TO: Mayor and City Council
THROUGH: Krishna Namburi, Interim City Manager
FROM: Brian D. Martin, PE, Public Works Director
SUBJECT:
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Future of Commercial Air Service at Salem - Willamette Valley Airport and Update on Airport Plans, Projects, and Development.
Ward(s): Ward 2
Councilor(s): Nishioka
Neighborhood(s): SEMCA, SESNA
Result Area(s): Strong and Diverse Economy.
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SUMMARY:
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As part of a broader corporate realignment across the western United States, Avelo Airlines ceased operating commercial passenger flights out of Salem-Willamette Valley Airport on August 10, 2025. Avelo had served as Salem’s only carrier since October 3, 2023, operating 820 flights and carrying about 90,000 passengers to and from Burbank, California, Las Vegas, Nevada, and Santa Rosa, California. In its first 19 months, the service generated an estimated $32.5 million in new visitor spending. Recruiting a new airline will likely require financial incentives from community partners to help underwrite an airline’s revenues during its initial operational period.
This report also provides an update on several ongoing and planned airport initiatives, including plans, studies, projects and hangar developments scheduled over the next several years.
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ISSUE:
Information only.
RECOMMENDATION:
recommendation
Information only.
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FACTS AND FINDINGS:
Issues: How successful was commercial air service at Salem-Willamette Valley Airport during nearly two years of operation, and what efforts, specifically financial incentives are needed to recruit a new air carrier? In addition, what plans, studies, projects, and hangar developments are underway or planned at the airport?
Commercial Air Service at Salem-Willamette Valley Airport: October 2023 to August 2025
Avelo Airlines began operating flights out of Salem-Willamette Valley Airport on October 3, 2023, and ceased operations on August 10, 2025. During this period, Avelo operated 820 one-way flights, carrying about 90,000 passengers to and from Burbank, California; Las Vegas, Nevada; and Santa Rosa, California. Most aircraft were Boeing 737-700 models (147 seats), with some Boeing 737-800 (189 seats). Passenger load factors varied by destination, with Burbank highest, followed by Las Vegas and Santa Rosa. In the first quarter of 2025, the average load factor for Burbank and Las Vegas flights was 74 percent, or three out of every four seats sold.
Between October 2023 and April 2025, Avelo brought 38,200 new visitors to the Mid-Willamette Valley. Using established economic multipliers, Volaire Aviation Consulting estimated $32.5 million in economic benefit from new visitor spending during this period.
Disposition of Avelo’s Minimum Revenue Guarantee (MRG) Fund
To attract Avelo in 2023, a $1.2 million MRG was established using an $850,000 Federal Small Community Air Service Development (SCASD) grant and $350,000 in contributions from local businesses. The City administered the MRG but did not use any General Funds for payments to Avelo. As of June 30, 2025, $854,643 (71%) of the $1.2 million MRG Fund had been paid to Avelo, with $345,357 (29%) remaining.
City staff are awaiting final invoices from Avelo to determine if additional MRG funds must be disbursed for July or August 2025. Any unused federal MRG funds at the end of the contract period in October 2025 must be returned to the federal government. Remaining local match funds will be returned to individual donors, unless donors elect to redirect their contributions toward a new MRG agreement with another airline. MRG funds could only be applied to flights to/from Burbank and Las Vegas. The flights to/from Santa Rosa were solely initiated by Avelo without MRG support.
Although Salem flights had a 74 percent load factor, the average fare was $59, which was below Avelo’s western market average, resulting in lower per-flight revenue. To sustain strong passenger loads, Avelo charged lower fares, which triggered MRG payments in 15 out of the first 21 months of service.
Financial Impact of Commercial Air Service
Community Economic Impact
From October 2023 to April 2025, each MRG dollar generated $43 in visitor spending in the community, a 43:1 return on investment (ROI). The $220,706 contributed by local donors leveraged $147 in new visitor spending per dollar, a 147:1 ROI.
Airport Capital Funding Impact
The City of Salem, State of Oregon, and Marion County invested $2.54 million in terminal and equipment upgrades for commercial air service. This investment helped secure $1.1 million in federal infrastructure funds for planning and design of terminal expansion, through the efforts of Congresswoman Salinas. The City also secured $1.15 million annually in FAA entitlement funds for FY26 and FY27 for capital construction improvements, based on surpassing 10,000 annual enplanements in 2024 and 2025. By operating commercial air service successfully for nearly two years, the City secured $3.4 million in federal capital funds - a net benefit of $0.86 million.
City General Fund Impact
From FY24 to FY26, the General Fund provided $1,969,500 to the Airport Fund to support 4.5 additional FTEs for federalized operations, and over $3,000,000 to the Salem Fire and Police for Aircraft Rescue and Firefighting (ARFF) and flight day police terminal security staffing for a federalized airport with commercial air service. In total, the General Fund commitment to air service operations was about $5.2 million.
Commercial air service revenues came from paid parking, fuel flowage fees, and ground equipment usage. Avis/Budget rental car commissions from Avelo passengers are unclear, and terminal advertising had only just begun when Avelo announced its departure. For FY24 and FY25 combined, commercial air service generated $265,795 in revenue for the Airport Fund. Avelo’s departure is projected to result in a $238,000 revenue loss in FY26, including higher landing fees revenue starting in October 2025. Overall, this revenue level produced a negative ROI of -$4.9 million for the General Fund’s operational support of commercial air service. However, as noted above, the General Fund achieved a positive ROI on its separate $1.9 million capital investment.
Efforts to Recruit Another Commercial Airline
Breeze Airways and Alaska Airlines have publicly announced plans to serve several of Avelo’s former markets beginning as early as Fall 2025 and Spring 2026. However, as of this report, Salem has not been offered replacement service from either airline. Representatives from Fly Salem, Travel Salem and Volaire Aviation Consulting are actively engaging multiple airlines to encourage an expansion of their service into Salem. While Salem demonstrated a strong start in the commercial air service market, it remains a risk for start-up service due to having only one carrier in its history of operations and lower than average per flight revenues. As a result, low-cost carriers are seeking an MRG equal to or larger than Salem’s original $1.2 million MRG, which supported up to four routes in 2023. By 2025, air service costs had risen, and initial conversations with the City’s aviation consultant indicate an MRG of $1.5 to $4.0 million will likely be required to attract a low-cost carrier to operate one or two destinations from Salem-Willamette Valley Airport. The next round of federal SCASD grants opens for application in Fall 2025 and will be awarded in early 2026. These grants can be applied toward MRG funding but require a local match, likely delaying re-establishment of commercial air service until Fall 2026. Starting sooner would require assembling a larger community-based MRG outside the grant cycle.
Airport Operations and Federalized Status
The airport has two vacant positions out of 9 FTEs authorized in the FY26 budget. The Airport Manager became vacant August 1, 2025, and the Airport Operations Program Manager will become vacant August 29, 2025. Aaron Ison, Airport Security Program Manager, is Acting Airport Manager, and a member of operations staff will serve as Acting Airport Operations Program Manager beginning August 30, 2025. No additional transfers or vacancies are planned for the next six months, depending on resumption of commercial air service. Personnel savings (vacancies) of $216,000 to $340,000 in FY26 are expected to offset the projected $238,000 loss in airline-related revenue from paid parking, fuel flowage fees, equipment rental, and landing fees.
Security operations will continue at federal standards, with badging and credentialing requirements. Beginning August 11, 2025, Transportation Security Administration (TSA) screening officers will report to Salem but may be reassigned to Eugene or Portland based on staffing needs. However, TSA policy requires the defederalization process begins at an airport 90 days after airline service ends, unless a new airline begins service or submits a letter of intent. Without this, Salem could lose TSA passenger and baggage screening equipment by November 2025. If removed, the re-federalization process could take several months once an airline commits to service.
Airport Master Plan Update
The Airport Master Plan update continues in close coordination of City staff with Mead & Hunt Consultants. Since the February 2025 Council work session, staff held three PAC meetings and scheduled an open house and PAC meeting for Fall 2025.
A major concern for the general aviation community is the future of Runway 16/34, a secondary runway. Initially, closure was considered due to potential loss of federal funding. However, the FAA designated Runway 16/34 a Legacy Crosswind Runway, making it eligible for rehabilitation funding. This determination allowed alternatives analysis to resume. The goal is to complete the Master Plan in Winter/Spring 2026.
Upcoming Capital Improvement Projects and Studies
Funded capital projects and studies are underway or planned for the next two years:
Hardstand Construction & Security Fencing Project
This project will build a reinforced concrete parking pad for commercial jets to park at the terminal gate area to prevent asphalt damage caused by heavy aircraft. It also includes security fencing to improve ramp security. The $1.54 million total cost includes $1.47 million in federal funds, $60,000 in State grant funding, and $17,000 from the City’s Airport Fund. Construction is expected in spring/summer 2026.
Taxiway A - North Pavement Rehabilitation
This project will rehabilitate pavement of north portion of Taxiway A. Design work is funded in 2025-2026 for $538,000 (Federal share $511,000, State Grant $19,000, City share $6,700). Construction is estimated at $6.7 million planned for 2026/2027.
Airport Resiliency Study
A State-funded study will assess the seismic resiliency of the airport’s primary runway and needs for post-earthquake relief flights. Cost is $150,000 (State Grant $112,500 and City Airport Fund $37,500). Study planned to begin in late 2025/early 2026.
Airport Terminal Area Plan
Funded by a $1.1 million federal earmark, this project will develop terminal expansion alternatives, identify a design, and secure federal environmental approvals before construction begins. Planning and design are expected to start in early 2026.
Air Traffic Control Tower Replacement Project
The FAA has approved the construction of a new Air Traffic Control Tower at a new location on the east side of the airport. This fully funded multi-million-dollar project is managed through the FAA and is expected to begin sometime in 2027 or 2028.
Development of Airport Properties and Leases
Aviation Business Activity Center (ABAC)
On August 28, 2023, City Council approved the purchase of the former Hertz Car Sales property from West One Automotive Group to provide an additional 8,250 sq. ft. of office space, 3,540 sq. ft. of service building space, and 230 parking spaces for future paid parking needs. The acquisition cost was $1,431,000 with another $408,000 authorized for HVAC, parking lot striping and other sidewalk and concrete work. Total debt authorization was up to $1.84 million from the City’s Utility Fund, with an annual debt service of $211,000 for 10 years. Currently, about 40 percent of the office building is being leased by the Salem Fire Department Emergency Medical Services (EMS) Program, with the remainder reserved for the future relocation of the Airport administrative offices when terminal expansion occurs. With the cessation of commercial air service, staff are considering finding short-term leases for that portion of the building. Negotiations with a potential tenant are underway.
General Aviation Hangar Development
The airport has about 24 acres of land available for new hangar development, with some smaller infill hangar lots in the already developed hangar areas. Another 46 acres are less suited for hangar development but, well-suited for commercial or industrial development. Two of the undeveloped hangar lots are leased and progressing through approvals, permitting and design process, while five more are reserved and in early development. Seven acres of the commercial/industrial land are leased by WattEV. PFAS discovered in a small portion of one of the hangar lots has slowed progress on development of that hangar site. PFAS sampling and testing is underway and will help determine the impact on hangar development in the southwest corner of the airport.
WattEV Lease and Development
City staff continue working with WattEV to develop the 7-acre site at southwest corner of Airway Drive SE and Turner Road SE for an electric semi-truck charging and tractor exchange installation.
BACKGROUND:
The City of Salem signed a 10-year operating agreement with Avelo Airlines in September 2023. Avelo Airlines began commercial passenger service at Salem-Willamette Valley Airport on October 5, 2023, with twice-weekly flights to and from Burbank, California, and Las Vegas, Nevada. A third weekly Burbank flight was added during the 2023 and 2024 holiday seasons. From May to September 2024, Avelo briefly operated flights between Salem and Sonoma County/Santa Rosa, CA, and Las Vegas service was paused from January to April 2025 before resuming in May 2025.
To attract and sustain operations during Avelo’s first two years in Salem, a $1.2 million MRG was established, consisting of an $850,000 SCASD grant and $350,000 contributions from the business community. While the city administered the MRG, no City General Funds were paid to Avelo. The MRG contract expires October 2025.
The City of Salem invested $1.9 million capital investment in 2023 to the Salem-Willamette Valley Airport terminal and campus to prepare it for commercial air service, with an additional $540,000 in State grants to acquire ground support equipment. Marion County contributed $50,000 in FY24 and $50,000 in FY25 towards terminal furnishings. The City’s General Fund has provided an average of $656,500 per year ($1,969,500 total) in assistance and added 4.5 Airport FTEs to support commercial air service from FY24 through FY26 and allocated over $1 million per year for Fire and Police staffing required for commercial operations at the airport.
Mark Becktel, AICP
Assist. Public Works Director - Operations
Attachments:
Public Comments received by August 13, 2025