Aviation

Affordable Airfares Program could end after fiscal 2016

In Wichita, under the current contract, Southwest Airlines is paid the difference between its costs and revenue each month that total costs exceed revenue. A Southwest Airlines spokesman was not immediately available for comment on the impact on Southwest’s services in Wichita.
In Wichita, under the current contract, Southwest Airlines is paid the difference between its costs and revenue each month that total costs exceed revenue. A Southwest Airlines spokesman was not immediately available for comment on the impact on Southwest’s services in Wichita. File photo

A 14-year-old program intended to bring lower airfares to Wichita and other smaller markets may end next year.

Gov. Sam Brownback on Friday proposed cutting funds to the Kansas Affordable Airfares Program, which was created in 2001.

The program now gets $5 million a year from the state to attract lower-cost airlines. The governor’s proposal would reduce that to $4 million for fiscal year 2016 and $3 million for the year after that.

But Jason Watkins, government relations consultant for the Wichita Chamber and spokesman for the program, said they will propose an alternative that will likely mean the end of the program altogether.

They will ask that Fair Fares receive $5 million in fiscal year 2016, which runs from July 1, 2015, to June 30, 2016, with the understanding that it will not ask for any future funding from the state.

“We think the Legislature and even the governor will look favorably at that,” Watkins said.

“The airfares program was never meant to be a permanent program. We have always said to our partners in the state Legislature and the governor’s office, ‘We need some short-term help to establish a program and get it on solid ground and then we can move forward with whatever is established.’”

“There aren’t a lot of other low-cost carriers we’re going to go out and attract anyway,” Watkins said.

It’s unknown whether the end of the program or possible phasing out of the funding would affect service from Southwest Airlines, the biggest recipient of the funding.

In Wichita, under the current contract, Southwest Airlines is paid the difference between its costs and revenue each month that total costs exceed revenue. Southwest lost money during its first eight months of service, from July 2013 to February 2014, and received the full subsidy amount of $6.5 million.

Under the Kansas Affordable Airfares Program, the state provides a grant of $4.75 million. That is matched by $1.75 million of local funds, which is split between the city of Wichita and Sedgwick County.

Southwest may adjust the service to address market, weekend and seasonal changes in demand, the contract states.

Sedgwick County is contractually responsible for the guarantee, which expires at the end of June, unless it is extended.

Mayor Carl Brewer said the city is not giving up on the program and will continue to evaluate whether it can afford to keep contributing to the fund.

“We’re looking at it realistically. We know it’s a challenge with the budget shortfall the state is having,” Brewer said. “We’re going to continue working on it.”

Southwest Airlines spokesman Dan Landson said they were aware of the budget proposal and said it was “too early in the budget process for us to comment on what, if any, impact there would be.”

The end of the program also would have implications for travel in western Kansas. Garden City’s airport gets $500,000 from the program, Watkins said.

Watkins said he doesn’t foresee the end of the program affecting Southwest’s presence in Wichita.

“They wanted some help coming into the market, getting themselves established on the transition from AirTran to Southwest, and they’re confident enough that their route structure and overall marketing will be successful in Wichita and they won’t need assistance from the state or local (government).”

But Mike Boyd, an airline consultant with the Boyd Group, is not as optimistic that the end of the fare program won’t mean the end of Southwest services in Wichita.

Southwest will need to determine if staying in Wichita is in its best interest, Boyd said.

The company overall is expanding its longer-haul flights out of Dallas, looking at new opportunities at New York’s LaGuardia Airport and adding service to Central America out of Houston. Meanwhile, the percentage of seats filled on flights last year “weren’t stellar,” Boyd said.

“We’re in a situation here where they may be making some decisions about Wichita long term. It is a tremendous achievement on Wichita’s part to have had this program. … They’ve done a heck of a job doing it and it was the right thing to do at the time,” Boyd said.

“Southwest is a wonderful company. They always say they support the market, and they do. They care about where they fly to. But when you’re looking at their need for airplanes, that may be one of the things they start to look at even without the affordable fares program.”

If Southwest were to leave, the biggest impact would be lost access to the Southwest hub at Chicago, Boyd said. Wichita has two other airlines that also fly to Chicago.

As the Air Capital, the big question for Wichita is whether it has global access, which it does through United and American, Boyd said.

Southwest, which bought AirTran Airways, began service in Wichita in the summer of 2013, replacing AirTran.

AirTran began service in Wichita in 2002 after being offered a revenue guarantee by the city of Wichita to help woo it to town to lower the cost of airfares.

Reach Kelsey Ryan at 316-269-6752 or kryan@wichitaeagle.com. Follow her on Twitter: @kelsey_ryan.

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