Top 6 Things You Need to Know About Our MRG

On Monday, May 20th, the Rochester City Council voted to create a $1.5 million fund to help RST attract new direct flights to a handful of leisure destinations. Here are the top 6 things you need to know.

1.  What was approved by the council? The council agreed to create a $1.5 million airline Minimum Revenue Guarantee (MRG) fund to be used as a key incentive in efforts by RST to attract new direct flights on low-cost airlines to leisure destinations.
2. What’s an MRG? A Minimum Revenue Guarantee (MRG) is an arrangement that’s common in the airline industry. An MRG is designed to reduce an airline’s financial risk in launching service on a new route by guaranteeing that the airline is paid a set amount of money if the airline is not achieving expected revenues.An MRG is not a subsidy. The goal is that high demand for flights would mean that they quickly become self-sustaining without dipping into payments from the MRG.
3. How will our airport’s MRG be funded? It’s expected that about $1.17 million would come from the City of Rochester’s federal budget stability funds left over from the pandemic and the rest from a variety of other city funds. No local tax dollars would be used.
4. How will the airport’s MRG work? Here’s the expected process:
   1. Negotiate with interested airlines.
   2. Reach an agreement and sign a contract with an airline.
   3. Celebrate the additional flight/flights and begin services!
   4. At the three-month mark, evaluate progress with the airline to determine whether to continue services or end the contract early.
   5. If a decision is made to proceed, we’d review quarterly revenue reports with the airline. The fund would provide payments if the airline were not achieving its expected revenues.
   6. After two years, the fund would return its remaining dollars to the City. And… flights would be fully self-sustaining!
5. What new destinations are being targeted and why? Our focus is on expanding service to leisure destinations, specifically Phoenix and Orlando. Here’s why:
   1. According to the Regional Airline Association, demand has shifted in the U.S. airline industry since the pandemic from business to leisure air travel. For this reason, airlines favor leisure destinations when deciding on new routes.
   2. Research conducted on RST’s behalf by Volaire Aviation Consulting shows that our community members travel regularly to Phoenix and Orlando already. They’re traveling for business, vacation and to visit friends and relatives who have relocated there. The friends and family they are visiting there would be potential passengers on the flight back to RST as well.
6. How would the additional direct flights benefit the community? Here are just a few of the many reasons:
   1. Providing direct flights to destinations our community members already frequent provides convenience and overall cost savings for them.
   2. A thriving airport is a vital part of a thriving community. Any additional air service out of Rochester will eventually generate additional dollars to maintain high-quality airport facilities for all its users, from medical and business travelers to vacationers.