proposal under the small community air service development ...airlineinfo.com/ostpdf82/54.pdf ·...

Docket: DOT-OST-2011-0119 Before the Office of the Secretary of Transportation US Department of Transportation

Proposal Under the Small Community Air Service Development Program

Sponsoring Entity: Evansville-Vanderburgh Airport Authority District Dun & Bradstreet Number: 021734082 Congressional Code: IN-008 August 2, 2011

Evansville Regional Airport Small Community Air Service Development Grant Application – August 2011

Table of Contents…

Executive Summary 1 Community Overview 2 Air Service Overview 3 Catchment Area & Competing Airports 4

Current Service 5 Top Markets 6 Air Service Improvement Efforts 7

Previous 2004 Grant 8 Air Service Shortcomings 9 Highest Fares in IN, KY, IL 9

Leakage Information 10 Absence of Star Alliance Partner 11

Proposal Objectives 12 Strategic Plan 13 Goals 13

Target Carriers 13 Target Market Info 13 EVV – IAD Market Analysis 14

Plan Implementation & Funding 17 Use of Local Federal Funds 18

Public/Private Partnerships 19 Timeline 20 Performance Measures 21 Financial Controls 21 Return on Investment 22

DOT Exit Strategy 22

Local Passenger Comments 23

Conclusion 24 Appendix A: Required Summary Information 25 Appendix B: Report on Previous SCASDG 26 Appendix C: Letters of Support 27


As of the ending of the third quarter 2010, Evansville Regional Airport had the highest average fares in all of Indiana, Illinois and Kentucky markets—an astounding 40% above the Great Lakes regional average. Evansville Regional Airport is an essential gateway to the national and international transportation system for a large portion of Indiana, Kentucky and Illinois. The airport’s 60 minute catchment area is home to more than 550,000 people. Despite the large population, the airport has long been underserved by airlines when compared to other airports in the region. In addition, with the absence of a Star Alliance partner airline the airport often times fails to show up as an option for travelers coming to the United States from other countries. A recent leakage study showed that due to a lack of available seats and high local airfares, nearly 45% of the Evansville catchment area residents choose to fly from other airports in the region, with most using Louisville, KY even though its two hours away. In addition to those passengers flying out of other airports, many are choosing to drive to their destinations instead of flying. The airport must do something to bring more options and better fares to the region. Since May of 2008, EVV has lost 47% of its flights and 37% of its available seats. Fewer options for local passengers has resulted in much higher fares as the average round trip fare is $452 while the Great Lakes Region average is a mere $324. EVV along with business and regional community leaders are committed to address this issue, pledging more than $100,000 in cash and in-kind contributions . Evansville Regional Airport has developed a method of providing start-up cost offsets, revenue guarantees, and market support for carriers’ entry into the market, but needs financial assistance in carrying it out. The airport through collaboration with Sabre Airline Solutions as well as Sixel Consulting has identified service to an eastern or southeastern Hub with a Star Alliance partner to be the best service to address the needs of the community. Key benefits would include but not be limited to: • Lower fares • Increased enplanements • Reduced leackage which is estimated currently to be 45% • Non stop service to unserved market as well as stronger presence on international map. Grant Success will be achieved through revenue guarantees to secure service, aggressive marketing along with fee waivers to support service, community financial and in-kind support, comprehensive market analysis, back up option for securing service with another carrier.


1

Executive Summary…


2

Community… Southwest IN is part of the Evansville, IN/Henderson, KY MSA—the 143red largest MSA in the USA. The population of the MSA is 351,911. The three-state (IN, KY, IL), 26- county market region has a population of more than 800,000. Evansville is the area’s largest city and economic hub. With a population of over 121,000, it is the third-largest city in the state of IN and it sits just 60 miles south of the median center of US population. Southwest IN is pro-business and is very dedicated to looking at economic development as “one region, one economy, one voice.” State and local government officials and corporate leaders are active partners in attracting new companies to the area and growing existing businesses. The region is home to diverse industry including plastics, energy, pharmaceuticals, metals and a large automotive sector. Even with the downturn in the national economy, the community has decided to take this time to reinvest in itself. In the last year, over $744 million has been invested in jobs & industry by Toyota, Berry Plastics, Mead Johnson & Deaconess alone for new production lines, headquarters, R&D facilities as well as expansions. Major investments are being made in education including $66.8 million in expansions for USI alone, new tech high school and new north high school for EVSC. Investments in tourism include a $17.5 million renovation to the Evansville Museum, a $127 million arena, new hotels including a $32 million Downtown Hyatt and The District development for Casino Aztar. Currently under construction is the $2-3 Billion I-69 extension which Is expected to be the largest transportation construction project in the country. By year end 2012, the section to Crane Naval Warfare center will be complete ahead of schedule. When complete, I69 will connect Canada and Mexico with Evansville right in the middle. For its size, the community has a great deal of international ties and is proactive in increasing international business opportunities for tri-staters. The Chamber of Commerce of Southwest IN has launched a “Go Global” campaign to assist local companies in doing business abroad. Evansville has long established “sister’ cities in Germany and Japan and just recently Mexico.


3

Air Service Overview…

YEAR American Delta/NW Other Total % Change

2000 47,000 150,560 63,044 260,604 -2.95

2001 46,006 125,370 54,701 226,077 -13.25

2002 39,467 137,603 49,566 226,636 0.25

2003 43,099 139,632 34,973 217,704 -3.94

2004 54,062 156,145 20,483 230,690 5.96

2005 63,706 175,266 6,244 245,216 7.23

2006 69,454 165,862 665 235,981 -4.61

2007 70,263 153,577 1,518 225,358 -4.50

2008 62,112 127,431 4,965 194,508 -13.69

2009 55,519 99,584 860 155,963 -19.82

2010 63,953 106,977 645 171,575 10.01

Enplanements 10 Year History:

• The EVV market generates a high mix of business traffic, driven by local industry

– Most markets have average round-trip air fares of close to $500 – After a 47% reduction in flights since 08’, not only have fares increased sharply, but

LFs average 75% – Good year-round LFs, particularly to the southeast U.S. (ATL)

• EVV has a relatively large base of international travel – Mostly business-based, tied to auto industry – Asia demand in particular – EVV-International revenue base grew 25% yr/yr in 2010

• EVV is a low-cost airport, with the flexibility to offer growth potential

– Airlines only generate 33.8 % of EVV revenue – Current CPE is only $10.52 (2010) – The Airport has two main air carrier runways.

• Runway 4/22 is the longest at the airport, with a length of 8,020 feet, with an ILS approach on both ends.

• Runway 18/36 is 6,286 feet long with GPS approaches

• Evansville/Southwest Indiana Catchment area consists of 558,000 people within a 1 hour drive – Growing: population base is growing about 2% per year – Strong industrial base: Top employers include Toyota, Mead Johnson, Koch Industries,

Alcoa and SABIC – There are large ties to the automobile industry but industry is diverse: plastics,

metals, energy, financial, pharmaceuticals, transportation/logistics, entertainment


4

EVV Catchment Area

• The 30 minute drive Evansville catchment area (seen in the dotted line) is home to 274,037 people (US Census estimates), The one hour drive catchment area (seen inside the solid line) is home to 557,912 people.

• EVV is two hours away from the nearest competing service.

• Evansville lies the following distances from other airports in the region:

• Louisville SDF • 126 Miles • 2:01 Drive Time

• Indianapolis IND • 174 Miles • 3:38 Drive Time

• St. Louis STL • 181 Miles • 3:07 Drive Time

• Nashville, TN • 172 Miles

• 2:47 Drive Time


5

daily departing

carrier market departs seats load factor

DL ATL 3.7 185 83%

DTW 3.6 181 70%

MEM 1.0 50 69%

MSP 1.0 50 Na

AA DFW 2.0 94 72%

ORD 4.5 212 68%

total 15.8 772 100%

• DL is the dominant EVV carrier with almost 60% of the seats out of EVV (July)

o Schedules particularly catering to international demand; DTW capacity increased recently

o MSP & MEM will operate seasonally this summer ending Sept 9 o While ATL capacity is up 27% yr/yr, it is still down sharply versus

levels earlier this decade

• AA’s DFW service goes back to 1x daily beginning August 2011

• EVV service is generally operating at good Load Factor levels, particularly ATL service; overall fares/yields are quite high

Current Service…

Rank Market PDEW RDEW Fare

1 ORD 27.3 $5,980 $219

2 DTW 16.4 $3,629 $221

3 DFW 16.3 $3,525 $217

4 ATL 11.7 $3,024 $258

5 LAX 13.2 $2,687 $204

6 LAS 14.2 $2,635 $185

7 LGA 11.5 $2,261 $196

8 MCO 13.7 $2,079 $151

9 SFO 7.6 $1,813 $240

10 PHX 10.2 $1,666 $164

11 SEA 6.9 $1,652 $241

12 DCA 8.8 $1,562 $177

13 PHL 8.4 $1,535 $182

14 TPA 9.8 $1,517 $155

15 MSP 6.1 $1,494 $243

16 BOS 7.1 $1,461 $205

17 DEN 7.6 $1,279 $168

18 PIT 5.8 $1,215 $211

19 IAH 4.5 $1,214 $268

20 SAN 5.2 $1,126 $215

21 RSW 5.8 $1,103 $189

22 EWR 4.4 $1,079 $248

23 BWI 6.2 $1,053 $171

24 SLC 4.8 $1,012 $209

25 SAT 5.0 $992 $199


Rank Market PDEW RDEW Fare 1 NGO 1.7 $3,209 $1,904

2 AMS 1.1 $1,701 $1,552

3 MNL 0.8 $1,207 $1,574

4 NRT 0.8 $1,102 $1,437

5 LHR 1.9 $1,038 $557

6 CUN 4.5 $1,007 $226

7 MTY 1.9 $882 $460

8 BKK 0.5 $861 $1,612

9 ICN 0.6 $819 $1,359

10 FRA 1.1 $769 $685

11 PVG 0.6 $671 $1,113

12 RUH 0.2 $595 $2,898

13 PEK 0.4 $544 $1,369

14 MEX 1.5 $538 $354

15 HKG 0.4 $481 $1,133

16 CDG 0.8 $424 $552

17 FCO 0.7 $406 $604

18 GRU 0.2 $336 $1,633

19 BCN 0.3 $315 $1,095

20 SGN 0.3 $314 $1,091

21 BOM 0.5 $302 $669

22 BNE 0.1 $284 $2,076

23 TPE 0.2 $277 $1,687

24 PRG 0.2 $258 $1,450

25 MXP 0.3 $242 $769

Top Domestic Markets

Top International

Markets

6


7

Air Service Improvement Efforts More Face to Face meetings with Airlines: The airport has taken a much more pro-active approach to meeting with airlines. Since 2008 face to face meetings with airline planners, schedulers and marketers have more than quadrupled. Correspondence via phone, email and social media have also increased as better relationships have been forged. EVV makes it a priority to stay in front of airlines and keep them updated on what’s going on in the community. Market Research: EVV commissioned an extensive Leakage Study to determine where local passengers are flying out of that concluded that 45% of passengers in its catchment area choose to drive 2 or more hours to fly out of other airports. The airport is also budgeting for new software in 2012 that will provide them with access to up to date industry routes, schedules and information. In September of 2011, the airport is undergoing astrategic planning process that will include the marketing department. University of Southern Indiana will be a partner in this process . More Strategic Advertising Campaigns: Audio/visual and print graphics have all been updated and improved. Campaigns are now centered around building community support for the airport. Local corporations, attractions and business groups have even participated in airport television spots. A new jingle and branding campaign has been underway for approximately 1 year now and new means of outdoor advertising as well as internet advertising are being utilized. Budgets: While revenues have been down the last several years and budgets have been cut, the marketing budget was increased from $183,000 to $190,000. Social Media & Internet: EVV re-vamped its website and included several interactive features and travel tools. The airport also can be found on Facebook, Twitter, You Tube and is currently working on a Linked In profile. Social media has proven to be a cost effective way to engage our customers and community by offering information such as weather/delay alerts, travel tips, fare sales, fun trivia and event information. Public Relations: More public speaking engagements have been done for groups such as Rotary, Kiwanis, Chamber of Commerce, etc. EVV also makes regular in studio appearances on TV and radio offering travel tips and air fare deals. The airport is hosting more events like an upcoming 5K on the Runway this Labor Day Weekend.


8

2004 SCASDGP Grant…

The current grant application represents a new project and is not concurrent with the 2004 project as that grant was completed in the 4th quarter 2008. The previous grant was in partnership with South Bend to provide intrastate service to Indianapolis whereas the current application is for new service with a new carrier to an eastern or south eastern market preferably with a Star Alliance partner. The 2004 grant was initiated to offer one-stop service between Evansville, Indianapolis and South Bend. The purpose was to restore an instrastate link that was lost after September 11, 2001. The goal was to help stimulate economic links between the southern, central and northern parts of Indiana. EVV was successful in obtaining a carrier for this new service in early 2005, however the service was terminated after only a short period of operation due to the bankruptcy of ATA. During its brief operation, the load factors for these flights were quite encouraging. This disruption of service delayed efforts to locate and retain another carrier and so the grant underwent an extension. EVV along with SBN were able to find a new carrier, Cape Air, that started service in November of 2007. With the high cost of fuel in 2008 posing a challenge for any and all air service, the service struggled to achieve profitability in the first summer of operation. Service between Evansville and Indianapolis had performed considerably better than service between South Bend and Indianapolis. With SBN’s load factors averaging just over 30%, it was decided they could not contune. Flights between SBN and IND were suspended as of Sept 30, 2008. Cape Air felt the service would not be feasible with just one leg and the service was discontinued at EVV as well. A copy of the Final Report is included in Appendix B. The new grant is justified given that EVV offers the highest fares in all of the Indiana, Kentucky and Illinois markets – 40% above the Great lakes Regional average. Something must be done to bring more options and lower fares to the region to make up for the loss of 47% of flights lost and 37% of seats lost since 2008.


9

Air Service Shortcomings… Evansville Regional Airport struggles to overcome three basic deficiencies in their current air service environment: • Highest average fares in all of Indiana, Kentucky and Illinois • Leakage to other airports who are 2+ hours away due to lack

of flight options as well as price • Lack of a Star Alliance partner which is key to many

international visitors coming to Evansville.

Average Domestic One Way Fares in Indiana, Illinois, and Kentucky Passenger Markets

Year Ended Third Quarter 2010

$226

$224

$196

$188

$185

$185

$172

$171

$171

$164

$164

$152

$145

$134

$129

$113

$100

$79

$60

$0 $50 $100 $150 $200

Evansville, IN

Champaign, IL

Paducah, KY

Fort Wayne, IN

Springfield, IL

Lexington, KY

Chicago O'Hare, IL

Louisville, KY

South Bend, IN

Peoria, IL

Moline, IL

Indianapolis, IN

Bloomington/Normal, IL

Chicago Midway, IL

Marion, IL

Quincy, IL

Rockford, IL

Decatur, IL

Owensboro, KY

Great Lakes Region Average: $162

Evansville –

Louisville

126 Miles

2:01 Drive Time

Evansville –

Indianapolis

174 Miles

3:13 Drive Time

3.5%

36% 55%


10

Airport Passengers PDEW Share

1 Evansville, IN 310,600 425.5 55.4%

2 Louisville, KY 202,225 277.0 36.0%

3 Indianapolis, IN 19,415 26.6 3.5%

4 Other Airports 28,778 39.4 5.1%

Total Evansville Area Passengers 561,018 769 100.0%

Originating Airport For Evansville Area Passengers

Tw elve Months Ended September 2009

Rank

True Market with LCC Adjustment

Evansville, IN,

310,600 , 55% Louisville, KY,

202,225 , 36%

Indianapolis, IN,

19,415 , 4%

Other

Airports,

28,778 , 5%

45% Leakage…


11

Absence of Star Alliance Partner

The Star Alliance is the largest airline alliance offering more than double the number of member airlines in either the One World or Sky Team alliances. Many times when international visitors try to book tickets to visit Evansville using one of these carriers, EVV does not show up as an option. Members include: • Adria • Aegean • Air Canada • Air China • Air New Zealand • ANA • Asiana Airlines • Austrian • Blue 1 • British Midland International • Brussels Airlines • Continental • Croatia Airlines • Egypt Air • Lot Polish Airlines • Lufthansa • Scandinavian Airlines • Singapore airlines • South African Airlines • Spanair • Swiss • TAM • TAP Portugal • Thai • Turkish Airlines • United • US Airways

Stats… 27 Member Airlines 4023 Aircraft 402,208 Employees 603.8 Million Passengers 150.7 Billion Revenue 21,000 Daily Departures 1,160 # of Airports 181 Countries Served

Your requested destination cannot be booked online or is not served by Lufthansa. Please use the airport atlas to find available airports.


12

Proposal Objectives…

Objectives for Program: • Increase airline competition in the market, in turn lowering average

fares • Provide more options and better connectivity for passengers • Increase awareness of EVV on international map through offering

flights with a Star Alliance partner • Decrease leakage to other airports and stimulate air travel for those

currently driving to destinations • Increase awareness in the regional market about new service at EVV

Means to Achieve Objectives: • Create incentives that appeal to a Star Alliance airline and/or other

network or low-cost carrier • Recruit targeted carrier using these incentives • Raise awareness about the new service and educate regional

passengers

Action Plan: • Provide start-up cost offsets which will help to reduce the risks

airlines face when entering a new market • Provide revenue guarantees to ensure the success of the new

service • Provide marketing support to increase awareness about the new

service, carrier, and alliance.


13

Strategic Plan…

Our plan calls for the introduction of new service by a third carrier preferably in the Star Alliance to address the high fares and decline of available seats as well as the somewhat “invisibility” of EVV to international visitors.

Goals The community is seeking a SCASDP grant in order to meet three primary goals: • New non-stop to currently unserved market(s) with new carrier

preferably in Star Alliance • Lower fares • Increase enplanements by reducing leakage, stimulating new market(s)

and increasing awareness

Target Carriers EVV has built strong relationships with network carriers in the Star Alliance that include recent face to face meetings and presentations: • March 2011 • June 2011 • July 2011 After extensive discussion, it has become evident that marketing support and financial assistance will be necessary to obtain new service given the current economic environment, uncertainty in fuel costs and limited availability of aircraft.

Target Market Info The data and analysis used in our sample route was performed by Sixel Aviation Consulting firm using their Hub Builder product.


14

Sample Route Analysis: EVV - IAD… The airport proposes to offer the grant funding in the form of start-up cost abatements, fee waivers, marketing support and revenue guarantees to an airline (preferably in the Star Alliance) for minimally one daily flight to a new market such as (but not limited to) IAD. This hub would give Evansville area travelers adequate access to competitive connecting service and provide for more fare competition in the market. The airport believes that the addition of this new service would result in better connectivity both domestically and internationally as well increased enplanements, significantly lower fares and an additional link to the national and international air transportation system.

The Dulles Hub Would Access 392 PDEW

and $67,800 in RDEW in the Evansville Market

With One-Stop Connections to 61 Destinations

Stage Length: 549 Miles

Block Time: 1.7 Hours

Evansville - Washington Dulles

Flight time assumes an ERJ170 operating at an average 420 mph groundspeed.

EVV-WAS Pax Have Been Suppressed by Rising Fares, Up 16% Since 1Q06, With Pax Down 23%

4,090

4,830

4,480 4,360

3,240

4,590

3,610

3,350

2,620

3,650

3,130

3,330

2,210

2,930 2,970

2,350

2,660

3,320

3,700

22.4

26.5

24.5

23.9

17.8

25.2

19.8

18.4

14.4

20.0

17.2

18.2

12.1

16.1 16.3

12.9

14.6

18.2

20.3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 2007-Q4 2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3

WAS PDEW

Total WAS Pax

$153 $151 $152 $156

$162 $161 $163 $159

$193

$182 $183

$155

$191

$163 $165

$190

$172

$183 $177

O&D Pax and Average One Way Fares Between Evansville and Washington-Baltimore

First Quarter 2006 – Third Quarter 2010

EVV’S Leakage Study

Estimates a Total of 26.5

Current EVV-WAS PDEW

15

The Dulles Hub Would Access 392 True PDEW in

Evansville, With 32 NYC PDEW and 27 WAS PDEW

Top 25 O&D Evansville True Passenger Markets Over Washington Dulles Study Period: Calendar Year 2009

31,067

23,309

23,032

20,389

19,318

16,757

15,916

14,639

12,411

12,068

12,040

11,358

9,298

7,658

7,273

6,818

6,061

5,473

4,305

4,149

4,056

3,910

3,108

3,092

3,088

42.6

31.9

31.6

27.9

26.5

23.0

21.8

20.1

17.0

16.5

16.5

15.6

12.7

10.5

10.0

9.3

8.3

7.5

5.9

5.7

5.6

5.4

4.3

4.2

4.2

0 5,000 10,000 15,000 20,000 25,000 30,000

Orlando-Sanford, FL

New York/Newark

Las Vegas, NV

South Florida

Washington-Baltimore

Atlanta, GA

Los Angeles Basin

San Francisco Bay Area

Tampa, FL

Boston, MA

Phoenix, AZ

Philadelphia, PA

Providence, RI

Hartford, CT

San Diego, CA

Seattle/Tacoma, WA

Manchester, NH

Raleigh/Durham, NC

Pittsburgh, PA

Cancun, Mexico

Savannah, GA

Norfolk, VA

Charlotte, NC

Montego Bay, Jamaica

Albany, NY

Annual Passengers PDEW

Source: Sixel Consulting Group Evansville True Market Study

16


17

Plan Implementation & Funding…

Evansville Regional Airport proposes that a small portion of the cost of new air service start-up be supported up front with federal funds from the Small Community Air Service Development Program. Of the total project cost of $600,000, only $50,000 will be used for marketing and advertising projects. An undetermined amount of money will be used to cover the airline’s start-up costs in the market. The federal share of this project will be $500,000, of which the majority is to be used as a revenue guarantee. It is projected that the majority of the grant money will be available to provide insurance in case that the new carrier loses money during the start-up phase of service in its first full year in Evansville. With demand for the service in the Southwestern Indiana market, the Airport projects the new flights will be profitable in their second year of operation. The airport does expect the new carrier to incur some losses at the launch of service, as the market becomes more accustomed to having this competing service, lower fares and as leakage and driving slowly decreases. The airport is targeting this program to meet the goals of the Small Community Air Service Development Program through increased capacity, lowered average fares and increased service by new carriers to additional markets. If for some reason service is not commenced in a timely manner for this route or with a Star Alliance partner, the airport proposes to use the federal grant money awarded under the SCASDGP to launch service on another route or with an other carrier interested in providing service to the community that can provide access to a new hub. The airport would recruit other airlines depending on their ability to compete and to lower local airfares.


18

Use of Local Federal Funds…

Marketing & Advertising: Evansville Regional Airport propses to spend $50,000 in funds on marketing and advertising promotions in support of new service. Advertising rates tend to be lower in the Southwestern IN region and that dollar amount will stretch much larger than in many other areas. The airport has also developed relationships with local advertising outlets and receives discounts and trades that would be passed along to promote this new service. The goal is to increase enplanements and usage through targeted regional campaigns. Revenue Guarantee: The airport proposes to make available at least $550,000 in funds for a revenue guarantee to the new carrier, to cover start-up losses that might occur during the first twelve months of service. Subject to negotiation, payments will be made to the new carrer 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. Start-Up Cost Offsets: The airport proposes to use a small portion of the funding provided under this proposal to pay for start-up costs in support of new service introductions. Money will be reimbursed to the new carrier from the revenue guarantee portion of this proposal as invoices are submitted detailing the work performed to offset the acquistion of necessary equipment to begin service (items include carts, tugs, power units, computer equipment, cabling, softwarem, etc.). Additional Costs: As part of this program, the 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. It is also expected that the airport will incur expenses in the recruitment of a new airline. These additional costs will come from the revenue guarantee portion of the funding.


19

Public/Private Partnerships…

Evansville Regional Airport will be working with a number of local partners to promote , support and market the new service. Contacts will be made to all regional chambers of commerce, economic development groups, convention & visitor bureaus and those with interest in growing the economic base of the community through local business growth, attraction of new business and the promotion of tourism and visitor traffic via the airport. Evansville Vanderburgh Airport Authority District: With board members appointed by both the City of Evansville and Vanderburgh County, the Evansville Vanderburgh Airport Authority District is charged with governing the airport. This board is made up of community leaders from local business organizations. The airport board will oversee the development of this grant application and administer the funds awarded. Evansville Convention and Visitors Bureau: The ECVB is one of the biggest supporters of bringing additional air service to the region and promoting tourism. They work continually to bring visitors to the region through conventions, sports and entertainment events and attractions and they have a vested interest in seeing improved air service options for visitors. Chamber of Commerce of Southwest Indiana: The CCSWIN is a totally independent non-profit corporation that is uniquely able to serve the needs of the regional business community. They are dedicated to one goal: the economic health of the area and the prosperity of its members. They know the impact that additional and improved air service can have to local economic health. The chamber plays a very active role in promoting doing business globally and realizes the international impact of having local access to the Star Alliance. Economic Development Coalition of Southwest Indiana: The Economic Development Coalition of Southwest Indiana is a private partner in this application and has a vested interest in its success. Representatives of this organization travel nationally and intenernationally in recruiting new business for this region. The coalition provides a number of in-kind services. Coalition funding will commit to a program of viral marketing through e-mail blasts to all members . The coalition also contributes mailers to area businesses explaning the benefits of new and additional air service.


20

Timeline…

This proposed project timeline assumes the Department of Transportation will award Small Community Grant funding by December 2011. Once the award is announced, Evansville Regional Airport will conduct additional airline meetings to secure new service. Based on airline planning lead times and the need for advanced bookings, we assume the new carrer would not commence service until at least March 2013. Initially the airport will need to execute the grant agreement with the Department of Transportation, meet with the prospective airlines to negotiate service and sign the minimum revenue guarantee agreement with the airline partner. Once service is announced and schedules are published, the airport would begin marketing the new route and working with the new carrier to monitor advance bookings. EVV will continue its marketing program and continue to work with the new carrier to monitor the route once service begins. EVV would submit grant status reports on a quarterly basis to the DOT throughout the two year term of the minimum revenue guarantee. These dates are estimated and it is possible service could be secured and launched on a more aggressive timetable once grant funding is awarded. It is also possible that new service could slip to 2014 should an airline require additional risk mitigation (beyond that included in this proposal) from the community.

Action Estimated Date

SCASDG Grant Award Announcement December 2011

Execute grant agreement with DOT January 2012

Meet with prospective airlines February – June 2012

Negotiate minimum revenue guarantee (MRG) July – August 2012

Announce service December 2012

Publish schedule December 2012

Begin marketing new route January 2013

Monitor advance bookings January – March 2013

Service launch March 2013

MRG available for service Mar 2013-Mar 2014

Monitor route performance Mar 2013-Mar 2014

Submit grant status reports to DOT Qtrly Q1 2013 -Q1 2015

Close grant April 2015


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Performance Measures… The success of the program will be based on three variables: Recruitment and Retention: Initiation of new carrier and new service will serve as the first measure of success. Increased enplanements: The increased number of enplanements will serve as the second measure of success. This measurement will include a monthly compaison to past enplanement numbers. Decreased Average Airfares: Documenting how much the average airfares charged in the community go down will serve as the third measure of success. The measurement of airfares will be derived from US DOT OD1A reports.

Financial Controls… As the sponsor, the Evansville-Vanderburgh Airport Authority District, will be the responsible parties for all fiscal matters and DOT reporting requirements. The Authority is established as a public governing body. As a public entity the DOT can be assured that proper financial controls are in place to guarantee that DOT’s Grant will be used in accordance with any subsequent agreement. The Evansville Regional Airport understands the 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. EVV successfully handled all reports and submittals under the 2004 DOT Grant including closeout. The Authority’s financial records and federal grants are audited annually by the Indiana State Board of Accounts. The authority is experienced in handling all aspects of the Small Community Air Service Grant.


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Return on Investment… The airport has laid out a cost effective and achievable strategy to add new service, increase enplanements, and lower airfares at the airport. This plan utilizes proven methods of improving air service which allow the Department of Transportation to be comfortable with selecting this proposal. Increasing competition and options which in turn results in lower fares is in line with the major goals of the Small Community Air Service Development Program. Approximately $50,000 of the $600,000 ($500,000 SCASDGP/$100,000 local) in cash is committed to being spent. The remaining $550,000 in cash available for the revenue guarantee portion of the grant may never be expensed.

DOT Exit Strategy… Evansville Regional airport has developed this proposal as a one-time grant. While the initial startup costs will be paid for out of other airport funds, the advertising and marketing program will commence a few months before service starts and will 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.

“Counting all costs and travel time, this makes my travel to and from Evansville roughly a draw between flying and driving. For now, driving wins, because I have the flexibility of having my own

transportation. Travel is not just about the costs, but about convenience as well. If the flight were two hours and a couple hundred dollars, as it was when I moved here, there would be no

question at that point. Not only would all my travel be by air, but it would be more often because of the convenience.” -- David Wolf

“…our team of approx 20 sales & engineering professionals rely extensively on EVV for travel. Very few of those flights were to final

destinations (Monterrey, Queretaro, Mexico City, El Paso, Los Angeles, Dallas, NY City, and others). Perhaps more importantly, our customers have great difficulty making connections to EVV. As we continue to review our organizational structure and location for key

personnel, I find myself questioning if future personnel would be better located in larger metro areas with better connecting flight options. I sincerely hope that additional air service from EVV is

planned—certainly not diminished service.” –Sam Woehler, George Koch Sons, LLC

“Currently we are flying 8-10 employees per month in/out of (EVV), with most travel being to our international locations-Hungary, China, Brazil and Korea.” – Sheri Pfingston, Gibbs Die Casting

“Last year we had a total of 1479 flights that either started or ended in Evansville to domestic and international locations that were booked through the American Express travel services we use. The

complete cost of these flights as booked was over $996,000. This does not include travel booked on other sites not using company travel which probably adds another 10% would be my guess. It also does not

include customers and suppliers who visit us from outside the region and obviously book their own travel. I would estimate this to be another 200 to 500 flights in and out during a typical year. The service in and out

of Evansville is marginal now for our business as options have been trimmed over the years. More opportunities to travel to larger hubs for international flights, or other areas of the country would be an advantage. I have actually driven to some of my plants as service has been cut back and flight options are not as good as a few years ago. Increased service would help our business and further reduction of what

we have now would make more difficult for us and might have us reconsider future investment and certainly positioning of roles like mine from this location.” –

Mike Walsh, SABIC

“Red Spot employees regularly visit the following countries (primary cities specified) each year. The number is an estimate of seats occupied per year on a round trip basis: Canada – Toronto (10) Mexico – Mexico City (10) UK – London (10-15) China – Shanghai (6), Guangzhou (3) Korea – Seoul’s Incheon airport (8) Japan – Tokyo’s Narita (Haneda will be preferred) (20+) Brazil – Sao Paulo (10-15) .” --Trenton Christian, Red Spot Paint

“Because of the limited air services we have, I frequently drive to Indy or Louisville to originate my flights because of the inability to avoid flying north to DTW, south to ATL or east to CVG to go west if I leave from here” – Tom Bodkin, Bamberger, Foreman, Oswald & Hahn

Local Passenger Comments…

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Conclusion…

Evansville Regional Airport has the highest average fares in all of IN, KY and IL markets-an astounding 40% above the Great Lakes regional average. The airport must do something to bring more options and better fares to the region. Since May of 2008, EVV has lost 47% of its flights and 37% of its available seats. Fewer options for local passengers has resulted in much higher fares. EVV along with business and regional community leaders are committed to address this issue by pledging both cash and in-kind contributions. Grant success will be achieved through revenue guarantees to secure service, aggressive marketing along with fee waivers to support service, community financial and in-kind support, comprehensive market analysis and a back up option for securing service with another carrier.


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Appendix A…

SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOT-OST-2011-0019

SUMMARY INFORMATION

All applicants must submit this information with their proposal, along with a completed form SF 424 on http://www.grants.gov.

A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) Not a Consortium Interstate Consortium Intrastate Consortium Community now receives EAS subsidy Community (or Consortium member) previously received a Small Community Grant If previous recipient: Date of grant: 2004

Expiration date of grant: 2008 B. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES) Public Private 1. EVAAD 1. Economic Development Coalition of 2. ECVB Southwest IN 2. Chamber of Commerce of SW Indiana C. PROJECT PROPOSAL: (CHECK ALL THAT APPLY) Marketing Upgrade Aircraft New Route Personnel Increase Frequency Low Fare Service Travel Bank Service Restoration Subsidy

X

X X

Surface Transportation Regional Service Other Revenue guarantee Launch New Carrier Star Alliance Start Up cost Offset First Service ____________ Study Secure Additional Carrier _____________

D. EXISTING LANDING AIDS AT LOCAL AIRPORT Published Instrument X Full ILS X Outer/Middle Marker X Approach X Localizer Other (specify)

x

x

x

x

E. PROJECT COST: 1. Federal amount requested; $500,000 2. State cash financial contribution $0 3. Local cash financial contribution… 3a Airport cash funds $50,000 3b Non-airport cash funds: $50,000 3c Total local cash funds (3a+3b): $100,000 4. TOTAL CASH FUNDING (1 = 2 = 3C): $600,000 5. Local funds contributed from already-existing programs or projects included in line 3c amt. 6. Local funds contributed from new commitments or new resources included in line 3c amount: 7. Airport In-kind contribution: 8. Other In-kind contribution: 9. 9. TOTAL IN-KIND CONTRIBUITON (7 + 8) 10. TOTAL PROJECT COST (4 + 9): $600,000

F. ENPLANEMENTS:

YEAR American Delta/NW Other Total % Change

2000 47,000 150,560 63,044 260,604 -2.95

2001 46,006 125,370 54,701 226,077 -13.25

2002 39,467 137,603 49,566 226,636 0.25

2003 43,099 139,632 34,973 217,704 -3.94

2004 54,062 156,145 20,483 230,690 5.96

2005 63,706 175,266 6,244 245,216 7.23

2006 69,454 165,862 665 235,981 -4.61

2007 70,263 153,577 1,518 225,358 -4.50

2008 62,112 127,431 4,965 194,508 -13.69

2009 55,519 99,584 860 155,963 -19.82

2010 63,953 106,977 645 171,575 10.01

Enplanements 10 Year History:

G. IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UNDER EXECUTIVE ORDER 12372 PROCESS?

a. This application was made available to the State under the Executive order 12372 process for review on (date)________ b. Program is subject to EO 12372, but has not been selected by the State for review. X c. Program is not covered by EO 12372 H. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF “YES”, PROVIDE

EXPLANATION) X No Yes (explain)______________


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Appendix B…

2004 SCASDGP See attachment 3


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Appendix C…

LETTERS OF SUPPORT

proposal under the small community air service development ...airlineinfo.com/ostpdf82/54.pdf ·...

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