Airline revenue guarantee fund pays nothing for March
With seats on new Chicago and Dallas flights booked, American Airlines' Revenue Guarantee Fund was invoiced $0 for March.
Apr. 26, 2013
The city didn't have to cover the cost of any lost profits for American Airlines flights last month due to filled seats.
The American Airlines revenue guarantee fund was charged nothing for the month of March, only the second month in the two-year contract.
The invoice amount from American Airlines for the period Feb. 14 thru Feb. 28 was $22,562, according to the city's finance director John Blattel.
American Airlines has offered a once-daily nonstop flight to Chicago O’Hare International Airport and twice-daily nonstop flights to Dallas/Fort Worth International Airport from Columbia Regional Airport since Feb. 14.
The airline and the city of Columbia agreed to a deal that a revenue guarantee fund would be provided to cover the costs of starting up the flights.
The success of these trips are due to market research, said Steven Sapp, public works information specialist.
“When they did research to find out, using the airline consultant, where people wanted to go, Dallas and Chicago easily fit within the top 10 list,” Sapp said. “Then we started looking at airlines that would be willing to fly to those particular destinations that our market research pointed to, and American [Airlines] emerged at the top of the list. Missouri has shown that there is a demand for those flights.”
The flights are so popular, even pre-bookings are having trouble finding space, Sapp said.
“We’ve seen people who are trying to book 90 days out and are having a hard time finding seats simply because that’s how far out these flights are filling up,” Sapp said.
The invoice of $0 can also be attributed to an average ticket price increase after the first two weeks of air service. The average ticket price was $19 higher in March than in February, and the difference was more than sufficient to cover the February revenue guarantee invoice amount, according to Blattel.
The fund includes contributors such as the city, MU, Cole County and Jefferson City.
“(The first invoice) was, by most aspects, fairly low,” Sapp said. “People were expecting to pay more than that.”
The fund has about $3 million, but it’s still too early to tell what that money will be used for, Sapp said.
“We’re only six weeks into this,” Sapp said. “It looks very promising so far. (American Airlines continues) to show very strong load factors and very strong pre-bookings, so if that’s any indication of what will happen over the next two years, which is the life of the contract, then certainly that money could have potential to expand their service even further for the citizens of Mid-Missouri.”
The research yielded other popular destinations such as New York, Arizona and California. However, Chicago and Dallas/Fort Worth will be the most beneficial to Columbia, Sapp said.
“University of Missouri has a big recruiting draw up in northern Illinois, up in Chicago, so flights up to the Northern area of Illinois were very attractive to the largest employer here in central Missouri,” Sapp said. “And the important thing about those two hubs too is that they are hubs – you can get anywhere in the world once you get to Dallas or once you get to Chicago.”
There exist more personal benefits of the two flights, Sapp said.
“If you drive to St. Louis or Kansas City, you have to get on an aircraft and fly to a hub, having to either change flights or make a connecting flight,” Sapp said. “The nice thing about flying out of Columbia is the first leg of your journey is not in a car. Your journey is in the air, getting closer to where you want to be.”
The city will continue to work with the airport to see what more can be done for the town, Sapp said.
“We’re always talking with other airlines, we’re always looking for new destinations, we’re always talking with our consultant to determine what destinations the folks in Mid-Missouri are wanting to go to or are needing to go to for business or for leisure,” Sapp said. “We do try very hard to make sure people get a good experience when people fly out of Columbia.”