily attributed to airlines reducing capacity,” Harman said. “Not so much that there wasn’t demand, they just chose to serve demand from other markets.”
Still, the airport is always working to try to attract new airlines to come to Bellingham and offer different destinations.
The airport’s market research shows flights to Denver; Reno, Nevada; Tucson, Arizona; Albuquerque, New Mexico; Honolulu and the Mexican destinations Cancun, Cozumel, Puerta Vallarta and Guadalajara would be particularly successful.
Recently, the airport has introduced an incentives package to attract new carriers to the airport.
“In the past the port prided itself on drawing air service by running a very efficient, safe, inexpensive airport,” Harman said. “But we’re in competition with all the other airports for air service, and airlines now expect incentives.”
The airport will waive the fees it normally charges airlines, if a carrier comes in and starts flying new routes. It also offers revenue guarantees — so if an airline’s average flight is less than 80 percent full, the port will cover the losses up to $300,000. Harman has seen some airports offer carriers more than a million dollars in revenue guarantees.
“We don’t need to do that because we do our market research,” Harman said. “We know that if they serve those cities from Bellingham that we’ve identified they will do better than 80 load factor.”
In fact, Harman said, airlines could offer 150,000 more seats on flights out of Bellingham, and 94 percent of them would be filled on continual basis.
“There is latent demand for those sort of destinations that we have identified,” Harman said. “But it depends on how much an airline can make here versus other markets for revenue per seat mile, and if they can make a little more elsewhere then they’re going to move that aircraft to that location.”
Many airlines are focusing on the East Coast to serve the kind of leisure destinations Harman hopes to attract to Bellingham, because while there’s demand here, there’s even more there.
“The airlines do much better in the leisure area in the eastern seaboard than the western seaboard,” he said. “That’s because the winters are much more brutal.”
West Coast travelers aren’t as desperate to escape to tropical destinations in the winter as East Coast travelers are, which makes it less appealing to the airlines.
“We’re in a temperate, mild beautiful place,” Harman said, “and it hurts us.”