It's in the Bank

It's in the Bank

Attracting air service through financial commitment of the business community

By Jodi Prill, Associate Editor

August 2002

The challenge of air service development is continually being addressed by airports and the communities they serve. Mike Boggs, former airport manager, offers one potential solution involving the business community, Travel Banks™, which promotes air service as well as economic development.

"The idea [of a travel bank] was the result of a lot of meetings with airlines and a lot of frustration between myself and the local business community in Eugene (OR), and not being able to figure out a way to influence airline decisions in favor of the community," explains Boggs, manager of airport business services for Mead & Hunt, a consulting firm based in Madison, WI. "We were looking for a way to increase the Eugene community's negotiating power with airlines for air service."
And that negotiating power is the travel bank. According to Boggs, a travel bank is formed when a community organization - generally comprised of the airport, chamber of commerce, and businesses - and an airline reach a contractual agreement stating that if the airline provides air service to a market, those businesses will use the service. Businesses are "locked-in" with the financial commitment by money deposited in the travel bank that can only be used toward purchases with a special credit card through the specified airline.
A travel bank is effective because "it locks in the commitment of the business community," Boggs says. So when the airline begins providing service, the businesses use the service.

Banking in Pensacola
Pensacola (FL) Regional Airport has had a travel bank with AirTran Airlines since November 2001. According to Frank Miller, airport director, the venture has been a success.

"People are using it (travel bank), it's doing exactly what we said it would do and it's really convenient for them."
Pensacola is a small hub airport, with last year's enplanements totaling 540,000. Miller explains that the local chamber of commerce and the City of Pensacola had identified air service as a priority, "so we were working to bring in a low fare carrier. Hearing about the travel bank at a meeting Mike (Boggs) attended, I came away thinking that may be a way to attract a low fare carrier into Pensacola."
Miller spent three long weeks making presentations to local businesses and was able to attract 327 businesses and individuals to pledge $2.7 million to the travel bank. He says the community was ready for something like this, so it was fairly easy to procure the commitment.
"The air service has resulted in increased enplanements," Miller says. "Our traffic for the month of May was up 26 percent over May of last year. It has also resulted in the airport being able to weather the aftermath of September 11th. We were tracking like all other airports in September and October of last year, with a 20 percent-plus decrease in traffic. In November, when AirTran started service, our traffic was up 5 percent and since then it's been a double digit increase each month."
AirTran offers travelers flights from Pensacola to AirTran's hub in Atlanta, and then onto 32 other destinations. Miller explains this is the reason they chose to bring in AirTran, which "provides service to the majority of our top destinations for our business travelers."

THE CHALLENGE
Boggs explains there are very few incentives to offer airlines for providing air service in a new market; but none appear to be as mutually beneficial as a travel bank.
Incentives such as revenue guarantees, marketing dollars, and airport landing fee reductions can all be used alone or in conjunction with each other, but they do not provide the guarantee that businesses will use the air service like a travel bank does.