Grunke column: Competitive airfares help local economies soar
I’m about to tell you something that, if you travel for business out of Missoula, you already know. Airfares here are high. Too high. Depending on how far in advance you purchase a ticket, fares to identical destinations might be double what they would be just down the road in Spokane. From an economic development perspective, that poses a real problem for our community.
Each year, Missoula companies are collectively spending millions of dollars more on airfare than they would if they were located in Spokane, Boise, Portland or Seattle. That’s millions of dollars that doesn’t go into R&D, technology improvements, marketing or hiring. High airfares restrict Missoula’s ability to build and attract businesses here, and to create job growth. That’s been frustrating for area businesses and for economic development groups, so much so that reducing airfares has become key to Missoula’s economic strategy.
Toward that end, the Missoula Economic Partnership is taking a lead role to address this issue with the Air Service Task Force. This group of business and community leaders is working to attract a low-cost air carrier to Missoula. Think hub-based airlines such as Jet Blue and Frontier. These kinds of carriers will build on Missoula’s already excellent non-stop service, while providing access to lower-cost connections through their hubs in major cities. That, in turn, puts downward pressure on business travel by creating route options.
The classic model is Syracuse, which in 2003 lured a low-cost carrier and went from one of the 10 highest ticket averages in the country to one of the 20 lowest. They attracted the carrier by pooling a fund that, in essence, insulated that carrier from losing money in the first year of its service to their market. To build the fund, 67 local businesses pledged five percent of their airfare budgets to guarantee the provider against a loss of up to $300,000.
That risk-sharing model has become common-place across the U.S. including here in Montana. Business leaders were able to bring Frontier to Bozeman four years ago, a move that lowered their average airfare by 11 percent and increased overall use by six percent. Great Falls recently followed suit and will now have Frontier service to Denver beginning this summer.
In Missoula, we’re working with local businesses to create a revenue guarantee fund. The amount is still being explored, but it will be six figures. At first, that may seem like a lot, yet when you consider there are individual companies here that stand to save that much annually if flights get cheaper, it’s a worthwhile investment. Moreover, the fund is only there as a guarantee. In many cases, carriers move in and operate profitably.
Since Frontier has shown a willingness to serve the Montana market and has had success in similar sized communities, they are at the top of our list. But that is only step one. The task force also will be working to attract an in-state carrier to replace the important air service lost when Big Sky Airlines vacated the state.
The result of these efforts? Missoula-based companies will have millions of additional dollars to invest in their growth and their people. New markets for their goods and services will be opened up. And companies looking to relocate here won’t be scared off by airfares.
In an ever-shrinking business world, air travel is a necessity. Cheaper business airfares keep money in the community, and by doing so, provide significant lift to economic development.
We encourage you to contact us about pledging a portion of your airfare budget by calling us at 406.541.6461.
This column by James Grunke, CEO of Missoula Economic Partnership, originally appeared in the March 25, 2012 edition of the Missoulian’s Western Montana InBusiness.