North American airline incentives: Best practices and emerging trends

Abstract

Industry economics have led airports to the increased provision of generous new route incentives to airlines in North America. However, many incentive programmes do not accomplish their goal of securing long-term viable air service. This paper contends that airports and communities should consider airline incentives in the context of a comprehensive air service development programme, to ensure that incentives are used to meet the strategic needs of the community. The paper discusses best practices for evaluating and implementing airline incentives within the North American regulatory environment. Key among these is quantitative market research and route analysis, required to determine whether incentives are appropriate for a specific air service, and to establish the level at which they should be offered. Emerging trends in North America point to larger incentive amounts, but increasing government intervention. Due to budget and/or regulatory constraints, financial incentives will not be possible in many circumstances. As a result, air service development practitioners must be aware of alternative methods of reducing carrier risk when initiating new routes.