Incentivize It and They Will Come? How Some of the Busiest U.S. Airports Are Building Air Service With Incentive Programs

Abstract

Problem, research strategy, and findings: In the 1990s, the Federal Aviation Administration (FAA) prohibited airport sponsors (local authorities managing airports) from diverting airport revenue to general municipal budgets and allowed the busiest airports to create air service incentive programs (ASIPs) to induce airlines to launch new air service. These incentive programs have not been evaluated, although planners need information on their long-term effectiveness. Few data, however, are available on ASIP programs; I created a database to identify which airports have ASIPs, which new airline services received incentives, and the services that continued after incentives ended. I find that 26 of 44 airports with ASIPs that recruited new routes spent $171.5 million combined between 2012 and the first quarter of 2015, 40% on routes that were not retained when the incentive ended. The busiest airports in the largest cities with growing populations, relatively independent of local economic status, were most able to recruit and retain new airline services. Small and medium airports, particularly in stagnant areas, were not able to recruit and retain new air services.

Takeaway for practice: The FAA should require airport sponsors to submit comprehensive information on their ASIP programs—the routes recruited and retained, as well as detailed estimates of the costs and benefits of each route—to provide planners with needed information. The FAA also should loosen the constraints on the use of non-aeronautical airport revenues so that communities can choose between spending on incentives to increase air service and other programs to increase local economic development.

Keywords:

• air transportation planning
• airline incentive program
• airport competition

Acknowledgments

I would like to thank the four anonymous reviewers, Max Z. Li and Theo Lim for assistance with data collection, and Karen Trapenberg Frick and Bryan Rowan for providing helpful feedback.

Color versions of one or more of the figures can be found online at www.tandfonline.com/rjpa.

Supplemental Material

Supplemental data for this article can be accessed on the publisher's website.

Notes

1 Examples of restricted funds that can be diverted at grandfathered airports include the multimodal Port Authority of New York and New Jersey, which can divert airport revenues to support the bridges and tunnels (McCain, 1999), and the City and County of San Francisco, which diverts 15% of concession revenue (which was about $20 million per year in the early 2000s) to other non-airport city funds under the grandfather provisions of the statute (Dempsey & McDaniel, 2008).

2 There can be separate incentives for increased frequency on existing routes that an airport sponsor deems of high importance. I do not consider these in this study.

3 The Airports Council International–North America (ACI-NA), one of the five worldwide regions of Airports Council International, advocates for and provides services to commercial airports and aviation-related businesses. According to ACI-NA's website, ACI member airports carry more than 95% of domestic air traffic and all the international airline passenger and cargo traffic in North America (Airports Council -International–North America, n.d.).

4 Some airport sponsors do not “publish” their ASIPs publicly yet still provide incentives in accordance with FAA guidance. For example, the City of Philadelphia does not publish their incentive program for the Philadelphia International Airport. However, the director of the Philadelphia International Airport noted in a 2010 hearing that his team encourages domestic and foreign carriers to service Philadelphia with incentives (City of Philadelphia, 2010, section “City Council's Joint Committees on Legislative Oversight and Transportation and Public Utilities”). Salt Lake City, with an incentive program active only through 2012, published the costs and the incentivized routes achieved through their incentive program but did not disclose the details of their incentive program (Salt Lake City Department of Airports, 2011).

5  It is not a coincidence that Atlanta (GA), home to the most important airline hub for Delta Airlines, and the airline hub in the United States with the most unique routes served (Ryerson & Kim, 2013), is spatially separated from other airports with ASIPs. In 2016, Delta agreed to extend their lease at their hub in Atlanta once the city committed in writing not to operate a second commercial airport (-Yamanouchi, 2016a, 2016b).

Additional information

Notes on contributors

Megan S. Ryerson

Megan S. Ryerson ([email protected]) is an assistant professor of city and regional planning and electrical and systems engineering at the University of Pennsylvania.