SHERIDAN — Sheridan city attorney Brendon Kerns briefed Sheridan City Council on the city’s potential involvement in the changing local air service during a council study session Monday.
Last week, the Sheridan County commissioners approved a memorandum of understanding with the Wyoming Department of Transportation indicating that the county will participate in WYDOT’s Commercial Air Service Improvement Plan.
The state’s plan includes a contract with SkyWest Airlines to serve as the commercial air service provides for four of the state’s critical air service communities. By participating in the plan, Sheridan County would agree to let SkyWest replace Denver Air Connection as the commercial air service provider at the Sheridan County Airport starting in January.
The county’s MOU with the state is contingent on the city of Sheridan agreeing to split the cost of partnering with SkyWest, though.
Both DAC and SkyWest require a minimum revenue guarantee — a payment that reduces risk for the airline by promising a baseline profit — as part of their contracts. Sheridan currently pays half of DAC’s MRG and has already committed $350,000 of its Optional One-Cent Sales Tax revenues to Sheridan County’s agreement with the airline in fiscal year 2020.
According to the MOU between Sheridan County and WYDOT, the state will pay 60% of SkyWest’s MRG, leaving Sheridan County to pay the remaining 40%.
The contract between WYDOT and SkyWest has not been officially executed, and therefore is not publicly available. During a presentation to Sheridan City Council last month, however, CAST President Shawn Parker said the proposed contract with SkyWest requires an MRG not to exceed $716,410 in the first year of the agreement — which would only last six months as SkyWest would not begin operations until January — and MRGs not to exceed $1,828,140 and $1,991,049 in the second and third years of the contract, respectively.
Kerns said the city is still working out an agreement with Sheridan County, but the broad conditions of the agreement would obligate the city to pay half of the county’s contribution to SkyWest’s MRG, or 20% of the overall cost.
By contributing that fee, the city would have the right to work with Sheridan County and WYDOT on establishing pricing, flight schedules and revenue management practices and strategies related to the local air service.
According to the MOU between Sheridan County and WYDOT, the county will need to reduce the annual cost per passenger the state pays by 10% after the first two years of the contract, based on the average cost per passenger established during that two-year period.
If the county does not meet that benchmark, WYDOT will have the ability to change flights, schedules and pricing to reduce their annual contribution, Kerns said.
Though Sheridan and Sheridan County have the outline of an agreement, Kerns said, the two entities need to determine how their partnership would function, be it through a committee, joint powers board or some other mechanism.
The local governments don’t have much time to finalize the details.
Kerns said council will need to approve an agreement with the county before the next meeting of WYDOT’s Aeronautics Commission Aug. 21, as that commission has not approved the agreement with Sheridan County yet.
If and when the Aeronautics Commission approves the agreement, it can begin working with its local partners to set pricing, schedules and begin booking flights for SkyWest’s Sheridan service.
“They’re needing to get on that immediately to be able to start filling flights as soon as possible,” Kerns said.
Council is expected to vote on an agreement with the county during its regular meeting Monday.