County OKs rebate program for airlines’ new flights, larger jets

After a history of refusing to dangle incentives in front of airlines for more service, management at McCarran International Airport has done an about-face.

Clark County commissioners approved without comment Tuesday a program to rebate as much as $250,000 a month to airlines that start new flights or deploy larger jets on existing ones. The credit, less than 2 percent of the fees and rents that airlines pay to use McCarran, will be meted out among the airlines that grow based on a year-to-year comparison of the official weight of their planes.

If no carrier adds seats, the credit would amount to zero.

Until now, McCarran confined itself to two indirect financial incentives: matching contributions with the Las Vegas Convention and Visitors Authority to help international carriers market the city, as well as deferring collection of charges such as landing fees, gate charges and counter rentals as the cost started rising sharply five years ago. The latter effort was completely paid off and ended last year.

The new strategy came about, Clark County Department of Aviation Director Randall Walker said, in the face of a fall in passenger traffic during the recession and the subsequent erratic recovery.

"New circumstances sometimes require new thought processes," he said.

For decades, airline schedules grew consistently, feeding the expansion of the Strip by bringing in nearly half of the tourists and convention attendees. The passenger count hit an all-time high of 47.7 million in 2007.

Then, the stumbling economy coupled with US Airways' dismantling of its former hub here slashed the total to an estimated 41.6 million this year, a nearly 13 percent decline.

McCarran's petition to the Federal Aviation Administration said that management "views the downturn as an anomaly and the incentives will be discontinued when traffic is back on track." However, Walker said there is no definition of "back on track" except "getting back to consistent growth."

Further, he conceded that the US Airways traffic might never be recovered. Its passenger count has dropped by three-fourths since 2007, although many were travelers who just changed planes and never left the terminal.

If the airlines earned the full $3 million annual rebate, it would amount to less than 2 percent of the $178.3 million they paid to use McCarran during the year ended June 30, 2012. As a result, Walker does not expect the incentives by themselves to boost service.

"Nobody comes to Vegas for the landing fee. There have to be other factors," he said.

But he hopes that the incentives could cast a deciding vote with an airline management that is otherwise on the fence about boosting local service.

While many small airports wave dollars at airlines to try to attract any flights, it's not as widely practiced among big airports such as McCarran. The Federal Aviation Administration, which oversees financial incentives, did not have a list of who does.

McCarran applied to the FAA for permission to go ahead with its incentives in February 2011. While using money to draw new airlines, nonstop destinations or increased frequencies is nothing new, McCarran drew some industry opposition by wanting to reward larger planes.

"We wanted an effective program to bring seats into the market for the visitor industry," Walker said.

However, the FAA had ruled in 1999 that using larger planes, called upgauging, does not meet the definition of new service that qualifies for incentives. Some industry officials complained that the provision discriminated against airlines with one-plane-model fleets and opened the door to manipulate the system, but the agency approved the program in April after more than one year of study and debate.

It was made retroactive to July 2011, since McCarran and LVCVA officials had already started marketing the incentives to airlines. The upgauging provision will expire in June, but can be renewed.

In the past 18 months, the credits have total ed $3.5 million, with Spirit by far the biggest winner at $1.5 million as it rapidly boosted its service. Las Vegas-based Allegiant Air was a distant second at $321,000, followed by Mexico's Volaris at $251,000, Virgin America at $236,000 and JetBlue at $175,000.

But as 2012 wore on, the credits diminished along with passenger counts. Preliminary schedules show declining seat counts into McCarran during the first half of this year.

The incentive would be based on any gain in an airline's landed weight, an officially set number for each plane, for its entire service in a given month. The difference would be multiplied by McCarran's current landing charge of $2.32 per 1,000 pounds.

Several other rules also apply, such as not decreasing the number of flights.

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.