How to Select Appropriate Incentives and Identify Resources to Enhance Air Service
In the current highly competitive airline environment, community-provided airline incentives are increasingly common. Airport and community members seeking service improvements may convince airline decision makers not only that the market has the required passenger and revenue potential but that the community is committed to supporting the service to ensure success and is willing to share the airline’s risk. In every air service market there are conditions and barriers-to-entry that tend to inhibit the success of air service initiatives. Limited airline resources and the need for communities to maintain or improve local air service have increased competition for air service. While airlines capacity is growing only slightly, in order for the airlines to add service in one community, they often reduce service in another. These factors have spurred interest in community sponsored air service support programs and related airline incentives.
Airline incentives take many forms, including:
- airline revenue guarantees
- cash payments
- marketing support
- airport fee waivers
- facility improvements
- travel banks
Air service development programs often include a mix of incentives that are provided to the target airline or in support of the desired airline service. Determining the amount of airline incentives is a role shared by airports and their communities. Typical airport incentives include marketing, fee waivers, and facility improvements.
The amount of incentives that can be provided by your airport is limited due to FAA policy and/or conditions attached to airport federal grants, known as grant assurances. It is critical that you are aware of these restrictions to determine what can be funded by your airport’s resources versus what can be funded by other community sources, which are far less likely to be restricted.
By far, the most valuable incentive to an airline that cannot be funded by an airport are revenue guarantees. This is where community participation is very valuable. Many revenue guarantees are funded by local businesses, universities and economic development corporations. Others are funded by SCASDP grants that also require community participation.