Buoyed by a record-setting 2017, Sacramento International Airport officials hope to up their game this year by finally landing a major European airline or two.
Their offer: Bring us an international flight –nonstop across the Atlantic – and we’ll let you fly rent-free out of California’s capital for two years.
A new county incentive package approved Tuesday in particular targets low-cost European carriers that recently have expanded their service to smaller U.S. airports, including Oakland and others in California.
Local airport chief John Wheat said Sacramento has talked recently with several cross-Atlantic carriers, including Norwegian Air Shuttle, which already flies out of Oakland, as well as Condor Airlines of Germany, and Wow Air, a low-cost Icelandic airline that flies out of San Francisco, Portland, Austin and Anchorage.
“We are having conversations with all those air carriers, telling them Sacramento makes a great secondary market” because of its convenience and proximity to many Northern California tourist destinations, Wheat said.
Airport officials also talked with Asian airlines about the potential for cross-Pacific flights, but say they think those deals are unlikely in the next few years.
The county is upgrading the airport’s existing financial incentive package to match similar offers from competing airports. “As we talk to carriers, the incentive program component is one we need to make sure we are competitive,” Wheat said.
Sacramento’s airport would temporarily waive airline landing and facility fees and chip in up to $400,000 for marketing and advertising in exchange for nonstop flights to new cities.
The waiver period would last 12, 18 or 24 months, depending on the type of new service. The incentives are greater for international flights to other continents, but include inducements for domestic airlines for new North American service.
Wheat said the airport has no financial estimate of its incentives. That will depend on what deals the airport can sign with airlines for new service. He also declined to say whether the airport was close to signing a deal to bring cross-Atlantic service here.
A spokesman for Norwegian Air Shuttle, which has announced nonstop flights from Oakland to Paris and Rome, said in an email his company is pleased that Sacramento is interested in doing business, and that the airline is looking at expansion opportunities, including in California. He declined to say whether the company is looking seriously at Sacramento.
Seth Kaplan, managing partner at Airline Weekly, said European airlines are increasing service in smaller markets. It is more expensive for them to fly to the West Coast, he said, but airlines are taking more chances with new routes now that fuel costs are down.
He noted that Icelandair on Tuesday announced it would launch a seasonal nonstop flight between Kansas City and Reykjavik, the first cross-Atlantic flight for Kansas City.
“It doesn’t hurt for Sacramento to try,” Kaplan said. An incentive package, he said, “can help tip the balance, but is not going to make an unviable market viable in the long term ... Sacramento isn’t on the map as a global destination, so you have to rely more on the originating traffic from Sacramento.”
Henry Harteveldt, a travel industry analyst for Atmosphere Research Group in San Francisco, said incentive packages have become the norm in the industry, but Sacramento has to be careful not to offer too much and ask too little.
“The airport has a fine line to walk,” he said. “It has a fiduciary responsibility to its community. It has debtholders to repay. Other airlines don’t want their fees to subsidize these companies.”
San Jose International Airport, the closest airport to Silicon Valley, offers a slightly more robust incentive program than Sacramento. That airport gives new international carriers a 30-month landing fee waiver: a complete waiver for the first 18 months, then 50 percent off for the next 12 months. It includes a $500,000 subsidy for marketing expenses.
Oakland International Airport, Sacramento’s closest competitor, reports it offers fee waivers up to 24 months.
Wheat said Sacramento’s airport can absorb 24 months of lost fees because new flights and new passengers will bring more revenues from other areas, including concessions and retail sales, and eventually will reap higher airline fees after the 24 months are up.
The airport is a wholly self-funded agency of the county government that must balance its budget with revenues from airlines, terminal concessions, rental car companies, parking and a per-ticket surcharge on passengers.
The airport has had a more modest incentive program in place for 14 years, officials said, and in recent years has signed incentive deals with JetBlue for service to Boston, Southwest Airlines to Baltimore and Spokane, Alaska Airlines to Cabo San Lucas and United Airlines to Newark.
The incentive changes come as the airport is on the upswing financially after struggling during the recession with declining flights, passengers and revenues.
Airport passenger levels hit an all-time high in 2017 at an estimated at 10.9 million fliers, topping the previous high in 2007. Airline flight plans indicate ridership could be up 12 percent in the first half of 2018, Wheat said, but he expects increases in the months and few years after that to drop to the 3 percent range.