The Salem City Council is scheduled Monday to consider signing an agreement with an unnamed airline, a major step in the years-long effort to bring back commercial flight to the capital city.
In the past year, the city has invested several million dollars to bring the Salem Municipal Airport up to federal standards and to attract airlines.
During his State of the City address, Mayor Hoy described the effort to bring commercial air service to Salem as “a little bit of a battle,” which has pushed city staff and the community.
Hoy hopes commercial flights will start by July.
The agreements to be considered on Monday outline the airline’s use of the airport, fees it would pay, and a financial subsidy it can expect from the city if passenger traffic doesn’t meet expectations.
Though the agreements will be voted on in a public session, the city is redacting the name of its partner in the deal.
City spokeswoman Courtney Knox Busch said the city has signed a non-disclosure agreement.
In the public version of the air carrier operating agreement, the name of the carrier has been redacted.
In January, Travel Salem President Angie Onyewuchi described the airline as a budget carrier with tickets ranging from $69 to $89 that intends to make Salem its West Coast hub.
During that meeting, the city council approved $2.4 million from the city’s general fund to renovate and staff the airport.
That was in addition to a $540,388 state grant for equipment the city received last spring.
As part of its effort to attract airlines, the city also obtained an $850,000 federal grant to hold for potential payment to the airline, that would be paid if flights fail to meet revenue targets during the first two years of operation.
The council will consider approval of those targets on Monday, under the air service agreement.
Councilors also will consider accepting a $350,000 grant from Travel Salem.
The city would also use the grant for $50,000 in marketing, to promote flights to and from the airport. The city will coordinate with the airline to create a marketing plan, according to the agreement.
Combined, the two grants would meet the maximum amount the city could owe for lost revenue in the first two years, at $1.15 million.
In a staff report from Brian Martin, the interim public works director, said that Travel Salem would use its own funding to pay its $350,000 commitment if it cannot generate local pledges.
“There should be no budget impact to the city from this agreement unless Travel Salem defaults and is unable to provide the matching funds,” Martin said.
The agreement requires at least two flights per week, with exceptions such as inclement weather. The initial non-stop flights may include Los Angeles, San Francisco, Phoenix and Las Vegas.
The airline would bill the city on a monthly basis to make up the difference between target and achieved revenue, which varies based on flight location.
The minimum revenue expected ranges from $20,167 to $31,167 per round-trip flight, with the Phoenix flights generating the most.
The air carrier operating agreement, which has a 10-year term with the opportunity to extend for five years, also includes some financial incentive for the airline by lowering fees from city standards set in the Master Fee Schedule.
For two years, the city would not charge its customary landing, airport parking and terminal rental fees.
Martin said the lower rates aim to “provide certainty for the air carrier as the program grows.”
“While the proposed rate schedules will reduce potential airport revenues, the expectation is that air carrier growth will provide additional revenue in other areas, primarily through expanded public parking and increased rental car commissions,” he said.
The contract provides for the city to service other airlines and requires the airline to report its landings and the number of passengers to the city each month.
The airport last saw commercial service in 2008, when Delta Air Lines left after a year and a half of service due to the impact of the recession on the industry.
Contact reporter Abbey McDonald: [email protected] or 503-704-0355.
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Abbey McDonald joined the Salem Reporter in 2022. She previously worked as the business reporter at The Astorian, where she covered labor issues, health care and social services. A University of Oregon grad, she has also reported for the Malheur Enterprise, The News-Review and Willamette Week.
