TO: Mayor and Members of City Council
THRU: Kelly Olivera, Assistant City Manager
FROM: Andrew LaGala, Airport Director
Deontae Watson, Deputy Airport Director
DATE: December 2, 2024
RE:
Title
Air Service Development Incentives
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal IV: The City of Fayetteville will be a highly desirable place to live, work and recreate.
Objective 4.1: To maintain public transportation investments with high quality transit and airport services.
Executive Summary:
Council is asked to receive a presentation from Airport leadership about the implementation of a new air service development incentive program. This incentive would be a minimum revenue guarantee (MRG) used to attract new direct flights to and from the Fayetteville Regional Airport.
Background:
The Fayetteville Regional Airport applied for a Small Community Air Service Development Program (SCASDP) grant award from the U.S. Department of Transportation in July 2024. The SCASDP grants are designed to provide financial assistance to small communities through a competitive grant process to help enhance air service. Although we were notified in October 2024 that our application was not selected for funding, the need remains for additional funding to incentivize new air service at the Airport.
A commonly used incentive in the airline industry is an MRG. MRG’s are used to offset the start-up costs and initial risk associated with launching new air service by providing a set amount of local funding to the airline in the event the new air service does not generate sufficient revenues.
Issues/Analysis:
The MRG agreement will outline the responsibilities of both the airline and the City, including the dollar amount of the local funding and the concession period for the service to be provided by the airline. MRG’s are only available for new direct flights to and from the Airport; airlines would not be eligible to receive this incentive for existing flights. Specific details of the MRG incentive program will be presented at a future Council work session, prior to entering a contractual obligation with an eligible airline.
Budget Impact:
The Federal Aviation Administration regulates incentives that can be offered to airlines, and specifically prohibits the use of Airport revenues for MRG’s. Funding for this incentive must come from some other local source.
Options:
1. Receive the presentation and direct staff to:
• bring an appropriation ordinance for local funding of an MRG incentive program to the next regular Council meeting, and
• present details of the program to Council at a future Council work session.
2. Do not receive the presentation and provide additional guidance to staff.
Recommended Action:
Staff recommends that Council move to receive the presentation and direct staff to bring an appropriation ordinance for local funding for an MRG incentive program to Council at the next regular City Council meeting and present details of the program to Council at a future Council work session.
Attachments:
ASD MRG Council Presentation