Cleveland Hopkins Thinks Big

Cleveland Hopkins expects to be handling 12.7 million passengers a year by 2010, and is already making significant progress towards its goal. However, the target relies on Continental Airlines' plan to increase service at Cleveland by 40 percent and the airline's recent announcement that it would cut 67 aircraft from its fleet could affect Hopkins' hopes adversely. Credit: Cleveland Hopkins International Airport

Cleveland Hopkins International Airport is used to making headlines. When it opened in 1925, it was the first municipally owned airport in the United States. It was also the first U.S. airport — in 1968 — to build a rapid transit rail service, giving passengers in downtown Cleveland direct access to its facilities.

More recently, Cleveland Hopkins International (IATA three-letter code 'CLE') has made news with the publication of an aggressive strategic development plan, a key target of which is to grow passenger numbers by up to 12 percent by 2010. In real terms, this means increasing the volume of passengers going through CLE to approximately 12.7 million. But the airport is already making good headway. Indeed, in 2007, passenger figures were up by more than 138,000, taking it to a total of 11.4 million.

Arguably, a large proportion of this can be attributed to Continental Airlines’ announcement in September last year that it intends to grow capacity at the airport by 40 percent over the next two years. Currently CLE’s biggest carrier, bringing in some 66 percent of the airport’s passengers, Continental expects its growth to evolve in three stages. The first of these got underway in 2007 thanks to significant increases in capacity on existing flights, including a 45 percent uplift on the number of services to San Francisco.

The second phase — to add 27 new flights to 12 new non-stop destinations — has already begun, too, with the creation of three new routes to Greensboro, North Carolina, Omaha, Nebraska and Savannah, Georgia, in March 2008 and flights to Birmingham, Alabama, Charleston, South Carolina, Green Bay, Alabama and Tulsa, Oklahoma, having commenced in April.

New flights

Five other new domestic destinations would follow in May and June, including Little Rock, Arkansas, on May 4, and Kalamazoo, Michigan, on June 12. But perhaps most significant of was the introduction of a new, seasonal international service to Charles de Gaulle, Paris on May 22, bringing Continental’s count of international flights from CLE to six.

“This is a very important and high-profile destination for us — one that will provide us with a wonderful connecting opportunity to Europe and the rest of the world,” said Todd Payne, chief of marketing and air service development at CLE.

But neither Continental nor CLE plans to stop with Paris. Payne expects the airline to announce “as many as a dozen new flights this summer.” In addition to this, the U.S. Department of Transportation (DOT) gave its tentative approval in September last year for Continental to run a route between New York/Newark and Shanghai as of March 2009, with a through service from Cleveland.

“This will provide non-stop flights to the largest U.S.-China market that today lacks daily service,” said Robbie Anderson, Continental’s senior director at Cleveland. “The new route will also provide vast single connecting opportunities from the airline’s New York Liberty hub, in addition to the through flight service between [CLE in] northern Ohio and Shanghai.”

What is it that has prompted Continental to enter into such a rigorous route development strategy through CLE?

When Routes News posed this question to Anderson, he not only cited “the professional leadership of the management at Cleveland Hopkins,” but also the number of “exciting changes” that are taking place at the airport.

Innovative concessions program

For Anderson, the development of a brand new BAA USA concessions program, which commenced in April, has been a significant draw. Certainly, it has been one of CLE’s key initiatives.

“We expect that the program will transform how we do customer service,” said CLE’s director Ricky Smith. “[Market research firm] JD Power has already rated us as the number one airport in the state and number four in the country, in terms of customer service, so we do well. But this concessions program will take us to a new level.

“We project we will double our sales from the beverage and food operation,” added Smith. “Our current program generates about $30 million a year, but our new program projects around $62 million a year.”

According to Smith, BAA USA intends to utilise ‘street pricing’ in its food and beverage outlets, so the prices charged to passengers in the airport won’t be any different to those they’d pay in their home towns. In addition, because BAA USA won’t own any of the stores or outlets itself, individual operators will be forced to compete with one another for the passenger’s dollar.

“Where you have competition, you drive quality of service,” said Smith. “And that, in turn, will drive willingness to spend, which will drive revenue.”

Interestingly, the extra $30 million per annum that CLE predicts it will generate through its concessions program will be fed back into a special fund that has been created to help lower the cost for airlines to operate at the airport.

Air incentive program

The fund is a major component of CLE’s air service incentive program, which was launched less than a year ago to entice airlines that currently operate at the airport — including Continental, Southwest Airlines, USA 3000 and United Airlines — to grow the frequency of their existing services.

The program is also being used to encourage both current and prospective carriers to open up brand-new routes, with CLE’s Todd Payne citing Mexican destinations outside of Cancun, and other European destinations such as Amsterdam and Frankfurt, as high on the airport’s wish list.

The incentive program — which is available for six months, per airline, per route — has two key facets: a landing-fee waiver and a cooperative marketing program, where CLE will potentially match an airline’s marketing campaign budget to promote a new or expanded service both at the destination market and locally at Cleveland.

“The air service incentive is valued at about $3.3 million as we speak, the lion’s share of which is in the six-month landing fee waivers,” said Payne. “The marketing funds are meantime worth between $10,000 and $40,000 per route, based upon the size of the aircraft, the frequency of the flight, and the size of the market.”

In addition to these shorter-term incentives, airlines are also being encouraged to expand or move to CLE based on a tempting re-division of non-airline revenues. Under previous agreements, airlines used to get a share of non-airline revenues based on the amount of space they leased at the airport. Now, that share will be calculated according to the number of passenger boardings.

“So if an airline grows at Hopkins, their costs will actually reduce,” said Payne, adding: “Some of our airlines have dramatically reduced their costs this way.”

Certainly, the figures would seem to stack up for any carrier looking to develop in or expand its route system from Cleveland. After all, CLE experienced a 9 percent increase last year in non-airline revenues — up from $44 million in 2006 to around $48 million in 2007. Plus, as an overall trend, the airport has seen its non-airline income grow from about 46 percent of total revenue in 2001 to nearly 54 percent by the end of last year.

And the incentives don’t stop there. The airport has managed to cut its landing fees from around $5 per 1,000 pounds of aircraft a year and a half ago to just $4.15 today.

Reducing costs

“Moving forward, we have engaged in a very aggressive program to lower our landing fees and other costs further,” said director Ricky Smith.

“Some of that includes taking services that are currently performed by the airline and bundling them with the airport’s contract," said Smith. "For example, an airline would previously have incurred costs for janitorial services performed in the public areas that they are responsible for. By bundling those services, we are taking both responsibility and cost off of the books of the airline. We believe we can offer some great efficiencies there.”

Elsewhere, the deployment of high-speed snow removal equipment has allowed CLE to remove snow twice as quickly as it has done historically. This has had a significant effect on the average runway clearance time at the airport; today, carriers can expect to be off the runway in just 28 minutes, compared with an average clearance time of 46 minutes at the end of 2006.

The airport is also in the process of expanding one of its runways, adding an extra 2,000 feet by the end of 2009. This, complemented by the building of a new international facility set to be completed by 2010, will give CLE more capacity to handle long-haul flights.

And then there’s the investment CLE has made in both security and car parking. Through the former, the airport has managed to cut in half the processing time passengers can expect when going through security checkpoints.

Meanwhile, through investment in parking reorganisation, passengers can now park much closer to the airport than they could this time two years ago. This summer, CLE will be introducing a new valet-parking facility, too, providing a number of additional concierge services, including vehicle maintenance and dry-cleaning services for clothes.

As for the future, the plan is to keep on growing, according to Smith.

“We’re in a competitive environment, competing particularly with Pittsburgh to the east and Detroit Metropolitan to the west,” he said. “Over the years, we’ve lost passengers to those airports and we’ve made some progress to redress that. By 2010, we hope to have made significant progress in regaining passengers in our catchment area.”

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