CBC, Chamber study airport

CBC, Chamber study airport

6:24 AM, Feb. 20, 2011

Increasingly frustrated with fewer flights and high fares, some of the region’s most powerful business leaders are taking the lead to revitalize the Cincinnati/Northern Kentucky International Airport.
Heads of the Cincinnati Business Committee and Cincinnati USA Regional Chamber say restoring flights and reducing ticket prices are critical to creating jobs and fueling the region’s economic recovery.

“The strength of our airport has a significant impact on the region’s ability to retain, grow and attract jobs,” said Gary Lindgren, executive director of the business committee. “The airport still offers us an advantage over many of our peer communities, but it is not the difference maker of the past.”

The two organizations joined forces last week to fund the work of a new private-sector airport task force. Made up of a dozen CEOs and executives from the region’s largest companies, it’s the business community’s strongest public effort yet to support the airport’s revival. The Northern Kentucky Chamber has not been involved so far.

The group’s first move will be to hire a national aviation consultant. Eventually, the companies could commit financial resources or seat guarantees to lure a new airline to town and add new domestic or international routes.

Delta Air Lines, the dominant airline at CVG, has reduced its local operations by more than 50 percent since January 2007. Monthly domestic departures dropped from 1,716 in January 2007 to 829 in January 2010. International flights declined from 107 to 50 during that time. Delta no longer flies direct to London, Frankfort or Amsterdam from CVG. In all, Delta travels to 77 destinations, down from 116 in 2007.

Business travel makes up 60 percent of traffic to and from the airport.
CVG and its board have cited many challenges in establishing new or expanded flight service. The slow economic recovery, airline consolidation, fleet contraction and the amount of competition from surrounding airports all contribute.

Federal Aviation Administration regulations and lease agreements with the airport’s seven existing airlines also restrict it from offering financial incentives to lure new carriers.

“This is a step we had been encouraging the business community to take,” airport CEO John Mok said. “Airlines’ first question, even after they determine a market opportunity in a community, is, ‘What level of community commitment can we anticipate?’ ”

Airlines are much more reluctant to take risks today than even a decade ago, Mok said. Adding a new route can cost hundreds of millions of dollars in fuel and equipment. Airlines need to see a business case that new service is needed and that traffic on those routes would be sustainable.

To back up their cases, coalitions of businesses in other cities have offered startup funds to new carriers or subsidies with a guarantee that a minimum number of seats would be filled.

In Pennsylvania, Kansas, Maryland and Utah, $2 million to $11 million in public and private funds and incentives have been awarded to airlines willing to add service to an existing airport.

“We’re not talking $5,000 or $10,000 here, but millions of dollars for international routes and tens or hundreds of thousands for domestic routes,” said Mike Miller, vice president of strategy for the American Aviation Institute, an industry think tank in Washington, D.C.

It’s the consideration of those large dollar amounts that is driving formation of the task force. Local corporations don’t want to commit their resources until short- and long-term goals for the airport’s revitalization are set.

“We need to gather data to determine what is the optimal situation, what best serves the needs of the city now and as it grows,” said Tom Williams, president of North American Properties and business committee chairman. “Long term, it’d be great to have another international spoke-and-hub situation, but that’s a long-term goal, if anything.”

With the consultant, the task force will survey local businesses to determine current and future air service needs. They’ll research incentive and regulatory options and recommend fixes.

“We haven’t been able to find a single model that works in a uniquely terrific way,” said Ellen van der Horst, chamber president and CEO. “We want to learn from all these models and create one that works for us.”

It’s likely the group will engage state and federal leaders to help secure incentives or regulatory changes. The Kentucky Senate has already passed legislation that could let state airports, including CVG, set up separate operating units to attract low-cost airlines. It must now be approved by the state House and Gov. Steve Beshear.

U.S. Sens. Sherrod Brown and Rob Portman and Ohio Gov. John Kasich also are keenly interested in seeing the airport’s revival, and quickly, Lindgren said.

Just this week, Brown wrote to Delta CEO Richard Anderson, requesting that Delta restore service and offer lower ticket prices at CVG. Bureau of Transportation statistics for the third quarter of 2010 ranked CVG the nation’s seventh priciest airport with average fares of $435.66. Cleveland ranked 12th, Columbus 30th and Dayton 38th.

“We don’t want to have to ask the FAA to intervene or the Justice Department to think about anti-competition,” Brown said. “We’re asking Delta to do it right and treat Cincinnati fairly.”

Delta maintains that its downsizing at CVG over the past five years was to meet market demand and return to profitability. In January, Delta officials committed to keeping between 145 and 165 flights through the spring and maintaining its existing offering of non-stop flights.

“Delta’s schedule today offers Cincinnati customers an opportunity to travel to and from all major business markets in one business day,” spokeswoman Kristin Baur wrote in an e-mail.

Van der Horst, Williams and Lindgren are prepared for a long engagement. It can takes months or years to establish new service at an airport.

The most effective private-sector groups work to secure long-term relationships with carriers, Miller said. That means visits to airlines’ headquarters, frequent meetings and calls and attendance at major aviation conferences and events around the world.

“In its early stages, a group like this is needed for one main reason. The Cincinnati airport needs to show the world that it has a unified business community,” Miller said. “But as many say in the airline industry, ‘Route development is a marathon, not a sprint.’ ”

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