Our View: Airline program woes raise questions about tax
July 28, 2012
Editor’s note: This editorial has been updated from its original published version. The vast majority of the 11 percent reduction in airplane seats for the 2012-13 season is attributable to the discontinuation of Frontier Airlines flights that never were part of the winter air program to begin with. Also, the goal of the air program has been to get back to 150,000 seats by 2016, not 160,000 seats.
Last fall, the Steamboat Pilot & Today endorsed a 0.25 percent sales tax to help fund direct ski season jet flights into Yampa Valley Regional Airport.
We backed the proposal because we were alarmed that the airport had experienced a 27 percent decline in available airline seats in three winters. We urged voters to approve the tax — which they did — on the presumption that the tax would give Steamboat the funds it needed to get back to 150,000 seats by 2016.
So imagine our dismay to learn this week that, with more than $400,000 in new tax dollars already in hand and another $500,000 anticipated by the end of the year, air program officials project an 11 percent decrease in available seats this winter. Instead of putting us on a path to 150,000 seats, the tax is barely going to keep us above 100,000 seats, the mythical Mendoza Line for airline flight revenue guarantees.
Airline revenue guarantees are used to ensure direct ski season jet flights into YVRA from key markets such as Dallas, Houston, New York, Atlanta and Chicago. Airlines prefer to fly more profitable business routes but will fly into Steamboat Springs if they can get specific revenue guarantees for the flights. If the load factors don't pan out during ski season, Steamboat's winter air program makes up the difference.
In 2004, Steamboat voters approved a 2 percent tax on lodging to help fund the winter air program. At the time, those tax dollars, combined with funding from Steamboat Ski and Resort Corp. and contributions from local businesses, were thought to be enough to take care of the program long term. But the recession, rising fuel costs and consolidation in the airline industry led air program officials to go back to voters last fall for the 0.25 percent sales tax. The tax is expected to provide about $1 million per year in funding for five years, after which it sunsets.
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Last week, Janet Fischer — of Ski Corp., which negotiates flight guarantees on behalf of the winter air program — outlined this season's projections for the Local Marketing District, which oversees the taxes that pay for the flight program. Fischer said the 11 percent reduction in inbound seats seeks to improve efficiency. For example, the new program reduces several Tuesday flights, which are the lowest performing for Steamboat. And the changes include adding Saturday and Sunday service on United from Los Angeles International Airport. Further, it must be noted that of the 11 percent reduction in seats, the vast majority of it is attributable to the discontinuation of Frontier Airlines flights that never were part of the winter air program to begin with.
It makes sense to reduce inefficient flights, but what has us truly concerned is that increasingly, the winter air program appears to be built on a flawed model, that no amount of tax dollars will be enough for the airlines that essentially hold all the cards in negotiations.
Some may think it's premature to judge the new tax. After all, it's still five months before the first ski season jet flights with the new tax dollars. But a reduction in seats and an increase in costs isn't just unanticipated, it's alarming.
Voters now twice have approved taxes to fund airline revenue guarantees. Each time, the tax was pitched as the solution, but neither has come close to solving the problem. Instead, the best case officials can make is that things would be worse without the taxes. We'd advise working on a backup plan because that's not an argument that's going to fly with voters in the future.