Traffic is clearly booming in the Washington DC metropolitan area. Airport statistics for 1999 show that Washington Dulles International was among the fastest growing passenger airports in the world, with a growth rate of more than 25%. Neighbouring Baltimore-Washington International (BWI) is not far behind, posting high double-digit growth. But despite these impressive rates of growth, the two airports have less in common than might meet the eye. Each owes its appeal to a markedly different market segment.
Growth at Dulles has been linked to its position as gateway to a high-end US major - effectively serving as the United Airlines East Coast gateway to Europe. For its part, BWI has owed much of its success to the presence of the world's pre-eminent low-fare carrier - Southwest Airlines. Since its arrival, the number of flights and destinations offered out of BWI has expanded exponentially.
The area's third airport is different again. National basically plays the role of a down-town, business-oriented airport. However, given its smaller size and the limitations on any expansion, it is rather the strategic interplay between Dulles and BWI which provides the main event in the Washington system.
Dulles International Airport
Besides acting as a United hub, Dulles has also developed an international reputation among foreign airlines as the natural airport of choice in Washington. That status has been achieved through a combination of skill and good fortune. According to David Blackshear, the head of the Maryland Aviation Administration (MAA) - the agency responsible for managing rival BWI - there is no inherent reason why Dulles should have gained that international perception - except, that is, for the marketing effort begun in 1982 by the Washington Airports Task Force.
The Task Force, a partnership between the State of Virginia and the Dulles-area business community, assembled a team that visited airlines around the world explaining just how under-served their airport was. Their work resulted in huge increases in international and domestic service, as well as the advent of the idea that, as far as airports are concerned, Washington DC and Dulles are synonymous - a perception that persists today.
The luck side of the equation has been the technology boom in northern Virginia. Head of the Metropolitan Washington Airports Authority (MWAA), the body that manages Dulles and National, James Wilding points to this factor as being among the most critical to the airport's success. He says that the concentration of technology firms in close proximity to Dulles is second only to Silicon Valley, and this has brought with it huge growth in the volume of high-yield originating traffic - both business and leisure. This origin and destination traffic growth has prompted United to build up its base at Dulles - it operates over 100 more daily roundtrips at the airport now than it did in 1997 - and has attracted more foreign carrier service.
By contrast, BWI's air service offerings are characterised by the heavy presence of Southwest, which has poured capacity into the airport. Washington's hometown major, US Airways, has also added to the low-cost presence at the airport with its MetroJet offering. Together these two operators mean that BWI is home to over 150 low-fare flights each day to more than 27 cities throughout the country.
When Southwest first arrived at BWI in 1994 with eight daily flights to two destinations, the airport represented the carrier's first foray on the East Coast. Manager of the MAA's air service development team Tony Storck explains that Southwest's decision to establish an eastern beachhead at BWI made perfect sense. After all, he says, it is the least congested facility in the centre of the country's fourth largest travel market. BWI, he points out, has many fewer air traffic delays, ample free gate space and more room to grow than the area's other two airports.
Whether or not BWI and its carriers admit to the fact, many airline observers also point to the synergy between Baltimore's "blue collar" image and the demographic catered for by the low-fares sector.
BWI's low-cost miscasting
However, its success with Southwest notwithstanding, BWI believes it has been miscast as a low-cost airport and resents the idea that Dulles is more suited for high-yield traffic. MAA head Blackshear states: "We're perceived as a low-fare airport, and that's fine, but it's not accurate." Among the statistics he cites to illustrate this point is the fact that there is more aggregate income within a 45-minute radius of BWI than of Dulles.
Even more aggravating to the MAA is the notion among the airline community that BWI chiefly serves Baltimore, while Dulles is more convenient for downtown Washington. Consequently, any meeting with the MAA invariably includes detailed descriptions of the relative ease of accessing BWI from Washington compared to Dulles. Storck addresses both issues when he says the "blue collar" image "might be the perception, but it isn't reality - we have 42% of our traffic coming from Washington."
Why would BWI not relish its position as one of the nation's top low-cost airports? Perhaps because the MAA - in common with airports authorities everywhere - would like to be able to offer a more well-rounded product than its current concentration on low-fare service would suggest. In particular, BWI would like to have more international service.
However, the heavy presence at BWI of Southwest and MetroJet exerts downward pressure on yields that scares off a lot of potential major players, both domestic and overseas. Nowhere is this phenomenon more evident than in the division of international service between the two airports: Dulles has flights to 21 cities outside the USA by 16 carriers, while BWI can claim eight foreign destinations served by as many airlines (see table over page).
The service of British Airways - the only foreign carrier to fly to both airports - is indicative. BA's daily schedule to Dulles consists of one Boeing 747 and one 777 (with a second in the summer) from London Heathrow. Conversely, while BWI also receives daily service from London, BA uses a smaller 767 and routes the service through London's second airport at Gatwick. BA route planner Dick Eberhart explains this service division by pointing to the better mix of traffic emanating from Dulles - more business and higher-end leisure. However, he adds that: "BWI tries to market itself as an airport for Washington, there is a much more affluent market that prefers to use Dulles."
KLM's experience in Washington is also telling. The Dutch flag carrier's first destination in the area was BWI, which it began serving in 1990 under a special programme designed to promote international flights to under-served communities. However, when the USA and the Netherlands signed an open skies agreement in 1993, KLM almost immediately picked up its operations and moved them to Dulles. The carrier puts its decision to switch airports with such alacrity down to the superior connecting possibilities offered at Dulles, as well as a desire to provide its customers with service to the "pre-eminent international airport in the region."
Wilding, looking on from the MWAA, claims that Southwest's presence at BWI has indeed fuelled its perception as a low-fare, domestic airport. "If you play too heavily into any one niche you will get in your own way with regard to maintaining goals of balance and ability to offer a well-rounded product," he warns, adding that bringing Southwest in was "a smart move" but brought its own penalties. "BWI aspired to be a much bigger player in international aviation than it has turned out to be, and a much more well-rounded player than it has become. Southwest's presence hurt it in those areas," he says.
The MAA has worked tirelessly to kill that perception. One method is through attracting new international service to BWI, targeting carriers for whom Washington would be a logical destination, but who, presumably, do not currently do so. Its stable of foreign airlines includes BA, Icelandair, Air Jamaica and Sir Freddie Laker's recently renamed carrier LB. The air service development department, hoping to add to that tally, recently set its sights on Ghana Airways and Aer Lingus. To entice these carriers to initiate service, the MAA extended breaks on airport user charges and rents. It also promised to dedicate its own funds and expertise to promote any new flights that the airlines launched.
Additionally, because there was no provision in the Ireland-USA bilateral air service agreement for Shannon-BWI flights, the MAA worked in concert with the Irish flag carrier on its application to the US Department of Transportation for the rights to operate the route. All these efforts were rewarded when the two carriers started service to BWI from Shannon and the Ghanaian capital Accra.
However, even with this success, some question the virtue of BWI's attempts to establish itself as an international gateway. Despite the considerable effort and funding that the MAA has put behind its route development effort, there are no guarantees that new carriers will stay at BWI for the long haul once the incentives expire, especially if positions come available atmore attractive Dulles. The departure of KLMin 1993 provides a dark reminder for BWI.
MWAA head Wilding questions the wisdom of his rival's eager pursuit of foreign carriers. "When you have to go buy international service, that's a decision you have to pray over a little bit," he comments.
Grading the strategies
So which tack has been better? Dulles undoubtedly won the race to be Washington's international facility and also reaps the benefits - in terms of destinations and frequency options - of being a key United hub. However, its ties with the major are not without their potential pitfalls.
Should the economy falter, one of the first areas to feel the pain will be the hi-tech sector. Such a development would be bad news indeed for a full-service airline like United, and it would be doubly painful for Dulles, which depends on both United and the high-end business and leisure traffic originating in northern Virginia.
Additionally, with the current tumult surrounding United, particularly its attempted purchase of Washington-based US Airways, there has to be some uncertainty on the part of the MWAA as to its future growth at Dulles. This uncertainty is especially disquieting in view of the $3.4 billion infrastructure up-grade the facility has initiated.
Lastly, for all MWAA's talk of offering a well-rounded product, the looming presence of the world's largest airline has kept low-fare operators at Dulles to a bare minimum. Attempts by AirTran Airways and MetroJet to establish discount flying at the airport have been largely thwarted by competitive responses - in both fares and frequencies - by United.
For its part, BWI appears in the eyes of some to have been overly concerned with its inability to attract much international service. The early start that Dulles took in attracting such players has given it a strong base from which to expand and a reputation among the major overseas airlines which will be hard for any competitor to shift. The MAA can throw money at airlines to bring them to BWI, but then must live with the reality that, given a choice, most foreign carriers will still on balance opt to serve Dulles.
However, BWI could yet come to savour its position as the Washington area's paramount low-fare airport. While serving low cost markets may seem to lack a little of the prestige that would attach to achieving the status of an international gateway, it does have numerous advantages. For example, a down-turn in the economy would be far kinder to BWI, as more leisure and business traffic would make the trip north to seek out low-cost travel alternatives.
Lastly, the unpredictable nature of the airline industry means that being principally a low-cost hub today does not necessarily mean being limited to that role in the future. The Washington situation is in many ways reminiscent of that in New York 13 years ago. Then, Newark International Airport played the role of poor relative to the more prestigious Kennedy and LaGuardia airports. At one point, the dilapidated Newark facility was known only as the home to low-cost forerunner People Express. Now, with Continental Airlines taking over as the lead player, Newark is arguably New York's crown jewel. Perhaps firmly hitching its star to Southwest's wagon will similarly provide BWI with more opportunities than penalties for future growth.
Source: Airline Business