Council approves more subsidies for air service

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By Arin McKenna

Less than eight months after New Mexico Airlines began air service from Los Alamos to Albuquerque, Airport Manager Peter Soderquist appealed to county council for $365,248 in economic development funds to further subsidize the fledgling service through August 2014.

“I’m going to support the motion, but I have to say I share the disappointment that I was expecting to not have to revisit this for another few years, rather than eight months later,” Chair Geoff Rodgers said. “The next time we do revisit this, there does have to be some significant increase in the use of this service,” Rodgers said.

“I’m willing to do it because transportation is a vital part of what we’re trying to do here. But next year, if it’s $365,000 and there are no grants and people still haven’t begun to use this thing, then it’s time to take a different view on it.”

Council approved the funding by a 6–1 vote, with Vice Chair David Izraelevitz voting against the motion. 

In 2012, council approved $150,000 for the service. Soderquist was able to reduce that amount to $28,000 by obtaining a $272,000 Small Community Air Service Development Program Grant (SCASDP) from the U.S. Department of Transportation, and a $15,000 contribution from Los Alamos National Laboratory. The money subsidizes the airline for under-booked flights. 

A $25,000 New Mexico Department of Transportation Air Service Assistance Program (ASAP) grant and $50,000 from the Economic Development Fund provided a marketing budget.

Initial funding was expected to cover costs for close to three years. The goal was to reach self-sufficiency before that time. 

Aside from a setback resulting from the government shutdown, the air service has experienced an average growth rate of 4 percent per month. But ridership is still far below projected figures. 

The airline also received notification of unanticipated fees and taxes averaging $10 to $15 per ticket just days before the service commenced.

The combination of low ridership and high fees will deplete the initial round of funding by January or February.

Soderquist requested $265,248 to subsidize the air service through August, when he hopes the county will be awarded another SCASDP grant. He cannot guarantee the county will receive a second award, but Soderquist is also seeking grant funding from other sources. 

The request included an additional $100,000 for marketing, although Soderquist anticipates using only $50,000 as a 50/50 match for a second ASAP grant. Los Alamos is eligible for an additional $175,000 from that program.

According to Soderquist, the biggest obstacle to success is a lack of LANL participation. LANL’s travel and expense management system accounts for only 19 percent of bookings, even though LANL enplaned over 20,000 passengers in Albuquerque in 2010. 

Soderquist plans to target marketing efforts at lab employees, with additional campaigns aimed at the 19 DOE facilities that travel to Los Alamos and at regional cargo operators. 

New restrictions on travel due to budgetary issues are only part of the problem. 

A survey of LANL chiefs of staff and administrative support personnel revealed that 19 percent were unaware of the service. Of the 49 percent who had used the service, 100 percent were satisfied. 

Thirty percent of those surveyed suggested that increased flight frequency would improve ridership. Council rejected an alternative to add a fourth round-trip per day at a cost $14,712 per month.

Soderquist discovered that LANL employees were able to book their flight as a “government rate,” which allowed for a refund if they had to cancel or change their flight. However, once that rate was entered for New Mexico Air, all subsequent airlines were booked as government rate as well. 

LANL does not have government rate agreements with airlines such as with Delta, United or American, so travelers were being billed for additional charges afterward. 

New Mexico Airlines has agreed to change LANL bookings to a “negotiated rate” to correct that issue. 

Soderquist had also just learned that LANL was not listing New Mexico Airlines as a preferred carrier. The lab’s travel office offered to correct that. 

Izraelevitz was the sole vote against additional funding. He suggested suspending service and restarting it after problems with LANL’s participation have been identified and corrected, something Soderquist said could damage momentum and have financial consequences.

“The service is not practical without a very substantial laboratory involvement, and the laboratory just has not been structured to take advantage of this service,” Izraelevitz said. “So we can spend $365,000. The following year, maybe we’ll spend $200,000, but the slope is just not there to increase it to a slope where it’s viable.”

Councilor Rick Reiss made the strongest case for continuing the service, arguing that a year was not enough time to determine if it could be self-supporting. 

“I personally believe that air service has a legacy of being an important economic development tool,” Reiss said. “If you have good transportation into your community, then it helps us from an economic development perspective.

“I also believe that airports and air service are the same as infrastructure. It’s something that governments do. It’s something we spend our money on, like power lines and water lines. It’s something that’s got a long life and it represents a long-term investment.” 

Rodgers asked when the service could be expected to pay for itself. Soderquist calculated that self-sufficiency can be achieved with a 75 percent load factor and by increasing ticket prices to $64.

“This request is based on 44 percent load factor. I’m almost positive we will do better than that,” Soderquist said. 

“In the 1980s we had 28,000 passengers flying on the airlines. In 2010 we had 21,000 driving down the hill to get a flight — I think there’s a strong chance we can get those passengers. We just need time to grow it.”

Rodgers cautioned against relying on 1980s statistics, since too many factors have changed since then. 

Councilors stressed using any means possible to get LANL more engaged in using the service and possibly helping to defray costs. One suggestion was to ask the lab to finance a fourth round-trip to accommodate lab employees. 

“This program is not just convenient: it potentially saves the lab money on travel,” Councilor Pete Sheehey said. “The amount of time lost and cost of renting a car is more expensive than the $49 flights. So it’s in their interest.”

Sheehey also asked if it was possible to get the Essential Air Service Act amended to include Los Alamos. The designation would exempt the service from some of the fees and taxes being levied now. At the time the Essential Air Service Act was passed, DOE was subsidizing air service, making the county ineligible. 

Soderquist responded that the program has been cut back from 600 airports to 200, but that it is worth the effort to pursue the designation.

“We are the poster child for Essential Air Service,” Soderquist said. 

During public comment, Aircraft Owners and Pilots Association volunteer David Carroll urged council to support the budget adjustment. 

“I think suspending service now would be a very large mistake. I think it would demonstrate in the public eye some bad faith, and that it’s just another failure, and that they would never see the air service coming back.”

Carroll suggested that the number of lab employees taking day trips to Albuquerque or those flying in from other DOE facilities could triple the number of potential fairs.  

“Somehow we need to get LANL’s attention, and we need to draw a mere 10,000 out of that potential 60,000 population, and that solves the problem,” Carroll said.