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November 2nd / 4th, 2007

"PTI Puts All Its Eggs In The Skybus Basket"

Over the past four years I have criticized the PTI Airport Authority for failing to think outside the box. That’s why I suggested a number of ways in which they might increase passenger traffic, including offering free parking, or 2-for-1 ticket deals to entice travelers to depart from Greensboro via one of the existing major air carriers. My ideas were rejected out of hand.

So be it, but now we lowly, stupid taxpayers are told, after the fact, that the airport authority has struck a deal to give Skybus $57 million dollars worth of incentives to locate a hub at PTI.

I suppose we should be grateful for the new jobs this package might generate, but, after all, other small airlines have come and gone, and there’s never a guarantee of how long any incentive-based job might last in any setting. And, I suppose it would seem disingenuous of me to complain about the Skybus deal after I’ve taken airport executives to task for failing to be proactive.

On the other hand, my proposals involved direct benefits and incentives to passengers as an inducement for them to fly on the majors. In fact I even suggested that we float a bond to pay for short term marketing and passenger perks so that Delta, United, and others could have proof of the need for lower fares, and a wider selection of flights emanating from the Gate City.

Instead, the Authority has taken the opposite approach by offering the incentives to a single, small airline in hopes that major carriers will quake at the sight of new competition, and decide to lower fares out of fear and desperation.

Reminiscent of the Dell deal which flim-flammed North Carolina taxpayers out of hundreds of millions of dollars, Skybus also threatened us with locating to Virginia if we didn’t bow down to their demands. It seems The Old Dominion has changed its slogan from “Virginia is for Lovers”, to “Virginia is for Leverage”. At any rate, such direct and indirect strong-arm tactics are offensive, proving once again that industry incentives amount to nothing but legalized extortion and corporate welfare.

We should also be offended that details of the Skybus incentive package were kept secret until after the deal was made. Speaking of which, here’s an unofficial summary of what PTI agreed to spend so we could snatch Skybus away from those omnipresent Virginians:
  • $33 million for a covered parking garage in phase 2, to be preceded by $5 million for creating new parking spaces at the outset;
  • $7.2 million to build a new Skybus concourse;
  • $3 million to repair existing gates and ticket counters for Skybus;
  • $1 million for four new gates;
  • $5 million for passenger development incentives, of which $2 million would go directly to Skybus; and,
  • $300,000 to market and advertise Skybus services.

  • Total package: $57 million dollars.
It seems pretty excessive. For example, the Miami-Dade airport offered a total of $680,000 in landing fee waivers to six major carriers in order to generate more flyers and increased revenues. Divided by six, that’s roughly $113,000 per airline.

Skybus gets $2 million.

So why would PTI put all of its eggs into one basket? Obviously because the airport authority is convinced that Triad residents who normally avoid flying, or who depart from Charlotte and Raleigh, will now fly out of Greensboro because of cheap seats on Skybus.

But business travelers account for a substantial portion of major airline revenues. It stands to reason then, that only if those business flyers defected to Skybus would the majors take swift action to lower fares for everyone, and offer a better selection of flights from PTI.

The problem is that most business travelers (and many other frequent flyers) are seldom drawn to discount airlines. TravelCounsellors.com recently announced the results of a survey among business travelers in Great Britain, the overwhelming majority of whom rejected budget seating and, instead, preferred to stay with a major airline that they trust. Whoops! What if those survey results also reflect the preferences of American business travelers? In that case, Skybus would have very little influence over the major carriers who currently serve the Triad, or in how they might adjust their rates and schedules in the face of a threat from $10 seats to Columbus.

No doubt that discount tickets will be attractive to many families traveling to Disneyworld or Disneyland on a budget, but I doubt that the major carriers will rush to compete for those fannies, and so, the PTI Airport Authority has made a leap of faith in committing $57 million to a hub for Skybus. Finally, I’ll restate the obvious. Industry incentives are only a good deal for those who receive them. To quote a basic tenet of entrepreneurial spirit, if a business plan is viable, then that business should be willing to commit its own resources.

Failure to do so demonstrates a less than full commitment to the project at hand.

I sincerely hope I’m wrong, and that Skybus will cause the major airlines to lower their fares while offering an abundance of new, non-stop flights out of PTI.

Even so, incentives are the wrong way to achieve that goal, and $57 million dollars is a lot of money to bet on one small air carrier with its hand out.

So fasten your seatbelts. No matter how this plays out, I predict turbulence ahead.