On June 2, 2017, American Airlines will begin non-stop service between Billings and Dallas/Fort Worth, TX.  This new service is the result of a lot of community effort to attract American Airlines and then support the new service with a combination of marketing funds and a revenue guarantee for the first year of service.  This Agreement sets forth the terms of minimum revenue requirements, Airport landing fee waivers, and the marketing support required by American Airlines.

City Council may:

• Approve the Agreement with American Airlines setting forth the minimum revenue requirements and the required marketing support; or
• Not approve the Agreement with American Airlines and jeopardize this new non-stop airline service to Dallas. 

Other than the landing fee waiver, the other costs that may be incurred to meet this Agreement end up being a net zero sum to the City.  The one year landing fee waiver is anticipated to cost the Airport approximately $46,325 of revenue opportunity.  However, with American leasing Terminal space, it is anticipated that the rental revenues will be approximately $150,000 in the first year.

During the past couple of years, there has been a more concerted effort to enhance the air service offered at the Billings Logan International Airport.  To achieve some improvements, members of the Chamber of Commerce's Air Service Development Committee including the Chamber of Commerce, Big Sky Economic Development, the Tourism Business Improvement District, and Airport staff determined that the best new service option would be to persuade American Airlines to serve Billings from the Dallas Fort Worth International Airport (DFW), but also wanted to explore enhancements to the service being provided by the incumbent airlines.  Subsequently, visits were made to the incumbent carriers of Alaska, Delta, and United, as well as a visit to American Airlines.
 
Over the years, the path to new service has changed and it is very rare that an airline will unilaterally start new service to a community.  Since the risk and expense of starting new service is fairly high, the airlines now require that the community that is getting the new service participate by covering some of the risk to implement the new service.  Some of the more popular incentives include guaranteeing revenues for the first year or two, provide free terminal space and landing fees, provide marketing programs for the new service, and providing the ground handling for the airline.  The Billings group decided that the local support would include a revenue guarantee, marketing support, and waived landing fees.  To help supplement this package the Airport agreed to be a Grant Sponsor for a Small Community Air Service Development Program (SCASDP) grant from the U.S. Department of Transportation.  The application for this grant required a local commitment, which included a local match of $700,000 and a landing fee waiver for $46,325.  Fortunately, the City was awarded a SCASDP grant for $750,000, for combined program of incentives totaling $1,496,325.  With this incentive program, American subsequently agreed to begin service between Billings and Dallas beginning June 2, 2017.  The Agreement sets forth the details of the incentive package and how it will be implemented.  In summary, this is a one year deal.  A flight segment amount has been determined with adjustment points for fuel price fluctuations.  Each time the aircraft flies between Billings and Dallas and vice versa that flight segment cost is compared to the total revenues for the flight.  Then each quarter, the total of the flight segments' profits and losses are netted together and American either made money or lost money.  The Agreement covers any losses.  If there is a profit, American keeps the profit and the quarterly accounting begins again.

In general terms, the whole community could be considered a stakeholder since this new flight opens up opportunities for direct service to Dallas and the new one stop connections from there.  Additionally, direct service to a new destination will usually result in new business opportunities that can financially enhance local businesses' revenues.  Specific stakeholders would be the 17 local organizations and businesses that are taking the financial risk to provide the local share matching funds required in this Agreement, in an effort to enhance the air service for all of Billings, eastern Montana, and northern Wyoming.

There are no policies or plans addressing this new service