New Orleans says no to regional airline hub proposal

Published Oct 17, 2012 at 10:00 am (Updated Oct 17, 2012)

Baton Rouge businessman John Miller says the city of New Orleans' rejection of a proposal to create a new low-fare airline hub at Louis Armstrong International Airport isn't deterring his investor group, M7 Capital, from pushing ahead with the idea.

"Oh no, not at all," Miller says, when asked if New Orleans' most recent rejection of the idea deals a deathblow to the proposal.

Miller last week pitched the idea—which has been in the planning stages for years—once more to the Regional Planning Commission, which drafted a resolution urging New Orleans to consider the deal. New Orleans Mayor Mitch Landrieu's office has responded in a letter, saying the proposal has "serious defects" and "fails to offer sufficient evidence demonstrating that the rewards it promises are realistic."

The proposal includes buying low-cost carrier Frontier Airlines, which has been for sale for the past year and is currently based in Denver. Miller says M7 Capital would not be included in the group of purchasing investors, and that it would not have an executive stake in the airline after it was purchased.

"M7 Capital is only the facilitator of the developer of the business model," he explains. "M7 Capital would not be controlling the deal or have an executive role in the airline."

The state, through LED, signed a Memorandum of Understanding in October 2010 with the developers, agreeing to provide incentives to the airline based on its ability to bring new passengers to New Orleans. The state would provide the airline $50 for every new passenger it brings to the airport, as long as it could create 125 new daily departures within the first three years of operation, among other performance benchmarks.

In the letter sent to Regional Planning Commission members following last week's meeting, Landrieu's office says providing such an incentive to one airline and not others "provides a government-funded competitive advantage" that could " 'cannibalize' passenger traffic from existing carriers." The letter says the $50 per passenger the state is offering in its incentive deal "far exceeds the profit margin of existing carriers."

Miller says New Orleans officials—specifically MSY Aviation Director Iftikhar Ahmad—have continually opposed the deal, saying they have not been provided with sufficient evidence that the state would see an adequate return on its investment. Miller maintains he has provided all the documentation that proves the deal is sound.

"There are many, many facts that they are just not considering," Miller says of Iftikhar and Landrieu's office. "[LED Secretary] Stephen Moret went through years of evaluation before he issued this MOU with us. It's a sound deal, and the return on investment is there. Do you think Stephen Moret would have signed it if it wasn't? Iftikhar Ahmad is blocking this deal. That's what this is."

Miller says he plans to continue meeting with New Orleans and state officials to put pressure on Landrieu's office to reconsider the proposal.

"I want to get the mayor to understand that through this process everything he's been told is not true," Miller says. "We've opened up ourselves to meet with everybody and anybody to continue talking about this deal, and that's what we'll continue to do."

You can check out a website detailing the plan
here; the letter from Landrieu's office to the Regional Planning Commission here; and Miller's email response to it here.