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CITY COUNCIL STAFF REPORT
DATE: September 16, 2015 NEW BUSINESS
SUBJECT: JetBlue Airways Incentive Program Funding
FROM: David H. Ready, City Manager
BY: Department of Aviation
SUMMARY
An action to approve Air Service Marketing Incentive funding to JetBlue Airways for
nonstop seasonal service between Palm Springs International Airport and New York
John F. Kennedy International Airport.
RECOMMENDATION:
1 . Approve Air Service Incentive funding for JetBlue Airways in an amount not to
exceed $50,000.
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 JetBlue
incentive seeks to continue this positive trend.
The East Coast is one of the greatest market growth opportunities for the entire
Coachella Valley tourism and conventions industry, with New York being the largest
metropolitan area. Under the incentive proposal, JetBlue will operate an Airbus A320
ITEM NO. 6
City Council Staff Report
September 16, 2015 —Page 2
JetBlue Airways Incentive Program Funding
aircraft for flights five times weekly - Thursday through Monday - between January 14,
2016, and May 1, 2016. The airline carries more than 32 million customers a year to 90
cities in the U.S., Caribbean, and Latin America with an average of 875 daily flights.
Palm Springs will be JetBlue's ninth destination in California.
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:
Because JetBlue Airways will now serve PSP Airport with additional direct service to
New York four days a week and increasing the seat capacity by more than 50% over
the service already provided by another airline, it 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 January 2016 to May 2016, or five months,
and equates to a not-to-exceed amount of$50,000.
Funding is available in the Airline Incentive Fund, account 415-6002-45521.
The anticipated increased passenger traffic from this new service to New York City 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.
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Thomas Nolan, A.A.E. David H. Ready, Es .
Executive Director, Airport City Manager
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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.
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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 DefinitionsiRequirements Low Freq High Freci Service
Min 21Wk RT Min 41Wk RT Min T
Min 3 Moo Min 3 Mos
(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) $100,000 $200,000 $300,000
EXISTING ROUTES EffPer Month
Target Category r 50%or More
Increased Capacity- Existing markets-served within 12 months $7.500 $10,000
Shoulder or Peak Season Based on monthly year-year seat increases (Per Route) (Per Route)
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