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City got burned when airline grounded service

Volaris Airlines pulled out of the Albuquerque market about seven months after arriving, saying there was not enough passenger demand for its flights to Guadalajara and Chihuahua, Mexico. (Source: Volaris Airlines)

Volaris Airlines pulled out of the Albuquerque market about seven months after arriving, saying there was not enough passenger demand for its flights to Guadalajara and Chihuahua, Mexico. (Source: Volaris Airlines)

Copyright © 2019 Albuquerque Journal

On the morning of June 24, an Albuquerque International Sunport spokeswoman emailed reporters to say that Mayor Tim Keller and his counterpart from Chihuahua, Mexico, would fly into the airport together the next day.

The two would arrive on a new Volaris Airlines flight from Chihuahua and participate in “a celebration and formal press conference” inaugurating the flight, the media advisory said.

City Hall and airport staff worked the rest of the day to prepare. They tweaked the event’s catering schedule. They discussed pitching an Albuquerque-Chihuahua story to The New York Times. They cemented details for a Sunport-sponsored Albuquerque Isotopes baseball game during which a sweepstakes winner would receive two Volaris tickets to Chihuahua.

But, by that night, everything had changed.

Albuquerque Aviation Director Nyika Allen was in Chihuahua and planning to fly home with Keller and María Eugenia Campos Galván when she heard rumblings that Volaris planned to scrap the Albuquerque-to-Chihuahua service after operating just a few flights.

She said she called the airline multiple times for an update and was unable to get a clear answer.

At 9:32 p.m., a city attorney was emailing Volaris officials in an urgent attempt to resolve the matter.

“This news (of potential cancellation) comes to us on the eve of the inaugural flight. We have sent a delegation to Chihuahua, including the Albuquerque mayor and airport director, who plan to board the inaugural flight tomorrow,” assistant city attorney Peter Pierotti wrote in an email obtained by the Journal through a public records request. “As you know, the City of Albuquerque has made significant preparations to announce and promote both Volaris and the Chihuahua service.”

Pierotti noted that a contract between the airline and the Sunport required Volaris to operate through at least November or repay incentives the airport had provided and that the city could pursue legal remedies.

He closed by writing: “All of us need to have clarity on this issue before the speeches, celebration, and promotions begin tomorrow.”

There never were speeches, a celebration or a news conference.

With lingering questions about Volaris’ intentions, the city made a last-minute decision to cancel the press event. Staff immediately began halting related advertising and trying to decide how to respond to media inquiries.

“We wanted to salvage as much of the money that we didn’t spend on this as possible and stop everything – (considering) money, reputation, everything,” said Allen, who did in fact fly home on a Volaris flight, although not a celebratory one.

“I think I cried,” she said in a recent interview.

The city confirmed the following week that the service was kaput and that it was considering legal options regarding Volaris’ contract default.

The latest attempt to lend legitimacy to the airport’s “international” moniker was not just embarrassing – it was costly.

The Sunport, which has a $70 million annual budget, invested nearly $1.6 million of its self-generated revenue for Volaris’ benefit, according to a letter the airport attorney sent Volaris.

The Volaris exit also raises questions about the potential for international service at the Sunport.

Volaris has said the flights were not financially viable, and numbers it provided the city show anemic interest.

But the city has cited a limp marketing effort on the airline’s part and says new flights need more time to develop than Volaris allowed.

“We can definitely say for us, for our air service consultant, no one had ever seen anything like this ever before,” Allen said of the situation. “And we have great relationships with our airlines here – we’re very open with them; we have conversations about starting and stopping new service; they give us tons of lead time; we talk about marketing.”

Albuquerque city officials in June abruptly canceled a news conference for a new Volaris Airlines flight between Albuquerque and Chihuahua, Mexico, after hearing rumors that the airline planned to cancel the service. Mayor Tim Keller, right, and his counterpart from Chihuahua, María Eugenia Campos Galván, left, were supposed to be on hand to celebrate. Volaris ultimately canceled the flight after Albuquerque denied its request to provide additional subsidies to provide the service. (Stephen Hamway/Albuquerque Journal)

Albuquerque city officials in June abruptly canceled a news conference for a new Volaris Airlines flight between Albuquerque and Chihuahua, Mexico, after hearing rumors that the airline planned to cancel the service. Mayor Tim Keller, right, and his counterpart from Chihuahua, María Eugenia Campos Galván, left, were supposed to be on hand to celebrate. Volaris ultimately canceled the flight after Albuquerque denied its request to provide additional subsidies to provide the service. (Stephen Hamway/Albuquerque Journal)

Expanding service

A Mexico-based ultra-low-cost carrier, Volaris approached the Sunport last year and expressed a desire to add Albuquerque flights, Allen said.

It launched nonstop service between Albuquerque and Guadalajara, Mexico, last November and announced in February plans to start Albuquerque-Chihuahua service in June.

The Sunport – which had not had an international flight in nearly a decade – upgraded its facilities to process passengers arriving from another country.

It spent $699,251 to construct a “federal inspection station” and make other improvements to accommodate Volaris, and an additional $401,013 on the automated passport kiosks at the station to screen international passengers, according to a July 1 letter to Volaris from Pierotti.

The Sunport also cut other deals with Volaris through incentive programs it uses to entice new air service.

It waived about $100,000 in rent and other airport usage fees and also spent about $270,000 on completed and contracted future marketing, according to the letter.

But few members of the traveling public were biting.

In a statement two weeks after the aborted news conference, the airline said it canceled its flights between Albuquerque and both Chihuahua and Guadalajara “due to low occupancy rates.”

“The lack of passenger demand (for any airline operating between these markets) affects the profitability of the business,” the company said in a written statement in early July.

Sales were abysmal.

By late June, none of the planned July flights from Albuquerque to Chihuahua had sold more than 20 tickets, according to an email Volaris sent to Allen.,

Only two passengers were booked for the July 16 departure, and three other flights sold fewer than 10 tickets.

The Airbus A-320 aircraft could seat 181 passengers.

But Albuquerque officials have pointed to deficient promotional efforts.

In a letter to Volaris, attorney Pierotti noted that the airline requested that marketing not begin until less than a month before the Chihuahua flight’s debut, saying the situation “should not reflect the potential for the route.”

Mayor Keller himself urged the Sunport to challenge Volaris’ claims the route could not succeed.

“You need to articulate/debunk their viability argument in the letter, as this will pre-empt their response to the media and our point will be available to media in this letter,” Keller wrote to Allen on June 28.

Volaris did not respond to specific Journal questions for this story, saying their July explanation would be their only statement on the Albuquerque flights.

Early exit

Albuquerque has a spotty history when it comes to international flights – and Chihuahua in particular.

A heavily subsidized flight between the two cities that began in 2009 lasted less than a year due to limited interest. The three-times-a-week AeroMexico flight averaged about nine passengers during its brief run, according to Journal archives.

Volaris’ arrival last fall marked the Sunport’s first international flight since then.

Keller heralded that service as a significant milestone.

“Making Albuquerque directly accessible to international markets is a critical component to tourism and economic development,” he said at a news conference last summer announcing the flight.

But Volaris’ Albuquerque-to-Guadalajara service did not exactly soar.

Records show the flight was often nowhere near capacity when it took off every Saturday and Monday. It averaged about 48 passengers per departure during its first three months, according to numbers Volaris provided Sunport officials in an email.

And correspondence reflects a discombobulated and truncated marketing effort before the Guadalajara flight’s start.

On Nov. 1, after weeks of correspondence trying to cement a mutually agreed-upon advertising campaign, Sunport spokeswoman Stephanie Kitts emailed Volaris urging marketing action.

“It is imperative that we start advertising right away. The flight starts in two weeks and we have not put out any advertisements whatsoever. If we don’t receive input from you by tomorrow morning, we are going to move forward with the plan we sent you.”

The same day, a city consultant copied Sunport staff in an email to Volaris in which he urged the airline to offer more detailed information about Albuquerque to Mexican customers and even warned Volaris it might be about to use a photograph of Gallup to promote the Albuquerque flight.

“Our primary concern is that nobody in Guadalajara knows what Albuquerque is, and the vast majority of people in Albuquerque don’t know what Guadalajara is,” he wrote.

While state government was not financially involved in the Volaris flights, former New Mexico Tourism Secretary Rebecca Latham said her then-department played a “supportive” role in the deal. Latham said in a recent interview there was reason to believe the service could be successful, citing research from a national tourism marketing organization and the fact Volaris initiated conversations with the Sunport.

Latham said local tourism organizations traveled to Mexico to meet with travel agents and tour agencies in an effort to generate interest in the flight. She also noted international travelers are highly coveted because they stay longer and spend more.

“I saw the people from Albuquerque doing what they should’ve been doing to create demand,” she said. “I never saw anyone on the other end, from Mexico or from Volaris, trying to create demand here for people to fly south.”

Plenty of empty seats

Roughly a month after the Guadalajara flight began, Volaris had already decided it was going to pull the plug, according to a Dec. 27 email from a Volaris executive to Allen.

“With loads below 30% (it) is extremely difficult to maintain the flight; even with marketing efforts, improvements in the product or waiting for maturity, I doubt that the load factor could reach above 75%, the demand is just not in (Guadalajara),” Volaris’ Barbara Acosta wrote. “… My suggestion is that instead of saying that the service has been cancelled, we should manage it as a switch to other destination.”

Which is not exactly what happened.

Allen said she knew in February when officials announced Volaris would begin a new route between Albuquerque and Chihuahua that it would replace Guadalajara, though the city did not share that at the time.

The Sunport director said she was hoping not to further disrupt the Guadalajara flight so that it did not end before Chihuahua began. She said she wanted to ensure there was no interruption in international service at the Sunport but also to see what impact further marketing would have on that flight’s popularity.

Also, Allen said she thought that announcing Volaris was ending the Guadalajara service “would damage Chihuahua’s chances at success.”

Indeed, despite the issues the Sunport had with Volaris in marketing Guadalajara, the city continued giving the airline incentives to operate Chihuahua flights.

“I’m legally not allowed to tell them that they can’t (operate at the Sunport),” Allen said, citing Federal Aviation Administration rules requiring she provide “fair and equitable access” to the facility. “So my option is let it flounder by itself or attempt to make it successful.”

The incentives, however, were not enough.

Two days after canceling the June news conference, Chihuahua and Albuquerque officials finally had a phone call with Volaris. Volaris said that to continue the service, it needed the cities to pay a combined $32,000 per flight, according to the Sunport.

A day later, Albuquerque officials told Volaris they would not provide the subsidy.

An airline attorney has said Volaris would repay the incentives, and a Sunport spokeswoman said the airport already received a little more than $100,000 and continues to negotiate for more. It was also able to cancel some planned marketing and reduce those costs.

But the Volaris attorney has rejected the notion the company is responsible for the Sunport’s biggest costs, such as the federal inspection station upgrades.

Sunport officials say the $1 million-plus in improved facilities could provide a long-term benefit should Albuquerque land more international service – which is the goal, Allen said. She said there were “good things” that came from the Volaris experience, including better marketing strategies for the future.

“We’ve seen incentives work really well for this airport over the years – an air service ‘development’ program plus the incentive program is a lot of why we have had so much success in the past,” Allen said. “But they’re not all going to work, that’s for sure, and very clear obviously after this one.”

Keller’s office said it will keep trying to land more international routes.

“International flights are a huge economic and cultural development opportunity, and we will continue to look for ways to foster that growth with airline partners that share our goals and commitment to reliable service,” Keller’s spokeswoman Jessie Damazyn said in a statement.

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