The current Essential Air Service (EAS) provider for the State of Montana, Great Lakes Aviation, Ltd., was awarded the EAS contract by the U.S. Department of Transportation after Big Sky Airlines suspended its EAS service, left the Airport, and subsequently went out of business. Great Lakes began daily service on February 1, 2009,  from Billings Logan International Airport to seven Montana communities including Sidney, Miles City, Glendive, Lewistown, Havre, Glasgow, and Wolf Point. Great Lakes' EAS contract expires at the end of April 2011.  Late last year, the U.S. Department of Transportation requested bids for a new EAS contract, which was successfully secured by Gulfstream International Airlines, Inc., based out of Fort Lauderdale, Florida.  Gulfstream will continue service to the EAS markets under the new EAS contract beginning May 1.  Gulfstream desires to lease office and gate hold room space for its EAS operations, and has opted not to enter into the standard Scheduled Airline Operating Agreement and Terminal Building Lease (Signatory Agreement), .  The Airport has available space to accommodate Gulfstream's needs and has negotiated a Lease/Permit with Gulfstream for the Terminal space, which also sets forth that Gulfstream will operate under and follow City Ordinance 90-4838 and 90-4850 as guidance for their operating requirements.

In most cases, the airlines renting space and operating out of the Terminal Building usually enter into a Signatory Agreement,  which provides for the space and operating requirements, as well as language that sets forth a rate making formula for airline Terminal Building rentals and airline landing fees.  This ultimately ensures the Airport's annual operating costs are covered.  In 1990, Ordinance 90-4838 was established, which basically follows the current language in the Signatory Agreement, and provides for the revenue generating capability needed for the Airport's bonding requirements and capital needs, regardless of whether an airline entered into an agreement with the City. In late 1990, Ordinance 90-4838 was amended by Ordinance 90-4850, which mirrored the previous Ordinance, except that a financial incentive for the airlines was incorporated into the language giving the airlines that entered into the Signatory Agreement a lower landing fee rate than those airlines that chose not to enter into the Signatory Agreement and operate under City Ordinance.

Presently, Delta, Horizon, United, Allegiant, and Great Lakes Airlines operate under the Signatory Agreement, which expires June 30, 2010; Frontier does not operate under the Signatory Agreement. The difference in the landing rate fee between a signatory airline and a non-signatory airline is currently $0.34 per 1,000 pounds of landed weight. An airline may opt to operate under City Ordinance if it is testing the market, or just does not want to be locked into a longer term agreement for Terminal rentals.

The City Council may:

• Approve the Commercial Terminal Building Lease and Operating Permit with Gulfstream International Airlines, Inc.; or
• Not approve the Commercial Terminal Building Lease and Operating Permit with Gulfstream International Airlines, Inc.

This Lease/Permit provides Gulfstream with 338 square feet of exclusive space for offices and crew quarters, and 1,621 square feet of gate hold room space for operations. Based on the current rate schedule, the Lease/Permit would generate approximately $52,084 in annual rentals for the exclusive use space. The operational space will generate additional revenue, based on the number of enplanements Gulfstream has at the Airport. Landing fees are estimated at approximately $45,000 per year.

Staff recommends the City Council approve the Commercial Terminal Building Lease and Operating Permit with Gulfstream International Airlines, Inc. for a term beginning May 1, 2011 and expiring on April 30, 2015.