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From page 4... ... 4 Types of Air Service Incentives Air service incentives are financial inducements offered to airlines to encourage new service to particular airports and to mitigate some of the financial risk that an airline takes when it starts service in a market that it did not previously serve. Generally speaking, there are two sources of air service incentives: airports themselves and community organizations that are interested in a region's air service scale and scope, such as state and local governments, private business or economic development organizations, and convention and visitors bureaus. Read the entire page →
From page 5... ... Air Service Incentives and Their Use 5 development corporations, convention and visitors bureaus, and other business or governmental organizations. The types of air service incentives are identified in Exhibit 1. Read the entire page →
From page 6... ... 6 Building and Maintaining Air Service Through Incentive Programs How Are Air Service Incentives Used and What Kinds of Airports Are Using Them? This section provides an assessment of the characteristics of the air service incentive programs used by airports and communities and the extent to which they are used by airports of different sizes. Read the entire page →
From page 7... ... Air Service Incentives and Their Use 7 CVB: Convention and visitors bureau. EDC: Economic development council. Read the entire page →
From page 8... ... 8 Building and Maintaining Air Service Through Incentive Programs offerings) ; and 28 data items detailing the types and characteristics of the community-directed incentives in use in support of the air services operating at the airport (including information about the community organizations operating near the airport and URL links to stories and reports that document these community-directed incentive offerings) Read the entire page →
From page 9... ... Air Service Incentives and Their Use 9 Exhibit 3. Air service incentives GIS database tool screenshot, showing display options for choosing map appearance and individual incentives. Read the entire page →
From page 10... ... 10 Building and Maintaining Air Service Through Incentive Programs Exhibit 5. Screenshot from air service incentives GIS database tool, showing examples of how large hub airport data is displayed. Read the entire page →
From page 11... ... Air Service Incentives and Their Use 11 hub Denver (DEN) , which has a marketing assistance incentive with a $2 million upper limit, while Houston Bush Intercontinental (IAH) Read the entire page →
From page 12... ... 12 Building and Maintaining Air Service Through Incentive Programs duration of any marketing assistance incentives offered by the airport (12 months, 24 months, or none for airports that do not offer incentives of this type) , and whether or not the local government offered incentives of any kind for use of the airport. Read the entire page →
From page 13... ... Air Service Incentives and Their Use 13 As shown in Exhibit 9, terminal rent rebates are offered to airlines as parts of air service incentive programs more frequently at medium and small hub airports than they are at large hubs and at nonhub airports. Just over half of medium and small hubs are known to offer incentives in this form, compared with around one-quarter of large hubs and around one-fifth of nonhub airports. Read the entire page →
From page 14... ... 14 Building and Maintaining Air Service Through Incentive Programs Exhibit 9. Terminal rent rebate incentives offered as part of air service incentive programs. Read the entire page →
From page 15... ... Air Service Incentives and Their Use 15 Case Studies of Airports, Communities, and Air Service Incentive Programs Objectives of the Case Study Analysis While the GIS database of air service incentive program characteristics for programs in use by U.S. airports makes recent airport and program data available for nearly all U.S. Read the entire page →
From page 16... ... 16 Building and Maintaining Air Service Through Incentive Programs international service. For example, many airports and communities seeking international service focus on providing marketing assistance to promote the new service both in the community and abroad. Read the entire page →
From page 17... ... Air Service Incentives and Their Use 17 Hub Size Geographic Scope Incentive Sponsor Large Medium Small Nonhub Domestic Service Incentives Only Airport-Directed Community-Directed Team research did not identify any airports that had ONLY Community-Directed Incentive Programs Airport/Community BOI BZN GSP BIL SUN International Service Incentives Only Airport-Directed Community-Directed Team research did not identify any airports that had ONLY Community-Directed Incentive Programs Airport/Community Domestic and International Service Incentives Airport-Directed SEA SJC Community-Directed Team research did not identify any airports that had ONLY Community-Directed Incentive Programs Airport/Community DEN IND CMH PIT BTV DAB PBG Note: Shaded cells indicate categories where the project team's research did not identify any airports with incentives that fit that combination of service type, incentive type, and hub size. Exhibit 14. Read the entire page →
From page 18... ... 18 Building and Maintaining Air Service Through Incentive Programs and topics probed by these questions are among those an airport should consider when designing or revising its own incentive offerings. • Please describe your current air service incentive program. Read the entire page →
From page 19... ... Air Service Incentives and Their Use 19 • How has your community tried to manage the perception that incentives, particularly MRGs, represent a "handout" to air carriers? • What successes have you had related to attracting or retaining service with your ASIP? Read the entire page →
From page 20... ... 20 Building and Maintaining Air Service Through Incentive Programs PAX: Passengers. PDEW: Passengers Daily Each Way. Read the entire page →
From page 21... ... Air Service Incentives and Their Use 21 O&D: Origin and destination. SCASDP: Small Community Air Service Development Program. Read the entire page →
From page 22... ... 22 Building and Maintaining Air Service Through Incentive Programs in FAA's Policy and Procedures Concerning the Use of Airport Revenue, February 16, 1999, (64 Federal Register 7696) and Airport Sponsor Grant Assurances. Read the entire page →
From page 23... ... Air Service Incentives and Their Use 23 itself is not a party to the agreement, although being a party to the agreement is not sufficient for determining whether an offering of subsidy is nondiscriminatory. The cost of providing incentives may not be included in the rate base for airlines not participating in the incentive program without their express permission. Read the entire page →
From page 24... ... 24 Building and Maintaining Air Service Through Incentive Programs How has the use and design of incentive programs by airports changed since the publication of the FAA Guidebook? Since the publication of the FAA Guidebook in 2010, air service incentive programs have become more widespread among U.S. Read the entire page →
From page 25... ... Air Service Incentives and Their Use 25 airport's finances or revenues) Read the entire page →
From page 26... ... 26 Building and Maintaining Air Service Through Incentive Programs Oversight and Incentive Program Features What flexibility do airports have under the FAA guidelines to design incentives for less than daily service or to target particular destinations (understanding they cannot target specific airlines) with their incentive programs? Read the entire page →
From page 27... ... Air Service Incentives and Their Use 27 Exhibit 18. Permitted incentives based on sponsor and funding source. Read the entire page →
From page 28... ... 28 Building and Maintaining Air Service Through Incentive Programs As part of each interview, the project team asked questions that addressed issues and information about the following: • How the airline evaluates airport incentives – Which incentives are most valuable – Whether incentives are included in the airlines' route profitability models – Whether the value of incentives varies by the size of airport, source of funding, and whether the airline already has service at the airport • How the airline interacts with airports regarding incentives and discussions around potential new service – How the airline initially makes contacts with airports about incentive programs – How the airline interacts with airports in terms of proposing ideas for incentives – Whether there is a standard incentive package the airline expects from any airport seeking new service – What the airline looks for when airports are promoting new service – What the airline wishes airports would do differently when promoting new service • Any challenges associated with designing incentive programs for airlines that want to provide less than daily service • How incentive programs offered by non-U.S. airports differ from those offered by U.S. Read the entire page →
From page 29... ... Air Service Incentives and Their Use 29 the incentives in years 1 and 2 and one without the incentives in the initial years. According to Airline 1, this approach helps the airline ensure that the route is likely to be profitable when the incentives go away, that is, the "longevity of market is a key factor; we're not interested in putting something in a market for one to two years." Cost-reduction measures were most important for one of the ultra-low-cost U.S. Read the entire page →
From page 30... ... 30 Building and Maintaining Air Service Through Incentive Programs "Europe is a more business-minded environment" and that European airports generally have more flexibility than U.S. airports to customize incentives for particular airline business models. Read the entire page →
From page 31... ... Air Service Incentives and Their Use 31 significant role. In general, marketing funds and rent/landing fee waivers appear to be expected and part of the "price of admission." The assessment of revenue guarantees by airlines was more divided, with several airlines (of varying business models) Read the entire page →
From page 32... ... 32 Building and Maintaining Air Service Through Incentive Programs incentives, and (d) whether the incentives were airport-directed or community-directed. Read the entire page →
From page 33... ... Air Service Incentives and Their Use 33 Impacts of Air Service Incentive Programs on Airport Activity and Regional Economic Variables -- Jobs The comprehensive regression analysis presented in the Technical Report examines the effects of air service incentive programs and other airport characteristics on airport activity and airport quality of service as measured by annual commercial flights, annual departing seats, and QSI scores. This analysis indicates that there are few strong statistical links between the presence of incentive programs at airports -- whether airport-directed or community-directed -- and these service variables, especially for large and medium hub airports. Read the entire page →
From page 34... ... 34 Building and Maintaining Air Service Through Incentive Programs the range of airport activity in this analysis. For small hubs, ranging between approximately 600,000 and 3,000,000 annual departing seats, offering incentives is associated by the small hub model in Exhibit 21 with between approximately 61,200 and 306,000 additional annual departing seats, because the incentive offers are associated on average with an increase in departing seats of about 10.2%. Read the entire page →
From page 35... ... Air Service Incentives and Their Use 35 Econ Impact ($M) Income ($M) Read the entire page →
From page 36... ... 36 Building and Maintaining Air Service Through Incentive Programs between the presence of incentives of any type at small hub and nonhub airports and annual seat departures that was developed in the econometric modeling shows how incentives affect airport activity on average. Second, the estimates for the average relationship between regional jobs and airport seat departures show how the seats associated with an incentive program at a small hub or nonhub airport may be associated with changes in regional economies. Read the entire page →
From page 37... ... Air Service Incentives and Their Use 37 This analysis of the regional economic effects of an airport's decision to offer air service incentives is based on the association between two different types of analysis and relationship. The first is the link between an airport's use of an incentive program (of any type and scale) Read the entire page →

From page 4...

... 4 Types of Air Service Incentives Air service incentives are financial inducements offered to airlines to encourage new service to particular airports and to mitigate some of the financial risk that an airline takes when it starts service in a market that it did not previously serve. Generally speaking, there are two sources of air service incentives: airports themselves and community organizations that are interested in a region's air service scale and scope, such as state and local governments, private business or economic development organizations, and convention and visitors bureaus.