VOL. 128 | NO. 148 | Wednesday, July 31, 2013
Waiting for Takeoff
By Jennifer Johnson Backer
A never-before-used economic incentive program designed to lure new air service to Memphis International Airport may have its first customer.
An economic incentive program designed to lure a new carrier to Memphis International Airport could be working just in time, as Delta has drastically reduced flights in and out of the city and has moved to dehub the airport.
(Daily News File/Kyle Kurlick)
Memphis-Shelby County Airport Authority officials moved swiftly to approve a measure that will bolster financial incentives offered to commercial airlines offering flights at least four days a week to new cities not served today by the airlines.
The measure was approved at a special Airport Authority meeting Tuesday, July 30, about two weeks before the next regularly scheduled board of commissioners monthly meeting.
While airport officials declined to identify the potential air carrier, Jack Sammons, board chairman, on July 25, told the Memphis Business Journal the Airport Authority has what he called “a hot prospect” that wants to start service at Memphis International. He told the paper the authority would like to close the deal as soon as possible.
“We have been in conversation pretty much with all of the airlines you would expect us to be – Frontier, JetBlue, Allegiant Air, Virgin America – you name it,” said Scott Brockman, executive vice president and chief operating officer of the Memphis-Shelby County Airport Authority. “If they are a domestic airline flying in this country, then we have talked to them.”
Brockman also declined to name any specific air carrier.
The $1 million air service development program to lure new carriers to Memphis International Airport was first approved last spring but has never been used since it began last July.
The original incentive program required new or competing routes to be flown five days a week, while the newer version of the program requires airlines to offer new flights at least four days per week for at least 12 months.
Brockman said the Airport Authority carefully studied other air service development incentive programs, and found that most programs require air carriers to fly to new cities four or five days per week – though some airports don’t have any minimum requirement and tier the incentives by how many days the air carrier flies.
An airline that opts into the incentive program must offer service to a city they don’t currently serve. For instance, an airline that currently serves Chicago can’t add another flight to Chicago four days a week to take advantage of the program, Brockman said. “They can’t bob in and out of this thing,” he said. “The key is we are looking for sustainable, low-cost or low-fare competitive air service. If it’s not sustainable, then it doesn’t do the airline or the community any good.”
Airport officials have been aggressively courting new airline carriers as Delta Air Lines Inc. has moved to slash the number of flights it operates to and from Memphis International Airport. The airline also announced it will remove Memphis International’s hub status and eliminate more than 200 jobs. The cuts begin Sept. 3, at the close of the busy summer travel season.
Beginning this fall, Delta will offer 60 flights per day out of Memphis, down from a peak of 240 flights per day out of Memphis in June 2009.
Network airlines have shifted from a strategy focused on operating as many flights as possible in an attempt to gain market share, to filling airplane seats and building more efficient networks. That shift has reversed low profit margins and losses, at the expense of service options and routes at most U.S. airports, including Memphis.
While Southwest Airlines Co. announced in early May it will enter the Memphis market Nov. 3 with daily nonstop service to five cities, the new service still pales in comparison to the number of flights operated in and out of Memphis International at its peak.
The Dallas-based discount air carrier is adding two new daily flights from Memphis to Houston and Tampa. The two new flights are in addition to previously announced flights from Southwest’s AirTran subsidiary to Baltimore, Chicago and Orlando that begin Aug. 11. Those flights also will operate under the Southwest brand beginning Nov. 3.
“Even Southwest, who is normally not prone to using incentive programs, has asked what we are doing,” Brockman said. “Though the fact that someone asks what we are doing doesn’t necessarily indicate they are going to use the program. They want to know what their competition may do.”