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Home My WebLink About9/16/2015 - STAFF REPORTS - 5.B. '?ALMS.. A. iy c V N f R �CO�ro.nfa '' c4`'F°"N`P. CITY COUNCIL STAFF REPORT DATE: September 16, 2015 NEW BUSINESS SUBJECT: WestJet Airlines Incentive Program Funding FROM: David H. Ready, City Manager BY: Department of Aviation SUMMARY An action to approve Air Service Incentive funding to WestJet Airlines for expanded air service between Toronto, Canada, and Palm Springs International Airport over the 2015-16 season. RECOMMENDATION: 1. Approve Air Service Incentive funding for WestJet Airlines in an amount not to exceed $60,000. 2. Authorize City Manager to execute all necessary documents. STAFF ANALYSIS: To promote the growth of commercial airline service at Palm Springs International Airport, City Council previously approved an Air Service Incentive Program. The intent of the program is to provide "jump-start" marketing assistance to both new and existing PSP air carriers that elect to operate new or expanded air service. To date, there have been approved funds to support seventeen (17) new or expanded routes into PSP by nine different airlines including WestJet, Virgin America, Frontier, United, Allegiant, Alaska Airlines, Delta, Air Canada, and Sun Country. These new and expanded services funded by the incentive program have been a contributing factor to PSP Airport's record growth in airport passengers. In 2014, the Airport saw an all-time record in passenger activity and airline capacity. The WestJet incentive seeks to continue this positive trend. WestJet Airlines, which already provides direct service to five Canadian cities, is increasing air service capacity to Toronto this season - November through April - between 60 to 100 percent in seat capacity. The airline has served the greater Palm ITEM NO. J[G� J City Council Staff Report September 16. 2015— Page 2 WestJet Airlines Incentive Program Funding Springs market for many years with seasonal service to Edmonton, Winnipeg and Toronto, and year-round to Vancouver and Calgary. These Canadian cities are PSP's only direct international destinations and one of the Valley's fastest growing markets for conventions, tourism, and part-time resident status. At the drafting of this staff report, the Palm Springs Airport Commission has not yet had an opportunity to consider this proposal; however, they will do so at their meeting of September 16, 2015, at 8:00 A.M. Although staff anticipates Commission approval, their action will be reported to City Council during the meeting. FISCAL IMPACT: WestJet Airlines is increasing the seat capacity between PSP and Toronto by more than 50% and is eligible, based on the stated Air Service Incentive Program Exhibit 1 (Existing Routes Target Category) for $10,000 per month. The service increase extends from November 2015 to April 2016, or six months, and equates to a not-to- exceed amount of $60,000. Funding is available in the Airline Incentive Fund, account 415-6002-45521. The anticipated increased passenger traffic will generate a direct and indirect economic financial benefit to the airport. Increased airport revenues will be realized from Passenger Facility Charges (PFCs), food and gift sales, car rentals, vehicle parking fees, aircraft landing fees, fuel flowage fees, etc., which should all contribute to a viable return on investment. Thomas N Ian, A.A.E. David H. Ready, Esq. Executive Director, Airport City Manager C2 PALM SPRINGS INTERNATIONAL AIRPORT AIR SERVICE DEVELOPMENT INCENTIVE PROGRAM EFFECTIVE JUNE 1, 2010 1. OBJECTIVE Air service is a vital contributor to the City of Palm Springs and the entire Coachella Valley, and it is widely recognized that that significant costs are associated with adding capacity through larger aircraft, more flights, or new markets. The promotion of new or additional capacity can be a critical factor in its success, acknowledging that airlines may redeploy valuable aircraft assets to other markets if targets are not achieved. The Palm Springs International Airport (PSP) Air Service Development Incentive Program (the 'Program") is designed to encourage and promote the expansion of commercial passenger airline service, both seasonally and year-round. Such growth can take place in new routes that are not currently served and/or through additional seat capacity being added by incumbent carriers in existing markets. Funds are to be used by the airline(s) to market and promote new services and/or significant year-year increases in seating capacity. The Program is non-discriminatory; any airline that meets the criteria can qualify to receive benefits as outlined in this document. However, the airlines serving PSP today are our valued tenants and customers, and it is greatly anticipated that both existing and new carriers can take advantage of this program to expand service successfully. 2.TIMING OF PROGRAM AND DISTRIBUTION OF FUNDS This Program is effective June 1, 2010, and may be continued until allocated funds expire or at the discretion of Palm Springs International Airport. Airlines meeting the requirements outlined in this document will be allocated the qualifying funds on a first-come, first-served basis until the Program expires or total funds for the Program are expended. 3. QUALIFYING REQUIREMENTS To qualify for incentives provided by the Program, the airline must take action in one of the following categories: NEw ROUTE. Initiate a new route to/from PSP, defined as not being served within the 12 months prior to the qualifying service. The category of market, frequency, and duration of operations as stated in Exhibit 1 (below) will determine the amount of maximum funding. 03 EXISTING ROUTES. Increase total monthly seating capacity, through additional flight frequencies and/or larger aircraft, compared to the same month in the prior year between PSP and the same airport. Note: For monthly year-year increases to qualify, the additional capacity has to be in effect for a two week minimum within that month. In both cases, the metrics outlined in Exhibit 1 will be used to determine qualifications for Program funds. In order to receive funding, each airline must do the following for EACH qualifying route: ■ Submit in writing (an emailed document is acceptable) confirmation of the new route and/or year-year increase in monthly capacity; ■ Request the funds in writing; • Provide an outline of how the funds will be deployed. The Program funds shall be utilized solely for the purpose of promoting the new route and/or year to year capacity addition. These promotional initiatives must be approved by PSP staff, and copies of program specifics may be requested. ■ In the event that a service or capacity increase is suspended prematurely, the airline shall be responsible for a pro-rated reimbursement of all marketing funds spent. EXHIBIT 1 NEW ROUTES Seasonal Seasonal Extended Target Category D• Min 21Wk Min 41Wk RT Min 31Wk R Min 3 Mos - Min 3 Mos Min 6 Mo (up to amounts) (up to amounts) (up to amounts New Long Haul Hub 1,500 miles or longer $100,000 $250.000 $400,000 or Focus City Not served within most recent 12 months Focus City-50+daily departures If NEW carrier to PSP(past 12 months) $200,000 $500,000 $800,000 New Long Haul 1,500 miles or longer $50,000 $100,000 $150,000 Key Markets Top 25 0&D's with no nonstop service from the region If NEW carrier to PSP(past 12 months) $100.000 $200,000 $300,000 New Hybrid or No existing markets served nonstop from $50,000 $100,000 $150.000 Complementary Markets that specific airport(past 12 months) If NEW carrier to PSP(past 12 months) S100,000 $200,000 S300,000 EXISTING ROUTES Target Category DefinitionsgRequirements Per Month 50%or More Increased Capacity- Existing markets-served within 12 months $7,500 $10,000 Shoulder or Peak Season Based on monthly year-year seal increases (Per Route) (Per Route)