Sask. earmarks $1.5M subsidy for WestJet flights between Regina and Minneapolis

Kayle Neis/Regina Leader-Post James Bogusz, president and CEO of the Regina Airport Authority, is shown inside the Regina International Airport on Friday, June 21, 2024 in Regina.

The new route includes of government subsidy of up to $500,000 per year for the next three years if Westjet’s sales targets are not achieved.

Alec Salloum

Regina Leader-Post

Known as a minimum revenue guarantee (MRG), it acts as “an insurance policy that offsets some of the risk for an airline in opening a new route,” according to an emailed statement from the province.

WestJet began offering daily year-round flights between Regina and Minneapolis on April 28, 2024.

“The Government of Saskatchewan is committed to fostering a competitive business environment in the province and direct flights to the U.S. increases our competitiveness,” said the statement.

The wording of the order-in-council states the province will provide “an amount up to $500,000 annually for fiscal years 2024-25 to 2026-27, for the purpose of attracting new direct flights between Regina and Minneapolis-Saint Paul.”

That money forms an “incentive,” according to James Bogusz, president and CEO of the Regina Airport Authority (RAA). Bogusz said this was how the RAA was able to bring back a daily flight from Regina to a major American hub, which he described as an ongoing “quest” that dates back to 2018 after Regina lost direct service to Minneapolis through U.S.-based Delta Air Lines as well as Chicago and Denver via United Airlines.

“This is basically a backstop to essentially top up their required revenue on the flight, but only if the flight does not generate sufficient revenue on its own,” he said Thursday, adding that he needed to “triple underline” the importance of the MRG in securing the route.

“The airlines on their own are not going to take all the risks for routes that are not through a major (Canadian) hub,” he said, with an eye to restoring direct flights to other American hubs like Denver and Chicago.

In this context, an MRG essentially means that if WestJet does not make a certain amount of money, the province will reimburse the company.

“Not a fan,” said Jason Childs, associate professor of economics at the University of Regina. “I don’t like corporate welfare. I don’t like subsidies.”

Childs’ objection to the minimum revenue guarantee is that it means airlines that come into Regina offering new routes will have to “compete with the run that’s revenue-guaranteed.”

“If we’re gonna have a market-based economy, which I think there’s a lot of reasons to have, then we shouldn’t be playing this game,” he said.

Childs believes the MRG could affect how the market will respond in light of subsidized flights, though he did see one potential bonus.

“If this does cause a little more competition in the domestic runs, then maybe that’s a good thing,” said Childs, who noted that opening up Minneapolis as an option for people flying elsewhere might bring down the prices of other flights to hubs like Calgary.

In advance of offering the MRG, Bogusz said “we make sure we do the research. We crunch the numbers before we offer these incentives,” adding this is not a “long-term play.”

For example, he cited a daily flight to Montreal offered in July and August that exists now because of a similar incentive. Bogusz said that summertime route no longer “requires incentives, though it did at the beginning.”

As travel recovers post-pandemic, Bogusz predicts growth this summer.

“I’m going to have more seats in my market to major city centres like Toronto and Vancouver than I had even in 2019,” he said.

A similar MRG currently exists for a Minneapolis flight out of Saskatoon which, over three years starting in February 2023, could see up to $2.2 million paid from the province to WestJet should the service prove unprofitable.

According to the province, “$1.2 million of the $2.2 million minimum revenue guarantee was provided to the Saskatoon Airport Authority” in the 2023-24 fiscal year.