Vail attaches strings to funding of flights
July 16, 2014
Here’s how it works
• Communities negotiate with airlines to bring service to an airport.
• Airlines, which don’t want to lose money, ask for “revenue guarantees.”
• Those guarantees essentially make the routes break-even propositions.
• Communities pledge a negotiated amount of money.
• If the airline loses money on the route, the community pays, from a dollar to the maximum negotiated amount.
VAIL — When Air Canada announced last year it would bring winter service to the Eagle County Regional Airport, it was seen as something of a gift. This season, it's time to pay.
Most airlines that start new routes ask communities for "revenue guarantees" so they won't lose money on those routes. Air Canada doesn't usually ask for those guarantees, but it did lose money on its first season of service to Eagle County.
The airline recently informed county airport officials that it would need a $115,000 revenue guarantee to continue even scaled-back service to the valley. Without it, the flights wouldn't be scheduled for the coming ski season.
Eagle County Director of Aviation Greg Phillips took that news to the Eagle County commissioners, who quickly approved reserving the entire amount in order to keep the flight — the first international service into the airport since the early 1990s. The commissioners also asked Phillips to find other "partners," so the county wouldn't be on the hook for the entire amount if it needs to be paid.
Phillips, along with the EGE Air Alliance, a local group dedicated to bringing more service into the airport, Tuesday made the Vail Town Council the first stop on that partner-seeking tour. The request to the council, known in advance, was for half of the revenue guarantee, $57,500.
Council members listened to Phillips and Michael Brown, of the EGE Air Alliance.
In his presentation, Brown stressed that the "flight is worth keeping," and that in the future, the Alliance will work with Air Canada. At the moment, though, the Alliance is focused on two main projects: maintaining the guarantees for a summer flight from Houston — which requires about $450,000 in guarantees — and work on a probable 2015 ballot issue to provide a still-undecided form of tax funding for future flights.
And, despite the need for a revenue guarantee for the coming season, Phillips described the Toronto flight as a "success." Shortfalls in passengers — and revenue — were largely due to maintaining the flight over the entire season into April, and the fact that the flight was scheduled relatively late in the travel-booking season.
Phillips said if the valley is serious about building international business, then the Toronto flight is a key building block.
"But it's going to take some work," he said, referring to the revenue guarantee.
While Vail was the first stop on the partnership tour, council member Greg Moffet asked who else was being asked. Brown said Aspen will be asked to contribute roughly 25 percent of the guarantee, since about 20 percent of that resort's destination traffic arrives via Eagle County. He added that Vail Resorts would also be asked for a contribution.
Council member Greg Moffet asked if the Beaver Creek Resort Company had been asked to contribute. Brown replied that group — the de facto government for Beaver Creek homeowners and businesses — had declined.
In a phone conversation after the meeting, Resort Company director Tim Baker said that group has decided to put all its air service support toward the Alliance.
"Our position is that our interest is best served by contributing overall to the Alliance, not on a flight-by-flight effort," Baker said.
That contribution has been $50,000 the past two years, something Baker said would continue as long as it is needed. That contribution, Baker said, is equal to that provided by the town of Vail.
Baker said he wished he'd been at the meeting to explain the Resort Company's position.
But at the meeting, Moffet expressed his frustration that Vail Resorts and the Resort Company aren't more involved with the Toronto flight. He eventually proposed — and the council voted unanimously to approve — a contribution of $25,000, with another $14,000, if it's matched dollar for dollar by the Resort Company.
While the Toronto flight guarantee was a rapidly developing situation, council member Jenn Bruno said he hopes some broader good can come from it.
"We all realize how important this is," Bruno said. "I hope this is a rallying call for other communities and the Resort Company that we all need to step up."
Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, firstname.lastname@example.org or @scottnmiller.