Oct. 21 (Bloomberg) -- Southwest Airlines Co. will start flying to Florida’s Panhandle, a region sometimes called the Redneck Riviera, in an accord with developer St. Joe Co. to ensure the service breaks even in the first three years.

Southwest will operate at least eight daily flights beginning in May to a new airport near Panama City, Florida, Chief Executive Officer Gary Kelly said today at the airline’s Dallas headquarters. St. Joe rose the most in a month.

The accord with Jacksonville, Florida-based St. Joe gives Southwest a safety net to enter an area that lacks large cities and attracts vacationers for its Gulf of Mexico beaches. Slumping business travel in the recession has helped drag Southwest to two quarterly net losses this year.

“We’re not in an environment where we want to take a lot of risks,” Kelly told reporters. Southwest and St. Joe have a “safety valve” to discontinue the partnership if certain criteria aren’t met, he said.

St. Joe said it owns about 71,000 acres of land surrounding the new airport. The accord with Southwest, the largest discount carrier, calls for St. Joe to provide “backstop” financing on a quarterly basis if needed to guarantee that Southwest breaks even, Kelly said.

Southwest fell 41 cents, or 4.4 percent, to $8.85 at 4:15 p.m. in New York Stock Exchange composite trading, while St. Joe gained $1.70, or 6.3 percent, to $28.63, in the biggest advance since Sept. 15.

Strip Malls, Students

The Panama City area earned the Redneck Riviera nickname for its strip malls, low-price motels, motorcycle enthusiasts and college students on spring-break benders. In recent years, St. Joe has been among developers reshaping the region with condominiums and homes aimed at wealthier vacationers.

The new airport costs about $318 million, with roughly one- third each coming from federal and state governments and airport authority revenue, according to the Panama City-Bay County International Airport Authority. The facility is being built on 1,300 acres of a 4,000-acre site.

St. Joe can terminate the flight agreement if the payments exceed $14 million in the first year of air service, or $12 million in the second year, or if flights haven’t begun within 90 days after the airport opens, according to a company filing. Southwest can withdraw if revenue falls short of “certain minimum annual amounts” under the accord, St. Joe said.

Kelly said Florida’s Panhandle is an “underserved gem,” and the new service will draw passengers who otherwise might drive. With 15 million visitors a year in the Panama City area, Southwest needs to convert just 1 percent of those tourists to air travelers to support 8 daily flights, Kelly said.

To contact the reporter on this story: Mary Jane Credeur in Dallas at mcredeur@bloomberg.net.

Last Updated: October 21, 2009 16:48 EDT