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Small Cities Wheeling and Dealing to Land Discount Airlines--for Jobs and Tourists

Business: Wichita's AirTran deal uses tax money to cover losses, ensure cheap fares.

September 18, 2002|STEPHANIE SIMON | TIMES STAFF WRITER

WICHITA, Kan. — Nothing burns Pete Austin like the ads. He can't watch TV, listen to the radio, open the newspaper without seeing an advertisement for AirTran, the discount carrier with bargain fares.

Cheap flights are fine, but the ads infuriate Austin because he knows AirTran is not paying for them. The city of Wichita is. He is. And he flies planes for a competing airline.

"The city is essentially using my tax dollars to try to eliminate my job," he fumed.

Wichita officials don't see it quite like that. They frame their unprecedented $5.1-million subsidy of AirTran as a gambit to create jobs by bringing in affordable flights--and on them, tourists, conventioneers and business travelers. They also hope that reasonable air fares will encourage existing businesses to stay put.

Wichita's lavish subsidy for the Orlando, Fla.-based AirTran ups the ante in a fierce bidding war that has erupted around the nation in recent years, as small and midsize cities vie to woo budget airlines to their gates.

Over the last few years, dozens of communities--from Albany, N.Y., to Stockton, Calif., from Eugene, Ore., to Tallahassee, Fla.--have fought to attract low-fare carriers. A few have succeeded without dipping into public funds. Many others have spent freely on incentives, buying the airlines equipment or picking up the tab for aggressive ad campaigns.

The latest, and most controversial, trend: deals, like Wichita's, that promise the airlines a certain profit in their first year or two of service--with any shortfall to be made up by the city.

The wheeling and dealing for budget airlines has raised tensions in some cities. But there's also a great deal of enthusiasm, because when the deals work, they work spectacularly--driving air fares down as much as 40% and attracting more fliers in a surge of spending that ripples through the local economy. Business booms for local restaurants, hotels and taxi services. Airport parking fees, concession sales and rental-car taxes soar. As Duane Patrick, a county commissioner from central Kansas, said with a grin: "You can't fleece 'em if they're not here."

As full-fare carriers cut flights, add fees, even edge toward bankruptcy, attracting discount airlines is "taking on a new sense of urgency" in cities hoping for economic growth, said Jamie Baker, an airline analyst with JPMorgan.

"Smaller communities are desperate for the service," added Elise Eberwein, a vice president of low-budget Frontier Airlines.

Wichita was one of them. The city of 315,000 has been served by half a dozen major carriers. But fares were among the highest in the nation. A last-minute trip to St. Louis, a flight of barely one hour, cost more than $1,200. A vacation to Tampa, Fla., purchased well in advance, would set you back $1,500.

Fares were so high that even executives on expense accounts routinely drove three hours to airports in Oklahoma or Missouri. "This market has been raped and pillaged," said Tom Ritchie, who runs a construction company.

"It was the No. 1 topic in Wichita," added Mayor Bob Knight. "It was enraging to anyone who had to fly."

Vowing to "do whatever it takes" to win discount flights, Knight pledged to cover up to $3 million of AirTran's losses in its first year of service and up to $1.5 million the second year. He promised to subsidize the airline's fuel if the price rises. And he committed $600,000 to promote the new service with ads, billboards and even an e-mail newsletter. The enticements worked: AirTran launched service to Atlanta and Chicago in May.

A second discount carrier, Frontier JetExpress, will begin flights to Denver today, supported by a $500,000 subsidy, plus $100,000 in ads.

Since AirTran began flying, the bland beige halls of Mid-Continent Airport have hummed with record traffic. The last-minute trip to Chicago that used to cost $1,300 is now $315. The $1,500 advance-purchase flight to Tampa is now $227. Officials estimate that passengers will save a total of $60 million over the next year. In a turnabout that has folks here chuckling, residents of Oklahoma are now driving to Wichita to catch flights.

Yet a handful of sharp critics here and around the nation are raising objections to deals like the one that has transformed Mid-Continent Airport.

For years, airport authorities have offered to upgrade terminals or write off some landing fees to attract coveted carriers, such as Southwest. Guaranteeing an airline a profit on each flight, however, seems to some a quite different--and quite dangerous--proposition.

"We aren't venture capitalists with money to throw at a prospective carrier that thinks there might be a market here but doesn't want to take the risk to find out," said Mike LaPier, director of the Central Illinois Regional Airport in Bloomington, which does not offer airlines incentives.

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