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Consultant: Better funding needed for current airline subsidy

By LVEDC Staff on June 17, 2014

LVEDC logo smallEDITOR’S NOTE: Given the analysis of the consulting team from a site-selector perspective, the following recommendation was developed to suggest a way to ensure that the Lehigh Valley is a place where the world’s most innovative companies and talent want to locate and live. The strategy is based on the assumption that the region as a whole must become and remain proactive in shaping its economic future but with a more targeted approach and better defined roles and responsibilities.

In A Blueprint for Success: An Economic Development Strategy for Sustainable Growth in the Lehigh Valle, Garner Economics urges LVEDC and other regional groups to “advocate for funding the existing airline subsidy.”

Observation: Many focus group participants and electronic survey respondents noted the need for additional air service and more affordable rates out of the Lehigh Valley International Airport (ABE). With ABE being between Philadelphia (PHL) and Newark (EWR)—both hub facilities— fares and schedule options make it more challenging for ABE to attract additional airline service solely on ridership.

In fact, in conversations with senior management of ABE, a 2013 leakage survey should that 70% of potential ABE ridership are using either PHL or EWR for the reasons noted above. The most realistic way for ABE to enhance its air service is by subsidizing an airline (revenue guarantee).

ABE has a subsidy in place; however, it is not funded to a level where it can be effective.

Recommendation: Assuming that the region is able to obtain a sustainable funding source for economic development, one of the programs that should have priority is better funding for the current airline subsidy. As federal subsidies for airlines may diminish in the short- and medium-term, it will be incumbent upon local communities who desire enhanced airline service to subsidize desired airline service if early ridership does not make it feasible for the airline to operate profitably out of the given airport.

The LVEDC should join with other entities in the region to advocate among local government agencies to increase funding for the existing subsidy at ABE. Although it is an expensive tool and there is no guarantee to keep an airline after the subsidy timeframe has expired, it is one of the few ways to compel airlines to act. A catchment survey will validate the feasibility of potentially new service for ABE.

Lead organization: Lehigh Northampton Airport Authority

NEXT WEEK: Look for more observations and recommendations from our consultant’s report.

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