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Air service task force advises guarantee for airline
Jul 14, 2014 - By Eric Blom, Staff Writer
Tasked with improving service at Riverton Regional Airport, the Fremont County Air Service Task force is considering a revenue guarantee plan for airlines serving the airport.
Presenters at a July 10 meeting told the committee a revenue guarantee could ensure good air service and cost little to local backers.
The task force of local government and business leaders still is considering other options to address the erratic service and low enplanements at Fremont County's only commercial airport, including whether to continuing working with current carrier Great Lakes Airlines.
Rather than simply paying part of an airline's costs every year, as some Wyoming airports do, a revenue guarantee would guarantee an airline a certain level of revenue and make up the difference if the carrier falls short.
"It's not a subsidy," task force chairwoman Missy White said in an interview.
Kari Cooper, representing Jackson Hole Air Improve Resourc-es, and Wyoming State Sen. Hank Coe, president of Cody-Yellowstone Air Service said their airports have had success with revenue-guarantee arrangements.
The airline would only receive the guaranteed revenue if it provided the service outlined in a contract with a local authority, helping to ensure good service.
In a revenue-guarantee arrangement, a local group usually makes a contract with an airline for a year, stipulating the level of service, such as a morning and evening flight every day, and the amount of guarantee -- $1 million, for instance. At the same time, the local group has to raise the $1 million to set aside.
If the airline ran the two flights every day for a year but only made $500,000 because too few people bought tickets, the local group would pay the airline $500,000. Both groups would make a new contract for the next year, and the local group would have to raise more guarantee money again.
The Wyoming Department of Transportation Aeronautics Division estimated a revenue-guarantee for Riverton Regional would be about $4.1 million to $4.2 million, White said. The projection was based on two flights per day.
"What we asked for is something in the neighborhood of 80 seats a day to a major hub like Denver," White said in an interview.
In its last budget session, the Wyoming Legislature set aside $1.2 million for the airport, or 72 percent, whichever was less. With the estimate of $4.1 million, the airport would receive the whole $1.2 million and have to raise at least $900,000.
The task force would plan to raise that from local governments and businesses, White said.
"What we've been told is the revenue guarantee is the most manageable and equitable arrangement. The other option is a payment, and we don't want to go down that road," she said. "We want to make this a self-sustaining enterprise."
A major factor in planning the contract and making sure seats are full so the local authority does not lose money is forecasting how many people would fly through Riverton Regional.
The $2.2 million revenue estimate is based on about 25,0000 to 30,000 people flying through the Fremont County airport. White thinks that number is possible, but the task force does expects the service would have to grow over several years to that level.
Last year, about 13,000 people flew through Riverton even with half of local flyers, based on WyDOT data, going to other airports, she said, yielding about 26,000 local flights a year.
That figure does not include non-local people traveling to Fremont County but flying into other airports and driving, who could add to the total.
The task force's next step is to go to local businesses to ask what kind of air service fits their needs, such as if weekend flights are important, White said. WyDOT Aeronautics is also exploring air service options with airlines, she said.
The task force did not commit to anything, but advice from the experts indicates which direction might be taken.
In the meeting, most task force members said they supported Denver as the destination hub rather than Salt Lake City or elsewhere. White said Denver International Airport is more convenient because it has more connecting flights.
Cooper recommended creating a private non-profit organization to be the local authority for a revenue-guarantee contract. Airlines like to protect details of contracts, she said, and dealing with a private organization rather than a government body would allow the airline to do so.
The task force discussed multiple airlines that could serve Riverton.
Coe recommended working with United Airlines, pointing out it has a hub in Denver, and saying the Cody airport has had success contracting with United, which then has a smaller affiliate actually fly the routes. Large airlines are also the most reliable, Cooper said.
Both outside experts said air service to their communities has been beneficial to the local economy and that a revenue-guarantee system has helped them build the service.
Jackson has been doing a revenue guarantee system for close to 30 years and has been adding new routes recently, Cooper said. Spending from visitors who fly generates millions of dollars in taxes and in income for local businesses, she said.
Jackson is by far Wyoming's busiest airport, boarding more than 250,000 passengers annually. Cody typically has more than 25,000 boardings.
Cooper recommended constantly gathering data on airport customers and tweaking the service to draw more flyers. Advertising is also vital, she said.
The Cody airport lost service in the early 2000s, Coe said, and a revenue guarantee helped bring it back. He said visitors who fly benefit the local economy more than drivers.
"We found someone who flies there stays 3.9 nights. If they drive in, it's 1.4 nights," he said.
White said air service helps the local economy.
"There's also some businesses that are in the process of considering where to locate their operations, and a lack of air service is a detriment to Fremont County," she said. "We'd love to be able to let them know what's coming so they can base their operations here."