Will new incentive program help CVG land JetBlue?

Posted at 4:30 AM, Jul 20, 2016

HEBRON, Ky. – The Cincinnati/Northern Kentucky International Airport has a new trick up its sleeve to entice additional flights and increase route competition – but are the recently approved incentives aggressive enough to land the likes of Alaska Air, Southwest or JetBlue?

CVG will roll out its first-ever air service incentive program at the first of the year, a plan that waives fees typically charged and dedicates certain dollar amounts to marketing support.

A new airline is eligible for funding, as are existing airlines that add service to specific new markets, both domestic and international.

There are 12 different packages overall – marketing support, for example, ranges from $50,000 for a minimum of 12 months of new seasonal service to Caribbean markets to $300,000 for two years for trans-Atlantic or trans-Pacific flights.

"As we go out and talk to airlines, we typically get 20 minutes; a lot of people call it speed dating," said Adam Kressler, director of air service development at CVG. "Eight out of 10 times, (they're) going to ask about our air service incentive package – and it's been a short conversation up to this point, because we didn't have it."

Over the last several years, such incentive programs have become increasingly important, CVG officials said, although airports are restricted by the Federal Aviation Administration on their type and duration.

CVG, for example, can only waive landing fees, gate use fees and ticket counter fees. An existing carrier or new entrant – like Southwest or JetBlue, a long-time focus, or Copa Airlines, which the airport is targeting for Latin American service – could also receive marketing support. If a new airline serves an airport-designed target or emerging market, more incentives apply.

"We specifically reviewed this with JetBlue, and they said it was highly competitive," said Bobby Spann, CVG vice president of external affairs. "But this is just one component in the overall scheme of things. It won't close the deal."

The four-year plan is set to roll out Jan. 1 – with one minor modification, at least for now. Several Kenton County Airport Board members, during a meeting this week, critiqued the package for not going far enough. Could marketing amounts go higher?

"Are we paying just to play? Or are we playing to win, which (if so), I think you can present a more aggressive option," said board member Chad Summe.

The board ultimately approved the incentives but voted to up the ante for airlines serving new target markets; instead of $75,000 in marketing dollars, flights to a new target market would allow for $150,000 in support. The same waivers apply.

CVG has identified nine such target markets, which include many West Coast destinations, namely Long Beach, Oakland, Portland, Seattle, San Diego and Orange County-John Wayne, but also Dallas, Houston and Chicago-Midway – destinations where there's strong demand, Spann said, but no direct routes. At least four of those cities were also recently identified by the Louisville airport when it updated its incentive package last month.

"It's a very competitive environment that we find ourselves operating in," Kressler said. "We think we've built a really good program. It's not the most aggressive in the world, but it certainly gets us to the table and makes us part of the conversation. We're on par with our regional peers with the dollar amounts we see."

Other parts of the program could be revised upward at a later time, CVG officials said.

"We benchmarked over 15 airports of similar size; we're more aggressive than some, not as aggressive as others, but we're right on the mark," Spann said. "Atlanta's more aggressive than we are – they offer $1 million (in marketing) for an international route. That doesn't make sense for us. We believe this is a good starting point."

Still, it's likely not enough – at least on its own right – to attract new trans-Atlantic or trans-Pacific service.

CVG CEO Candace McGraw said they would need additional outside support – i.e. incentives from the business community – to land the likes of British Airways or Lufthansa or new direct service to London-Heathrow or Tokyo, Japan.

Per FAA regulations, CVG says it can't be privy to those conversations, she said. In its incentive literature, CVG says it maintains close relationships with business leaders, economic developers and corporate business managers.

"International's a tough road," McGraw said. "In terms of domestic, in terms of new entrants, we've been successful so far, but now we're going after certain markets that other airports are also really working hard at. This keeps the conversation going."

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