Jack Penning, managing partner at Volaire Aviation, speaks to the Kenai City Council in Kenai, Alaska, on Wednesday, June 19, 2024. (Jake Dye/Peninsula Clarion)

Jack Penning, managing partner at Volaire Aviation, speaks to the Kenai City Council in Kenai, Alaska, on Wednesday, June 19, 2024. (Jake Dye/Peninsula Clarion)

Kenai Airport can support expansion, study says

New services could include a direct line to Seattle

A study of traffic to and from the Kenai Municipal Airport proves that it can support an expansion in services — including a direct line to Seattle — and grant funding is already being sought to make that a reality. Those were key takeaways of a leakage and retention study of the airport by Volaire Aviation, who presented findings to the Kenai City Council during their regular meeting on Wednesday, June 19.

Jack Penning, a managing partner at Volaire, said their purpose is to develop air service and help communities market it. He presented an evaluation of the airport’s current service and traffic, an overview of larger industry headwinds, then looked to “what the potential is for this community to be connected to the rest of the world.”

Expansion of the airport’s service, especially the addition of a proposed Kenai to Seattle route, “is not a short-term project that we have commenced upon.” Penning said that the results of the study show that the airport can support expanded service, and he said he’s already working on a grant application to incentivize a larger airline to add the new route, but told the council “this could be years in the making.”

The study found several key indicators that the community can support greater air service. First and foremost, local demographics show incomes above the national average, a good indicator that the community can support air service.

Another major indicator, Penning said, is the high cost and low capacity of existing service. Only 55% of seats by commercial air carriers in Kenai were filled in 2023. That doesn’t necessarily indicate a lack of demand, he said, instead it indicates that high costs lead people to drive to Anchorage and represents what is a “highly seasonal market.”

Further, 95% of those passengers flying out of Kenai have another, separate ticket out of Anchorage.

“That means 95% of your passengers that fly out of this airport are buying two tickets when they leave or come back,” he said.

Those ticket fees add up, Penning said.

“It’s a very, very expensive air service market,” he said. “What happens in markets with fare that high is that it suppresses the traffic. People just don’t travel as much, for obvious reasons.”

Motivating the idea of developing a Kenai to Seattle route is the finding that Seattle is the primary destination for Kenai travelers, Penning said. There are 68 people every day, in each direction, traveling to and from Seattle.

That’s enough people to make a profit, Penning said, and if fares come down, traffic will be stimulated further.

What’s crucial, he said, is understanding if there is enough traffic to support service to another market without hurting existing service. There’s no value in trading service, because that doesn’t add anything to the airport or the community.

“We want to grow the market through additional service,” he said.

A majority of travelers to and from the Kenai Airport, at 55%, don’t live here. Penning said that’s high, even considering that the Kenai Peninsula is a beautiful place to visit.

“That tells us that we’re only probably scratching just the very edge of the demand for inbound tourism from these markets,” he said. “There’s more room.”

Penning said the results of the study are better than he anticipated.

“Those findings tell me this community can support more flights without damaging current service,” he said. “There is opportunity, with lower fares, to create new passengers. There’s an opportunity to get people to quit driving to Anchorage.”

There are obstacles, of course. Penning cited the massive and ongoing pilot shortage, saying there are now about 14,000 pilots short of what airlines need to operate the networks they were operating in 2019. During the pandemic, 7,000 pilots took buyouts to retire early, and now airlines are culling their services because they can’t replace those pilots fast enough. The training network, he said, is “completely inadequate”

“The pilot shortage is going to get worse, and more communities are going to completely lose service in the United States. Period. It’s going to happen. By 2026 we’re 24,000 pilots short of what we need. This is the single biggest threat to air service in regional communities.”

As a result, everyone is flying less, he said, illustrating his point by describing the schedule of an Alaska Airlines aircraft before the pandemic. It would have started at 6 a.m. and flown around 11 hours a day. That same jet now flies eight hours a day — meaning it spends more time on the ground and communities see fewer flights.

That, Penning said, is a major factor driving prices up. Fewer flights means fewer opportunities to make up large lease costs for aircraft.

A flight from Kenai to Seattle in 2019 would cost around $121 per seat to fly. Penning said at the established number of seats being filled, 55%, that’s $240 that the airline would charge in fares to turn a profit. Today, those seats cost $200, and a $350 fare breaks even.

That’s why Penning said acquiring grant funding will be important to offset the risk that an airline — likely Alaska Airlines — will see in adding the proposed new route. He showed a map of the United States with 360 dots strewn across it, each representing an airport offering at least a six-figure incentive for new routes.

Penning described those incentives as “minimum revenue guarantees.” If the route is successful, those guarantees don’t need to be paid out.

“Our competition is not Homer, our competition isn’t Anchorage,” he said. “Our competition is every dot in the Lower 48. That’s how we have to think about air service recruitment and air service development.”

Volaire is already preparing an application on behalf of the City of Kenai to the Federal Department of Transportation’s Small Community Air Service Development Program. The program isn’t funded by tax dollars, Penning said. It instead comes from a variety of fees collected from airlines and ticket purchases.

In addition to providing an incentive, Penning said the city should also waive fees for any new carrier for any new route. Long term, there will need to be a local marketing program as well.

“I’ve won over $25 million in funding from that program, since the program was released in 2002,” he said. “We’ve turned that into sustainable new service in many places. If we want to be truly competitive, we need to win that grant.”

Completing the application will take roughly the next month and a half, Penning said. They must describe a business case for the service, proving it can be profitable.

Before such a service is added, the airport will also need to have a reinstated presence of the Transportation Safety Administration, though Penning said such a move would come well down the line and could be done to minimize disruption to other travelers.

A concern raised by council members was whether such a service could coexist with the existing airlines that service the airport — Kenai Aviation and Grant Aviation.

The results of the study, Penning said, leads his firm to believe that “service to Seattle can coexist with our current service, or even enhanced service to Anchorage.” Existing high prices are leading countless people to instead drive between the Kenai Peninsula and Anchorage, and those travelers could be recaptured.

“The market generates almost 500 passengers per day in each direction,” he said. “We don’t even have that many seats out there today. We’re talking about seats that are going to be filled by people who are primarily driving to Anchorage.

“The goal is not to replace.”

A full recording of the meeting and Penning’s presentation can be found at kenai.city.

Reach reporter Jake Dye at jacob.dye@peninsulaclarion.com.

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