Models for funding resort airports vary
December 1, 2013
Editor's Note: This is the final part in a series about the struggles mountain resort airports face.
EAGLE COUNTY — Mountain airports would deteriorate without the service contracts negotiated with airlines.
Steamboat Springs Local Marketing District data estimates a 75 percent loss in winter air service without airline contracts. That decrease would mean a loss of 91,000 seats, 60,000 winter passengers, 100,000 annual room nights and $70 million in annual passenger spending, according to a Local Marketing District report.
Flyers such as Mike Berland appreciate the effort by regional airports to grow air service. He prefers flying to his condo in Vail in the winter months, because that's when air service is at its best and he can get a nonstop to the Eagle County Regional Airport from New York. Other New Yorkers know it, too — Berland said the Saturday nonstop at the beginning of spring break is like a New York shuttle to the Eagle County Airport.
"Everyone knows each other on that Saturday morning flight (from New York)," he said.
Locals often complain about high fares, but Berland doesn't think price matters when you have a busy lifestyle and want to get to your destination quickly. When Berland leaves Vail at Christmas, he heads to Florida with his family before returning to New York. You'd think the nonstop Denver-to-Tampa flight would be the most convenient, he said, but it's not.
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"It's much easier to fly from Eagle (nonstop) to Miami and then drive a couple of hours rather than take the chance driving from Eagle to Denver," he said. "I know that Eagle-to-Miami flight doesn't get cancelled — it's a (Boeing) 757."
Savvy travelers need the right air service, not just any air service. Flight routes are strategic, such as the Houston flight to the Eagle County Regional Airport last summer. Houston is a logical market for the valley not only because a significant amount of Texans own second homes there, but also because Houston is a great connection point for Latin American visitors.
The Telluride/Montrose Regional Air Organization, known as the Colorado Flights Alliance, reports that most winter skiers arrive in the area via airplanes, said Chief Operating Officer Matt Skinner. The airports — Telluride Regional and Montrose Regional — serve the Telluride ski resort and to a lesser extent Crested Butte. The region is not within a convenient drive of any major city, which is what makes it a "pure destination," he said.
The same is true for Jackson Hole, Gunnison and Yampa Valley. Resorts far removed from metropolitan areas might not be resorts at all without air service.
"Ninety percent of the people that come for winter skiing are flying traffic," said Mike Gierau, chairman of the Jackson Hole Air group, which raises money to pay for air service contracts. "We don't have a choice (but to pay for air service)."
Funding models vary
Resort airports are paying revenue guarantees to airlines with public funds, private funds and resort-contributed funds. There's no perfect model, either, which is why the EGE Air Alliance is raising money to pay for extensive market research in 2014 to determine which types of funding would work best in Eagle County.
Kent Myers, an aviation consultant who works with the Eagle County Airport, the Gunnison/Crested Butte Regional Airport, and the Telluride and Montrose Regional Airports, thinks the Steamboat Springs community has a good system. There's a public-private alliance that pulls funds from the business community, the ski company and tax revenues to support air service which brings in 70 percent of the region's total winter vacation visitors.
Yampa Valley Airport Manager Dave Ruppel said voters approved the tax question in 2011 — a 0.25 percent sales tax increase — that sunsets in 2015.
"I think (the sunset clause was important)," he said. "I think we'll go back and ask (voters) for it to be renewed."
There's an airport commission that is the advisory board for all three airports in the Yampa valley. A good cross section of the community participates, to which Ruppel attributes some of the local success.
"There's a lot of people who understand the value of airports and air service and who bring that business expertise and knowledge — that's something that really helps," he said.
Getting a community to collectively understand the value of their local airport is an uphill battle. It took a while in Jackson Hole, but there are now more than 200 businesses that contribute money to the air service there each year, giving an average of $2,000 each. Jackson Hole does not have a tax that funds air service. Gierau said local, county and state contributions total 10 percent or less of the total annual fundraising.
"Government money is great, but it always comes with strings attached," he said, adding that airlines like to see a more sustainable funding model since government money isn't always reliable. "Through the way we have it set up, the airlines know those relationships aren't going to come and go with political or corporate wind."
Myers likes the model in Jackson Hole. He compares it to the "old Wild West."
"If you don't participate in the air program (in Jackson Hole), and you have kids who play hockey, they might be on the team but they don't get any ice time," Myers said. "There's a lot of peer pressure up there."
Gierau chuckles at the suggestion that it gets that serious.
"I don't know if we go that far. We do use peer pressure up here," he said. "We put an ad in the paper and tell everyone in the community who participates and to patronize those businesses. Being on that list or not becomes something that people around the community notice."
It's a strategy the EGE Air Alliance in Eagle County is testing. In early 2013, the group started a heavy community-wide fundraising campaign for local air service. They successfully raised money for the Houston summer flight, but the stakes are much higher in 2014.
"Our goal for 2014 is $710,000, whereas last year it was $400,000," said Alliance board member Gabe Shalley. "It has become a year-round air service initiative."
The alliance also generated a list of supporters and published it in the Vail Daily. Vail Valley Partnership President Chris Romer hopes that list starts to have the same kind of influence within Eagle County as the Jackson Hole list does within its community.
In Montrose and Telluride, a 2 percent lodging tax and 2 percent restaurant tax — passed by voters in 2003 — raises air service funds that are also supplemented by local businesses and the ski resort. Matt Skinner, CEO of the program there known as the Colorado Flights Alliance, said the funding ensures air service better than simple shuttle-type air service only to Denver. He said the group also publishes a thank-you list of the businesses that participate each year. He said if that's considered peer pressure, then he hopes it's constructive.
The group has also very rarely paid a full revenue guarantee, Skinner said.
"We've moved both of our summer flights completely off a guarantee," he said.
The Gunnison-Crested Butte Airport has a special district and taxing authority created by voters in 2002 and reauthorized in 2008. The RTA's mission is to provide and improve air transportation to and from the airport on a year-round basis and to develop a long-term public ground transportation system. The sales tax collected for the district equates to 3.5 cents on a $10 sale in the city of Gunnison and 6 cents on a $10 sale in the rest of the district. It generates between $900,000 and $1.2 million annually, according to recent RTA board meeting documents.
The EGE Air Alliance is about where Jackson Hole Air was a decade ago — Romer said 65 businesses contributed to the alliance this year, while Jackson Hole has about 200 businesses participating — but it's ahead of where Aspen is in terms of a formalized fundraising group. While Aspen maintains the free market is what determines air service there, a new group of community leaders and business owners in Aspen has started meeting, said Bill Tomcich, president of Stay Aspen Snowmass.
"We've been meeting almost monthly since early this year," he said. "With the ultimate goal of creating a more stable funding source when other opportunities present themselves."
Aspen has been very careful not to go down the minimum guarantee road. Instead, negotiations there center around start-up incentive packages such as covering the marketing costs for the flight.
"Sometimes others are willing to put significant dollars on the table, but the challenge is once you go down that road, it's hard to ween yourself off them," Tomcich said.
But communities do ween themselves off eventually. Most summer flights into the Eagle County Regional Airport are no longer subsidized, and market forces convinced American Airlines to add an incremental Saturday flight from Atlanta for six weeks this winter, in addition to its daily Atlanta flight, without a revenue guarantee.
Shalley suspects the Alliance's focus might shift toward providing subsidies for a second flight out of a market already serving the airport.
"Those are the small, little ways we can grow service," she said. "The reason we're even doing (minimum revenue guarantees) is we're trying to gain some seats back that we've lost in the marketplace."
Aspen/Pitkin County Airport Aviation Director Jim Elwood said the community recognizes the risks airlines take on when they begin new air service, which is why the focus has been on limiting their start-up expenses. He said market forces are in transition, though, and there's also a recognition that competition for air service is fierce.
"I think all of us are going to have to be flexible and adaptive," Elwood said. "Relationships matter a lot. (The airlines) want to have a partner who understands they need to be successful to have that airplane there or they will move that airplane to another market. You've got to have the trust of the carrier that you're going to do what you said you're going to do."
Both Tomcich and Elwood agree that Aspen's demographics and its reputation as a posh resort have a lot to do with the ability to let the free market determine air service there. The ability to charge higher fares makes it more attractive for airlines, and Tomcich notes that the airport's location just a couple of miles from downtown Aspen, also helps.
Myers thinks Elwood and Tomcich have done a great job with air service in Aspen, but forming a group to tackle the air service issues of the future is a step in the right direction. Myers points out the case of Cincinnati, Ohio — a big city airport where air service is expected. Delta pulled its hub out of the airport, though, resulting in the loss of nearly 80 percent of the airport's flight service.
"I see it across the country," Myers said. "Places like Cincinnati are going, 'We've got to get our act together here.'"
Lauren Glendenning is the editorial projects manager for Colorado Mountain News Media. She can be reached at email@example.com or 970-777-3125.