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Officials discuss revenue guarantee for new flights to Chicago, Dallas

Friday, October 12, 2012 | 4:04 p.m. CDT; updated 10:51 p.m. CDT, Monday, October 15, 2012

COLUMBIA — City and regional leaders would pledge American Eagle airlines a $3 million guarantee against losses as part of the deal to begin new flights between Columbia Regional Airport and Chicago and Dallas-Fort Worth, officials said.

The $3 million would come from a revenue guarantee fund that city officials and business leaders have raised through contributions from the Columbia Chamber of Commerce, MU, Boone County, Cole County and Jefferson City.

Under the deal, American Eagle, a subsidiary of American Airlines, would receive money from the fund if it fails to bring in total revenue averaging $4,403 per flight to Chicago and $5,010 per flight to Dallas each month, officials said. The airline could receive a maximum of $1.5 million a year for two years in compensation.

"I hope we're giving up nothing," Mayor Bob McDavid said. "The financials make this a good deal. But the money is at risk."

Both parties in the contract would have 90 days to back out of the deal, McDavid said.

If the deal is approved by the Columbia City Council and by American Airlines — and if contributors to the revenue guarantee fund follow up their pledges with checks — 50-passenger regional jets would fly between Columbia and Dallas-Fort Worth International Airport twice daily and between Columbia and Chicago O'Hare International Airport once a day. The flights would begin in February.

Money for the revenue guarantee will be placed into an escrow account as it comes in, Columbia Chamber of Commerce President Don Laird said. "We don't think there will be any problem" collecting the money organizations have pledged.

McDavid said he is not concerned about American Airlines' recent financial difficulties affecting the deal. American Airlines' parent company, AMR Corp., filed for Chapter 11 bankruptcy last November.

"You have to understand there have been bankruptcies throughout the industry," McDavid said.

Laird also said he's not worried about American's financial situation. "Most every airline has gone through bankruptcy," he said.

Jefferson City is among the contributors to the revenue guarantee fund. The Jefferson City Council voted earlier this month to pledge $100,000. Jefferson City Mayor Eric Struemph said he is delighted about the deal.

"What this gives us in terms of access is tremendous for our area," Struemph said. He thinks American Eagle will need very little compensation from the revenue guarantee fund.

"I think it's going to be so popular we won't have to worry," Struemph said.

This year, American Eagle already has added flights between Chicago O'Hare and Sioux City, Iowa, Waterloo, Iowa, and Steamboat Springs, Colo., according to its website. The airline also added flights between Dallas-Ft. Worth and Des Moines, Iowa and Garden City, Kan.

The City Council is scheduled at 5 p.m. Friday to introduce and give first reading to four ordinances related to the deal:

  • An agreement with American Airlines.
  • An agreement with contributors to the revenue guarantee fund.
  • A marketing agreement with Zimmer Radio.
  • An ordinance appropriating money for the revenue guarantees.

On Monday, the ordinances will be considered under old business at the council's regular meeting, and the public will be allowed to offer its input. The council intends to take a final vote on the ordinances at a later date, perhaps at a special meeting on Oct. 22.

Supervising editor is Scott Swafford.


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