Fuel Prices, Carrier Trouble Make Ivanpah Valley A Gamble

A barren patch of desert 25 miles from the Las Vegas strip sits quietly as the location of a recently controversial major airport development plan aimed to take the burden off the near-capacity McCarran International Airport. The $7 billion-plus venture known as Ivanpah Valley Airport is at risk of opening up to two years later than projected due to delays in planning and studies, according to the Las Vegas Sun.

McCarran International Airport chief Randy Walker publicly cited his concerns stemming from a potential delay of up to 18 months while the Federal Aviation Administration studies the impact on airspace in Southern Nevada.

Such a delay would risk the airport opening in 2018 or 2019, not 2017 as planned.

Though such a long-range delay seems hard to fathom, it is causing tension due to analyst reports of current Las Vegas major airport McCarran hitting capacity between 2011 and 2014. Thousands of new hotel rooms are being built up and down the strip in the resort city, and if Ivanpah is not ready as a critical reliever, many wonder how visitors will get to the city.

Though this worry is on the minds of many including Walker, one industry analyst believes the worry is misplaced in the current airline industry climate.

Jack Keady, president of Keady Transportation Consulting in Playa del Rey, CA believes as more airlines are on the path to bankruptcy, flights being cut now won’t return any time soon and the new Ivanpah airport may not be required to meet the needs of the city.

"Why do they need it?" asked Keady, "There's not going to be a big resurgence (in the airline industry) based on easy money and cheap oil. How can you possibly justify a new airport in the middle of nowhere?"

As many fares to Las Vegas are discounted so profit is less per flight than other city destinations, Keady calls the destination a "low-yield" market for the struggling carriers. "It's not a place where you get your full-fare first-class passengers," he said.

The question is if airlines will decide it's cheaper to cut flights to the area than to keep them operating. Though many flights have been cut, airport officials noted that many have been connecting flights where passengers use the airport as a stopover and not a destination. These passengers do little to help the local economy.

"More unique routes to Las Vegas have been canceled in the past six months than the 18 months prior," a Morgan Stanley report in late-May by said. Unique routes are defined as routes not replicated by the airline at any other time of day or day of the week. In other words, once that unique route is cut, the airline no longer services that specific route.

The report added in November 2007, "the number of deplaned passengers at McCarran International Airport fell ... (2 percent) over the prior year." The drop was the first such since mid-2003.

Adding to the sour news within the report, fuel prices continue to worry many within the industry and reduce their optimism for the future.

According to David Castelveter, spokesman for the Air Travel Association, for years airlines have based plans on projected crude oil prices in the range of $70 to $90 per barrel. But since 2000, as fuel costs rose 217 percent, airfares have not kept up, decreasing 0.5 percent in the commercial industry over the same period he noted.

"And now we're paying $130, and put yourself in the shoes of an airline planner who's trying to figure out what schedule to fly based upon the yield of an airplane and the cost," he said.

Because of this, he reports 100 fewer airports in the United States will be served by commercial airlines by the end of 2008 than in 2007. But Las Vegas may turn out to be a unique outlier in the industry, if current tourism growth is sustained.

McCarran International Airport last year handled 47.7 million passengers. Even with renovations, the airport has a maximum capacity of 53 million people. Though airport spokesmen could not predict when that capacity is reached, they say prudence dictates being ready for that day.

However, if the need fails to materialize, they are not opposed to ruling out plans for Ivanpah. I've said many times, if the demand's not there, we do not want to build it," said Walker. "But that said, we're still not going to sit on our hands for the next three to four years. We're going to continue planning, looking forward as we have been. Anything else would be irresponsible."

FMI: www.mccarran.com, www.snvairporteis.com