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Wednesday, July 17, 2024

NC trend: RDU expects strong overseas growth.

As vice president of regulatory affairs and product safety for Merz Therapeutics North America in Raleigh, Hadley Iliff travels several times a year to Frankfurt, Germany, which is the company’s global headquarters. But until Lufthansa launched a direct flight from the German financial center to Raleigh-Durham International Airport in June, the trip meant flying through other cities.

Lufthansa added service between RDU and Frankfurt in May.

“This direct flight will eliminate several hours of travel time on each end of the trip and remove the natural potential for delays whenever there is a connecting flight involved,” says Iliff.

She’s not alone. The airport added three new international destinations this year, bringing the total to 10, a record for RDU and double the number in 2019, as airlines accommodate growing demand for international flights, including many business travelers.

The expansions come as RDU led the largest 50 U.S. airports in passenger growth last year, according to U.S. Department of Transportation statistics. Boardings gained 22% to a record 14.5 million. That number is projected to grow 7% to 15.5 million this year.

In addition to Frankfurt, where Lufthansa offers flights five days a week, RDU added service in June to Panama City, with four flights a week by Copa Airlines. Next up is Mexico City, with Aeromexico launching service in July. That follows Air France, which began flights from Paris in October, taking over the route from Delta Air Lines.

IcelandAir, which started flying four days a week from RDU in 2022, added year-round, daily flights to Reykjavik in May. “We’re the fastest community in 15 years that’s gone from less-than-daily service to daily service” for Icelandair, says Michael Landguth, CEO of the Raleigh-Durham Airport Authority.

Those new flights are in addition to Air Canada’s service to Montreal and Toronto and American’s London flights. Bahamasair also flies from RDU to Freeport, and Airlines’ London, while Delta and JetBlue fly to Cancun, Mexico.

To be sure, RDU’s global offerings are less than Charlotte Douglas International Airport’s 37 international locations. Boardings in Charlotte increased 12% to a record 53.4 million last year, More than 90% used American Airlines’ second-largest hub.

Landguth says he’d like to attract more flights to Central America and South America due to the state’s large agriculture industry, and also India because of its rapidly growing middle class. “They have income. They want to travel,” he says. “Guess what else they want to do? They want to go to great universities. So we need to make sure we have a good pipeline.”

For now, though, the airport is taking a “momentary pause” and working to make sure the new service is successful, Landguth says.“The worst thing you can do is try to recruit and over recruit and then you start getting failures from an international standpoint,” he says. “We need to get [the new flights] stabilized first.” For example, Air France wants to fly a larger plane into RDU, which likely means moving to a gate now occupied by American.

For his pitch to Lufthansa, Landguth looked at what St. Louis Lambert International Airport did to attract the German airline in mid-2022. While German conglomerate Bayer bases its U.S. crop science headquarters in St. Louis, the airport had no nonstop transatlantic flights. So Greater St. Louis Inc., which represents the region’s business community, and the local port authority agreed to pay Lufthansa as much as $5 million over a two-year period.

RDU’s authority put together a package of about $3 million in fee waivers and marketing support to Lufthansa. Merz and other companies pledged to buy a certain number of tickets, and state government chipped in $3 million in incentives. “This is what I call a pay-to-play game,” says Landguth. “If you don’t come with the incentives, then they look at the market and say, ‘Obviously you’re not very optimistic that it’s going to work.’”

Lufthansa is the world’s fourth-largest airline with revenue increasing 14.5% last year to $38.6 billion in 2023. Profit more than doubled to $1.85 billion. It flies to 26 U.S. cities, also launching  service to Minneapolis-St. Paul in June.

Landguth emphasized to Lufthansa that at least 10 German companies had Triangle-area subsidies with at least 100 employees, including BASF, Hanson, Bosch and Mann & Hummel. “We’ve been talking to Lufthansa since 2014,” says Landguth. “It’s a long conversation to have because it’s a huge investment those carriers are going to wind up making.” It helped that the Raleigh-Durham market is the largest in the United States that did not have a direct flight to Germany.

Europe is also RDU’s largest international market. Of its 1.5 million international travelers each year, more than 600,000 have Europe as a destination. More than 200,000 fly to the Caribbean, followed by 160,000 heading to Asia.

Germany is the second-largest European destination for RDU travelers, behind the United Kingdom. Nearly 60% of the airport’s travelers to Europe do not use its London, Paris and Reykjavik non-stop flights.  Landguth displays a map showing RDU travelers come from as far north as Lynchburg, Virginia, and south into South Carolina — an area with a population of 4.4 million.

Tim Gabel, the chief executive officer of RTI International, boarded the first Lufthansa flight to Frankfurt in June. The nonprofit research organization has staff based in Germany who are working with pharmaceutical and biotechnology companies there, along with offices in Barcelona, Spain, and Lyon, France. “Having another international flight is important for the region,” says Gabel. RTI views Europe as a growth market and “a great segue into Africa and Southeast Asia.”

The airport authority estimates that the Lufthansa flight would generate $3.3 billion in economic impact during the next 25 years, and about $125 million in state and local tax revenue.   

Merz Therapeutics executive Iliff believes the Triangle’s substantial pharmaceutical industry will help lead to more international flights at RDU. “In turn, this can grow the potential local talent pool, enhance innovation and widen professional networks,” she says.

“[RDU is] the canary in the coalmine,” Landguth says. “We’re a good indicator of what’s going on in the community. What we’ve got to do is go sell it.”

Chris Roush
Chris Roush
Chris Roush is executive editor of Business North Carolina. He can be reached at croush@businessnc.com.

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