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HomeMy WebLinkAbout1/2/2003 - STAFF REPORTS (11) DATE: January 2, 2003 TO: City Council FROM: Deputy Director Aviation-Administration via Executive Director-Airports AIR SERVICE DEVELOPMENT 2003 INCENTIVE PROGRAM RECOMMENDATION: It is recommended that City Council approve a Air Service Incentive Program for Fiscal Year 2003, SUMMARY: This action would approve an Air Service Incentive Program that would allow the Airport to further enhance Air Service Development activities with air carriers to increase routes. BACKGROUND: The Air Service Development Program of the Palm Springs International Airport has seen great success over the last year and a half. During this time airport management has conducted 19 meetings with 14 different carriers across the country. Out of these meetings the airport has announced three new carriers into our market, two others announced year round service, and four others have enhanced service levels beyond the prior year. All of this work has allowed the airport to pull itself out of the 25% drop in air service that was the result of various airline aircraft utilization changes in reaction to the events of September 11, 2001. The Airlines are facing unprecedented losses as they continue to reorganize and redefine their Hub's,routes,aircraft and labor requirements. In the face of these efforts airline marketing budgets have been scaled back and the question that routinely is asked, "what marketing assistance can the airport provide". The question is one that we do not take lightly as PSP continues to be in competition with other destinations for new air service. The possibility of marketing funding is what may help the airline make a final decision. So far airport management has been answering with a proposed marketing offer. These marketing offers to the Air Carrier were made possible as a result of the network of relationships throughout the Desert Resorts Hospitality Industry. Airport management has invested substantial time and effort to meet with various sectors of the Hospitality Industry to educate them on the air service available to bring tourism into our valley. Through this education process the Hospitality Industry has shown overwhelming support for the air service development program and some of the marketing needs that arise from our efforts. Two of the largest supporters of the air service development program have been the Convention & Visitors Authority and Palm Springs Tourism. On several occasions a 8 need for direct marketing funds has been requested by the airline. The Airport without having a formal policy adopted by the City Council could not offer any airport funds. However, the CVA & Palm Springs Tourism allowed for some funding in their respective marketing budgets to be set aside to meet the request of the airline considering new service. The key piece missing until now is that of the Airport having a mechanism to fund marketing efforts thru its own budget. With this proposed program we will have completed the final piece and allow airport management to continue to work with the air carriers on adding new routes to our resort destination. This Air Service Incentive Program represents a change from the prior years"Freeport 2002". While the previous Air Service Development Incentive program"Freeport 2002" had no direct successes, the awareness of the program allowed airport management to hear back from the airlines on the true need for marketing. The need for this shift in direction is that of advertising the new routes. This new focus on marketing will continue to demonstrate the airport's commitment to new air service success. "Freeport 2002" established the airports willingness to work with the airlines and we wish to continue this effort with a focus on marketing. The marketing time frame is key and it is intended that the marketing will run 60 days prior to the start of service and again during the first 30 days of operation of the new service in order to maximize the exposure during the initial start-up phase. This advertising time line is one of the key elements that PSP management takes into account when conducting Air Service Development,as the increased service levels are always weighed against the markets ability to generate sufficient loads for the carrier. The Airport Commission unanimously approved the air service incentive program and recommended it move to the City Council for approval. The $50,000 is budgeted in the Airports current budget, Account No. 415-6002- 42690 Contingency. r G ALLEN F. SMOOT, A.A.E. RICHARD STRICKLAND Executive Director-Airports Deputy Director of Aviation-Administration APPROVEDn� REVIEWED BY DEPT. OF FINANCE City Manager_ Attachments: 1. Air Service Incentive Program 2. Resolution EXHIBIT 1 TO RESOLUTION PSP FY2003 AIR SERVICE INCENTIVE AWARD CRITERIA. • Up to$25,000 will be committed to any airline that • Is a new commercial carrier at PSP;and/or • Initiates a minimum of daily,nonstop service from PSP to one of PSP's top 25 unserved O&D markets/destinations in the United States;or • Initiates a minimum of 2 times per week service from PSP to the New York City market • Summer service is eligible for incentive program for any airline that • Initiates service daily,nonstop and runs for at least 75 days during June thin August from PSP to one of PSP's top 25 O&D markets currently without summer service • An airline that initiates service to more than one unnerved destination will be eligible for multiple awards. • An airline that(1)is a new carrier and (2) initiates service to an unserved destination in the specified markets will be eligible to receive a maximum of S25,000. If such airline initiates service to an unnerved destination in the future,the airline will be eligible to receive additional incentives at that time. • PSP and the airline will cooperatively develop the marketing incentive program. Marketing incentive funds can be used for the following activities: • Cooperative advertising to promote new service (primary focus of funding) • Other activities as agreed by both PSP and the carrier • Carrier must operate the flight for a minimum 4 month period • If summer service;carrier must operate flight for min. 75 days • 'Total FY2003 incentive fund is limited to$50,000. Once these funds are exhausted, no further incentives will be granted in FY2003. Top PSP UNSERVED O&D MARKETS New York TFK/EWR Philadelphia PHL Salt Lake City *SLC Detroit DTW7 Chicago" ORD/MDVV Washington IAD Seattle* SEA Boston BOS Minneapolis* MSP Baltimore BWI Atlanta* ATL Oakland OAK Portland * PDX ''Indicates summer service route. 8A5 RESOLUTION NO. OF THE CITY COUNCIL OF PALM SPRINGS, CALIFORNIA. ESTABLISHING AN AIR SERVICE INCENTIVE PROGRAM SO AS TO PROVIDE MARKETING FUNDING FOR AN INCREASE IN AIR CARRIER SERVICE ON NEW ROUTES DURING THE INCENTIVE PERIOD. WHEREAS the Palm Springs International Airport has contracted with Simat, Hellisen & Eichner from Boston, Massachusetts for continued Air Service Development Analysis; and WHEREAS the City adopted Freeport Summer 2002 Air Carrier Operational Cost Reduction Initiative" by resolution 20295;and WHEREAS any incentive program offered must be equitable to any and all carriers in its administration and effect; and WHEREAS through various meetings with multiple airlines experience has been gained demonstrating a need for marketing funding; and WHEREAS airport management has held meetings with Sacramento and Denver International Airport's to review their respective Air Service Incentive programs;and NOW THEREFORE BE IT RESOLVED that the "PSP FY 2003 AIR SERVICE AWARD CRITERIA" is hereby approved, attached as Exhibit 1, as the airline incentive program of Palm Springs International Airport. ADOPTED this day of 2003. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED &APPROVED AS TO FORM