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Revenue is tanking at T.F. Green Airport – on purpose

Target 12

WARWICK, R.I. (WPRI) – It’s unusual for any business operation to deliberately tank revenue, but that’s exactly what officials say they’re doing at T.F. Green International Airport.

The R.I. Airport Corp., the quasi-public agency which operates the state’s flagship airport in Warwick, estimates it will take in about $13 million in airline revenue this fiscal year, marking a steep 36% decline from the $21 million made during 2018-19, according to a recently released budget.

Non-airline revenue, meanwhile, is projected to decline 4% to just under $36 million. That includes all the money the airport makes on fees related to food and beverages, rental cars and parking.

For most business executives, such declines might raise red flags, but Airport Corp. President and CEO Iftikhar Ahmad insists it’s all part of the plan.

“This is by strategy,” he told Target 12. “We’re very proud of it.”

The strategy, he explained, is to drive down the cost of doing aviation business in Rhode Island, so that low-cost carriers – such as Allegiant Air, Frontier Airlines, Spirit Airlines and Sun Country Airlines – are attracted to bring flights here.

Since the fiscal 2014-15 year, the cost of doing business at T.F. Green has declined from $13.36 per passenger to an estimated $6.50 per passenger, according to the Airport Corporation. The state also created an Air Service Development Fund that has provided millions of dollars in taxpayer funds to subsidize routes.

As more low-cost airlines – often called “budget airlines” – enter the market, other airline companies are forced to reduce prices in order to compete, which all boils down to cheaper flights for passengers.

Making it more affordable for people to fly in and out of Rhode Island, Ahmad said, is good for the overall economy – even if it comes at the expense of less revenue.

“We’re not trying to make a profit here,” he said. “Our mission is to protect Rhode Island, its economy and whatever is in the best interest of our public.”

Despite the drop in revenue, the Airport Corporation remains in the black, with net income of $1.9 million in 2018-19.

The idea may sound good in theory, but how well it’s working is debatable.

Ahmad, who took charge of the airport in 2016, points to the influx of new budget airlines in recent years, along with the reversal of a years-long decline in passengers before his arrival, as evidence the strategy has worked.

But 2019 has brought some concerning signs, especially as Southwest Airlines has reduced routes across the country, including to and from Rhode Island.

After at least three consecutive years of growth, passenger numbers have declined this year, which could spell trouble for the overall strategy. In July, the number of enplaned passengers at T.F. Green totaled 1.1 million year-to-date, down nearly 10% compared to the same period in 2018.  

“The softening is in the demand,” Ahmad said. “Lowering the costs of doing business for the airlines doesn’t guarantee that people will buy the tickets.”

T.F. Green has to contend with other international airports in the region, namely Boston Logan International Airport, which creates fierce competition to attract both carriers and passengers.

“It’s very, very difficult to compete with the Boston airport,” said Yuwen Chen, associate professor of supply chain management at the University of Rhode Island. “We know the Boston airport, even though logistic-wise it may not be convenient, they provide way more frequent flights.”  

Chen said that is a problem for T.F. Green when it comes to convincing airline carriers to stick around for very long. If airlines don’t fill planes with passengers, they cut flights, which makes the airport seem less convenient.

“We know there are several airlines that tested the market in the airport, but eventually realized maybe they don’t attract enough passengers,” Chen said.

Rhode Island – already much smaller than Logan – also suffers from poor name recognition, according to both Ahmad and Chen.  

The Warwick airport is named after the late U.S. Sen. Theodore Francis Green, who as governor led the so-called “Bloodless Revolution” of 1935 that cemented Democratic dominance in the state. Green is described on the U.S. Senate website as “an ardent internationalist,” who worked on a range of issues, including the Truman Doctrine, the NATO alliance, the Marshall Plan and the Korean War.

But while his name may have been well-known in the 20th century, Ahmad argues it doesn’t ring out in the 21st century, which hurts the state and its ability to market the airport. Chen agrees, saying people who are not from New England don’t consider flying to Rhode Island – even if their final destination is closer to the airport than Logan.

“People who do not live in the immediate area, they would not know what T.F. Green Airport is. They would not know how close it is to Boston,” Chen said. “If we change the name to Providence, well, they know Providence is in Rhode Island, and it’s in New England and it’s not far from Boston. I think that definitely can attract some people.”

Chen suggested the airport should play up the fact that it’s much more convenient than Logan.

“If people have flown to Boston, they know it’s very, very difficult to get in and out,” he said. “’We are not Logan’ – this would be a good slogan for the Rhode Island airport.”

Ahmad has twice unsuccessfully advocated for legislation to change the airport’s name after running into opposition from Green’s heirs. He plans to try again next legislative session, although he admits the problem may be bigger, as Green isn’t the only name that fails to resonate with travelers.

“The other thing is the confusion of Long Island with Rhode Island,” Ahmad said. “I don’t have anything against Long Island, but I think people should know where we are, and what we have to offer.”

Ahmad said his five-year plan is to increase the number of passengers to between 5 million and 6 million and have about 35 nonstop flights with a dozen airlines. (There are currently 27 nonstop flights).

He admits the goal is lofty, but is adamant that it’s achievable – although a recession or soaring fuel prices could make “things get really sketchy,” he added.   

“The supply is here,” Ahmad said. “Now we’re trying to attract more passengers to come buy tickets so we can fill our planes.”

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for WPRI 12. Follow him on Twitter

Susan Campbell (scampbell@wpri.com) is the Call 12 for Action and Target 12 consumer investigator for WPRI 12 and Fox Providence. Follow her on Twitter and on Facebook.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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