Incentivizing Air Service

A transportation specialist, a consultant, and an airport give strategies for offering commercial air service incentives.

“It’s important for communities to understand that each incentive has risk associated with it,” adds Audino. “Marketing support tends to be a low-risk investment on the part of an airport; revenue guarantees and travel banks usually require a good chunk of change and are riskier ventures.

“It’s also important for communities to understand that there are no guarantees that incentives will lead to long-term success; failure is an option.

“It’s extremely important for airports to take the lead in educating the community, both the business community and the general public, and helping them understand the fundamentals of air service development.”

Targeting air service at Sarasota Bradenton

“Sometimes offering incentives worked, sometimes they didn’t,” says Sarasota Bradenton Airport president Piccolo. “Overall, our program has worked very well and has enhanced airline service here.

“We used our incentive program and combined it with a Small Community Air Service Development (SCASD) grant back in ’05 to attract AirTran here — now it does more than 400,000 passengers per year.

“We also used our incentive program to help attract Jet Blue here — it serves us year-round, has been here now for three years, and is adding service to Boston in November. AirTran is adding Milwaukee in November.”

Sarasota’s incentive program works like this: “We set up different target markets that we want to get service to and that we don’t already have service to,” relates Piccolo. Then, depending on the number of flights an airline is willing to operate per week, and whether it’s year-round or seasonal, it may qualify for an abatement of so many dollars per passenger enplaned.

“For example, if you’re going to fly twice per day, 52 weeks per year, daily service to say, Detroit, then you would get a $7 per enplanement fee abatement. So you take your rent and your landing fees and all that, and you deduct $7 per enplaned passenger; aircraft size (amount of passengers per aircraft) also applies.

The airport also commits marketing support of up to $500,000 per year for the first year; the marketing support varies from $62,000 to a half a million depending on the level of intensity of the service, says Piccolo.

“We aren’t trying to set up airlines to be in competition with each other, we’re looking to add service to the community,” he says.

Piccolo says the airport has had an incentive program of some sort since 2001. Last year during the downturn, the airport didn’t have any airlines take it up on its offers. “On average, I say we get two carriers per year who will try the incentive program with a particular route,” he remarks.

“I’d say our program has been successful about 75 percent of the time (new service becomes sustainable).
With regard to adjusting the program over the years, Piccolo comments, “In the beginning we were constantly tweaking the program; it was far broader in the early years.

“What we found over time was that we needed to be more targeted; we needed to set a certain number of rules to make it worthwhile to us as well as to the airline — now the program is sophisticated in the sense that it’s very targeted.

“Another key component of the program is that we offer it to any airline, either new or incumbent. Because we focus on the city pair that we don’t currently have service to, we’re not subsidizing competition to an existing city pair here at the airport. Any carrier is eligible to get the incentive for providing service to a new city pair.”

On the marketing front, Piccolo says money comes from interest earnings on the airport’s reserve. “So we don’t use any airline revenue from our carrier activity to help pay for that; it comes out of our own pocket so to speak,” he says.

A consultant’s perspective

Boyd Group’s Sieber says where incentives are most effective is in getting an airline to potentially move an airport up on the pecking order of other markets that the carrier is willing to take a risk on.

“Whether the incentive be fee waivers, marketing support, or risk abatement funds — absent there truly being a market which can be self-sustaining over the long term, we recommend that airports not offer incentives,” relates Sieber.

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