Hartford Business Journal

18 Hartford Business Journal • February 19, 2018 • www.HartfordBusiness.com By Matt Pilon mpilon@HartfordBusiness.com D uring its first year flying to Dublin, Ireland out of Bradley International Airport, Aer Lingus missed its revenue goal, triggering a $4.5 million subsidy from the state, the Hartford Business Journal has learned. The payment, which is pending from the state Department of Economic and Community Development (DECD), is part of a $13 million incentive deal inked between state officials and the Irish airline to woo it to Bradley, where flights began in Sept. 2016. Revenue subsidies make up the bulk of the two- year deal, at $9 million, with the rest comprised of marketing incentives and airport fee waivers. Revenue-guarantee subsidies have become more common in the industry, particularly for smaller and mid-sized airports, though this is the first deal of its kind in Connecticut. Kevin Dillon, executive director of the Connecticut Airport Authority, said it's not uncommon for airlines to miss revenue targets built into the deals, which are designed to reduce the financial risks of a new service. "I think from a revenue guarantee standpoint, this is typical," Dillon said. "You typically find that airlines have to draw on it." State officials said they hoped to see the Dublin service draw higher revenue in the first year. Nonetheless, they have decided to move ahead with the second year of Aer Lingus' revenue-subsidy deal, pointing to a recent uptick in passenger traffic as a sign for optimism. The deal "absolutely" provides value to the state's economy, DECD Commissioner Catherine Smith said. "I think there is a gigantic payback for the state — it creates jobs in the local market and I hear from business travelers who use it that they love to go out of Bradley," Smith said. "I would certainly have liked to not have to provide the full $4.5 million, but hopefully the full number won't be needed in year two." Indeed, Aer Lingus passenger traffic is up 8 percent in the first quarter of its second year (Oct.-Dec. 2017), according to data published by Bradley Airport. January and February passenger data were not yet available. Smith said launching the service just ahead of the tourism off-season may not have been ideal timing. Aer Lingus decided to reduce flight frequency for the first two months of this year, from four round trips per week to three, which the airline says is a response to off-peak seasonal demand. The airline's contract with the state, obtained by HBJ, appears to allow Aer Lingus to run three flights a week all year, if it chooses, but airline spokesman Declan P. Kearney said flight frequencies will return to year-one levels next month (four round trips per week in March and daily round trips from April to October). Kearney said the Hartford-Dublin route "has performed in accordance with expectations since its launch." He said the airline, DECD and Airport Authority have met their commitments and that Aer Lingus is "encouraged by both the performance of the route to date and its positive relationships with the state and the CAA." Aer Lingus is now about halfway into the second and final year of that revenue-subsidy deal, which state officials said in 2015 would be built around the amount of revenue Aer Lingus would need to break even on its new service. DECD and the airline negotiated revenue targets in advance of the service launching. The airline could receive up to $4.5 million in its second year, if it misses its revenue target by that much. Year-one targets According to the Aer Lingus-DECD contract, the airline has a revenue target of $134,550 per round-trip Air Support Aer Lingus taps $4.5M state subsidy after direct flights to Ireland miss year-one revenue target An Aer Lingus jet taxiing at Bradley Airport in late Sept. 2016, when it began flights out of the Windsor Locks airfield. Aer Lingus missed its first-year revenue target. (Below) Connecticut Airport Authority Executive Director Kevin Dillon said it's not uncommon for airlines to tap revenue-guarantee subsidies. PHOTO | CONTRIBUTED PHOTO | HBJ FILE

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