Despite consistent guidance from Boyd Group International Michael Boyd that communities should never pay airlines to serve their city, Panama City may ultimately do just that as Southwest begins to serve its new Northwest Florida – Panama City Airport when it opens in May. The community is providing a guarantee against losses rather than providing a direct subsidy to the airline as it tries to capture the 15 million visitors to the area who travel there by car. Related Story

Delta clearly rejected mainline service to the new airport, an official told Aviation Today’s Daily Brief recently. The move sent many questioning Southwest’s mindset in adding the point to its route network but St. Joe, the area’s largest land owner, which was instrumental in getting the new airport as part of its 100-year development plan for the region, is providing $14 million in revenue guarantees, according to the SEC filing submitted yesterday. St. Joe and Southwest have entered into a strategic alliance agreement to facilitate air service to the new airport. As part of the agreement, St. Joe has agreed to reimburse Southwest if it incurs losses at the new airport during the first three years of service. It also provides for any profit from the air service during the term of the agreement to be shared with St. Joe up to the amount of St. Joe’s prior payments. If the guarantees exceed those targest, which include $12 million in the second year, the contract can be terminated. The deal also calls for profit sharing as well as marketing participation and a no-compete clause preventing the airline from serving another airport within 80 statute miles of the new airport during the three-year term of the agreement.

Southwest’s service at the new airport will consist of at least two daily nonstop flights from Northwest Florida to each of four destinations for a total of eight daily nonstop flights. While local business leaders hailed the new service, it will impact the regional airlines now serving the airport including Atlantic Southeast Airlines’ Delta Connection service over Atlanta. Related Story 

“We are very pleased to welcome Southwest Airlines to Northwest Florida,” said Airport Authority Chairman Joe Tannehill. “One of our primary goals in relocating our airport was to attract low-fare service to our region. With this announcement, we have secured service from the world’s premier low-fare airline.

“Most people are familiar with the concept of the ‘Southwest Effect’,” he continued. “While it’s impossible to put an exact number on the impact of this announcement, it’s big. Low-fare service will turbo-charge our regional tourism industry and economic development efforts. You don’t have to look any further than Fort Myers to see what Southwest service can mean to a region.”

A number of local organizations have committed to helping launch the new Southwest service. They include both the Bay and Walton County commissions and their respective tourist development Councils, which have also pledged marketing support towards this effort, and Coastal Vision 3000, the Northwest Florida business group which created the regional destination brand, THE Beach. Additionally, The St. Joe Company has entered into a strategic alliance with Southwest Airlines.

The alliance provides for the new service to the first new airport to be built in 16 years. St. Joe was instrumental in getting the new airport built as part of its development master plan for the area. It is the largest landowner in Northwest Florida with hundreds of thousands of acres in the service area of the new airport. Specifically, St. Joe owns approximately 71,000 acres of land surrounding the new airport. Millions of tourists are drawn each year to Northwest Florida beaches, many from Texas. The region is also home to important defense aerospace economic clusters anchored by U.S. Air Force, Navy and Army installations.

“The entire Northwest Florida region can be proud of its efforts to secure service from the nation’s premier low-fare airline,” said St. Joe’s CEO and President Britt Greene. “Southwest service, combined with the economic development potential of the new airport, will be instrumental in the long-term success of the region. The region now has a truly meaningful catalyst to help drive growth in the coming years.”

St. Joe intends to aggressively leverage Southwest’s service at the new international airport to drive tourism, economic development and job growth in the region and real estate absorption in the company’s projects across Northwest Florida.
“History has shown that the ‘Southwest Effect’ can have a dramatically positive economic impact on a market and a region,” said Greene. “We believe Southwest’s entry into Northwest Florida will be the foundation from which growth will emanate for future decades. This will truly provide a catalyst for us to create value for our shareholders for many years to come.”

“In the past, Northwest Florida’s economic growth has been hampered by limited service and some of the highest airfares in the country,” Greene said. “Southwest, with its legendary Customer service, extensive network and competitive fare structure, greatly improves our competitive position for economic development prospects and dramatically raises this region’s profile.”

Given the current state of the U.S. economy and the airline industry, new airline service must be positioned as an economic development initiative with broad regional support. St. Joe has been working alongside a number of regional organizations to secure the financial commitments to support this new air service: Coastal Vision 3000, the Bay County Tourist Development Council, the Beaches of South Walton Tourist Development Council and the Panama City – Bay County Airport and Industrial District.

The agreement provides for conditions, including the timely completion of the airport and Southwest reaching satisfactory agreements with the local airport authority regarding the use of the new airport and agreements with regional tourism groups regarding coordinated marketing