Saturday, January 23, 2016

General Electric's power: Key to landing JetBlue?



General Electric's recent decision to move its headquarters to Boston could play a major role in finally getting JetBlue Airways to Cincinnati, The Enquirer has learned.

But GE's deep ties to Greater Cincinnati aren't all that makes the case to bring the discount airline to Cincinnati/Northern Kentucky International Airport stronger than ever. CVG has the ability to offer financial incentives for the first time in the airport's yearslong courtship of JetBlue, which has a hub in Boston.

It still doesn't guarantee that JetBlue is coming to town, but the timing has never been better for a marriage between the discount carrier and Cincinnati.

"In recent years, GE has increased its presence significantly in Southwest Ohio through its Dayton and Cincinnati operations of GE Aviation, as well as the corporation’s new global shared services operation on The Banks," GE Aviation spokesman Rick Kennedy told The Enquirer. "Collectively, this will increase demand for air travel from Cincinnati to the new GE corporate headquarters in Boston."

Kennedy declined to discuss whether GE would specifically play a role in helping to broker a deal between JetBlue and CVG, referring airline-related questions to the airport. CVG continues to recruit JetBlue, an effort that dates back to at least October 2012, when The Enquirer first reported airport officials were in talks with the New York-based airline.

“Boston remains a key focus city for CVG and our air-service development efforts," airport CEO Candace McGraw said. "Our goal is to provide competitive options in all markets, particularly key business destinations, and we are making progress in that effort."

Evendale-based GE Aviation has nearly 7,000 employees across the region. GE is expected to have more than 8,000 employees here after the Fortune 500 company's Downtown riverfront office opens this spring.

JetBlue is in expansion mode, including launching in Cleveland last year. The carrier's expansion plans appear to be going well. JetBlue's sales jumped 9 percent to $6.3 billion in the year ending Sept. 30, according an Enquirer analysis of Bloomberg financial data.

"We are always looking to expand ... however, we have no decisions regarding Cincinnati to announce at this time," JetBlue spokesman Philip Stewart said.

The Motley Fool, which produces a range of financial publications along with financial services, asked in a report this week whether JetBlue should look to expand following GE's decision to move to Boston. The report noted that JetBlue's big weakness in competing for business fliers is that it doesn't go to several of the top U.S. business markets, including Cincinnati and Atlanta, where GE has major operations.

"JetBlue could have trouble competing for GE's internal corporate travel business when it doesn't serve Cincinnati and Atlanta," according to the report.

Demand appeared high for more flights to Boston from CVG even before GE's big headquarters announcement. One of GE Aviation's largest manufacturing plants is based in Lynn, Massachusetts, which is 8 miles northeast of Boston's Logan International Airport.

In a 2012 study commissioned by top regional business executives, Greater Cincinnati's 10 largest companies identified Boston as the No. 1 U.S. city that corporations desired more flights to from CVG. Airport officials used the study to develop a plan to target adding more flights to Boston and seven other U.S. cities, an effort to provide more competition to dominant carrier Delta Air Lines.

CVG has been able to add new flights to seven of the eight cities – the exception being Boston. Frontier Airlines, Allegiant Air and American Airlines have helped provide new service to some of those cities, including Las Vegas, Atlanta, New York and Orlando. Low-cost carriers Frontier and Allegiant have played a major role in lowering CVG's average ticket price and increasing the airport's passengers the past two years.

But Delta's four daily nonstop flights remain the only service between Cincinnati and Boston, where Procter & Gamble also has major operations with its Gillette grooming business. Fares remain high on nonstop flights from CVG to Boston. Many of the same companies that said they want more flights to Boston continue to have corporate travel deals with Delta.

If GE's connection to Cincinnati and Boston isn't quite enough to persuade JetBlue, perhaps a financial incentive could. CVG's new five-year contract with the airlines, which went into effect Jan. 1, allows the airport to offer such incentives – something the old deal did not.

"An incentive program isn't carte blanche," said Daniel Friedenzohn, an assistant aviation professor at Embry-Riddle Aeronautical University in Daytona Beach, Florida, and a former United Airlines network planner. "But if you’re at a tipping point, it can give that nudge to get the airline to commit.”

Delta had the upper hand on how money generated from airline operations was spent at CVG under the old contract. That deal, signed in 1974, required CVG to give back any profits generated from airline operations to the carriers at the end of each year. After 2014, for example, CVG had to give $4.9 million back to the airlines.

In the new deal, CVG doesn't have those financial constraints. It now shares profits with the airlines, and CVG's McGraw said her staff is reviewing how other U.S. airports use discretionary money for incentives.

A typical incentive program allows an airport to waive landing fees for a limited time, make gate and ticketing counter improvements, and cover some start-up costs for an airline. The federal government restricts incentive programs, and airports typically aren't allowed to offer large amounts of cash to a new airline.

CVG has been able to lure Frontier and Allegiant and increase passengers "by just pure hard work and gutting it out," McGraw said, and adding an incentive package to the recruiting toolkit could only improve the airport's chances of landing JetBlue and other new airlines.

"The most exciting part about the new deal: It lets the airport control our own destiny," she said.

Original article can be found here:  http://www.cincinnati.com

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