LR airport hopeful incentives will snag direct Mexico flights

To expand its service with new airlines and destinations, Little Rock National Airport, Adams Field will increase its marketing incentives budget to $250,000 in 2008, up from $100,000.

In part to try to snag a direct flight to Mexico, the Little Rock Municipal Airport Commission gave unanimous approval Tuesday both to raise that budget and approach local businesses and groups for support.

Joseph Pickering, a senior consultant with Mead & Hunt's Aviation Business Services in its Peachtree City, Ga., office, presented findings to the commission at its monthly meeting. Earlier this year, the commission approved incentive program recommendations and a larger market study from Mead & Hunt, Inc., a Madison, Wis.-based consulting firm.

"Incentives do work" when airlines decide where to add service, he told the commission. "They can work as a tie breaker." The airport's incentive plan, which was established in 2003, combines fee waivers and marketing support, including no overnight fees, no landing fees for six months for new or expanded nonstop service and reduced gate rentals. Marketing awards to promote the launch of a new service are capped at $25,000.

Mead & Hunt's recommendations included targeting incentives based on the value of markets rather than using a one-size-fits-all approach. For example, Pickering said, Europe should have more value than Phoenix. A mainline jet should have more value than a regional jet.

The airport should also make the promotion periods longer and consider making facility improvements, such as adding signs and counter space, Pickering said.

According to the study, incentives help offset the risk associated with adding a new service to an airport. Airlines associate greater risk with smaller airports, so the smaller the airport, the bigger the incentives needed to attract new service.

Airports of all sizes have incentive programs. Dallas-Fort Worth International Airport, for example, caps its program at $7 million per year and includes landing fee rebates and marketing support for service launch and new carriers. For example, a new international route with a Boeing 747 could receive $1.4 million versus $200,000 for a regional jet flying to Mexico.

Larry Lichty, chairman of the commission, said that he was shocked by some of the incentives offered by other airports.

"I think you get the picture of what we're up against," he added.

It's also important to join forces with local businesses and organizations, such as the Little Rock Regional Chamber of Commerce and the Little Rock Convention and Visitors Bureau, to persuade airlines to add service and flights, Pickering said.

Adding service "should be viewed as an economic development," Pickering said.

Little Rock serves a market of about 1.3 million people, with about 1.24 million passengers boarding planes to leave Arkansas in 2006. A total of about 2.4 million passengers arrive and leave from the airport annually. Although the airport retains most of its passengers and does have nonstop service to most major hubs, it's missing service to major East and West coast destinations - excluding one daily flight each to Washington Dulles International Airport and Newark Liberty International Airport.

"My sense is we've picked the low-hanging fruit," Pickering said. "You've got great service, but most of your hubs are served well. The next level of service is going to be more difficult." Deborah Schwartz, executive director of the airport, said during the meeting that the increase in the marketing budget was specifically to target direct service to Mexico.

Philip Launius, spokesman for the airport, said AeroMexico, Mexicana and Frontier airlines will be contacted about adding service to a Mexican destination in the near future. Although there's no firm city, Launius said Frontier would probably fly to a resort destination such as Cancun or Cozumel, whereas Mexico-based Mexicana had mentioned Guadalajara, the nation's second-largest city. "It's going to depend on the airline's network and what they want to do," he added.

One additional hurdle in adding international service to Little Rock: There's no customs area. Because the terminal will either be rebuilt or expanded in the coming years, they're not ready to spend money on setting up a customs area, Launius said.

"We don't want to waste money on a facility that may or may not fit into our future plans," Launius said.

Instead, the flight will have to stop at another U.S. airport to go through customs before arriving at Little Rock. Another possible solution would be for the federal government to allow for the customs office to be in Mexico. Canada has "preclearance" for U.S. customs at some of its airports, and the Mexican government is pushing hard for the same privilege, Launius said.

Other data in the market study found that in a comparison of the summers of 2000 and 2007, seat capacity has decreased by 18 percent.

In 2007, the airport retained 91 percent of its passengers, down from 99 percent in 2001. The study showed that of the primary area of travelers, 5 percent used Memphis International Airport and 4 percent used other airports in Arkansas.

"Having that high of a retention rate is very unusual," Pickering said in an interview after the commission meeting.

In a comparison of fares, Mead & Hunt found that Little Rock had lower prices in 20 of the top 25 markets, and Little Rock's average one-way domestic fares were $26 lower than those in Memphis.

This article was published 09/19/2007