Fares up, flights down at Indianapolis airport

Travel agents still talk wistfully of ATA, the city's homegrown airline that brought low fares and nonstop service to Florida, Las Vegas and other favored destinations for Indianapolis passengers.

"ATA drove down prices. It was unique," said Mark Moorhead, president of The Travel Agency in Carmel, who booked countless ATA trips for customers in the 1990s and early 2000s.

More than any other factor, it was ATA's demise as a passenger carrier in 2006 — driven into bankruptcy from which it never recovered before closing two years later — that explains why Indianapolis saw some of the steepest cuts in passenger service and largest jumps in airfares of any U.S. city over the past eight years.

A new study by USA Today of air service at the nation's 200 largest airports found that Indianapolis International Airport has lost a third of its passenger flights since early 2005 while inflation-adjusted airfares here have risen 23 percent — the 17th-largest jump among the airports studied.

Only now is Indianapolis starting to recover from the fallout over the departure of ATA, which in 2004 was the city's largest air carrier with 25 percent of passenger traffic.

The city's air service continued to decline after ATA closed down when another airline, Northwest, reduced the mini-hub it had been building in the city after its merger with Delta in 2009, said Chris Matney, air service director at Indianapolis International Airport.

Other mergers also ended up reducing flights and keeping airfares higher by reducing competition, Matney told The Indianapolis Star.

"When it came time to take the medicine the airlines were doling out across the whole U.S., we took more than our share," he said.

Local airfares — which began rising after ATA's closing, through the recession of 2007-09, and during the subsequent years of high jet fuel prices — have finally begun to stabilize this year, Matney said.

And for the first time in years in Indianapolis, several airlines have begun adding new routes, including nonstop service to Los Angeles, San Francisco and Trenton, N.J.

"We're turning around from a long run of negative air travel," Matney said.

The USA Today study tracks by number what's been a tumultuous period for passenger aviation over the past eight years. The period was marked by rampant airline consolidation, radically restructured route systems, escalating costs and erratic airfares (though the average inflation-adjusted ticket price at all 200 airports rose just 5 percent since 2005.)

Indianapolis went from being a city with 13 air carriers to one with eight. Seats on flights originating here dropped nearly 40 percent, from 1.75 million to 1.1 million. Nonstop flights fell from 46 to 30. And inflation-adjusted airfares rose on average from $316 to $388.

It all happened despite the city opening a $1 billion runway, control tower and airport terminal, a humpback-roofed building that's been voted the best-functioning airport in the country. The city-owned airport even froze landing fees on airlines to not add to their costs after the new midfield terminal opened in 2008.

New terminal or not, having fewer flight offerings and costlier ticket prices has been an undeniable drag on the city, said Michael Huber, president of the Indy Chamber. "It's certainly not been helpful in an increasingly connected world."

Huber said he could try to spin the issue by saying Indianapolis hasn't suffered the severe cuts of 60 percent to 80 percent in flights and seats that other midsized airports such as Cincinnati and Memphis have seen. But "I realize that's not necessarily inspiring," he said.

For Brian Sweany, a Fishers businessman who flies a few dozen times a year, primarily to the East Coast, the decline of air service in the city has meant paying more for his ticket and waking up three hours earlier to catch one-stop flights to New York because the nonstop he used to take was eliminated.

"I'm up at 3 a.m. just to make a lunch appointment in New York," said Sweany, director of acquisitions for Recorded Books, whose studios are in New York. "At times I drive to Chicago because I don't want to deal with the hassle of one-stop flights."

While air service from Indianapolis to New York has narrowed, it's still there. Indianapolis city officials and businesses grew so frustrated with the paucity of flights to the West Coast that they lobbied the Indiana Economic Development Corp. earlier this year to fashion a first-time guarantee to United Airlines to get it to begin once-daily nonstop service to San Francisco starting in January.

"That's what it took" to persuade United to offer the five-hour flight, Matney said of the $1.5 million guarantee that the IEDC put up. United will draw on the money if revenue from the flight doesn't meet projections over the first year.

Airlines, most of which operate on thin profit margins these days and have a bankruptcy in their past, are wary of adding long-haul flights in non-hub airport cities such as Indianapolis. The 1,700-mile Indianapolis-to-San Francisco once-daily flight, for example, costs around $40 million a year to operate, considering the cost of the plane, jet fuel, crews and overhead, Matney said.

City officials now hope that United's competitors don't respond by offering cut-rate fares on competing one-stop flights to San Francisco, undercutting the gamble that the IEDC has taken with public money.

The narrowed air service and rising airfares in Indianapolis have been something that city tourism and convention officials have had to overcome, in part by pointing out that Indianapolis can offer visitors comparatively cheap hotel rates, restaurants and taxi fares, said Chris Gahl, a spokesman for Visit Indy, the city's tourism promotion arm.

On the other hand, the new San Francisco air service, and recent restart of nonstop daily flights to Los Angeles by American Airlines, gives Visit Indy some rare airline service news to trumpet on its website and in promotional items.

"It's a new message we have been able to deliver to key meeting planners," Gahl said. "We can now tout nonstop flights to San Francisco and Los Angeles."

Airport and city officials think Indianapolis has taken almost all the hits it can take from airline consolidation, cost-cutting restructuring and other trends that have trimmed routes and raised fares in non-hub airports such as Indianapolis.

Passenger count declines are close to leveling out, projected to be down only about 3 percent this year over last, Matney said.

Indianapolis International, meanwhile, has adapted to the long decline in airline service by turning more to non-airline sources of revenue to finance its operations. They include land rent from a solar power farm on its property and landing fees from cargo carrier FedEx, which has created its second-largest cargo hub in Indianapolis. The airport collects more in landing fees from FedEx than all the passenger airlines combined.

Sweany, the Fishers businessman, said he sees an ironic side to the decline in air service in Indianapolis every time he uses the new terminal.

"It's such a wonderful airport. You would think your choices of flights and airlines would be equally as nice."