On airport subsidies and passenger growth

6 comments March 12th, 2009

Reader “G. Kent” has been raising some good questions about how Chicago Rockford International Airport has used subsidies and incentives to spur its passenger growth in recent year. But the record shows, it’s not as one-sided as he (and others?) may think.

Here’s how much the airport has spent (or plans to spend) on air service development:

FY 2006:

• Revenue guarantee - $1.74 million
• MilesAhead program - $461,000
• Advertising - $962,000
• Other air service development costs -$256,000
• TOTAL - $3.42 million

FY 2007:

• Revenue guarantee - $1.64 million
• MilesAhead program - $90,000
• Advertising - $403,000
• Other air service development costs - $342,000
• TOTAL - $2.44 million

FY 2008

• Revenue guarantee - $822,000
• MilesAhead - $132,000
• Advertising - $365,000
• Other air service development costs - $190,000
• TOTAL -$1.51 million

FY 2009 (estimated)

• Revenue guarantee - $1.1 million
• MilesAhead - $69,000
• Advertising - $437,000
• Other air service development costs - $194,000
• TOTAL - $1.8 million

FY 2010 (budget)

• Revenue guarantee - $0
• MilesAhead - $150,000
• Advertising -  $457,000
• Other air service development costs - $229,000
• TOTAL - $836,000

You see that the amount spent on air service development has gone down, while passenger service has gone up (the exception being FY 2009, which had an unplanned bump up because of fuel prices on the Southern Skyways routes). This gives credence to reader Sally Hanks’ point of “priming the pump” - the airport has to pay more early to prove itself, and as it proves itself it becomes cheaper to attract service.

But before you say, “Oh, they threw $10 million away the past few years”, look at the income from passenger service over that time:

FY 2006:

• Income from airlines and terminal services - $412,000
• Passenger facility charge - $193,000
• FAA formula grant (based on having more than 20,000 passengers) - At least $1 million
• TOTAL - $1.61 million

FY 2007:

• Income from airlines and terminal services - $495,000
• Passenger facility charge - $262,000
• FAA formula grant - At least $1 million
• TOTAL - $1.76 million

FY 2008:

• Income from airlines and terminal services - $599,000
• Passenger facility charge - $402,000
• FAA formula grant  - $1.5 million
• DOT grant for United subsidy (from 2006-7) - $1 million
• TOTAL - $3.6 million

FY 2009 (estimate):

• Income from airlines and terminal services - $494,000
• Passenger facility charge - $401,000
• FAA formula grant  - $1.5 million
• TOTAL - $2.4 million

FY 2010 (budget):

• Income from airlines and terminal services - $566,000
• Passenger facility charge - $420,000
• FAA formula grant  - $1.5 million
• TOTAL - $2.49 million

So passenger service has brought in $12 million in direct revenue to the airport that wouldn’t be here without the post-2003 boost.And that doesn’t include millions in discretionary FAA money that comes here to improve the terminal and U.S. Customs facility, buy jet bridges, expand ramps … and eventually bring a parking deck here?

In fact, if RFD did nothing but maintain existing service, that $2.5 million in annual income budgeted for 2010 would still come in But what you’re seeing is, as time goes on, the outlay is outstripped by the income. And that doesn’t even quantify the economic impact of having a growing passenger service airport that bring people from outside of Rockford here.

So, yes, Mr Kent, the airport has paid airlines to come here and - to an extent - passengers to fly here. But enough of those routes stick around and enough of those passengers come back to offset those subsidies … and the subsidies are going down, while other numbers go up.

Call me a “shill” if you want, but here are the numbers … do you have something in response?