Southwest to serve new Florida airport, will be reimbursed for losses

Southwest Airlines yesterday announced it will launch service at the new Northwest Florida-Panama City International Airport next May, operating at least two daily flights to four undisclosed destinations. The airport, slated to open May 18, is being built on land donated by St. Joe Co., Florida's second-largest landowner and a major developer in northern Florida. Under a "strategic alliance" between the companies, St. Joe agreed to reimburse SWA on a quarterly basis if the airline incurs losses during the first three years. "We've got an opportunity to be a launch airline at a new airport but we're not in an environment where we can take a lot of risk," SWA Chairman and CEO Gary Kelly said yesterday in Dallas at the airline's annual media day.

According to a Securities and Exchange Commission filing from St. Joe, the agreement may be terminated by St. Joe if payments to Southwest exceed $14 million in the first year or $12 million in the second year. SWA may terminate the deal if annual revenues at the airport "are less than certain [agreed upon] minimum annual amounts." Either party may cancel after two years, Kelly said, adding that Florida's Gulf panhandle region "is a large, underserved, overpriced tourism gem." The current airport, Panama City-Bay County International, has no mainline jet operations but is served by regional partners of Delta Air Lines and Northwest Airlines. Kelly also said yesterday that SWA could add two more new destinations next year.