Aviation Planning & Policy UpdatePresented to

Inland Northwest Business Travel Association

Lawrence J. Krauter, A.A.E., AICPChief Executive Officer

Spokane International Airport, Felts Field and Airport Business Park

Aviation Policy and Planning Update

• FAA Reauthorization Legislation Status

• Airport Traffic Activity

• Air Service Development

• Master Plan

• VALE Project

• Project Pegasus/AIR Spokane

• Airport Business Changes

• Felts Field Historic District

• Items of Interest and The Year Ahead 2012

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FAA Reauthorization Status23 Extensions and 1 Lapse Later……..

• Legislation last passed in 2003 and expired in 2007

• Currently on 23rd Extension (through Jan. 31, 2012)– Average extension period is 51 days– Lapse on July 22nd

– Trust Fund Lost $340M/Airlines Raised Fares and Pocketed Difference– 4,000 FAA Employees Furloughed

• National Mediation Board language was the big hold up• Compromise reached between House and Senate Leaders• Conferees appointed and met to markup bill on Tuesday• Scheduled for a Floor vote as early as tomorrow• Provides funding of FAA and AIP through FFY 2015• AIP is set at $3.35B, which is less than the $3.5B carried in extensions

– Translates to @ $4.7M in Entitlement Formula funds to SIA (@ $500k reduction)• Matching share of projects will decrease from 95% to 90%• PFC cap remains at $4.50 (SIA collects @$6.7M/year currently)

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2006-2011 Passenger Data

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2012 – 2006 Cargo Data

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DEN

LAS

MSP

OAK

ORD

PDX

PHX

SEA

SFO

SLC

BOI

GEG

Current GEG Service

6Note: United serves ORD seasonally.Source: Schedules for August 21-27, 2011 and August 22-28, 2010 via OAG.

2011 2010Destinations 11 13 (2) -15%Carriers 6 6 - 0%Daily Departures 51.1 61.6 (10.4) -17%Daily Outbound Seats 5,537 6,286 (749) -12%Average Aircraft Size (Seats) 108.3 102.1 6.2 6%Daily Departures/Destination 4.6 4.7 (0.1) -2%

Change

MSP-DLDEN-UA

ORD-UALAS-WN

SLC-DLDEN-F9

SEA-ASSFO-UA

PHX-USPDX-AS

PHX-WNOAK-WN

DEN-WNSJC-AS

SLC-WNBOI-W

NSMF-AS

SEA-UAPDX-WN

SEA-WN50%

55%

60%

65%

70%

75%

80%

85%

90%88%

85% 84%

82% 82% 81% 79%78% 78% 78%

76% 75%74%

70%

67%65%

62%60% 60%

55%

Load

Fac

tor

76% Average Load Factor

Light Blue = Route No Longer Served

Source: U.S. DOT T-100, YE May 2011, via Data Base Products.

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GEG Load Factors by Route

GEG Top Markets Without Nonstop Service

Rank Airport Code Airport Name PAX

PDEW Y-O-Y Avg. Fare Y-O-Y Rank City Name PAX

PDEW Y-O-Y Avg. Fare Y-O-Y

1 LAX Los Angeles 112 1% 136$ 0% 1 LA Basin (BUR/LAX/LGB/ONT/SNA) 308 0% 137$ 3%2 SAN San Diego 104 -4% 137$ 8% 2 San Diego 104 -4% 137$ 8%3 SMF Sacramento 93 1% 129$ 6% 3 Sacramento 93 1% 129$ 6%4 SNA Orange County 82 15% 135$ 3% 4 Washington/Baltimore (BWI/DCA/IAD) 83 6% 216$ 9%5 ONT Ontario 58 -11% 145$ 10% 5 Dallas/Ft. Worth (DAL/DFW) 64 4% 181$ 9%6 DFW Dallas/Fort Worth 56 2% 185$ 10% 6 New York City (EWR/JFK/LGA) 51 10% 224$ 5%7 SJC San Jose 54 13% 129$ 5% 7 Anchorage 50 12% 216$ -4%8 ANC Anchorage 50 12% 216$ -4% 8 Orlando (MCO/SFB) 45 -1% 182$ 10%9 BUR Burbank 49 -1% 138$ 2% 9 Reno 42 -17% 131$ 13%10 MCO Orlando 45 -1% 182$ 10% 10 Houston (HOU/IAH) 42 5% 172$ 2%11 RNO Reno 42 -17% 131$ 13% 11 Atlanta 41 25% 207$ -10%12 ATL Atlanta 41 25% 207$ -10% 12 Boston Area (BOS/MHT/PVD) 35 5% 221$ 11%13 MCI Kansas City 35 2% 153$ 14% 13 Kansas City 35 2% 153$ 14%14 SAT San Antonio 30 8% 185$ 0% 14 San Antonio 30 8% 185$ 0%15 STL St Louis 30 7% 179$ 14% 15 St Louis 30 7% 179$ 14%16 DCA Washington Reagan-National 30 5% 226$ 7% 16 Southeast Florida (FLL/MIA/PBI) 28 2% 224$ 10%17 BOS Boston 28 13% 216$ 10% 17 Detroit 27 8% 190$ 4%18 DTW Detroit 27 8% 190$ 4% 18 Philadelphia 27 -4% 216$ 11%19 PHL Philadelphia 27 -4% 216$ 11% 19 Austin 27 20% 151$ 3%20 AUS Austin 27 20% 151$ 3% 20 Honolulu 26 -7% 244$ 6%21 IAH Houston-Bush 27 -8% 181$ 4% 21 Nashville 26 3% 183$ 13%22 IAD Washington-Dulles 27 8% 208$ 11% 22 Kahului 24 20% 229$ -2%23 HNL Honolulu 26 -7% 244$ 6% 23 Albuquerque 24 0% 155$ -2%24 BWI Baltimore/Washington 26 5% 214$ 12% 24 Tampa/St. Pete (PIE/TPA) 24 30% 178$ 1%25 BNA Nashville 26 3% 183$ 13% 25 Omaha 22 30% 159$ 2%

Airport Markets City Markets

Source: U.S. DOT, Origin-Destination Passenger Survey, YE 1Q 2011, via Data Base Products; Schedules for August 21-27, 2011 via OAG.

Why LA Basin?

• Spokane/Coeur d’Alene is largest population center in Pacific Northwest without nonstop service.

• SoCal represents 11% of total traffic at GEG.

• Substantial Hub Connect Penalty (as much as 5 hours)

• Airline schedule/capacity shifts could reduce LA access

• FYI– 3Q 2011 indicated 10% increase in LA traffic on average fares

that were down -1%.9

 Historic Passenger DemandLos Angeles Basin 

2008 2009 2010LAX 109,150 81,370 82,170Orange County 36,700 46,430 61,820Ontario 73,730 50,270 43,380Burbank 28,390 34,550 36,680Long Beach 11,340 8,870 5,830Total 259,310 221,490 229,880

Seattle 548,580 451,980 452,680Portland 230,360 198,190 194,250  Seattle and Portland are Spokane’s number 1 and 2, top passenger markets, respectively. Combined, the LA Basin passenger traffic would surpass Portland as our number 2 market, yet does not have nonstop service.

Spokane-Coeur d’Alene is the largest population center in the Northwest without nonstop service to the LA Basin.

What is SCASD?• Small Community Air Service Development Grant Program• Administered by US DOT• $6m - $10M/year • Funded through ticket tax proceeds• Very Competitive

– 70 Applicants in 2011• Grant is good for 3 years• Provides for incentives to airlines for service improvements• Requires a local match commitment that cannot come from

the airport

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Airline Service Requirements• Operate an aircraft with 99 seats or greater (assures a narrowbody jet)

• Fly a six-day per week schedule (minimum)

• Nonstop to one of the following LA Basin Airports:

Burbank Long Beach Los Angeles InternationalOntarioOrange County/John Wayne

• Fare levels must remain within 10% of current connecting service fares (average)

• Commitment for one year of service

• Commitment to marketing of the new service

Support:

CdA Resort North by NorthwestCVB ReliOnDemand Energy US BankGSI Zak! DesignsItronJobsPlusU.S. Rep. McMorris RodgersU.S. Sen. CantwellU.S. Sen. Murray

Support:

CdA Resort North by NorthwestCVB ReliOnDemand Energy US BankGSI Zak! DesignsItronJobsPlusU.S. Rep. McMorris RodgersU.S. Sen. CantwellU.S. Sen. Murray

$950,000 Grant Award from USDOT (9/27/11)!$200,000 Local Match Requirement

Local Match:

• Devote Historic Travel Expenditure in Support of the New Route• Other Cash Contribution• Marketing/Advertising

Networks and JumpStart(Speed Dating the Airlines in March and June)

• Networks– AmeriJet– Delta– JetBlue– SeaPort– Spirit– Southwest

• JumpStart (TBD)• Need help from INBTA members to identify demand for:

Los Angeles BasinDallasAtlantaCalgarySan DiegoNorthwest Regional communities that can be served by SeaPort

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Master Plan Update Status

• Completed– Inventory– Forecasting– Airside Facilities

• In Progress– Terminal Area– Landside Facilities

• Next– Land Use Plan– Financial Plan

• Planning Advisory Committee has met 4 times (5 Meetings budgeted, will likely be at least 2 additional meetings)

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Five Year Capital Improvement Plan

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Air Cargo

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Voluntary Airport Low Emissions (VALE) Program

• Gate Electrification (12 Aircraft Loading Positions) Pre-Conditioned AirGround Power Converters

• Cargo Apron Electrification (4 Aircraft Loading Positions)

• Solar Photovoltaic Arrays (Clean electric)

• Ground Service Equipment Charging Stations

• Alternative Fuel Vehicles

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Aerospace Initiative Recruitment (AIR) Spokane

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Pre-Certified Site Process

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AIR Spokane

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Executive BoardAl French, Chairman, Spokane County Board of CommissionersDavid Condon, Mayor, City of SpokanePatrick Rushing, Mayor, City of Airway HeightsLarry Krauter, CEO, Spokane AirportsChristine Johnson, Chancellor, Community Colleges of SpokaneRich Hadley, President/CEO, Greater Spokane IncorporatedTom Fritz, Chairman, Greater Spokane Incorporate

Steering/Coordinating Committee

Robin Toth, Co-ChairTodd Woodard, Co-ChairMarshall Farnell, Spokane CountyJohn Pederson, Spokane CountyGerry Gimmell, City of SpokaneJoe Dunlap, Spokane Community CollegeMark Mattke, Spokane Area Workforce Development CouncilShelly Quinn, Greater Spokane IncorporatedKeith Metcalf, Washington State Department of TransportationCharlene Kay, Washington State Department of TransportationSabin Reynolds, Burlington-Northern & Santa Fe Railroad

Tasks ahead • Develop a calendar of milestones and significant

events• Identify key stakeholders such as Boeing’s

existing regional suppliers• Meet with Tayloe Washburn and Craig Gottleib to

discuss specific Spokane opportunities• Initiate discussions with the BNSF• Assess the capacity of the existing utilities

WaterSanitary SewerSteam?Communications/data linesNatural GasElectric

• Compile estimate of costs to deliver and construct the necessary infrastructure

• Start the site certification process - City/County/Airport equally share cost to cover

• Begin assembling information and data points from previous site selection processes such as the Airbus RFI for sites to produce an air-tanker for the Air Force and Boeing’s 787 siting process

Airfield Business Changes

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Felts Field Historic District

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Items of Interest• Airport & Airway Trust Fund Stability

• Lapse caused revenue loss of $340M• Airline Ancillary Fees

• In first half of 2011 Airlines Collected $4.3B and paid no taxes on the revenue.• Passenger Facility Charges

• PFC Application Approved by FAA on 8/25/11• Projects Funded:

• Snow Removal Equipment• Snow Removal Equipment Storage/Maintenance Facility• Glycol Recovery Vehicles

• Security Screening• TSA Known Traveler Pilot Program

• Spokane Community College Aerospace Technology Center• Land Transfer from Washington State to SCC Approved by Legislature/Governor• Grant Received for Aerospace Program Development ($20M/$5.8M to SCC)

• Sustainable Aviation Fuels Northwest• Selected by ACI-NA as winner of 2011 Environmental Achievement Award

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The Year Ahead• Airlines struggle for profitability• Economic Turmoil• Euro Zone Sovereign Debt Crisis• No FAA Administrator• New DOT Secretary at end of year• Federal and statewide elections

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U.S. Domestic System

• Yield and Load Factors Improve for the airlines.• Airlines continue to “De-risk” their schedules.• American Airlines Chapter 11 = 1Q12 Grounding of aircraft and

Resizing of route network. Pinnacle next?• Competition will decline.• Fares will rise (i.e. 21 percent in the last year).• Small communities will suffer cuts as the economics of 50-seat

Regional Jets result in their withdrawal from service (see Pinnacle).

• SIA flat or down slightly on same amount of seat capacity.• Smaller communities’ traffic down in double digits.• Consumer protection improves as of January 26th.

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2012 Priority Initiatives

• New Parking Products• Short Term and Long Term Financing for CIP• Trusted Traveler Rollout• SCASD Grant for Nonstop Los Angeles service• Anchorage Nonstop Service• Boeing/Tier 1 and 2 Suppliers Recruitment• Hangar Development at Felts Field• Felts Field Historic District and Neighborhood Revitalization• Airport Business Park Master Plan• SCC Inland Northwest Aerospace Technology Center• New Customer Service Program and Service Quality Initiative• Gas Station/Convenience Store• Snow Removal Equipment Storage Building• New Fire Station (Design)

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Thank you fellow INBTA members!