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Docket: OST-2006-23671
Before the Office of the Secretary of Transportation
U.S. Department of Transportation
Sioux Falls Regional Airport, South Dakota Proposal Under the Small Community Air Service Development Program
An Integrated Program of New Low-Fare Service Development via;
Start-up Cost Offsets, Advertising/Marketing and Revenue Guarantees In Support of Frontier Airlines Service to/from Denver
Sponsor: Sioux Falls Regional Airport
Michael Marnach – Executive Director
Dun & Bradstreet Number: 803178011
April 2006
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 2
Table of Contents
Description Page number(s)
Table of Contents 2
Introductory Letter 3
Applicant Information 4-8
Executive Summary 9-14
Detailed Explanation of Proposal 15-16
Use of Local / Federal Funds 17-18
Public / Private Partnerships 19
Role of Partnerships 19
In-kind Services 19
Expected Results 20-23
Performance Measures 24
Financial Controls 24
Return on Investment 24
DOT Exit Strategy 24
Alternate Plan 25
Letters of Support 26-28
Air Service at Sioux Falls 29-32
Air Service Deficiencies 33-35
Availability of Alternate Airports 36
Service Provided to Diverse Users 37
Air Service Advisory Groups 37
Local Air Service Development Efforts 38
Extenuating Factors Affecting Air Service 39
Sioux Falls Community Summary Information 40-43
Comparison of Sioux Falls to Regional Communities 44-47
Conclusion 48
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 3
Introductory Letter
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 4
Applicant Information
Not a Consortium Community now receives EAS subsidy
Interstate Consortium Intrastate Consortium
Community Name Sioux Falls, SD
Address 2801 Jaycee Lane
City, State, Zip-code Sioux Falls, SD 57104
Point of Contact: Michael Marnach
Phone: 605-336-0762
Fax: 605-367-7373
Email: sfraa@dakota.net
County: Minnehaha
Dun & Bradstreet #: 803178011 Designated Legal Sponsor: Name Michael Marnach
Title Executive Director
Organization Sioux Falls Regional Airport
Address1 2801 Jaycee Lane
City, State, Zip-code Sioux Falls, South Dakota 57104
Phone: 605-336-0762
Fax: 605-367-7374
Email: sfraa@dakota.net Public/Private Partnerships:
1. Sioux Falls Development Foundation (Forward Sioux Falls)
2. Sioux Falls Area Chamber of Commerce
3. Sioux Falls Convention and Visitors Bureau
4. Sioux Falls Regional Airport
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 5
Project information:
Marketing Upgrade Aircraft New Route
Personnel Secure Increased Frequency Low Fare Service
Travel Bank Service Restoration Surface Transport
Subsidy Regional Service Other (specify)
Revenue Guarantee Launch New Carrier
Start Up Cost Offset First Competitive Service
Study Secure Additional Carrier
Project Goal: Project is intended to address problems involving:
High Fares
Insufficient Air Service
Unique Airport Circumstance
Access to National Transportation System Needed
Other (specify)
Please provide a brief synopsis (in one paragraph) of the highlights of your proposal:
Sioux Falls Regional Airport has presented an air service recruitment package to Frontier
Airlines for service to/from Denver. Frontier may be interested in beginning this service
using 70-seat regional jet or 70-seat turboprop aircraft. The entrance of Frontier in Sioux
Falls would represent the region’s SECOND low-fare service provider, following America
West Express’ entry in 2004. In order to eliminate the barriers to entry, the Airport has
assembled a program of startup cost offsets. In order to promote the service, the Airport
is providing money for advertising and marketing. The Airport is requesting funds from the
U.S. DOT to provide Frontier a minimal insurance package, via a revenue guarantee, to
help alleviate some of the risk involved in beginning this service.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 6
Project Cost: Federal amount requested: $ 350,000
Total local financial contribution: $ 70,717
Airport funds: $ 35,717
Non-Airport funds: $ 35,000 Sioux Falls Development Foundation
State financial contribution: $ 0
Existing funds: $ 0
New funds: $ 0
In-kind contribution: $ 44,895 Ramada Inn
(Amount & description)
Total cost of project: $ 465,612
Air Service Development Zone: Airport Information: Airport Name: Sioux Falls Regional Airport
Airport City: Sioux Falls
Airport State: South Dakota
Airport Code: FSD
Airport Classification at Sioux Falls:
Non Hub Small Hub Medium Hub Other Existing landing aids at Sioux Falls:
Full ILS Outer/Middle Marker Published Instrument Approach
Localizer Other Existing Service at Sioux Falls:
Jet service Low Fare Service Turboprop
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 7
Air Carriers Serving Sioux Falls:
Air Wisconsin (UA) Allegiant
American Eagle (AA) Comair (DL)
Mesa (HP) Mesaba (NW)
Northwest Pinnacle (NW)
SkyWest (DL) SkyWest (UA)
Current Flight Information for Sioux Falls: (as of April 2006)
CVG = 14 Roundtrips per week on Comair (DL) with CRJ 200’s.
DEN = 28 Roundtrips per week on United Express with CRJ 200’s.
LAS = 4 Roundtrips per week on Allegiant with MD80’s.
LAS = 2 Roundtrips per week on Northwest Airlines with 319’s.
MSP = 7 Roundtrips per week on Northwest Airlink with ARJ’s.
MSP = 12 Roundtrips per week on Northwest Airlink with SF3’s.
MSP = 7 Roundtrips per week on Northwest Airlines with DC9’s.
MSP = 7 Roundtrips per week on Northwest Airlines with 319’s.
MSP = 6 Roundtrips per week on Northwest Airlines with 320’s.
MSP = 12 Roundtrips per week on Northwest Airlink with CRJ 200’s.
ORD = 35 Roundtrips per week on United Express with CRJ 200’s.
SFB = 2 Roundtrips per week on Allegiant with MD80’s.
136 Total Flights
Enplanements at Sioux Falls:
2001: 285,144
2002: 224,796
2003: 294,284
2004: 327,672
2005: 355,290
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 8
Airfares at Sioux Falls: (Fared Avg Fares Based on US DOT OD1A Survey –
12 months ended September 2005)
O&D Market: Las Vegas Airfare: $262 RT 10.86¢ per mile O&D Market: Denver Airfare: $354 RT 25.72¢ per mile O&D Market: Phoenix Airfare: $368 RT 15.35¢ per mile Proximity of Other Airports to Sioux Falls:
Non-hub (w/jet service): Sioux City, Iowa 79 driving miles
Small Hub: Des Moines, Iowa 281 driving miles
Medium Hub: Omaha 182 driving miles
Large Hub: Minneapolis-St Paul 260 driving miles
Low-fare service: Omaha 182 driving miles
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 9
Executive Summary
Primary Objectives of Proposal
Objectives for Program:
• Increase Enplanements
• Achieve Competitive Pricing
• Increase Regional Awareness of Air Service Available
Means to Achieve Objectives:
• Recruit Low-Fare Carrier
Course of Action to Support Means:
• Provide Start-up Cost Offsets
• Initiate Marketing and Advertising Campaign
• Make Available Revenue Guarantee
Program Costs:
• Total Costs: $465,612
• Federal Share: $350,000
Sioux Falls Area Overview
The Sioux Falls Regional Airport serves the 185,000 residents located in the Metropolitan Statistical
Area (MSA) (Minnehaha and Lincoln counties), as well as being the primary air transportation
node for an area comprising 32 counties in southeast South Dakota, southwest Minnesota,
northeast Nebraska and northwest Iowa. With enplanements of roughly 355,000 in 2005, Sioux
Falls is classified as a small hub airport. Within a 90-minute drive of the Sioux Falls Airport reside
over 800,000 people.
While airline service is also offered at Brookings, Huron, Aberdeen and Watertown, the Sioux Falls
Regional Airport is the nearest airport with jet service for the entire eastern half of South Dakota.
The nearest large hub airport is located 260 driving miles northeast of Sioux Falls, at Minneapolis-
St Paul. The nearest low-fare service is 182 driving miles south of the community, at Omaha.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 10
Sioux Falls has some of the highest average airfares in the entire country, despite the newfound
presence of America West and Allegiant Airlines. Traffic is dominated by two major airlines:
Northwest, and United, with Delta, America West and Allegiant pulling minor shares of traffic.
Both United and Northwest provide good connections to the eastern half of the United States
through hubs in Minneapolis/St. Paul (Northwest) and Chicago (United). However, connections
to the western part of the US, including all large West Coast destinations, are limited to flights
through United’s Denver hub. Due to a lack of competition on these routes, fares are extremely
high. These high fares have had the effect of deterring passengers from flying.
Table 1:
Officials at the Sioux Falls Regional Airport believe competition is needed from a “low-fare
carrier” – initially one with service to the west. To support this growth program, the airport is
requesting a one-time Federal Grant in the amount of $350,000. This will augment $35,000 in
local cash, $35,717 in airport fee waivers and $44,895 in crew accommodation discounts.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 11
Together this money, totaling $465,612, will be used to help recruit low-fare service to the Sioux
Falls market. The airport has recruited Frontier Airlines to begin non-stop, low-fare service to its
Denver hub. Airport management believe this new service could also have the effect of
lowering fares on routes in the western US, and causing traffic to increase at the Sioux Falls
Regional Airport.
The Denver Conundrum
Sioux Falls is fortunate to have regional jet and mainline service on three of the world’s largest
airline networks. However, the problem in the market is not just access, but rather the cost of
that access. The Sioux Falls Regional Airport, and the entire region, would benefit and grow with
the introduction of new low-fare service in a way that is not possible with the incumbent carriers.
The benefit of low-fare service at Sioux Falls Regional Airport would not only benefit the 504,000
people residing within Sioux Falls Regional Airport’s Primary Catchment Area, but also the more
than 1 million people in the Secondary Catchment Area for which Sioux Falls represents the
nearest airport for any competitive service and jet service.
Table 2:
Local vs. Connecting Passengers on United at Sioiux Falls via Denver
Denver on XX, 30,780
Denver on UA, 9,240
Connecting, 106,794
Denver on UA Connecting Denver on XX
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 12
Sioux Falls Regional Airport is presently served daily by United Express to Denver. For the twelve
months ended September 2005 United Express offered an average of 262 seats per day each
way on an average of 4.9 departures per day. By this measure, one could say that the Sioux
Falls to Denver market is well-served. However, of the 212 passengers departing on United
Express via Denver on average each day, only 12.6 passengers, or 5.2% of the total onboard
passengers are reported as United Airlines passengers in the local Denver – Sioux Falls market.
An additional 42 departing passengers per day are reported on “XX”, or “Commuter” airlines in
the local Denver – Sioux Falls market. However, because of the reporting vagaries of these
“Commuter” passengers, there is no way of knowing the exact number that are misreported in
the local market. Therefore, United Airlines could be carrying anywhere from a low of 12.6 to a
high of 54.6 local Denver – Sioux Falls passengers each day each way. Even assuming that
United carries 54.6 passengers per day each way, there would then still be the majority of
passengers, 157.4 per day each way (74.2% of the total) that connect through Denver to other
markets in the western U.S. It is to all of these markets, including Denver, that Sioux Falls wishes to
provide competitive service.
In no way is this application meant to materially attack the excellent service provided to the
community by United Express. The fact of the matter is that for a market such as Sioux Falls,
located in the upper Midwest, there are not many options available from which to recruit low-
fare airline service. The largest low-fare carrier, Southwest Airlines is not interested in serving Sioux
Falls at this time. Airtran, Jetblue, Sun Country, Spirit and ATA do not have the right-size aircraft
to serve a market such as Sioux Falls. The merger of America West and US Airways has forced
America West to reconsider service to markets such as Sioux Falls, as they concentrate on the
integration of the network. That leaves Frontier Airlines as the only low-fare carrier remaining
who 1) has the aircraft sized correctly for the market and 2) is interested in serving Sioux Falls. The
tact that Frontier hubs at Denver and United hubs at Denver should not be reason enough to
disallow this application.
What this application proposes to do is bring fare competition to dozens of the 103 total
domestic destinations in the western U.S. that reported United Airlines passengers via Denver
over the latest twelve month period. In fact, of the top 20 Sioux Falls to western U.S. markets
served by United, Frontier Airlines can provide competitive service to 18 markets. By excluding
Oakland and Ontario (which are served by Frontier at both San Francisco and San Jose and also
at Los Angeles), Frontier serves all of the top 20 markets.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 13
Table 3:
Top 20 United Airlines western markets at Sioux Falls, with Frontier service (YES/NO)
Rank City Pair PDEW Share Frontier Service
1 Phoenix 12.9 7.9% YES
2 Denver 12.7 7.8% YES
3 Las Vegas 11.0 6.8% YES
4 Los Angeles 9.6 5.9% YES
5 San Diego 9.0 5.5% YES
6 San Francisco 8.3 5.1% YES
7 Seattle/Tacoma 8.1 5.0% YES
8 Dallas/Fort Worth 7.2 4.4% YES
9 Santa Ana 6.6 4.1% YES
10 Ontario 5.9 3.6% NO
11 Sacramento 5.9 3.6% YES
12 Salt Lake City 5.3 3.3% YES
13 Portland 5.2 3.2% YES
14 San Antonio 4.0 2.5% YES
15 Albuquerque 3.8 2.3% YES
16 Boise 3.3 2.0% YES
17 Houston 3.2 1.9% YES
18 Reno 2.9 1.8% YES
19 Oakland 2.9 1.8% NO
20 Tucson 2.9 1.8% YES
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 14
Table 4:
Table 5:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 15
Detailed Explanation of Proposal The Sioux Falls Regional Airport proposes new non-stop service to Denver on Frontier partner
Horizon Air (dba Frontier JetExpress) under the Small Community Air Service Development
Program. As previously mentioned, the Sioux Falls market lacks competitive connecting service
to the West Coast. New flights on Frontier JetExpress would solve both of these problems in the
market, while bringing fares down, and likely increasing enplanements.
Local Sioux Falls representatives met with executives of Frontier in Denver in November 2005. The
airline intimated that they might be interested in serving the market. Sioux Falls proposes one or
two daily non-stop flights to and from Frontier’s Denver hub. Service would be provided under
the Frontier JetExpress name, and operated by Horizon Air. Horizon would fly either a 70-seat
Canadair Regional Jet or a 70-seat Q400 turboprop. Flights would be timed to provide
maximum connecting opportunities for passengers traveling beyond Denver, to other cities
along the West Coast and into Mexico and Canada
Table 6:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 16
Sioux Falls proposes a relatively small portion of the cost of starting the new service be supported
with federal funds from the Small Community Air Service Development Program. The Sioux Falls
Regional Airport requests a total grant of $350,000.
The Sioux Falls Regional Airport projects the grant money will provide insurance in case Frontier
needs help getting over the hump during the first year of operations, in what would normal be a
year of losing money on a new route. With demand for the service in the Sioux Falls market, the
Airport projects the new flights will become profitable on their own in the nine to 12-month
period. The flights should be fully self-sustaining in their second year of operation.
The objective of the proposal is two-fold. First, The Sioux Falls Regional Airport seeks to bring the
region’s first low-cost, low-fare provider to the community. This in turn would stimulate demand
and quell the leakage the airport experiences today. Second, through the successful
introduction of targeted low-fare service to Denver, Sioux Falls Regional Airport hopes to
encourage other carriers, both low-cost and full-service carriers, to enter the Sioux Falls market
and provide service to additional destinations. The historical support of the airport from area
travelers is evident in the peak passenger numbers experienced by the airport in 2005. Sioux Falls
Regional Airport is targeting this program to meet and exceed those peak numbers through
increased capacity, lowered average fares and increased service by new carriers to additional
non-stop markets.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 17
Use of Local / Federal Funds
Airport Provided Marketing and Advertising
Sioux Falls Regional Airport proposes to spend $50,000 in funds on marketing and advertising
promotions in support of new service introductions. The goal is to increase ridership and usage
through targeted regional campaigns.
Airport Provided Startup Cost Offsets
Sioux Falls Regional Airport proposes to spend up to $35,000 in funds to pay for start-up costs in
support of new service introductions. Money will be reimbursed to Frontier as invoices are
submitted detailing the work performed to offset the acquisition of necessary equipment to
begin service (items include carts, tugs, power units, computer equipment, cabling, software,
etc.). Unspent funds will roll into the advertising and marketing program.
Revenue Guarantee
Sioux Falls Regional Airport proposes to make available at least $300,000 in funds for a revenue
guarantee to Frontier to cover start-up losses that may occur during the first twelve months of
service. Subject to negotiation, payments will be made to Frontier quarterly when income
derived from passengers and cargo is less than agreed expenses on the route. Revenue
generated that exceeds expenses will be carried forward and tapped before any grant funds
are used.
Airport Fee Abatements
In addition to the $35,000 in cash contributed by the Sioux Falls Development Foundation, the
Sioux Falls Regional Airport will waive landing fees and terminal rents for a twelve month period.
These fees are calculated to be $23,000 for terminal rent and $12,717 for landing fees. The total
contribution from the Airport itself will be $35,717.
Air Crew Accomodation Discounts
The Sioux Falls Ramada Inn pledges to offer 50% discounts off normal room rates for the three
Horizon Air crew members who will overnight in Sioux Falls. This in-kind contribution totals $44,895.
Additional Costs
As part of this program Sioux Falls Regional Airport understands that additional expenses will be
incurred, such as monitoring the results of the program and reporting those results back to the US
DOT. In addition, Sioux Falls Regional Airport expects to incur some expenses in the recruitment
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 18
of additional airline service. The Airport will pay for these additional expenses out of other airport
sources and will not incorporate these fees and charges into this proposal.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 19
Public / Private Partnerships Air service development in the Sioux Falls community consists of the airport and several
organizations with ties to the business community, not only in Sioux Falls and Minnehaha County,
but the region as well. The Partnership consists of the Sioux Falls Development Foundation, the
Sioux Falls Area Chamber of Commerce and the Sioux Falls Convention and Visitors Bureau.
Role of Public / Private Partnerships The role of the community partnerships is to help target the air service needs in the community,
recruit additional airline service and encourage the use of the service once implemented.
Because of the importance of air service in the economic stability and growth of any region, the
Sioux Falls Development Foundation is providing the cash match for this program. All three
organizations will help promote the usage of the flights through newsletter features, e-mails
contacts, meetings and marketing materials. The Airport will coordinate the marketing program
that is a part of this proposal with the local newspapers and television stations.
In-kind Services from the Community Air Crew Accommodation Discounts
The Sioux Falls Ramada Inn pledges to offer 50% discounts off normal room rates for the three
Horizon Air crew members who will overnight in Sioux Falls. This in-kind contribution totals $44,895.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 20
Expected Results While Sioux Falls Regional Airport customers will certainly take advantage of the non-stop
competition to the Denver market, its 2nd largest passenger market, the major reason for the
recruitment of Frontier is the dozens of domestic and international markets that are served on a
one-stop basis through Denver. While the focus on connecting traffic will be to and from the
west, the geographic location of Denver and Sioux Falls is such that connections are also logical
for customers traveling to the south central and southeastern U.S. – points such as Dallas/Fort
Worth, Austin, Orlando and Miami can be easily accessed through Frontier’s Denver hub.
Table 7:
Sioux Falls Regional Airport has based its expected results on local market conditions and US DOT
data available through June 2005. The proposed results from January 2007 through December
2007 follow:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 21
Table 8:
These results assume that service is commenced with twice daily flights of a 70-seat regional jet
or Q400 turboprop aircraft to/from Denver. It is projected that the annual passenger demand
for Frontier service beginning in January 2007 will be 70,471 to and through Denver for an
average annual load factor of 74.5%. The actual passengers carried are projected to produce
$9.1 million in revenue, generating $6,749 per flight. Average itinerary mileage will be 982 miles
and yields are projected to be 13.17¢ on an average one-way fare of $129. The top projected
passenger markets can be viewed in Table 9.
Because of the low-fare nature of Frontier Airlines, the Sioux Falls Regional Airport expects that
fares in the western markets served by Frontier will average $129, versus the $189 average today.
It is further projected that Frontier will have no more than a 33% market share in any one market,
with a 29% share of the Denver market (as opposed to the 93% share of the market that United
experiences today.)
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 22
Table 9:
Table 10:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 23
Table 11:
Table 12:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 24
Performance Measures
The success of the program will be based on two measurable variables; the number of
enplanements at the airport and the average airfares charged in the effected city pairs. The
first measurement will include a monthly comparison once the program begins to past
enplanements numbers. The second measurement will be derived from US DOT OD1A reports.
Financial Controls
As the sponsor, Sioux Falls Regional Airport will be the responsible party for all fiscal matters and
DOT reporting requirements. As a public entity the DOT can be assured that proper financial
controls are in place to guarantee that the DOT’s grant will be used in accordance with any
subsequent agreement. Sioux Falls Regional Airport understands that the grant is a reimbursable
grant, meaning the Airport is responsible for program expenditures and will submit invoices to the
DOT for reimbursement, based on a percentage of the total grant request.
Return on Investment
Sioux Falls Regional Airport has developed a cost effective and achievable strategy to increase
enplanements at the airport. The proposal uses proven methods of achieving air service
improvements, allowing the DOT to be comfortable with choosing this proposal. The increased
competition and access to increased competition with airfares by adding service to Denver is a
major goal of the Small Community Air Service Development Program.
Only $100,000 of the $400,000 in cash is committed to being spent. The remaining $300,000 in
cash available for the revenue guarantee portion of the grant may never be expensed.
DOT Exit Strategy
Sioux Falls Regional Airport has developed this proposal as a one-time grant. While the initial
startup costs are expensed almost immediately, the advertising and marketing program will
commence a few months before service starts and last for at least twelve months. The revenue
guarantee program will also be in place for twelve months, with two additional twelve month
periods available for negotiation. It is projected that the service will be financially self-sustaining
within the second twelve months of service.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 25
Alternate Plan
In the unforeseen circumstance that Frontier does not begin service before the end of summer
2007, Sioux Falls Regional Airport will seek another airline that can offer low-fare service to Sioux
Falls.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 26
Letters of Support
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 27
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 28
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 29
Air Service at Sioux Falls Regional Airport
Sioux Falls Regional Airport receives scheduled daily service to three airports – Chicago O’Hare,
Denver and Minneapolis. United Express provides regional jet service to Chicago O’Hare and
Denver. Northwest Airlines provides a mixture of jet, regional jet and turboprop service to
Minneapolis and less than daily service to Las Vegas. In addition, Allegiant operates less than
daily service to both Las Vegas and Orlando. America West Express ceased operations to
Phoenix on April 1st, 2006.
Table 13:
Sioux Falls Regional Airport has experienced increases in passenger volumes since 2003, when
boardings began an upward trend that continues. In fact, over the latest twelve months the
Airport has set domestic, international and total passenger records – nearly 670,000 total. The
increase in passengers has also resulted in record domestic, international and total revenue
records as well - $125.2 million total, as average fares in Sioux Falls have been relatively
consistent over the past decade.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 30
Table 14:
Table 15:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 31
Table 16:
Table 17:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 32
As of the twelve months ended in September 2005, Denver is reported to be Sioux Falls Regional
Airport’s 2nd largest passenger market and 3rd largest revenue market. Among the top 20
passenger markets at Sioux Falls, 12 of those markets can be served by Frontier Airlines through
Denver. This includes #1 Las Vegas, #2 Denver, #4 Phoenix, #9 Dallas/Fort Worth, #11
Seattle/Tacoma, #12 Los Angeles, #13 San Diego, #14 San Francisco, #15 Houston, #16 Portland,
#19 Santa Ana and #20 San Antonio.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 33
Air Service Deficiencies
Sioux Falls Regional Airport has two main deficiencies in air service; 1) the Airport does not have
enough capacity to meet the demand to points located to the western U.S., and 2) the Airport
does not have substantive low-fare competition to its major airlines. Over the past twelve
months United Express has averaged load factors of 80.4% with four year-round flights per day.
The market also absorbs and supports a fifth flight that has been added during the summer
months over the past few years.
Table 18:
In terms of airfares to the western U.S. Sioux Falls airfares are 16.2% above the Midwest regional
average (Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin). At
Sioux Falls’ top 20 markets that can be served by Frontier through Denver, average fare
differences vary from 2.3% to/from Boise to 37.9% to/from Salt Lake City. Other large differences
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 34
exist between Sioux Falls and Phoenix (37.8%), Dallas/Fort Worth (35.6%), Seattle/Tacoma (24.2%)
and Los Angeles (32.6%).
Table 19:
Fare differential between Sioux Falls and Midwest markets to top 20 western Sioux Falls markets
Market FSD Fares Midwest Fares Difference
1 Las Vegas $131 $123 6.0%
2 Denver $177 $129 37.1%
3 Phoenix $184 $134 37.8%
4 Dallas/Ft Worth $215 $158 35.6%
5 Seattle/Tacoma $209 $168 24.2%
6 Los Angeles $209 $158 32.6%
7 San Diego $182 $154 18.7%
8 San Francisco $199 $192 3.6%
9 Houston Intercontinental $201 $174 15.5%
10 Portland, OR $215 $196 9.6%
11 Orange County $194 $183 5.7%
12 San Antonio $185 $176 4.6%
13 Sacramento $213 $191 11.4%
14 Ontario $187 $184 1.7%
15 Salt Lake City $232 $169 37.9%
16 Albuquerque $176 $162 8.9%
17 Anchorage $272 $260 4.9%
18 Austin $179 $172 4.1%
19 Boise $195 $191 2.3%
20 Reno $181 $166 8.9%
Total $189 $163 16.2%
As of June 2006, Frontier Airlines will serve 78 domestic airports, not including Denver, with 54 of
those airports located west of the Denver hub. Frontier service will greatly increase the level of
one-stop connections offered to/from Sioux Falls and will offer competitive low-fare service to
dozens of western airports which are presently served on a one-stop basis from Sioux Falls by
United Airlines.
Among the domestic airports that are now served by United Airlines and which will receive new
competitive one-stop connecting service via Denver are Albuquerque, Boise, Las Vegas, Los
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 35
Angeles, Orange County, Phoenix, Portland, Sacramento, San Diego, San Francisco, San Jose,
Seattle/Tacoma, Spokane and Tucson – 54 one-stop domestic airports in total. This total does
not include the new competitive service to half a dozen Canadian and Mexican destinations.
Table 20:
Frontier to be First Competitive One-stop Airline Service = 54 Airports
Alamosa Gillette Riverton
Albuquerque Grand Island Rock Springs
Alliance Grand Junction Sacramento
Amarillo Hays Salt Lake City
Anchorage Houston Intercontinental San Antonio
Austin Kearney San Diego
Billings Laramie San Francisco
Boise Las Vegas San Jose
Chadron Liberal Santa Fe
Cheyenne Los Angeles Scottsbluff
Cortez McCook Seattle/Tacoma
Dallas/Ft Worth North Platte Sheridan
Dickinson Oklahoma City Spokane
Dodge City Orange County Telluride
El Paso Phoenix Tucson
Farmington Portland, OR Tulsa
Fresno Pueblo Williston
Garden City Reno Worland
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 36
Availability of Alternate Airports
The nearest airports to Sioux Falls are Sioux City (SUX), Brookings (BKX), Watertown (ATY) and
Huron (HON). None of these airports are served by more than one airline or have jet service,
with several being Essential Air Service markets. The nearest competitive airport for Sioux Falls
residents is Omaha Eppley Airfield – 3 ½ hours south. The majority of area leakage travels to
Omaha. Additionally, Minneapolis/St Paul is a 4 ½ hour drive (in good weather) to the north and
east of Sioux Falls.
Table 21:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 37
Service Provided to Diverse Users
The Sioux Falls area contains a great diversity of businesses and organizations, including
government, education, agriculture, technology and tourism. The service requested via Denver
would serve a large portion of the market west of the hub.
Table 22:
Air Service Advisory Groups
The Sioux Falls Regional Airport has established an Air Service Advisory Group to help recruit new
service and support incumbent airlines. The Group consists of the Sioux Falls Development
Foundation, the Sioux Falls Area Chamber of Commerce and Forward Sioux Falls, as well as the
Airport.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 38
Local Air Service Development Efforts
Since 2003 the Sioux Falls Regional Airport has been aggressively pursuing air service initiatives. In
2003 Sioux Falls visited with America West Airlines, Allegiant Airlines and Delta Air Lines. The results
of these initiatives have been Delta Connection service to Cincinnati, Allegiant to Las Vegas
and America West to Phoenix. The last service the result of a cooperative arrangement
between Sioux Falls, America West and the U.S. DOT through the Small Community Air Service
Development Grant.
In 2005 Sioux Falls visited again with Delta and Allegiant and added a visit to Frontier Airlines in
November. Allegiant added several flights per week to Orlando Sanford in November 2005,
while Delta has announced one daily flight to Salt Lake City beginning June 8th, 2006. The visit to
Frontier corresponded to a request for United to add seat capacity to Denver to carry the
additional passenger demand experienced to the west. Frontier was not approached until the
Airport was certain that the market and the incumbent airlines could support the competition.
While America West announced its departure from the market in December 2005 effective April
2006, citing high fuel prices, a merger with US Airways and low load factors during the summer
months, the Airport continues to work with America West to bring the service back, at least on a
seasonal basis.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 39
Extenuating Factors Affecting Air Service
While America West Airlines began west-bound service to Phoenix in 2004, the service provided
was once daily with a mid afternoon departure from Sioux Falls. While this service was used
quite often by the leisure and discretionary community for travel to Phoenix during the traditional
colder season in Sioux Falls, the timing of the flight during the summer was not conducive to
business travel and usage suffered.
Table 23:
Local vs. Connecting Passengers on United at Sioux Falls via Denver
Phoenix, 15,442
Connecting, 9,603
Phoenix Connecting
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 40
Sioux Falls Region Information
Sioux Falls is not only South Dakota’s largest city; it is the largest city in the four northwestern
states of Wyoming, North Dakota, Montana and South Dakota. It’s a regional hub of
commerce and transportation, and consistently ranks among the best places in America to live
and to raise a family. The City of Sioux Falls is home to almost 135,000 people, while the metro
area has a population of 185,000 (Source: US Census 2003 Projections). Within a 90-minute drive
of the Sioux Falls Airport reside over 800,000 people.
The Sioux Falls economy continues to thrive. Companies continue to open new facilities in Sioux
Falls while established companies expand; creating new jobs, infusing new capital, and
broadening our tax base. Since 1990, nearly $2.5 billion worth of construction has occurred, over
15,000 new housing units have been built, and non-farm wage and salary employment has
increased by nearly 39,000.
Companies from all across the nation have discovered that the business climate of Sioux Falls is
perfect for growing a business. The tax bite here is smaller, the cost of doing business allows
companies to make a decent profit and government sees itself as a partner for growth, not an
adversary. Add practical business incentives to that mix and you've got a formula for success, in
Sioux Falls.
Sioux Falls’ business community is anchored by a varied group of companies, providing a
diversified economic base for the region. Moreover, the community enjoys a business
community with enough different components to avoid the lows of a bad economy.
Sioux Falls has five companies who each employ more than 2,000 people. Two of the five are
health service related, two are major banking conglomerates (Citigroup and Wells Fargo), and
the fifth is a huge meat processing company that boasts being one of the largest in the Midwest.
Sioux Falls has dozens of companies that employ more than a hundred employees each. These
companies are diversified, with interests from manufacturing, to communications, to
entertainment, to pharmaceuticals.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 41
Table 24:
Sioux Falls is also home to a pair of major universities and a major college. Augustana College,
founded in 1860, is the largest private college in the state. The college has a reputation for
academic excellence & the average ACT of enrolling freshmen is 24.5--highest in the state. The
college has been ranked by U.S. News as a top ten Midwest Regional Liberal Arts College as well
as a top ten college in terms of value. Affiliated with the Evangelical Lutheran Church of
America, Augustana has an annual enrollment of 1,800 students. The University of Sioux Falls is a
private, coeducational, residential Christian university founded in 1883. Affiliated with the
American Baptist Churches, USA—USF is the second largest & the oldest private university in
South Dakota. More than 1,400 students from 24 states & a variety of foreign countries walk the
halls & pathways of the Midwest campus. “USDSU” is located in a brand new state-of-the-art
facility on the campus of Southeast Technical Institute. The University of South Dakota, South
Dakota State University & Dakota State University together provide complete Certificate,
Associate's, Bachelor's & Master's degree programs in Sioux Falls.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 42
Table 25:
The community-wide efforts in Sioux Falls to maintain one of the healthiest environments in the
nation in which to live, work and raise a family are making headlines. The sample of accolades
below reinforces the Sioux Falls area’s vitality as a regional and national leader in economic
development, retail sales, health care, manufacturing, financial and business services and
quality of life.
• For the second year in a row, Forbes’ annual survey of the Best Places for Business and
Careers named Sioux Falls No. 1 overall in the Best Small City Category. The city rated No.
3 in the magazine’s Income Growth Index and No. 4 in the Cost of Doing Business Index
(May 2004). In 2002, the magazine ranked Sioux Falls No. 5 overall.
• CNN/Money Magazine reported unemployment figures for the top and bottom 20
Metropolitan Statistical Areas (MSAs) in the U.S., based on The Bureau of Labor Statistics’
March 2003 unemployment rates. Sioux Falls made the Top 20 list coming in at No. 9 with
a 2.9 percent unemployment rate.
• Business Week named Sioux Falls one of the “Dazzling Dozen” Pockets of Prosperity where
the economy is still humming. The article states that while “growth remains healthy” in
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 43
Sioux Falls and “the national economy is sputtering, other metropolitan areas also have
tight labor markets and growing economies” (October 2002).
• South Dakota ranked No. 1 in the “Small Business Survival Index 2002,” a study compiled
by Washington, D.C.-based Small Business Survival Committee. The study, which ties
together 20 major government-imposed or government-related costs that affect small
businesses, ranked South Dakota first in three tax-rate categories: personal income,
capital gains and corporate (July 2002).
• Sales & Marketing Management magazine, calling Sioux Falls a “diamond in the rough,”
designated the city as a great smaller market for businesses to make a move. The
magazine cited the community’s growth rates as a huge opportunity and recognized
the state’s friendly tax laws (April 2002).
• In Ladies’ Home Journal’s study of the 200 cities considered the best cities for women in
2002, Sioux Falls was named the third least stressed city. The magazine also scored Sioux
Falls high for economy (No. 2), highest employment rates (No. 2), spiritual centers (No. 9),
available jobs (No. 10) and lifestyle (No. 12) (April 2002).
• Sioux Falls received an A+ on Zero Population Growth’s 2001 Kid-Friendly Cities Report
Card. The city excelled in health, public safety, education, economics, environment and
community life, ranking third out of 140 cities.
• The Software and Information Industry Association (SIIA) placed Sioux Falls No. 11 out of
25 metropolitan areas for software-related employment in 2000.
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 44
Comparison of Sioux Falls to Regional Communities The average airfare for passengers traveling to/from Denver and airports west is $163 one-way
among all Midwest airports (Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota,
and Wisconsin) and $184 one-way at Sioux Falls. Sioux Falls’s average fare is 12.9% above the
Midwest average.
In terms of average fare per mile (yield) to airports west of Denver (including DEN) Midwest
airports average 11.12¢ per passenger mile. Sioux Falls’s average yield of 14.22¢ to these same
airports is 27.9% higher than the regional average.
Table 26:
Fares and Yields at Midwest Airports to/from Denver and Airports West
1 Duluth $202 1 Rapid City 15.63¢
2 Fargo $200 2 Lincoln 14.58¢
3 Wausau $197 3 Sioux Falls 14.22¢
4 Appleton $193 4 Fargo 13.83¢
5 Green Bay $193 5 Duluth 13.62¢
6 Cedar Rapids $189 6 Bismarck 13.22¢
7 Madison $185 7 Des Moines 13.04¢
8 Sioux Falls $184 8 Cedar Rapids 12.85¢
9 Des Moines $183 9 Wausau 12.65¢
10 Bismarck $174 10 Omaha 11.97¢
11 Chicago O'Hare $172 11 Minneapolis 11.90¢
12 Lincoln $172 12 Appleton 11.78¢
13 Peoria $169 13 Green Bay 11.72¢
14 Moline $169 14 Madison 11.49¢
15 Bloomington-Normal $168 15 Chicago O'Hare 11.16¢
16 Rapid City $166 16 Peoria 11.11¢
17 Minneapolis $163 17 Moline 10.62¢
18 Milwaukee $152 18 Bloomington-Normal 10.57¢
19 Omaha $150 19 Milwaukee 10.06¢
20 Chicago Midway $121 20 Chicago Midway 8.25¢
Midwest Average $163 Midwest Average 11.12¢
In a comparison to two similar size markets that have low-fare service – Boise and Spokane –
Sioux Falls catchment area is larger than either, however passenger volumes are a fourth of the
volumes experienced at either Boise or Spokane (see Tables 27 - 29).
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 45
Table 27:
Table 28:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 46
Table 29:
The Sioux Falls Regional Airport looked at all 72 airports in the U.S. that have the potential for
Frontier JetExpress service. By comparing passengers, revenue, fares, yields and distance to
Denver, it was determined that the potential value to Frontier of flow passengers through Denver
from Sioux Falls represents the 5th best opportunity for future air service additions (see Tables 30-
31).
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 47
Table 30:
Table 31:
Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 48
Conclusion
Among the 200 largest domestic passenger markets in the U.S., Sioux Falls Regional Airport
average fares are the 7th highest. Because of this, the Sioux Falls Regional Airport has been
aggressively pursuing new airline service to the area in order to stimulate competition, increase
enplanements and lower average airfares.
The goal of this proposal is to assist in recruiting a price aggressive low-fare carrier to the
community, namely Frontier JetExpress. Airport officials have met with Frontier Airlines executives
and are moving forward towards gaining service to Denver. As Frontier looks to expand service
in the face of new competition from Southwest Airlines in Denver, markets such as Sioux Falls can
provide added value for Frontier while bringing substantially lower fares to the community. This
can be accomplished with the continued success of United Express service to Denver in mind.
The Sioux Falls Airport feels that there may be up to four times the number of passengers in the
Sioux Falls market as exist today…but only with the introduction of substantive low fare service.
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