In Depth: Airport Officials Seeking More Business

by tcveigh on August 18, 2010

Kentucky’s three major airports are in no danger of going out of business, but their operators would like to see more passengers coming through the doors. They say economic incentives may be one way to make that happen.

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In 2005, there were 650 average weekday airline departures from the Cincinnati/Northern Kentucky International Airport, or CVG. This year, the number has fallen to 225.

“From 22 million passengers, to 10 million passengers, annually,” said John Mok. “From 130 non-stop cities served to 70 non-stop cities today. From five non-stop European destinations to one.”

CVG CEO John Mok says the cuts not only reduced air service options, but led to thousands of layoffs at the airport and the closure of two terminal concourses. Louisville Regional Airport Authority Director Skip Miller says current economic conditions leave airlines with few choices except consolidation. But fewer carriers mean fewer seats.

“We had a two-and-a-half percent reduction in seats available nationwide last year,” said Miller. “And this year is no different. We’ve had a half-percent reduction in the marketplace. And that’s been through a variety of efforts by the carriers to create a closer match in terms of supply and demand and to create a more competitive environment.”

Lexington Blue Grass Airport Director Eric Frankl (gesturing in photo) says it’s no secret communities are suffering from the diminishment of passenger service. And since airports help attract business and industry, Frankl says communities must work hard to restore both domestic and international air passenger service capabilities. One way to do that, he says, is by using economic incentives to attract low fare service providers.

“The State of Kansas has studied the impact of low fares and now budgets for these type of incentives, because they believe that for an annual investment of $5 million, the citizens of Wichita would save over $40 million because of lower air fares,” said Frankl. “As a result, air service would not only be enhanced for the consumer, but also the benefit of existing companies and potential future companies that are located in that community and that state.”

Frankl says the Lexington airport recently used federal incentive dollars to entice AirTran Airways to offer direct service to Orlando and Fort Lauderdale. In the first six months of service, airport passenger activity rose by more than 16 percent. Frankl says incentives work because airlines are assured a certain amount of revenue for each flight. John Mok says airports in Pittsburgh, Portland and San Diego have spent millions of dollars on incentives to secure or retain international flights – resulting in hundreds of new jobs. In order for Kentucky airports to compete on a level playing field, Mok says they, too, must offer incentives.

“They ask us two questions, once they are convinced that there’s market opportunity available,” said Mok. “The first is, what’s the cost of doing business at your airport? The second is, what financial incentives can you offer us to attract us to come to your airport? So, it’s a pay-to-play game, basically the rules today.”

Kentucky lawmakers are definitely listening. More than 40 House and Senate members from two committeess showed up to hear what the airport directors had to say. But Sen. Robin Webb says legislators need much more information before moving forward. For one thing, they need to hear from the airlines.

“I think we need to hear what they need,” said Webb. “I think we need to hear how they are faring in the industry overall, before we start doing state investments in that way.”

More hearings are planned in coming months, with possible recommendations emerging in time for the 2011 General Assembly, which convenes in January.

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