Dec. 20 -- Aberdeen's $500,000 small community grant to help finance an airline is expected to last only one year unless revenue increases for Great Lakes Airlines.
The city received the grant to help entice a second airline to the area. It worked.
Great Lakes Airlines, Aberdeen's newest air carrier, began flying into Aberdeen on Oct. 28. On Nov. 27, the city received its first bill from the carrier -- $18,214.90. That amount was determined by subtracting the company's actual revenue from its goal.
The Wyoming-based airline had a targeted gross revenue of $25,585.87 for October. Because Great Lakes began flying Oct. 28, that means the company was expecting to make an average of $6,396.47 per day. In reality, the airline made $7,370.97 total.
There were 11 total flights in October, each on a 30-passenger Embraer Brasilia plane. This means 330 seats were available in October. Great Lakes Airlines' Web site offered introductory one-way fares to Denver for $79. To reach the projected goal of $25,585.87, 324 of the 330 seats had to have been sold.
Airport manager Dave Osborn said offering introductory fares is normal for a new airline. He said paying the company the $18,214.90 is like paying a businesses start-up fee.
A draft of the contract between Great Lakes and the city of Aberdeen originally said that if roughly 21 of the plane's 30 seats were filled, the airport would not owe Great Lakes any money. But after a contract revision, the payment is now based on the amount of revenue generated each month versus the company's goals.
In November, the company's expected revenue is $217,563. With 30 days in November and two round-trip flights per day (or four flights per day), that means 120 flights in and out of Aberdeen. With 30 seats per flight, 3,600 seats were available.
Assuming the company is still offering its $79 introductory one-way fares, 2,754 tickets would have had to be sold to reach the goal of $217,563 for November. The city has not received a bill for November, and Osborn does not know know many seats were sold. Great Lakes Airlines officials could not be reached for comment.
If the company sells seats at $152, which was described as the "normal rate," 1,432 tickets would need to be sold.
Money from the grant is expected to run out in a year, but by then the airline should be running on its own, Osborn said. The airline is under obligation to serve Aberdeen for three years, regardless of revenue and grant money, he said.
According to the contract between Great Lakes Airlines and the city, the expected revenue and grant breakdown is as follows:
--October -- expected revenue: $25,586; amount expected from the grant: $13,644 (the airline made less than expected, and the grant made up that amount).
--November -- expected revenue: $217,563; amount expected from the grant: $91,563.
--December -- expected revenue: $236,199; amount expected from the grant: $84,299.
--January 2007 -- expected revenue: $219,549; amount expected from the grant: $78,149.
--February 2007 -- expected revenue: $220,734; amount expected from the grant: $67,434.
--March 2007 -- expected revenue: $229,615; amount expected from the grant: $50,415.
--April 2007 -- expected revenue: $204,865; amount expected from the grant: $30,565.
--May 2007 -- expected revenue: $256,733; amount expected from the grant: $33,713.
--June 2007 -- expected revenue: $234,826; amount expected from the grant: $46.
--July 2007 -- expected revenue: $235,891; amount expected from the grant: $131.
--August 2007 -- expected revenue: $238,023; amount expected from the grant: $23.
--September 2007 -- expected revenue: $206,642; amount expected from the grant: $2.
--October 2007 -- expected revenue: $238,996; amount expected from the grant: $16.
If Great Lakes reaches its targeted monthly goal, the airport owes nothing, and each dollar above the targeted goal will be credited toward the following month's targeted goal, according to the contract.
The airport will spend $90,000 in cash and in-kind services over 12 months for the promotion of Denver-Aberdeen air service awareness through an advertising and marketing campaign, also according to the contract.
Osborn said the projected revenue isn't out of the ordinary.
In October, if the tickets had been sold at the normal rate of $152, about 161 of the seats, roughly half, would have needed to be sold.
Great Lakes is partnered with Frontier Airlines and United Airlines. Aberdeen's other carrier, Mesaba Airlines, is partnered with Northwest Airlines.
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