Wednesday, March 19, 2014

Contracts inked for Air LOT money

Air Service Board authorizes up to $1.5 million

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By GREG MOORE
Express Staff Writer

A United Express regional jet awaits boarding this winter for a direct flight from Hailey to San Francisco. Photo by Roland Lane

    The recently created Air Service Board last week signed agreements to spend a maximum of about $1.5 million of local-option-tax money to fund development and marketing of commercial air service to the Wood River Valley.
    The funding is expected to accumulate from monthly tax receipts generated through a 1 percent “LOT for Air” passed by voters in Sun Valley in November 2012 and by Ketchum and Hailey voters last fall.
    The additional LOT revenues from the three cities are expected to total about $2 million per year.
    The Air Service Board agreed to pay the nonprofit Fly Sun Valley Alliance up to $900,000 for the remainder of fiscal year 2014, which ends Sept. 30, to go toward securing commercial air service to Friedman Memorial Airport. Of that amount, a maximum of $860,000 is to go toward paying revenue guarantees to airlines that provide that service and no more than $40,000 toward developing new services.
    The board also agreed to pay the Sun Valley Marketing Alliance up to $582,654 for air service marketing.
    The contracts give the Air Service Board the right to terminate them with 90 days notice.
    For years, Sun Valley Co. and Fly Sun Valley Alliance through its fundraising efforts have been funding revenue guarantees to Alaska Airlines for its seasonal flights between Sun Valley and airports in Los Angeles and Seattle. Beginning this winter, a contract was signed with United Airlines to support daily, seasonal flights between Sun Valley and San Francisco. The amounts of Sun Valley Co.’s contracts with the airline are confidential.
    A $500,000 federal grant to Friedman Memorial Airport is supporting a revenue guarantee with United Airlines to begin service this summer between Friedman and Denver. The three local partners have stated that they are working with United to add winter service for that route, which is intended to provide connections with East Coast cities.

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“We could pay the whole $900,000, but we hope we won’t.”
Eric Seder
Fly Sun Valley Alliance

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    Fly Sun Valley Alliance board President Eric Seder said the new LOT money will help support the San Francisco service and the Denver service if it continues past this summer.
    “I don’t think the San Francisco service would have succeeded without it,” he said.
    The amount of money that will actually be spent on subsidizing the flights this year will depend on the amount of business that Alaska Airlines generates.
    “We could pay the whole $900,000, but we hope we won’t,” Seder said.
    He said the Air Service Board, which is made up of the mayors of the three cities involved as well as a non-voting representative from the Blaine County Commission, will be continuously deciding how to allocate the LOT money as situations change. A portion will need to be kept in reserve to fund potential revenue shortfalls by the airlines, and the remainder can be spent on developing new routes and on advertising the Sun Valley area.
    “There’s a substantial amount for the Marketing Alliance [this year] to expand their services so we can generate traffic,” Seder said.
    Marketing Alliance President Arlene Schieven said the organization’s core costs are covered, and all of its share of the LOT money will go toward additional advertising. She said the organization has almost completed a marketing plan for this summer targeting five markets. She said 25 percent of the money will be spent in San Francisco and in Los Angeles, 17 percent in Seattle, 12 percent in Denver and 21 percent in New York.
    Schieven said the plan includes different strategies for the different markets, depending on the amount of awareness about Sun Valley that already exists in each city and on the portion of the population there likely to be attracted to the Sun Valley area’s offerings.
    Schieven said the marketing campaign will run from April to September and peak in June and July.
Greg Moore: gmoore@mtexpress

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