Federal Study Cited Eugene Travel Banks as Successful Model

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02/21/03 FRI 15:55 FA% 541 682 6838 EUGENE AIRPORT Pw AD IN f~]002 p. 75 "...The airport manager and president of the Iota! Chamber of Commence developed the idea of 'Wing firrancia pledges from local businesses to set up a "travel bank" to secure service to Phoenix from Amen West Airlines. T e Chamber of Commerce and airline negotiated the amount of funds needed in the travel bank as II as the exact service to be provided (e.g., number of daily flights and the type of aircraft). Interested businesse in the communi were then asked to commit future travel dollars to the carrier and sign an agreement that guarant business fly would use the new service. The agr+eemertt also inducted various protections for particlparrts' inv ents. The fun were held by the airiine, which issued corporate accounts to par'ticlpating businesses. The partici 'ng companies had 24 months to use the funds, after which any remaining funds reverted to the airline and were aiiable as ti+dce vouchers for another 12 months. After that point, any funds remaining in the bank would go to the airline. Eugene's airport also committed x300,000 over 2 years for marketing to promote the new service...." p. 76-77 "...With the success of the first travel bank, Eugene officials looked into the possibility of a second travel bank for L Angeles service. After negotiating an agreement with Horizon Air, the Chamber ~ Commence ag n successfully sought pledges from area businesses. This bank became operational 1 year after the first travel k, and patticlpating businesses had used 81 percent of the funds within the first 18 months. Tabte 4 prov es more detail about the America West and Horizon Air travel banks. One Eugene Airport official said that travel banks offer a number of advantages over other types financlal incentives. The travel banks' advantages include: • providing airlines a guarantee of sustained support over the initial periods, when risks are picaily higher aid • helping the new carrier overcome frequent flyer programs of incumbent airlines, existing t el habits, incentives provided to travel agents who book on the incumbent carriers, and corporate rchase ' agreements. As of October 2002, the iwo travel banks had added five flights and 290 seats daily to the Eugene market. They also brought more jet service to Eugene. The airport manager believes the travel banks were su 1 in adding competition to the market, alleviating high fares, and stemming some of the passenger leakage to Portland. Our analysis of Eugene enplanement data shows that the travel banks played a role in the shift in arket share between the dominant carver- United -and the other carriers at Eugene from 1898 to 2001. Ov that period, United's market share decreased from 71 percent of the market to !58 percent. (See fig. 20.) Addi ally, since America West and Horizon have maintained their Phoenix and Los Angeles service after the end each travel ba , we concluded that the travel banks have generated long term surx~ess in Eugene. The Eugene ai rt manager sal the community is exploring the possibility of additional travel banks with other carriers." Excerpts from GAO report Small Community Alr Service (GAO-0330) January 2003. I