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Incentives Are Key in Fight for Air Service

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Incentives Are Key in Fight for Air Service

Incentives Are Key in Fight for Air Service
January 20
15:43 2015

MIAMI — Airports looking for new or expanded service should have an aggressive incentive program in place in order to attract attention from the airlines, says an air service consultant. Pittsburgh International and Raleigh-Durham International airports feel like they have plans in place that will get them the service to the domestic and international markets they have targeted in 2015.

Michael Lum is the executive director of Air Service Strategy and Development for Eugene, Oregon-based Sixel Consulting Group. Past wins for the firm include Kalispell, Montana, to Los Angeles via Alaska Airlines, Idaho Falls, Idaho to Minneapolis-St. Paul via Delta Air Lines and Portland, Maine, to Chicago Midway on Southwest Airlines.

Michael Lum.

Michael Lum.

“I think the best thing we can do for an airport wanting new or expanded service is to give them guidance as to how much money it will take in incentives to attract an airline,” said Lum. “Some airports don’t really understand airlines’ economics and the money at stake, so they underestimate the money needed to incentivize the airlines.”

The first question is always what an airport’s expectations are, said Lum. “If we think they are being realistic, we can work with them. For example, if a city like Richmond, [Virginia], called and said `we want service to London on British Airways, we would say that won’t happen, and they wouldn’t be a good match,” he said. “It’s important to understand expectations before working with a client and have a pretty good understanding of what an airport’s strategies are and what markets they are looking at.”

Teresa Damiano is the vice president of communications and community affairs for Raleigh-Durham International Airport. While her airport has informally offered incentives since it got service to London from American Airlines back in 1994, it wasn’t until April 2014 that the program was formalized by the airport’s board.

Terminal 2 at Raleigh Durham International Airport.

Terminal 2 at Raleigh Durham International Airport.

“The airport authority offered $500,000 for marketing support for the new flight to help with awareness. We worked with the state tourism organization, the convention and visitors bureau and American Airlines in partnership,” said Damiano. “We did FAM trips for media writers and worked with American on travel packages to make the London community aware of North Carolina as gateway to the United States. We did a similar effort in 1996 for our Toronto service with Air Canada.”

On the domestic side, RDU is focusing on flights to the West Coast, especially Seattle and San Diego, said Damiano. “There are others, but these two markets are named in our official air service policy,” she said. “It includes $250,000 in targeted marketing support that is managed by us for two years.” The policy expires in two years, which gives the airport flexibility with incentives, she added.

On the international side, the airport want service to Paris or Frankfurt, said Damiano. “We offer marketing support for international flights of $500,000 over two years, along with landing fee waivers and other fee waivers at the airport’s discretion,” she said.

RDU got service to San Francisco in 2010, and sees Seattle as a similar city. “The size of that market has grown, and the synergies between Seattle and Raleigh-Durham is natural,” she said, noting that Seattle and San Diego are their largest markets with no direct service.

The airport celebrates new service to San Francisco by United Airlines.

The airport celebrates new service to San Francisco by United Airlines.

Looking at the total traffic taking international flights, the RDU region has 1.5 million passengers a year, said Damiano. “Our daily London flight has done very well for 20 years,” she said. “Our analysis shows that the majority of our international traffic is going to various places in Europe, so the gateway capabilities of Paris or Frankfurt are almost on an equal level on a connectivity standpoint.”

In making the case to airlines, it all starts with the local economy and what the business activity in the region is, said Damiano. “We are a growing region with various number one accolades that the community receives. We are home to entrepreneurs and we have one of the top biopharmaceutical industries in the world,” she said. “We also have robust clinical research facilities, we have Duke and the University of North Carolina-Chapel Hill, medical facilities and major cancer research.” North Carolina State University and North Carolina Central University are also in the region.

RDU can show airlines that its future growth goes west and internationally, said Damiano. “And it’s all backed by data created by the airport and and our air service consultant,” she said. “We also do expectations of loads and operating costs to make the airlines’ job of analyzing routes a little easier.  They do hundreds of these, so we can do the analysis and put it on their radar screen.”

And the airport created a microsite for the World Routes conference in September to offer airlines fresh data, said Damiano. “Constant communications and good data are key, along with face-to-face meetings,” she added.

Jim Gill is the acting airport director for Pennsylvania’s Allegheny County Airport Authority, which oversees Pittsburgh International Airport. He said his airport’s incentives program, started a few years ago, was built around offering reduced landing and gate fees for routes without nonstop service.

“We updated the program last year to make it work more for what carriers are interested in,” said Gill. “Some airlines are interested in lower landing and gate fees, while others are just interested in marketing support.”

What Pittsburgh’s air service manager does is offer flexibility in plans to address the concerns and needs of specific carriers on the routes they want, said Gill. “Previously, our incentives were target-based and inflexible,” he said. “So we now have the ability to offer whatever they need.”

It’s important to offer balance with incentives programs, said Gill. “Obviously, we try and be as active as we can getting information about or airport to new airlines, but we don’t want to ignore incumbent carriers,” he said. “It’s all part of a proactive effort to get the word out, whether going to air service conferences, our staff serving on air service committees, sharing information with carrier planners and developing those relationships.”

Airports know it’s all about putting people in seats, said Gill. “Airports are a small part of the cost to run a route, and we have to be competitive and partner with airlines on the success of a route,” he said. “Developing long-term relationships with incentives leads to more frequencies.”

The celebration for Delta’s service to Paris.

The celebration for Delta’s service to Paris.

Gill used the airport’s service on Delta Air Lines to Paris Charles De Gaulle Airport as an example. “Delta operated this flight under a subsidy from the local business community. The subsidy has been gone for a few years and the route is still operating,” he said. “I’m not sure the route would have come to fruition without the subsidy. If nothing else, it accelerated interest in the market, and it’s a good example of reaching out and creating the opportunity.”

In making the case for air service, it’s all about putting people in seats and being profitable, said Gill. “We will abide by all the restrictions as related to incentives promulgated by the FAA, but we will go to the utmost extreme for the greatest opportunity for success,” he said. “JetBlue added service to Fort Lauderdale even though it was already being served by Southwest Airlines.”

The airport worked with JetBlue on a coordinated event with corporate travel planners and travel agents, said Gill. “It was a chance for them to learn about the new service and ask questions,” he said.

Pittsburgh is not a hub anymore, but it is still hungry for service, said Gill. “Our local economy is growing and Pittsburgh continues to reinvent itself, and a carrier can come into this market and grow.”

The competition for air service gets more difficult every day, said Lum, noting how American, Delta and United are shrinking their regional jet fleets. “But they are replacing the 50-seat RJs with larger regional jets or even mainline aircraft but not on a one-to-one basis,” he said.

The year 2015 will be even more difficult because airline fleets are not growing, said Lum. “What’s happening with most airlines is that they are adding capacity, but they’re adding because the average size of aircraft being added to fleet is increasing and replacing smaller aircraft,” he said.

Airports can’t stand out from the crowd if they don’t have a market, said Lum. “Any airport these days need to have a very aggressive incentive program, because most airports already have them,” he stated. “With all things being equal, the airport with the best incentives program and the lowest ongoing operational cost is going to win.”

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About Author

Benét J. Wilson

Benét J. Wilson

Mother, Aviation Queen, Veteran Aviation Journalist, AVgeek since age six, number one fan of the Boeing 747 and Student pilot (can't stick my landings). I would actually pay rent to live in an airport. bwilson@airwaysmag.com @AVQueenBenet

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