St. Cloud woos regional airlines with subsidies

  • Article by: PAT DOYLE , Star Tribune
  • Updated: August 13, 2012 - 9:00 PM

The business community has also come up with more than $6 million in pledges to buy tickets.

Millions of dollars in business pledges and public subsidies are bait in the latest campaign to lure an airline to St. Cloud Regional Airport.

It's in final negotiations with an airline for regular service to Chicago, said Al Kremers, a business leader involved in the talks.

"We're very optimistic that the announcement will be this year," he said.

He wouldn't identify the airline, but said talks deal with twice-daily flights to and from O'Hare International. He says the airline would use 50-seat jets.

The airport also is in final negotiations with another airline about flights to Phoenix three days a week on larger jets, he said.

The regional airport has tried to lure airlines for a decade. Efforts were intensified in 2010, after Delta stopped flying 34-seat prop planes from St. Cloud to Minneapolis-St. Paul International Airport and Sun Country curtailed flights from St. Cloud to gambling resorts in Nevada.

But confidence has grown recently with nonbinding pledges by local businesses to spend more than $6 million on flights to Chicago.

The airport also is offering $750,000 in federal grants awarded last year to subsidize airline revenues.

"We have some incentives that we didn't have in the past," said St. Cloud Mayor Dave Kleis. "I'm confident we'll have air service."

Airport director Bill Towle added, "We are getting closer and having some back and forth talks with a couple of these airlines, really kind of working on the incentives."

Doubts persist

But a government study and one industry expert said cities like St. Cloud face tough odds when they seek lasting airline service.

"Once the subsidy runs out, the service tends to expire," said William Swelbar, a researcher at the Massachusetts Institute of Technology's International Center for Air Transportation. "At the end of the day ... you can't buy a market."

Even if a new carrier were to offer better convenience and price, it would compete with the frequent flier program available to Delta customers flying out of MSP.

The inspector general for the U.S. Department of Transportation concluded in 2008 that half of the federal grants given to small airports nationwide failed to achieve the kind of air service they sought.

Still, the report said, airports that garnered local support and focused on attracting new service were more successful than airports that sought to expand existing service and lacked community backing.

"Communities which conduct in-depth market analysis and support their grants through substantive ... support are more likely to succeed," the report said. "Revenue guarantee grants had the highest success rate, 44 percent."

The $750,000 in grants from the Small Community Air Service Development Program could subsidize service at St. Cloud for a year or more, boosters said.

While noting obstacles to gaining service, Swelbar said the St. Cloud airport might fill a niche for an airline with ample numbers of 50-seat planes and needing routes tailored for them. Delta and other large airlines have jettisoned 50-seaters as fuel-inefficient, but some smaller carriers still rely heavily on them.

They make up, for example, the biggest share of the fleet of SkyWest, a regional carrier that has 159 CRJ-200s with 50 seats.

Even if fuel prices make a 50-seater a loser for an airline, "by using it from St. Cloud with community support, they lose less than parking that airplane," Swelbar said.

SkyWest did not comment Monday on whether it was considering flying out of the St. Cloud airport. Kleis said SkyWest was one of "the main airlines right now that we are talking to."

Business pledges

Some airport boosters see the facility as a potential draw for residents of far northwestern Twin Cities suburbs, who could find it more convenient to reach than MSP.

But supporters cite demand from St. Cloud area businesses as a bigger factor.

The $6.2 million in pledges came from 290 businesses surveyed by the Greater St. Cloud Development Corp. and others seeking air service that asked firms to estimate their 2013 travel budgets for flights to Chicago.

"We're asking people to be realistic -- don't throw a number out there that you're never going to use," said Jami Bestgen, a St. Cloud business consultant helping organize the effort. "I feel pretty confident those numbers can be met."

One business that pledged to buy tickets is Microbiologics, a laboratory testing facility that specializes in environmental and public health threats. About 40 percent of its revenue comes from outside the United States, making travel important.

"It's a big deal for us," said Brad Goskowicz, CEO of the firm, which pledged to buy $100,000 in Chicago tickets. "Most of your major cities are going to have flights directly into Chicago, and then if we had connecting service up here, that makes the international travel much, much easier for those folks."

Pat Doyle • 612-673-4504

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