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Columbia airport fund largely untapped

Columbia airport fund largely untapped

JC officials pleased with investment in program

December 29th, 2013 in News

Approximately 10 months after the creation of the $3 million revenue guarantee fund for the Columbia Regional Airport, the fund remains largely untapped, and its current balance exceeds the initial balance, according to Columbia Finance Director John Blattel.

While Blattel believes this fact spells success for the balance of the fund and the development of the Columbia Regional Airport, in general, it comes as no surprise, Blattel said.

"This is what we believed would occur, what we were anticipating," he said.

The city of Columbia, which controls the account, paid out $22,562 to American Airlines in February 2013, the first month of the fund's existence. Since then, there have been no further payments, Blattel said.

Columbia established the fund with a two-year agreement to attract American Airlines to Columbia Regional Airport. In addition to contributions from Columbia, University of Missouri and other private investors, Jefferson City and Cole County each invested $100,000 into the fund.

While the fund exists to secure a certain level of revenue for American Airlines on a monthly basis, revenue is calculated on a per-flight basis. Revenue for one-way flights must exceed $5,012 and $4,403 for flights to Dallas and Chicago, respectively. If the amount of revenue of American Airlines does not reach a specified number in a given month, Columbia pays American Airlines the difference, according to the air service agreement.

While the amount credited to the Columbia Regional Airport depends on several factors affecting the cost of each individual ticket, revenue stemming from flights filled to 75 percent of capacity will usually exceed American's minimum required amount, though this is an approximation, Blattel said.

At a 2 percent interest rate, the escrow account has accrued enough interest for its current balance to exceed the original balance of $3 million. Blattel has invested the money in a "large investment pool," some of which is United States government bonds, he said.

At the end of September, the balance of the account was about $3,036,000.

Though Blattel is slightly concerned about a potential lack of demand in the months of January and February, "there has been growth (in demand) since the agreement was signed," he said.

Blattel believes the ability of passengers to reach nearly any airport in the nation through the two hub cities of Chicago and Dallas to which planes from the Columbia Regional Airport fly increases the attractiveness of the local airport to both leisure and business travelers, he said.

"...It (Columbia Regional Airport) provides a service to the community that was sorely needed. Prior to the current service agreement, businesses declined to come to Columbia, Missouri, because of a lack of ability to return to company headquarters. It's a big deal," Blattel said.

American Airlines is also adding a second daily flight to Chicago in April 2014, which will total four daily flights in and out of the Columbia Regional Airport, according to the Columbia Regional Airport website.

Blattel described the economic benefits that will result from investment into the agreement with American Airlines.

"Mid-Missouri wants service to major airports. The convenient connections ... will support success," he said.

Because the addition of the second flight to Chicago will allow passengers to fly from Columbia to Chicago and back on the same day, Blattel believes more people will use the Columbia Regional Airport for travel to Chicago, he said.

"(Adding the second flight) ... increases the odds of success," Blattel said.

Following the conclusion of the two-year agreement in February 2015, each investing entity will receive back a proportional share of the account's balance based on the amount of their initial investment, which, if the current trend continues, would indicate a profitable return on each respective investment, Blattel said.

Local officials reflected Blattel's sentiments of the agreement's prevailing profitability.

Cole County Presiding Commissioner Marc Ellinger characterized the agreement with American Airlines as "... a lot more successful than we anticipated."

"The first month could have been tough during that transitional period. It's a success story, one we ought to talk more about," Ellinger said.

The Cole County Commission approved the withdrawal of $100,000 from general revenue for investment into the revenue guarantee fund in December of 2012.

Because of his recurrent travel on flights to and from Columbia, Ellinger has personally viewed the extensive usage of Columbia Regional Airport's air service, he said.

"I fly on it frequently, and its very full or almost full. The success is only growing," Ellinger said.

Interim City Administrator Drew Hilpert also acknowledged the unexpected early prosperity of the agreement.

"It's been a little better than I thought ... given the history of airlines in Missouri," he said.

Similarly to the County Commission, the City Council voted in December of 2012 to invest $100,000 into the revenue guarantee fund, Hilpert said.

Hilpert considers the deposit of money into the revenue guarantee fund to be a "good investment with good return," he said.

"The real value is that it gets you one step away from international airports. It's another piece that allows the country to connect to us. It's a piece to raising the tide of the economy," he said.