The Port Authority Of New York And New Jersey Meeting Of

The following is the agenda and related materials as of Friday, February 10, for the February 16, 2017 Meetings of the Board of Commissioners and Board Committees of The Port Authority of New York and New Jersey and its subsidiaries to be held at 4 World Trade Center, 150 Greenwich, NY, NY 10007.

Meeting attendees are required to go through a security screening upon entering the building. Attendees are encouraged to arrive early. Security screening will begin at 11:00 a.m.

Stewart International Airport – Air Service Development Incentive Program

Request:
- This item authorizes a three-year air service incentive program to continue to encourage airlines to increase passenger air service at Stewart International (SWF) Airport, thereby maintaining its marketability as a viable regional airport in the Hudson Valley and as an alternative international gateway to the New York/New Jersey metropolitan region.


Transaction Details:
- The program would continue to provide incentives to encourage airlines to establish service to new destinations. Specifically, the program provides a two-year domestic and international route incentive package to any air carrier or charter operator providing scheduled non-stop passenger service to an unserved domestic or international destination from SWF.

Background:
- The proposed program will attempt to mitigate a carrier’s start-up and marketing costs during the critical first 24 months of service while enabling SWF to compete with other airports such as Albany, Hartford and Westchester County.
- The proposed program would allow for the continuation of incentives authorized by the Board at its February 2012 meeting, that are due to expire on March 31, 2017.
- Over the last five years, these incentives were successful in establishing service to Myrtle Beach International Airport and St. Pete–Clearwater International Airport from SWF.



(Board – 2/16/17)



~ It was recommended that the Board authorize the Executive Director to extend an existing air service incentive program, which would continue to provide for financial and marketing incentives to passenger airlines that initiate non-stop service on new routes from Stewart International Airport (SWF) for a three-year period. For new non-stop domestic routes, the following incentives would continue to be offered: (1) a credit of up to $525 per turn for ground handling service charges for the first and second full years of new non-stop service; (2) marketing and advertising support valued at $3 per outbound seat, not to exceed $150,000 per destination in the first full year of non-stop service and $75,000 in the second full year of non- stop service; and (3) a 50-percent reduction in rent and fees associated with the new service for the first full year of non-stop service, and a 25-percent reduction in rent and fees in the second full year of non-stop service. For new non-stop international routes, the following incentives would continue to be offered: (1) a credit of up to $900 per turn for ground handling service charges for the first and second full years of new non-stop service; (2) marketing and advertising support valued at $3 per outbound seat, not to exceed $250,000 per destination in the first full year of non-stop service and $125,000 per destination in the second full year of non-stop service; and (3) a 100-percent reduction in rent and fees associated with the new service for the first full year of non-stop service, and a 50-percent reduction in rent and fees in the second full year of non-stop service. The incentives would be provided to participating airlines for a 24-month period from service start date, provided that service begins between April 1, 2017 and March 31, 2020.

~ Since acquiring SWF in November 2007, overall passenger enplanements at the airport have decreased, due to negative economic conditions, fluctuating fuel cost, reductions in industry capacity, and increased competition from nearby airports. As a result, airlines have been reducing seats and retiring smaller, less fuel-efficient regional jets predominantly serving smaller airports like SWF. Some airports in closer proximity to larger metropolitan hubs have witnessed a complete cessation of scheduled air service.

In an effort to prevent a further reduction in air service at SWF, the Board authorized a Retention Incentive Program in August 2008. The program waived certain fees and rentals for all airlines providing passenger service at SWF for a period of three months. This program proved to be successful in retaining existing airlines and air service. At that time, the Board also was informed that staff would develop longer-term solutions to grow air service at SWF.

~ On February 9, 2012, the Board authorized a five-year air service development incentive program for SWF, on the same terms as for the currently proposed extension of the program. Given the significant number of airports competing for a limited number of available seats, staff has been aggressively pursuing airlines while marketing SWF as an alternative gateway to the New York/New Jersey region. These efforts have resulted in direct flights from SWF to Myrtle Beach International Airport and St. Pete–Clearwater International Airport. The existing program authorized in 2012 is due to expire on March 31, 2017. The proposed extension of the program, which would continue the previously established incentives for an additional three-year period,



(Board – 2/16/17)

~ Seeks to attract and sustain new route service and the associated revenue by mitigating startup and marketing costs during the critical first 24 months of service.

~ The incentive program, as extended, would be in effect from April 1, 2017 through March 31, 2020. The incentive credit to be provided to participating airlines requires that service begin by March 31, 2020.

~ The total amount of costs associated with the program would be determined by the flight activity, and the number of outbound seats, to new destinations. It is expected that additional revenue generated by increased flights and passenger traffic would more than offset the cost of the program.



~ RESOLVED, that the Executive Director be and he hereby is authorized, for and on behalf of the Port Authority, to offer to passenger airlines that initiate non-stop service on new domestic routes from Stewart International Airport (SWF) the following incentives, for a 24-month period from service start date, provided that service begins between April 1,
2017 and March 31, 2020: (1) a credit of up to $525 per turn for ground handling service charges for the first and second full years of new non-stop service; (2) marketing and advertising support valued at $3 per outbound seat, not to exceed $150,000 per destination in the first full year of non-stop service and $75,000 in the second full year of non-stop service; and (3) a 50-percent reduction in rent and fees associated with the new service for the first full year of non-stop service, and a 25-percent reduction in rent and fees in the second full year of non-stop service; and it is further

~ RESOLVED, that the Executive Director be and he hereby is authorized, for and on behalf of the Port Authority, to offer to passenger airlines that initiate non-stop service on new international routes from SWF the following incentives, for a 24-month period from service start date, provided that service begins between April 1, 2017 and March 31,
2020: (1) a credit of up to $900 per turn for ground handling service charges for the first and second full years of new non-stop service; (2) marketing and advertising support valued at $3 per outbound seat, not to exceed $250,000 per destination in the first full year of non-stop service and $125,000 per destination in the second full year of non-stop service; and (3) a 100-percent reduction in rent and fees associated with the new service for the first full year of non-stop service, and a 50-percent reduction in rent and fees in the second full year of non-stop service; and it is further

~ RESOLVED, that the form of all contracts, agreements and other documents in connection with the foregoing shall be subject to the approval of General Counsel or his authorized representative, and the terms of such contracts, agreements and other documents shall be subject to review by General Counsel or his authorized representative.

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