Good signs at Stewart

Port Authority of New York and New Jersey, owner and operator of the money-losing Stewart International Airport in Newburgh, last week issued its July 2018 traffic report. It was hard to fault the year-to-year improvement in the number of paying passengers.

In July 2016, Stewart reported 26,346 revenue-paying passengers flying in and out. During the first full month of Norwegian Air operations last July, 55,708 passengers paid to use the airport. This year 69,998 paying passengers flew in and out of Stewart during July, a double-digit improvement over last year. Stewart will be handling about 700,000 paying passengers this year, its best performance in a decade.

By this metric, things are looking up for the 1,200-employee regional airport. Both domestic and international passenger traffic have increased year over year.

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But the skies are not entirely clear. Storm clouds are rapidly approaching from the middle distance.

Even in an industry so volatile as the airline business, the forecasts have been unusually dire. “Norwegian fights for survival as predators circle,” a June 2018 Financial Times article was headlined. Norwegian Air finds its aggressive business model questioned and its debt level unsustainable, warned the article and similar ones. European business analysts are predicting a new wave of airline consolidations that they are sure will swallow Norwegian. A dyspeptic major discount competitor, Ryanair, has forecast the Scandinavian carrier’s collapse may come as soon as later this year. 

What happens at Stewart will neither save nor sink Norwegian. The slope of the growth of customer demand for its offerings, however, provides a leading indicator of the possibilities of low-cost routes between secondary American airports and European destinations.

Norwegian has been responsible for more than half the increase in revenue-paying passengers at Stewart since last July. Almost all the remainder came from the increase in the number of Allegiant Air passengers on domestic routes. In July, the number of domestic passengers at Stewart increased by 6,087 over the previous July. The number of international passengers increased by 8,203. 

The double-barrel double-digit increase of course accrues greatly to the benefit of the airport. In the short term, Port Authority’s growth strategy is working. Norwegian is generating the increase in international travelers and Allegiant the increase in domestic travelers.

Norwegian’s route schedule has changed, and it will continue to change. It is making two daily flights each way instead of one between Dublin and Stewart. It had also announced forthcoming plans for daily flights between the American airport and Edinburgh and Shannon. More recently, it announced that next May it will discontinue flights to Edinburgh because of a dispute over a passenger tax surcharge from Scotland. The parties have eight months to work out a deal.

Hard-ball negotiations between airports and airlines have become a more important element in the air transportation industry, and the footloose international discount carriers have paid close attention to this element of their cost structure.

Don’t worry about the heft of Port Authority of New York and New Jersey in any negotiations. The bistate public authority, which handles 125 million air passengers a year, has $5.3 billion a year in annual operating revenues and a capital budget of $2 billion a year. Port Authority, which has sufficiently deep pockets to afford favorable terms to sustain an operation that’s losing money now but gives promise of a turnaround, makes a good partner. 

Both Norwegian and Port Authority say they are pleased with their present arrangements. Though the value of the Stewart foray is not yet proven, the signs are promising. It’s possible that the size of the New York metro market will be sufficient to continue to draw more low-fare travelers to Stewart. If push comes to shove, the Hudson Valley airport may offer better opportunities than the Hartford and Providence airports with which Norwegian has also experimented.

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