Aviation

Incentives are part of talks with Southwest

Southwest Airlines and Wichita airport officials have begun discussions about bringing the low-cost airline to Mid-Continent Airport.

"After decades of studying the Wichita market, they have finally come to the conclusion that there is a market for them here in this town, and they think it will be successful," director of airports Victor White said this week of Southwest.

As long as there are incentives involved, White said.

How much those incentives will be and where the money will come from is unknown.

Airport officials plan to assemble a group of city, county, economic development, chamber and business leaders to formulate a strategy and gauge the interest on whether or how to proceed.

"We're going to kick this into gear," White said.

"The ball is in the Wichita community's court at the moment.''

Southwest's entrance would benefit the airport and the community by increasing passenger traffic, lowering fares and increasing jobs, White said.

"It's an exciting opportunity," he said.

Air service is critical to a successful business community, said Harvey Sorensen, former chairman of the Wichita Metro Chamber of Commerce and an attorney at Foulston Siefkin.

"The better air service you have, the more business you can do," he said.

The Eagle, citing sources, reported last month that Southwest and local officials had begun discussions.

Southwest spokesman Chris Mainz declined to comment on the status of the talks or about incentives.

"Except to say it's commonplace for airports and airlines to have those discussions, but (we) really couldn't get into any details as far as where we are with these particular talks," Mainz said.

Southwest would offer service from Wichita to Dallas, Las Vegas and Chicago through St. Louis, a total of seven or eight flights a day.

"That's the initial round of service of markets they are targeting," White said.

He hopes the first meeting with local officials will take place in the next week or two.

"My take is we need to make some decisions before the end of the month — decisions as to what our next steps are going to be," White said.

Southwest "just wants a yes or no answer: 'Are we going to do this or aren't we going to do this?' " White said. "If the answer is no, they'll bid us adieu and go onto the next place they're going to try."

If the answer is yes, "then we'll have to figure it out... and work out a deal," he said.

The deal must be completed by fall, which is the deadline given to the city by Southwest, White said. With that time frame, service would start about June 2011, White said.

He declined to say how much in incentives Southwest is seeking, saying it's proprietary.

"They want an insurance policy — they want a backstop," he said. "They just want to make sure they don't lose any money."

Historically, in other cities it has entered, it takes Southwest up to three years to develop a market to stand on its own, White said.

AirTran subsidies

An airline seeking incentives is not new for Wichita.

The state provides $5 million a year in revenue guarantees to AirTran for three daily flights to and from Wichita and its Atlanta hub.

AirTran Airways has received revenue guarantees every year since it started service in Wichita in May 2002. The city and Sedgwick County each contribute another $1 million.

The Kansas Legislature agreed to provide the money every year for five years. That's set to expire June 30, 2011. The Legislature must approve the money each year.

Despite tough economic times, the Legislature this week approved next year's incentives. At times the money appeared to be at risk.

"It's exciting news," White said. "We can all breathe a little sigh of relief."

Although it has been in the market for eight years, AirTran has not turned an annual profit on the Wichita route and has tapped into the subsidy every year.

"That's the really sad part of the story," White said. "As much as we love AirTran, and we love the product that they offer here... for some reason, it hasn't caught on with the traveling public like we thought it would."

Southwest incentives

Asking for subsidies as revenue guarantees is a new business model for Southwest Airlines.

For the first time, Southwest is receiving incentives for service it began this month to Panama City Beach, Fla.

In an unusual arrangement, a private company, real estate developer St. Joe Co., will subsidize at least the first two years of service.

St. Joe will guarantee up to $14 million in incentives for the first year of service and $12 million in the second year.

The amount of incentives Southwest is seeking in Wichita isn't that much, White said.

On Tuesday, however, Southwest announced new service to two cities in South Carolina — Charleston and Greenville-Spartanburg — without the lure of incentives.

South Carolina lawmakers reportedly have been talking about offering subsidies to attract low-cost carriers to the state. But Southwest's deal isn't contingent upon them.

White wonders whether that may have implications for Wichita. He plans to ask Southwest.

"We're hopeful that means they have changed their philosophy toward asking communities for subsidies," White said.

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