Written by The Business Journal Staff
City officials believe Fresno is no longer competitive with other regional airports in attracting new carriers. So later this month, Director of Aviation Kevin Meikle will go before the city council seeking authorization to significantly boost the incentive fees Fresno Yosemite International Airport can offer new carriers to add service to Fresno.
Meikle gave a preview of FYI’s beefed up Airline Incentive Program at a meeting last week of the Greater Fresno Area Chamber of Commerce’s Government Affairs Council.
Explaining that FYI’s current Airline Incentive Program is now 10 years old, Meikle, along with Assistant Director of Aviation Dan Weber and several other airport officials, outlined a proposed update to the existing program that FYI officials believe could generate significant additional air traffic in and out of Fresno.
“Incentive programs, which are allowed by the FAA, are one of the few things airports can use to attract new carriers,” Meikle said.
Under FYI’s current program, financial incentives available to entice potential new carriers are capped at $95,000. “This passive approach has not produced results in nearly four years,” Meikle said.
The updated program would boost those fees as high as $350,000 to $400,000 and would be focused on what Meikle called “targeted markets and viable business cases.”
In order to attract to new business, airport officials are also able to waive landing fees for up to one year, a practice that Meikle said would continue under the proposed new incentive program.
Being able to offer carriers higher incentives will make Fresno “more competitive,” Weber said. “We need more meaningful incentive packages to better compete with other airports and markets.”
Offering financial assistance in the form of marketing support and waiving landing fees are “the two biggest tools” airports can use in attracting new carriers, according to Meikle, who said today, just four carriers — American, Delta, Southwest and United — control 80 percent of the domestic air travel market.
“These airlines care more about profit margin than market share,” Weber added. “These airlines are going to put their aircraft into airports that meet their profit margin.”
Al Smith, former CEO of the Fresno Chamber and a member of the Government Affairs Council, asked Meikle what would prevent an airline from coming in and taking advantage of the beefed up incentives and then pulling out of FYI when the incentives expired.
“We saw an airline like Frontier come in, grab the incentives and then leave when they were gone,” Smith said.
Meikle acknowledged that there are “risks” to any incentive program. “The bottom line is that there are no guarantees,” he added.
But since Fresno’s incentives program is self-funded via passenger receipts, the major financial risk to increasing the incentive program would be a sudden and unanticipated drop off in passenger traffic at FYI.
And Meikle added that with Fresno “bucking the trend and growing our capacity at FYI,” increasing the number of carriers serving the airport would benefit local travelers’ wallets too. “Free market competition is what drives lower air fares,” he said.
FYI has seen a noticeable uptick in passenger traffic in recent months. During the first quarter of this year, 336,482 people flew in or out of the airport, an 11.3 percent increase over the same period last year.
Meikle said that in order for the momentum to continue, Fresno must remain competitive. Many U.S. airports currently offer incentive fees starting at $1 million and higher, he said, adding FYI’s updated incentive program also should target carriers that serve “priority airports” that Fresno travelers use most frequently, including Chicago, Minneapolis, Houston, Atlanta and a number of facilities in Southern California.
Following the presentation from airport officials, the Chamber’s Government Affairs Council voted unanimously to support the updated program FYI officials are proposing.
Meikle is scheduled to ask the Fresno City Council for formal approval to update FYI’s Airline Incentive Program on June 30.