CITY COUNCIL STAFF REPORT

DATE: October 2, 2013 CONSENT AGENDA

SUBJECT: AIR SERVICE INCENTIVE PROGRAM FUNDING

FROM: David H. Ready, City Manager

BY: AIRPORT

SUMMARY

This action would allocate Air Service Incentive Program funding for three qualifying airline service expansions scheduled to Palm Springs International Airport during the 2013-2014 season.

RECOMMENDATION:

1. Approve Air Service Incentive funding for Delta Air Lines and Sun Country Airlines in an amount not to exceed a total of $150,000.

2. Authorize City Manager to execute all necessary documents.

STAFF ANALYSIS

In an effort to promote the growth of commercial airline service at Palm Springs International Airport, an Air Service Incentive Program was previously approved by City Council. Up to $1 million was set aside from the Airport Fund to provide promotional financial support for new or current air carriers that elect to offer new and/or expanded air service.

Since this program was launched, the Airport Commission has recommended and City Council has approved over $700,000 in air service fund allocations to support new and expanded service by several carriers including WestJet, Virgin America, Frontier, United, Allegiant, and Alaska Airlines.

For the 2013-2014 season, three specific nonstop routes will have enough increased capacity to meet the program's qualification for incentive funding. Qualifications are based on year-to-year growth calculated on a monthly basis as shown in detail on page 3 of this report. With some variation by month, Delta Air Lines is increasing its flight

ITEM NO. _4.... \1..___ City Council Staff Report October 2, 2013 - Page 2 Air Service Incentive Program Awards capacity to Salt Lake from two to three daily flights and its Minneapolis-St. Paul service from one Saturday-only flight to a full seven day operation. Sun Country Airlines is expanding its service to Minneapolis-St. Paul, beginning earlier in October and increasing the frequency from five to eight flights each week.

Incentive program amounts will be predicated upon criteria unique to each route, including how many months of qualifying service will be provided this season. The below "table" outlines routes and incentives - and a detailed monthly "frequency table" is attached.

Qualifying Not-To-Exceed Category Airline Route Date Range Funds

Existing Routes Delta Minneapolis Oct '13- Jun '14 $50,000 Existing Routes Delta Salt Lake City Oct '13- Jun '14 $50,000 Existing Routes Sun Country Minneapolis Oct '13- Jun '14 $50,000

FISCAL:

The total amount of this incentive request will not exceed $150,000 and will be calculated monthly based on airline schedule adherence. Funds for this expenditure are available in the 2013-14 Airport Budget, Account Number 415-6002-45521.

From a revenue generation standpoint, increased passenger traffic anticipated with the higher capacity levels will create additional income through Passenger Facility Charges (PFC's), food and gift concessions, car rental concessions, vehicle parking fees, aircraft landing fees, fuel flowage fees and other sources of income to the Airport.

Thomas Nolan Executive Director, Airport

Cc Frequency tables

02 City Council Stall Report October 2, 2013 - Page 3 Air Service Incentive Program Awards

Delta Winter 2013-2014 Minneapolis Frequency Changes

Year Oct Nov Dec Jan Feb Mar Apr May Jun

2012-2013 0 0 0 0 2 5 0 0 0

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Freq Change 0 0 12 31 26 26 30 23 3

Year-Year 0% 0% 100% 100% 1300% 520% 100% 100% 100%

Min2 Wks No Yes Yes Yes Yes Yes No

PSP Program Qualification $0 $0 $0 $10,000 $10,000 $10,000 $10,000 $10,000 $0

Total Marketing Funds Qualifying funds based on per month $50,000 calculation of yr-yr frequency increases

Delta Winter 2013-2014 Salt Lake City Frequency Changes

Year Oct Nov Dec Jan Feb Mar Apr May Jun

2012-2013 63 61 61 62 69 128 75 60 60

Freq Change 23 16 16 5 0 -6 20 33 30

Year-Year 37% 26% 26% 8% 0% -5% 27% 55% 50%

Min2 Wks Yes Yes Yes Yes Yes Yes Yes Yes Yes

PSP Program Qualification $7,500 $7,500 $7,500 $0 $0 $0 $7,500 $10,000 $10,000

Total Marketing Funds Qualifying funds based on per month $50,000 calculation of yr-yr frequency increases

Sun Country Winter 2013-2014 Minneapolis Frequency Changes

Year Oct Nov Dec Jan Feb Mar Apr May Jun

2012-2013 7 14 22 27 24 26 20 18 0

Freq Change 10 5 -4 5 8 10 10 5 0

Year-Year 143% 36% -18% 19% 33% 38% 50% 28% 0%

Min2 Wks Yes Yes Yes Yes Yes Yes Yes Yes No

PSP Program Qualification $10,000 $7,500 $0 $0 $7,500 $7,500 $10,000 $7,500 $0

Total Marketing Funds Qualifying funds based on per month $50,000 calculation of yr-yr frequency increases

03