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U of I owes a $400,000 airline subsidy

Alaska Airline's University of Idaho plane
Posted at 4:10 PM, Jul 06, 2022
and last updated 2022-07-06 18:10:23-04

This story was originally published by Kevin Richert in IdahoEd News.

The University of Idaho will pay $400,000 to subsidize air service to and from the Palouse for the just-ended school year.

But U of I officials say the subsidized service is doing what they wanted it to do: It is helping the university draw students from the populous Treasure Valley.

The $400,000 payment closes the books on the first year of a three-year contract between the University of Idaho and Alaska Airlines. Under the agreement, Alaska promises to provide five round-trip flights per week between Boise and Pullman, Wash. But the deal came with a catch: The U of I agreed to pay Alaska up to $500,000 if flights failed to hit a 10% profit margin.

The airline will receive the full $500,000 subsidy, but nearby Washington State University has agreed to pick up $100,000, U of I spokeswoman Jodi Walker said last week.

The subsidy will come from the U of I’s budget reserves, said Brian Foisy, the U of I’s vice president of finance and administration. And the subsidy isn’t a complete surprise.

When U of I President C. Scott Green pitched the contract to the State Board of Education in May 2021, he said he expected the U of I to have to pick up some costs — but not the full amount.

It isn’t clear exactly why the flights didn’t hit Alaska’s 10% profit target — and if that’s a function of higher-than-expected costs, lower-than-expected passenger numbers, or some combination of the two.

But in an email to Idaho Education News last week, Walker suggested passenger numbers were at least part of the problem.

“It takes time to retrain travel patterns and Moscow has been without air service to Boise for so long,” she said.

In an email statement Tuesday, Alaska also took the long view.

“New markets take time to stimulate,” the airline said. “We expect to build more traffic as we enter the second year of service and have no plans to reduce service going forward.”

Grounded for several years, the Boise-to-Pullman flights resumed in August.

The U of I pushed for the Alaska contract in hopes of drawing Treasure Valley students. The Treasure Valley is one of the U of I’s student recruiting hotbeds, but a winding, mountainous six-hour drive separates the valley from the Moscow campus.

The U of I also says the air service will help university employees who have to travel to Boise for business.

The U of I has no hard numbers on student or staff flight usage, but enrollment numbers suggest the air subsidy is paying for itself. First-year enrollment from the Treasure Valley increased by 56 students last fall, and overall enrollment from the Treasure Valley is up by 228 students. And each undergraduate student generates more than $10,000 in revenue for the U of I, Foisy said.

The State Board approved the Alaska Airlines contract unanimously, and despite the first-year payout, the board is standing behind that decision.

“Students need to be able to travel safely and efficiently between Moscow and the Treasure Valley,” board spokesman Mike Keckler said in a statement Tuesday. “That is why President Green views the agreement as a way to improve recruitment and retention at the University of Idaho and the board agreed with him.”

The contract runs for two more years — and the subsidies could continue to max out at $500,000 per year.

The U of I is optimistic moving forward, Walker said. Alaska is committed to the air route, and adding connecting flights from Boise to other destinations. And U of I officials say the rising price of gas could encourage Moscow-bound travelers to consider flying.

“While inflation is likely to make it more expensive to fly, it has already made it more expensive to drive,” Foisy said Wednesday.