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 requirements between the City and the Billings Chamber of Commerce for the local match funds required as part of the financial incentive package to entice American Airlines to begin service between Billings and Dallas.  Since Federal Regulations prohibit the City and the Billings Logan International Airport from utilizing Airport funds to promote or fund any airline service, the financial incentive requirements subsequently must be covered by other third party funding and/or with Small Community Air Service Development Program (SCASDP) grant funds, which the City applied for and was awarded.  In the Agreement between the City and American Airlines for the new service, both local match funds from the community ($700,000) and SCASDP grant funds ($750,000) are being used.  This Agreement with the Billings Chamber of Commerce set forth the terms for accessing and using the local funds, should they be needed.

City Council may:

• Approve the Agreement with the Billings Chamber of Commerce to provide the local match funds that may be needed to supplement the revenue guarantee payment for American Airlines; or
• Not approve the Agreement with the Billings Chamber of Commerce and subsequently jeopardize the program put in place to have American Airlines provide direct service between Billings and Dallas.

With the approval of this Agreement the City's financial impact will net to zero.  In the event that American Airlines submits a bill for the service to provide the flights between Billings and Dallas, the Billings Chamber will submit any funds needed by the City to cover the airline losses that are not covered by the SCASDP grant.

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).
 
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 newly served community 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 grant requires 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 a combined program of incentives totaling $1,496,325.  Since the City of Billings and the Billings Logan International Airport are prohibited by Federal Regulations from participating financially in supporting air service, the community must supply the local match funds.  Since the contributions for the local match funds came from 17 organizations and businesses, the Billings Chamber of Commerce has agreed be the local designee for the local funds and agreed to enter into this Agreement with the City to provide the local match funds as needed.
 
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 payment of funds required to meet the local match needs when American provides the City with a billing for the air service between Billings and Dallas.  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.  If it is a loss then this contract kicks in and the loss is covered with guaranteed funds provided by the SCASDP grant and the local matching funds required from the Billings Chamber of Commerce through this Agreement.  If it is a profit, American pockets the revenues, no local or grant moneys are paid, and the process starts over for the next quarter.

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 acting through the Billings Chamber of Commerce, 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.