Hardberger says no money for roads, but oversees corporate welfare of $800,000

Below see the City Council Action Item from April 5, 2007. It was approved and Express Jet is running taxpayer funded ads on KTSA right now! Read more about it in this Express-News article.
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An Ordinance authorizing reimbursements, up to $800,000.00, to ExpressJet Airlines, Inc. for advertising and promotional expenses related to the San Antonio Air Service Incentive Program. [Presented by Mark Webb, Director, Aviation; Penny Postoak Ferguson, Assistant City Manager]

CITY OF SAN ANTONIO
Request for Council Action

Agenda Item # 20
Council Meeting Date: 4/5/2007
RFCA Tracking No: R-1355

DEPARTMENT: Aviation Department

DEPARTMENT HEAD: Mark Webb

COUNCIL DISTRICT(S) IMPACTED:
City Wide

SUBJECT:
Air Service Development Incentive for ExpressJet Airlines, Inc.
SUMMARY:

This Ordinance amends the budget and appropriates to ExpressJet Airlines the amount of $800,000.00 for reimbursement, in accordance with the San Antonio Air Service Incentive Program, of advertising and promotional expenses related to the air carrier’s initiating eight new daily non-stop routes from San Antonio to Albuquerque, NM; Oklahoma City, OK; Tulsa, OK; Ontario, CA; Sacramento, CA; Raleigh-Durham, NC; Tucson, AZ; and New Orleans, LA. The eight new routes include twice daily (sixteen total) scheduled frequencies.

BACKGROUND INFORMATION:
The Aviation Department’s Fiscal Year 2007 Budget includes Incentive Program funds for reimbursement of advertising and promotional expenses to any air carrier introducing new daily non-stop flights on a currently unserved route. The new service must continue for a minimum of six months to qualify for the incentive. To date, incentive funds have been awarded to United Airlines, Continental Airlines, Delta Air Lines and Southwest Airlines.

In February 2007, ExpressJet Holdings Inc., a regional airline once wholly owned by Continental Airlines Inc., launched a new carrier using 50-seat Embraer jets. The new airline, ExpressJet Airlines, will focus on point-to-point service versus a hub and spoke system. ExpressJet will fly to 24 cities starting in April 2007 with full route network rolled out by May 2007.

On April 2 and April 9, 2007, ExpressJet Airlines will initiate two daily non-stop flights from San Antonio to Los Angeles/Ontario, CA and Sacramento, CA. By June, 2007, ExpressJet Airlines will have begun new twice daily non-stop flights to Albuquerque, NM; Oklahoma City, OK; Tulsa, OK; Ontario, CA; Sacramento, CA; Raleigh-Durham, NC; Tucson, AZ; and New Orleans, LA with continuing service to Jacksonville, FL. Once the roll out of all new flights is complete, San Antonio will serve as a focus city in the ExpressJet system.

Recognizing the importance that promoting and advertising plays in customer awareness and the success of new air service, the cities of Albuquerque, NM; Oklahoma City, OK; Tulsa, OK; Ontario, CA; Sacramento, CA; Raleigh-Durham, NC; and New Orleans, LA. are also providing ExpressJet Airline marketing and rental abatement incentives.

The Aviation Department has specifically targeted most of these cities as new markets for many years. The eight new nonstop routes have in total an estimated annual San Antonio origination and destination (O&D) passengers base of over 538,000. As a result of the added service, ExpressJet will pay the City landing fees and terminal rentals in an estimated amount of $773,378.00 from April 1, 2007 through December 31, 2007. Additionally, it is estimated that, based on a 70 percent passenger load factor on a 50-seat ERJ aircraft, ExpressJet Airlines will remit to the City approximately $436,968.00 in passenger facilities charges. ExpressJet expects to hire 42 employees for its San Antonio base of operation and to spend over $750,000 on refurbishing terminal facilities and equipment. San Antonio will also be the base for 160 crew members – pilots and flight attendants.

ISSUE:
This action is consistent with City Council’s policy to encourage additional new nonstop air service from San Antonio through the Incentive Program.

ALTERNATIVES:
Not amend the budget and maintain funding at the current budgeted level. This action would require an amendment to the Air Service Development Incentive Plan to restrict fund availability for new nonstop routes to the amount budgeted each fiscal year.

FISCAL IMPACT:
The Aviation Department’s Fiscal Year 2007 Budget includes funds to implement the Incentive Program. The current balance in the Airport Fund for implementation of the Incentive Program is $650,000. Approval of this ordinance amends the budget, appropriates funds and authorizes payment from Airport Fund in an amount not to exceed a one time expenditure of $800,000.00 to ExpressJet Airlines for reimbursement of advertising and promotional expenses, requiring an additional appropriation of $150,000 from the Airport, Operating and Maintenance Fund. Total payment to ExpressJet Airlines, not to exceed $800,000.00, will be made from Airport self-generated funds. This sum will be recovered through additional airline rentals and fees, as well as parking revenues generated at the Airport.

RECOMMENDATION:
Staff recommends approval of this ordinance.

ATTACHMENT(S):
File Description File Name
ExpressJet Discretionary Contracts Form ExpressJet Discretionary Contracts Form.pdf
Ordinance/Supplemental Documents 200704050373.pdf

DEPARTMENT HEAD AUTHORIZATIONS:
Mark Webb Director Aviation Department

APPROVED FOR COUNCIL CONSIDERATION:
Penny Postoak Ferguson Assistant City Manager

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