Tampa International Airport about to enter the pay-to-play airline incentives game

An Air France Boeing 777 arrives at Orlando International Airport on June 7, the first flight of a new Paris-to-Orlando route.The airport doesn’t have an incentive program but contributed money for an advertising campaign in Central Florida to promote the route. Some of that advertising targets travelers in the bay area.

Special to the Times | Greater Orlando Aviation Authority

An Air France Boeing 777 arrives at Orlando International Airport on June 7, the first flight of a new Paris-to-Orlando route.The airport doesn’t have an incentive program but contributed money for an advertising campaign in Central Florida to promote the route. Some of that advertising targets travelers in the bay area.

For years, the management at Tampa International Airport refused to jump into a popular game in airline recruiting: paying to play. The idea of doling out dollars to airlines to fly new routes seemed unfair and fraught with financial peril.

Enter Joe Lopano, a cocky New Yorker who became TIA's new CEO in January. A top priority: increase the anemic number of nonstop flights from Tampa to international cities and the West Coast of the United States. To do it, he's willing to open the airport's coffers.

His staff has worked feverishly to pull together an incentive policy the airport's governing board can approve after a workshop Monday.

There's a lot at stake.

Just one wide-body jet flying daily between Tampa and a major European city would generate $154 million a year in spending in this region, says one airport consultant. On the other hand, paying millions of dollars to entice airlines to come to TIA only to have them leave when the money runs out would be a tough hit to the airport's bottom line, not to mention embarrassing to those who pushed for it.

Tampa International is about to enter a fiercely competitive arena, and it's late to the fight.

• • •

Lopano knows the incentives game well.

Before coming to Tampa, he was the marketing chief at Dallas-Fort Worth International Airport, where he made his name as top dealmaker with a fat bankroll, said Kevin Schorr of the aviation consulting firm interVISTAS in Bethesda, Md.

The airport launched its first incentive program in 2005 and kept upping the ante. By 2009, DFW had about $8 million a year to attract new long-haul international service and up to $3 million a year to secure new domestic routes.

Lopano got results.

Virgin America agreed to fly to Dallas from Los Angeles and San Francisco last summer, after receiving a waiver of airport fees for a year and $375,000 in marketing money. Virgin turned down a pitch from Tampa International for a San Francisco-Tampa flight. Airport officials had only $25,000 in advertising assistance to offer.

DFW also recently used a $3.1 million package to entice Australian carrier Qantas to fly from Sydney to Dallas, instead of to San Francisco.

Dallas-Fort Worth International is the nation's fourth-largest airport and the biggest hub for American Airlines. The airport has deep pockets, even collecting royalties from natural gas drilling on some of its 18,000 acres.

Even with a smaller budget and the state's largest airport a short drive down Interstate 4 in Orlando, Lopano is undaunted by the challenge.

"We will be the international gateway for the west coast of Florida," Lopano told the Pinellas Tourist Development Council earlier this month. "We will win as a team."

He'll have some tough competition.

• • •

In Florida alone, 10 commercial airports offer incentives of widely different cost and scope, according to Seabury APG, a consultant hired by Tampa International.

Sarasota-Bradenton International has the state's ''most aggressive'' incentives for domestic service, offering as much as $500,000 in advertising for new flights, Seabury said.

Orlando International has no formal incentive program, but the airport pitched in $50,000 to promote four new services: Air France to Paris; Avianca to Bogota, Colombia; Edelweiss to Geneva; and Caribbean Airlines to Trinidad. The airlines and the airport are trying to attract Tampa Bay area travelers to those new flights with ads on local public radio stations.

Most airport incentive programs will waive a combination of landing fees, terminal rent, gate fees and federal inspection charges. Many pay to advertise the new service, sometimes requiring a match from the airline.

Airports typically dangle bigger incentives for international flights, which are far more expensive for airlines to operate than domestic routes. They might offer deals only for specific markets. Miami International lists more than two dozen international ''premium markets'' that qualify for $50,000 in matching money for advertising in addition to fee waivers.

Uncle Sam sets limits on how far airports can go. Rule No 1: They can't just write airlines a check.

They can't guarantee the airline a certain amount of revenue or number of seats will be filled. (Community groups, like chambers of commerce, can do both.) And airports can't offer incentives only to discount carriers, such as Southwest, AirTran or JetBlue,

Do the incentives work? The results vary in Florida.

Noah Lagos, director of St. Petersburg-Clearwater International, calls his incentive deal in 2006 with Allegiant Air an unvarnished success.

The airport was headed for its first year below 400,000 passengers in more than a decade. Then the no-frills airline appeared with an offer to make the Tampa Bay area its second Florida destination, with Lagos' airport as the gateway.

Allegiant's demand: no airport charges for two years except fueling fees, plus $1.5 million for advertising for new routes. Pinellas County's tourism promotion agency picked up half the tab.

Now, Allegiant flies tourists from 22 small cities, most in the Midwest and Southeast, to St. Petersburg-Clearwater. Lagos expects the airport will handle 800,000 passengers this year — twice as many as when Allegiant arrived.

But what if new flights go bust? The airline usually leaves town and airports write off their contribution.

Take Tallahassee and AirTran. In 2001, the city put up a $1.5 million revenue guarantee to cover losses for new small jet routes AirTran flew to connect Tampa and Miami with the state capital.

AirTran gobbled up the whole $1.5 million to offset $2.4 million in losses. The airline ended the money-losing flights after two years.

Hollywood-Fort Lauderdale International Airport had mixed success with 30 incentive deals between 2001 and 2008. Thirteen ended with airlines closing down new routes when incentives ran out. One airline, Aeromexico, launched Mexico City flights from Fort Lauderdale in 2003 and again 2006, each time leaving after less than a year. Aeromexico's incentives: just over $230,000.

Still, Hollywood-Fort Lauderdale made twice as much money from airlines that continued flying after the incentives ended than it lost from the ones that left, said spokesman Greg Meyer.

"Some of these programs work and some don't,'' said aviation consultant Michael Miller. "But how are communities going to know if they don't try starting small and build from that?''

That's precisely the question critics of Tampa International's airline recruiting efforts asked for years.

• • •

Tampa Bay travelers, especially business travelers, have long griped they can hardly fly anywhere overseas without stopping in a hub such as Miami, Atlanta or Charlotte — or driving to Orlando.

Each week, Tampa averages just 24 nonstop flights outside the United States, composed mostly of flights to Canada and British Airways' daily flight to London.

That puts TIA far behind Miami International (1,300 nonstop international flights), Fort Lauderdale (359) and Orlando International and nearby Orlando Sanford International combined (199).

Orlando's robust international service, in particular, has frustrated Tampa International officials for decades. It's tough to persuade airline executives to add Tampa as a new destination when they have planes flying to an airport 90 miles away.

Lopano is betting that incentives can help TIA make that case.

He would not reveal many details of what he will propose to the airport board on Monday. Lopano has said the airport will target five international destinations: Frankfurt, Germany; Bogota, Colombia; Panama City, Panama; Sao Paulo, Brazil; and Mexico City. It makes sense that the incentive plan will likely offer financial sweeteners for new routes to Europe and Latin America.

Routes to West Coast cities without any current nonstop flights from Tampa — San Francisco, Seattle and San Diego are the top three — will likely be eligible for incentives, as well.

It's unlikely Lopano will have the cash that was available to him in Dallas, an airport more than three times larger than Tampa International.

Pinellas County's tourism agency might dig into a $200,000 account for advertising new routes. Its counterpart in Hillsborough, Tampa Bay & Co., might help, too.

Incentives alone won't work. Tampa International will need to present a solid business case that travelers will fill enough seats to make a new route profitable, aviation experts said. After that, the right financial sweetener could tip the scales toward Tampa and Lopano.

"His record in Dallas proved he's a guy that gets things done,'' Schorr said. ''But Dallas is a different market than Tampa, and he had more money to spend on incentives.

"The question is, can he take that success and translate it to Tampa?''

Contact Steve Huettel at huettel@sptimes.com or (813) 226-3384.

Tampa International Airport about to enter the pay-to-play airline incentives game 06/18/11 [Last modified: Saturday, June 18, 2011 8:35pm]

    

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