Airline Revenue Guarantees
Air Program Funds Important
Airline Revenue Guarantees air program funding is important for your community to have readily available. It can become a need for your community to have funds for airline revenue guarantees or other incentives to acquire or support airline service. Sometimes you have advance notice well in front of an air service acquisition opportunity and other times you don’t. Creating an established funding support system in your community can help you maximize air service acquisition and avoid missing out on community air service opportunities that can sometimes come up on short notice.
I recently came across an article where airline revenue guarantees came up as a need to support Toronto Canada to Vail airline service at the Vail/Eagle Airport in winter. There was little notice for the community to commit to what was actually a retaining of air service to/from Toronto on Air Canada.
Fortunately for the Vail Community, they were able to execute on the airline revenue guarantees of $115,000 despite not having a set fund for this opportunity. Some communities would have had to pass up the air service option in similar situations and had the airline revenue guarantees requirement been higher, Vail may have ended up missing out on this opportunity.
In this situation, Vail had secured last winter 20132014 service From Toronto to Vail/Eagle airport (EGE) for a commitment to devote funds to marketing support. The first year of this flight occurred without the airline needing airline revenue guarantees. While the service did well per the article in February and March it did not do as well in December and January. Air Canada, the operating carrier, was requiring airline revenue guarantees to continue the service in the 20142015 winter.
Surprises in the change of serving requirements conditions and support from the airlines are not unheard of especially when flight performance falls short. Fortunately for Vail they were able to act quickly, secure the airline revenue guarantees funds and continue the air service from Toronto.
If Vail wasn’t able to get commitments from various community organizations quickly (In this situation it was only a couple of days), they would have lost out on this airline service. Why would this matter?
Well, for many communities, especially ski communities, visiting guests spend a lot of money which filters through the community helping with tax collections, which support community services, as well as supporting businesses and job creation which helps keep the community citizens employed etc…When an Average guest in many ski communities spends $1500 or more…the contribution to the local economy of even one airline service is very large, often millions of dollars.
If you can make $4 Million Dollars and it costs you $115,000 would you invest the $115,000? The return on this investment would be about $35 to $1 invested. Many businesses and communities feel this is a good ROI and do make such an investment via airline revenue guarantees in their air service.
Note: While you may have to commit to guarantee up to $115,000, if the flights do well you don’t necessarily pay any or all the $115,000. Communities only pay up to this amount pending the real shortfall from the pre-agreed upon contract terms.
If a community wants to ensure it can act on most if not all airline revenue guarantees opportunities they would be wise to: a) pre-set a target for funds for an airline revenue guarantee program, b) insure the pre-set target includes enough uncommitted discretionary funds for unexpected expenses or unexpected air service opportunities and c) will have funds that are sustainable over many years to avoid any potential loss of air service.
A community that has a preset funding strategy and program is better prepared as it regards airline revenue guarantees or other air support needs. This preparation will give their community with a good chance to acquire and keep air service and take advantage of sometimes surprise airline service opportunities.