Air service: Shortage of state funding creates uncertainty around flights future

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SHERIDAN — The state’s Air Service Enhancement Program, which provides critical funding to airports around the state, including Sheridan County Airport, is projected to run out of money by July 2019, according to a report presented to the Wyoming Legislature’s Minerals, Business and Economic Development Committee last week.

The loss of funding from the ASEP would require Sheridan County to either restructure or discontinue the agreement it currently has with Key Lime Air, which operates out of the Sheridan County Airport as Denver Air Connection, when it comes up for renewal next year. How exactly the county will proceed, though, will depend on several variables that will take shape over the coming year.

“It’s really all up in the air right now,” County Administrative Director Renee Obermueller said.

Sheridan County’s current agreement with Key Lime Air includes a minimum revenue guarantee that ensures the service is profitable regardless of how many passengers purchase tickets. The state currently subsidizes 60 percent of Key Lime’s MRG — $596,937 — and that subsidy comes out of the ASEP.

The remaining $397,598 of Key Lime’s MRG is split among the city of Sheridan, Sheridan County, Buffalo and Johnson County. Those partners cannot afford to take on the state’s share of the MRG, but Obermueller said they could potentially afford to fund the agreement independently if Key Lime’s MRG shrinks.

Over the past two years, the Denver Air Connection has grown and ticket purchases have been more consistent; as a result, the revenue guarantee Key Lime requires was nearly halved in the county’s latest contract with the service, which took effect in July.

That agreement is scheduled to end June 30, 2019.

The county hopes that as Denver Air Connection continues to develop, the MRG it requires will continue to decrease until Sheridan County and its partners can afford to maintain the agreement without state assistance.

Obermueller said both Sheridan County and the city of Sheridan have allocated $250,000 for air service from Optional One-Cent Sales Tax revenue. If Key Lime’s total MRG were to drop to around $500,000, she said the county and city could likely take on the contract by themselves.

The looming termination of the AESP, though, means the MRG will have to reach that level in the next year if Sheridan County is going to continue with Denver Air Connection, and Obermueller said there is no way to project what Key Lime will require come next July.

Sheridan County Airport may have another option for air service, depending on the progress of the Air Service Improvement Council, which was created by legislation passed during the Wyoming Legislature’s latest budget session to improve air service in the state.

The council’s initial efforts are focused on four communities considered to be in critical need of assistance in providing air service; Sheridan is one of those communities, along with Rock Springs, Riverton and Gillette.

Sheridan County Commissioner Steve Maier, who was appointed to the Air Service Improvement Council as the representative of the Wyoming County Commissioners Association, said the council plans to finalize a request for proposals for air service providers at its meeting in Rock Springs next week.

The council’s RFP is structured as a capacity purchase agreement, in which the four communities would contract with one provider and use the leverage of their combined purchasing power to secure a more competitive price.

But if Sheridan does enter into the CPA, it will have to contract with whichever service provider the state selects, which could very likely mean ending the Denver Air Connection partnership.

Both Obermueller and Maier said the county has been impressed with Denver Air Connection’s service and is optimistic about its continued growth.

“We knew when we had our first conversation (with Key Lime) in July of 2015 that this was a longterm commitment,” Obermueller said. “We knew it would take two, three, four years before we would see sustainable growth and get to the point where we could be independent.”

Entering into the state’s CPA could mean starting over.

There is uncertainty surrounding the CPA as well, though.

The state has not received proposals from air service providers, which means Sheridan and the other communities cannot evaluate whether the contract would benefit them.

Once the specifics of the agreement are on the table, communities will have the opportunity to opt-out of the CPA.

“There are a lot of question marks out there,” Maier said. “With the RFP, obviously, we don’t know what the response will be and the communities may or may not want to be part of the state system. That gets problematic, though when you ask an airline to submit a bid or proposal when they’re not sure which communities they’re going to be going to.”

There is also no guarantee that the CPA will be in place by next July. Maier said the state has allocated some money to facilitate airports transitioning to a new model, but that funding, too, is limited.

The Air Service Improvement Council’s efforts were always going to force Sheridan County to make a tough decision. But the projected loss of funding for the ASEP may have placed a shot-clock on that decision.

By |September 6th, 2018|

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