The Passenger Seat
Whether you ride, drive or fly, transportation issues affect everyone. Especially when fuel prices are so high. Join Thomas V. Bona as he examines the things that make the world move.

On airport subsidies and passenger growth

March 12th, 2009 at 02:16pm Thomas V. Bona

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?

Entry Filed under: Uncategorized

6 Comments Add your own

  • 1. Craig Knauss  |  March 12th, 2009 at 8:18 pm

    The G. Kent types of Rockford are part of the reason why I didn’t return after I finished college. They oppose everything anyone else does to try to help the community, while offering little, if anything, of their own. He (?) accuses you of being a “shill” for the airport. I’ll admit that you are a bit of a cheerleader for it. But so what? You are trying to offer support for something that would better the community. Rockford could use a lot more cheerleaders. Instead, the city is full of people who sit on their dead butts and whine. There’s a famous saying, “Make no small plans, for they fail to stir men’s souls.” Rockford’s motto should be, “Make no plans whatsoever, for you might stir the rabble.”

    I was born and raised in Rockford and felt its transportation systems were pitiful, especially for a city of that size. When the Northwest Tollway was built, it could have been located miles closer to downtown Rockford and could have had more exits. But it wasn‘t. Instead, it’s way out on the Boone County line. And there’s no intercity rail service either. And Rockford lacks a four-year university or much of anything else to attract young professionals. Everything that was done in Rockford was half-hearted because it might cost a little money. Or stir the rabble. And Rockford shows the results of that lack of foresight and ambition.

    The community I now live in (Tri-Cities of Washington) is about 2/3 the size of the Rockford area, yet has about three times the airline passengers. The Interstate highway passes through town and we are on major rail lines, as well as a navigable waterway. It has a nice civic arena AND a very nice convention center. And across the river is another exhibition hall. 90 miles away is Yakima, pop. 85,000, with their own arena, a new convention center, etc. The same for other communities in Washington (and Illinois). The Tri-Cities are growing rapidly, even now, because they made some bold plans for the future, unlike Rockford.

    BTW, G. Kent. You criticized Thomas for not having any important “assignments”. What are yours, if any?

  • 2. Don  |  March 12th, 2009 at 8:39 pm

    Craig, You say Rockford lacks a four-year University.

    How stupid and ill informed can you be, lmao. What is Rockford College. Oh yeah, a four year university.

    What a moron. Glad you left. Enjoy TRi cities WA. I’ve been there. It’s a piece of s..it.

  • 3. Craig Knauss  |  March 12th, 2009 at 8:52 pm

    Thomas,

    Here’s a suggestion for a little “investigative” reporting: Why don’t you do an article on Dupage County Airport over in West Chicago and compare it to RFD. You could cover things like a comparison of user fees, landing fees, real estate tax rates, capital expenditures, benefits to the general public, etc. And maybe show pictures of the multimillion dollar corporate jets that use it. I’m suggesting this because I paid taxes to DPA for 23 years and I think it will be an eye-opener.

  • 4. Thomas V. Bona  |  March 13th, 2009 at 7:11 am

    Craig,

    Thanks for your response. My role is not a “cheerleader”, but a reporter (though on the blog I let my hair down a bit more … what’s left of it.) My goal is to present the facts in the right context. I admit I get a particular kick trying to figure out new service possibilities, but I’ve also hunted down whether things work out as planned (Ireland, for example … and may I never again have to write about Festival).

    I don’t fault Mr “Kent” for raising good questions, even if I don’t appreciate his tone. It’s fair to wonder if the return on investment is worth it, but now that Sally and I have given such in-depth responses, it would be interesting to see what he says next.

    Craig, thanks for your regular commenting.It’s readers like you who make this blog fun.

    Not sure I have time to get into the Dupage Airport.. I’m too busy with my non-assignments ;-)

  • 5. G. Kent  |  March 13th, 2009 at 7:10 pm

    Thomas, thank you for posting the numbers. Very helpful. But I’m afraid they don’t come close to revealing the full picture. For example, they don’t include the indirect, or, overhead costs of the airport. Granted, the airport staff don’t spend ALL their time working on passenger issues, but they spend SOME. Likewise, the cost of maintaining the equipment and general spending at the facility have to be included as well. These would include salaries, benefits, utilities, supplies, etc.

    Then there is the opportunity costs associated with passenger service. Money and manpower spent on passenger service is money and manpower NOT spent on something else.

    But mostly I object to the sheer amount of hyperventilating that goes on every time OBrien sneezes. As I said in one of my earlier posts, we are in the middle of the worst economic crisis in at least 30 years. Day in and day out coverage of what by anybody’s definition is a small airport seems like a waste of resources for the business staff.

    BTW, what are “other air service development costs?” Can you provide a breakdown?

  • 6. Craig Knauss  |  March 14th, 2009 at 10:29 am

    Feel better now, Don?

    I am well aware of Rockford College. My brother took some classes at their old campus. My sister got a Graphic Arts degree there at their “new” campus. It’s a nice, little, liberal arts college. And I see they offer two Masters programs. So, I suppose, that technically makes RC a university. But when I did a search of the WWW.Rockford.edu website for “university” it came up empty. Maybe a genius like you could explain that, Don?

    I lived in Rockford for 23 years and northern Illinois, mostly Wheaton, for 27 more years. My family has lived continuously in the Rockford - Byron area since the 1880s. My father is buried in Rockford and my grandparents are buried next to Byron NPP. So I have deep ties to Rockford, even when I now longer live there. So it hurts me to see when the community starts going downhill. A few years ago, while I was moving my mother to a retirement home, I cruised down Main Street from Riverside Blvd to the airport. There wasn’t very much to impress me, I’m sad to say. There were a few bright spots, but way too many boarded up buildings and things falling into disrepair. It was disheartening. But it didn’t surprise me. When I lived in Rockford, there was very little investment in the future. Nobody wanted to spend a dime that didn’t give them an immediate payback. Nobody wanted to lift a finger. And the city runs rampant with NIMBYS who try to stop everything. So now we can see the result. What was your contribution, Don?

    About 8 years ago I was about to get laid off from my engineering job and was in the midst of a divorce. I had the opportunity to work on a project at the Hanford Site in Washington. I had nothing to lose, so I took it. It turned out to be a good decision. Don, you called the Tri-Cities a “a piece of s..it.” You did not state when you were there, where you were at, or why you were here, if you really were here, so there is no frame of reference. If it was 20 or more years ago, I might have agreed with you. If you were in one of the outlying “nowhere” farm towns, I might have agreed with you. If you were a resident of the Walla Walla state penitentiary, oh, well. The place has changed remarkably fast and mostly for the better. A five-year absence shows considerable change. A ten-year absence shows mind-boggling change. This is what I’ve found:

    Home prices are a little higher than Rockford, but much less than Wheaton.
    Real estate taxes are about one-third what I paid in Wheaton for similar size home.
    Sales tax is higher, at 8.25%, but we have NO income tax.
    Food and medical is slightly higher. Meat could be better, but we have excellent medical and dental facilities.
    Electricity rates are about 1/3 of ComEd’s rates.
    Overall cost of living is probably higher than Rockford, but about 30% less than Wheaton.
    The weather is much better than northern Illinois. Less snow, less cold. It seldom goes below zero in the winter. It’s hotter in the summer, going over 100 at times, but the humidity is low. (The locals say it’s “muggy” when the humidity hits 30%!) And our growing season is longer. But we do have to irrigate to keep things alive in July and August. We do have an occasional dust storm, but those are getting rarer. For some reason allergies are a problem here. Probably due to the fruit grown nearby.
    There are a ton of stores, restaurants, hotels, etc. And we are building new things at an incredible rate, even now. We are the fastest growing area in Washington and one of the fastest in the U.S.
    Our streets and highways are in much better condition. Potholes are a rarity around here. And driving times are low. (My work commute is 15-20 minutes for about 10 miles. In Wheaton, it was 30 minutes for 3.5 miles.)
    Our unemployment rate is less than 3%.
    Outdoor entertainment opportunities abound. We’re right on the huge Columbia River and about two hours to either the Cascade Mtns or the Blue Mtns. Plenty of boating, fishing, hunting, skiing, biking, etc. There are hills all around us that range from about 1500 ft elev to about 3600 ft. So it’s not nearly as flat as northern Illinois.
    Indoor entertainment is on a par with Rockford or Dupage County. (It was pretty scarce in Wheaton.) So there is some room for improvement there. And we have our minor league sports teams, like hockey, arena football, etc.

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