CAP will help recruit companies and venture investment

Competitive Airfare PartnershipBy Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.

When one thinks of entrepreneurial hotspots, the cities most likely to come to mind are San Francisco, Boston, New York and Research Triangle Park. All are home to venture capital firms, strong academic institutions, and robust, low cost air service.

The Knoxville-Oak Ridge region is frequently described as a “flyover community,” one that venture capitalists (VCs) cross at 35,000 feet on their way somewhere else. Because of Knoxville’s lack of low cost service and non-stops to the West Coast, local start-ups are clearly handicapped in their ability to get East and West Coast VCs to visit and invest.

The adverse impact, however, is not felt just by fledgling companies seeking venture funding. It is also beginning to impact the ability of local economic development organizations trying to recruit companies to the region, according to Dave Conklin of the “Competitive Airfare Partnership” (CAP).

Fortunately, there’s a concerted effort to try to correct the situation.  The Competitive Airfare Partnership is organized under the Knoxville-Oak Ridge Innovation Valley, the regional economic development initiative.

“Our objective is two-fold,” says the long-time airline executive who more recently retired as the top marketing person for the Metropolitan Knoxville Airport Authority.

“We want to recruit a low fare, sustainable carrier that is making money and offering options,” he says, explaining those options include multiple destinations at lower costs than are currently available.

While the local entrepreneurial community is not CAP’s target, the region’s start-ups would clearly benefit from the group’s initiative and the industry knowledge that Conklin brings to the group’s strategic efforts.

“Our real value is to the business community,” he says. “The existing fares (out of Knoxville) are about 25 percent above the national average.”

In fact, Knoxville air fares are the eighth highest in the nation among the country’s 100 largest airports. That reality not only makes it more costly to operate from Knoxville, but it is a negative factor that companies consider in evaluating the viability of the region as the location for a new facility.

Conklin cited one large area enterprise whose employees travel frequently. Its overall annual budget for airline tickets is about $10 million, and CAP projects that a low fare carrier would drop that cost by about $2.3 million.

I have known Conklin since we were neighbors in the early 1980s, and one of his strong traits is to come to any meeting armed with facts and figures.

During a recent presentation to the East Tennessee Economic Council, Conklin cited the impact on the Greenville/Spartanburg (GSP) and Charleston, SC airports after Southwest started service to both cities in 2011 and JetBlue added Charleston in early 2013.

In 2010 – the year before Southwest entered those two markets, Knoxville’s annual passenger count for domestic travel – business and leisure – was 1,451,166, nearly 300,000 above GSP at 1,175,390 and about a half-million below Charleston’s annual volume of 1,932,496.

Three years later, Charleston was approaching 2.5 million passengers, up 500,000 in three years, and GSP had increased by about 550,000 to 1.731 million. Where was Knoxville? Up almost 100,000 but now trailing both cities that, ironically, are becoming known for their emerging entrepreneurial communities.

Yet, Conklin points out that the Knoxville Metropolitan Statistical Area is larger than either South Carolina city.

Looking at costs alone, Conklin talks about an industry measure called “yield” which is the fare divided by the distance. In the case of Washington’s Reagan National Airport, a very popular destination of local business travelers, the yield out of Knoxville is a whopping 57.9 cents per mile compared to 33.5 cents per mile out of GSP and 35.5 cents per mile from Charleston.

For Conklin and CAP, there’s another important benefit for the regional economy.

“Our tourism market is likely 99 percent (people who) drive from within 400 miles,” he says. “Low fares would really impact and grow tourism here,” drawing a non-driving crowd from a much further distance to a region that is already home to the most visited national park.

After all, Conklin notes, “Orlando was nothing 50 years ago.”

CAP is working with local businesses to secure Letters of Intent toward a pool of $3 million to incentivize a low cost carrier to start service from Knoxville. Conklin emphasizes the money would only be used to help market the new service, not to underwrite the carrier’s costs, and would not be required until an agreement is in place with the low fare airline. The effort is currently on target and slightly above $1.6 million in commitments.

Companies interested in learning more should contact Conklin at dconklin@chartertn.net or 865/966-4461.

 

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