Proposal under the Small Community Air Service Development Program Docket DOT-OST

Transcription

1 Proposal under the Small Community Air Service Development Program Docket DOT-OST Sponsor: Casper/Natrona County International Airport DUNS Number: Congressional District Code: WY 01 Contact: Mr. Glenn S. Januska, A.A.E. Airport Manager Casper/Natrona County International Airport 8500 Airport Parkway Casper, WY Due Date: August 2, 2011

2 SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET OST SUMMARY INFORMATION APPENDIX C All applicants must submit this information with their proposal, along with a completed form SF- 424 on A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) X Not a Consortium Interstate Consortium Intrastate Consortium Community now receives EAS subsidy X Community previously received a Small Community Grant in Grant was completed in B. PUBLIC/PRIVATE PARTNERSHIP Public: Private: 1. Casper/Natrona County Int l Airport 1. Casper Area Chamber of Commerce 2. Natrona County 2. Casper Area Economic Dev. Alliance 3. City of Casper 3. Frontier Airlines 4. Town of Edgerton 4. Allegiant Airlines 5. Town of Midwest 5. Casper Journal 6. WYDOT Aeronautics 6. Casper Star Tribune 7. KCWY News Townsquare Media 9. Casper Area Convention & Visitors Bureau 10. KTWO Television 11. Atlantic Aviation - Casper C. PROJECT PROPOSAL Project Proposal: (Check All That Apply) X Marketing Upgrade Aircraft X New Route _X_ Travel Bank Service Restoration Subsidy Surface Trans. Regional Service _X_ Revenue Guarantee X Launch New Carrier X Start-up Cost Offset First Service Study X Secure Additional Service Other (explain below) Small Community Air Service Development Program Page I

3 D. EXISTING LANDING AIDS AT LOCAL AIRPORT: X Full ILS X Outer/Middle Marker X Published Instrument Approach X Localizer Other (Specify) E. PROJECT COST: Description Sub Total Total 1. Federal Amount Requested: $500, State cash financial contribution $30,000 Local Cash Financial Contribution 3a. Airport cash funds: $30,000 3b. Non-Airport cash funds (CVB): $10,000 3c. Other Non-Airport cash funds: $20, Total local cash funds: $60, TOTAL CASH FUNDING $590,000 In-Kind contribution 5a. Airport In-Kind contribution $6,240 5b. Other In-Kind contribution $219, TOTAL IN-KIND CONTRIBUTION $225, TOTAL PROJECT COST $815,480 F. IN-KIND CONTRIBUTIONS 1. Barter Advertising $60, Travel Bank $150, Chamber of Commerce $9,240 Total $219,240 G. IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UNDER EXECUTIVE ORDER PROCESS? a. This application was made available to the State under Executive Order Process for review on. b. Program is subject to E.O , but has not been selected by the State for review. x c. Program is not covered by E.O H. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? x No Yes (explain) Small Community Air Service Development Program Page II

4 Ashton thony Felt Driggs Victor Swan Valley Wayan a Springs Georgetown Ovid Freedom Gardiner Old Faithful Grover Smoot Geneva Border Saint Charles Garden City Laketown Randolph Woodruff JAC Jackson Evanston Tabiona Tower Junction Canyon Lake Bondurant Kemmerer Buffalo Olive CASPER/NATRONA COUNTY INTERNATIONAL AIRPORT MARKET AREA Prairie City Broadus Capitol Daniel Big Piney La Barge Lyman Robertson Lonetree Granger Neola Lapoint Roosevelt Myton Dubois Boulder Ouray Wapiti Farson Jensen COD Crowheart RKS WRL Lodge Grass Acme Dayton SHR CPR GCC Pavillion Lysite Shoshoni Bill Moneta Arminto RIW Powder River Rawlins Cherokee Birney LAR Boyes Wyola Warren Moorhead Ridge Powell Frannie Meeteetse Superior Lovell Emblem Grass Creek Hudson Atlantic City Greystone Gebo Basin Thermopolis Tipton Sunbeam Elk Springs Massadona Shell Manderson Baggs Great Divide Ten Sleep Lamont Craig Hamilton Big Trails Hayden Story Buffalo Mayoworth Kaycee Sussex Alcova Saratoga Elmo Arvada Ross Midwest Savageton Rockypoint Fort Collins FEW Alzada Glenrock Orpha Douglas Manville Shawnee Medicine Bow Garrett Rock River Mcfadden Bosler Centennial Encampment Albany Red Buttes Columbine Clark Kings Canyon Walden Coalmont Glendevey Gould Rustic Orin Moorcroft Glendo Esterbrook Little Medicine Wendover Marshall Uva Horse Creek Owl Canyon Slater Albion Sturgis Lead Tilford Black Hawk Upton Mystic Wasta RAP Osage Hill City Newcastle Hermosa Custer Scenic Fairburn Pringle Dewey Buffalo Gap Rockyford CDR BFF Angora Bayard AIA Maurine Shadehill Fairpoint Alva Newell Aladdin Howes Enning Beulah St. Onge Sundance Lance Creek Chugwater Carr Jay Em Lingle Veteran Lyman Hawk Springs Edgemont Provo Harrison Ardmore Smithwick Oelrichs Wayside Crawford Marsland Hemingford Berea Oglala Glad Valle Red Elm Philip Wanble Allen Porcupine Martin Wounded Knee Pine Ridge Hay Springs Lakeside Gordon La Grange Bridgeport Harrisburg Lisco Albin Dalton Oshkosh Ashby Arthur Kimball Potter Keys Burns Sidney Lodgepole Ogallala Carpenter Peetz Sedgwick Grover Crook Grant Padroni Keota Lon Eli Whi Small Community Air Service Development Program Page III

5 Table of Contents Summary of Community Proposal 1 New Grant Proposal 2 Previous Grant 2 Our Community Team 2 Our Airport 2 Plan is Consistent with DOT Priorities 3 Unique Circumstances 3 Air Service Background 3 Casper/Natrona County International Airport (CPR) 3 Air Service History 4 Current Air Service 5 Casper/Natrona County Community Profile 6 Economic Indicators 7 Unique Air Travel Problems of the Market Area 8 Passenger Market for Casper 8 Local Market Demand 8 Market Stimulation 9 High Air Fares 9 Passenger Forecast 11 Action Plan 12 Action Plan Elements 12 Marketing Program 12 Marketing and Media Selection 13 Advance Ticket Sales Program (Travel Bank) 14 Cost Offset Program 14 Revenue Guarantee 14 Total Support Package 15 Innovative Marketing Program 16 Economic Stimulus 16 Performance Measurement and Schedule 17 Performance Measurement 17 Schedule 18 Community Support 19 Assurances 20 Frontier Airlines Letter of Support 21 Allegiant Air Letter of Support 22 Additional Letters of Support 24 Small Community Air Service Development Program TOC i

6 Summary of Proposal New Grant Proposal PROPOSAL OF CASPER/NATRONA COUNTY INTERNATIONAL AIRPORT The Casper/Natrona County International Airport (CPR) suffers from very high air fares, particularly to Denver. Since 2007 the average one way fare without taxes and fees for the four year period has been approximately $ for a market that is only 230 miles away. This average fare resulted in a yield of $1.07 per mile, three times the 34 cent per mile U.S. average for markets under 500 miles. Meetings and discussions have been held over the past four years with United Airlines, the only airline providing service in the Casper-Denver market. We have asked United to lower the local fare in the Casper-Denver market back to the fare levels experienced in the period from 1990 to 2005 which resulted in an average fare of approximately $115 one way without taxes and fees, or an average rate of $.50 per mile, still higher than the U.S. average. These meetings and discussions have not been successful to date. These high fares are causing many air travelers to make a four hour drive to Denver to do business, participate in leisure activities, or in many cases to fly to beyond destinations. A leakage analysis developed by Sabre Airline Solutions in 2010 indicated that the Casper/Natrona County International Airport is only retaining 23% of the Casper-Denver local passenger and that Casper is only retaining 45% of all the Casper area passengers that travel by air. United did upgrade their flights from 30 seat EMB-120 turbo prop aircraft and 37 seat DH8-200 turbo prop aircraft to 50 seat CRJ-200 jet aircraft, but they did not lower the fares to reflect the economic efficiencies of this change of aircraft. Casper/Natrona County International Airport and the supporters of this proposal believe that the only way that the fares will be lowered to a reasonable level to meet the communities air service demand is by instituting competitive air service by a low cost carrier (LCC) that will charge lower fares. In so doing, we are seeking a grant to support the establishment of new air service to Denver by Frontier Airlines. Initial service will be one round trip flight per day with E-190 jet aircraft. Frontier is well known for having fares that are lower than the fares of United Airlines and also known for stimulating passenger demand when they enter a market. The high airfares are negatively impacting the passenger enplanements at Casper/Natrona County International Airport. The leakage analysis developed by Sabre Airline Solutions shows that the local market is generating passengers per day at CPR with passengers per day being leaked to other airports. Frontier Airlines has air service to almost all of Casper/Natrona County International Airport s top markets and this combination of airline and airport should be a great partnership. Frontier Airlines has indicated that it is interested in providing air service between Casper and Denver if the sponsor can provide a support package to help offset start up cost and fund a marketing program to support the new air service. The Airline has indicated that it could start service with one daily round trip flight with 99 seat E-190 aircraft in Small Community Air Service Development Program Page 1

7 Casper/Natrona County International Airport is also seeking grant funds to support new air service to Phoenix/Mesa Airport by Allegiant Airlines and existing airline air service to Las Vegas, Salt Lake City, and Denver with the implementation of a local marketing and advertising program. Allegiant Airlines has indicated that it would like another marketing and advertising campaign similar to the 2008 campaign to help support new nonstop service to Phoenix/Mesa Airport. Starting in 2008, the Airport and State contributed over $80,000 for marketing and advertising for new service by Allegiant Airlines to Las Vegas and promoting the regional jet service to Denver and Salt Lake City by the other airlines. The key to this new marketing and advertising program was that it focused on an enlarged catchment area to include communities over two hours from Casper/Natrona County International Airport. This campaign was extremely successful and the Airport would like to do this again in conjunction with the new, low fare air service to Denver. Casper/Natrona County International Airport is requesting a grant of $500,000, with a local and state cash contribution of $90,000, an in-kind contribution of $75,480 plus a $150,000 commitment for tickets for a total incentive package of $815,480. With the receipt of the Small Community Air Service Development grant funds, our airline assistance package will have sufficient resources to provide a strong marketing program for the new air service and provide a revenue guarantee and cost offset for the airline during the initial months of operation. Previous Grant Casper/Natrona County International Airport received a grant under the Small Community Air Service Development program jointly with Gillette Wyoming in The grant was $500,000 and was intended to support new air service between Casper/Natrona County International Airport, Gillette-Campbell County Airport, and Billings Montana by providing funds to lease a B-1900 aircraft for Big Sky Airlines. The airline had a small community hub in Billings and it was thought that Casper and Gillette could be contributors to the Big Sky operations at Billings. Air service was started in 2003 but the passenger demand was minimal and the airline ceased operations after a year in Casper and Gillette and returned the aircraft to the leasing company. Our Community Team Our community team includes Natrona County, the City of Casper, the Casper Area Convention and Visitors Bureau, the Casper Area Chamber of Commerce, the Casper Area Economic Development Alliance, and will be led by the Casper/Natrona County International Airport. This group has been able to develop incentive programs that have led to new nonstop jet service to Minneapolis, Chicago, and Las Vegas. Our Airport The Casper/Natrona County International Airport meets all FAA and TSA requirements for the type of service we are seeking. The Airport has the ticket counter and gate space to conveniently handle the current service of Allegiant, Delta Connection, United Express, and new service by Frontier to Denver. Small Community Air Service Development Program Page 2

8 Plan Is Consistent With DOT Priorities This project to add service to Denver is consistent with the priorities established by the Secretary of Transportation. The new air service will not detract from the current air service and should help create a stronger awareness of the Casper/Natrona County International Airport. The Community and the Airport will work with Frontier Airlines to provide low fares in the Casper- Denver market by offering a support package to advertise the new service, a revenue guarantee and cost offset program to offset initial losses, and establish a ticket bank to support passenger use. Additionally, the Community and Airport will work with Allegiant Airlines to advertise the new Phoenix/Mesa service should that service be established. Finally, advertising and marketing funds will also be utilized to promote existing air service to Las Vegas, Denver, and Salt Lake City. The proposed Denver service will benefit local businesses, education institutions, the general public, and especially the leisure traveler during this economic recession and in the future. It will also get the air traveler out to their car and back onto an airplane for trips to Denver and beyond. Unique Circumstances Low fare service to Denver will recapture the leaked passengers and expand the reach of Casper/Natrona County International Airport. As an example, the new low fare air service initiated by Allegiant Airlines to Las Vegas in 2008 proved that Casper/Natrona County International Airport can be the airport of choice for almost half of the people in the state of Wyoming. Prior to the Allegiant service, there were 5,770 annual passengers in the Casper-Las Vegas market. Allegiant Airlines service expanded this market to 29,200 passengers. These passengers were from counties and cities over 150 miles from Casper. In fact, over 79% of the Las Vegas passengers from the twelve county catchment area now use Casper/Natrona County International Airport as their originating point to Las Vegas. Only 22.7% of the passengers from these twelve counties use Casper/Natrona County International Airport for flights to Denver. Air Service Background The Casper/Natrona County International Airport (CPR) The Casper/Natrona County International Airport meets all FAA and TSA requirements for the type of service we are seeking. It is the primary commercial airport for jet airline service for approximately half of the State of Wyoming. It is estimated that the population of the Airport catchment area is over 254,000. Casper/Natrona County Airport has traditionally provided the best link to the National Transportation System for the residents of the many small, rural communities throughout the central part of Wyoming. The economies of the region continue to grow. Population is increasing, retail sales are up, and new companies are moving into the area and demand for airline service continues to be high. The Casper/Natrona County International Airport is a full service Airport. The passenger terminal has space to accommodate six airlines, and currently has three rental car companies and Small Community Air Service Development Program Page 3

9 other customer amenities. Convenient, reasonably-priced automobile parking is available on- Airport. The Airport is seven miles northwest of downtown Casper and is owned and operated by Natrona County. The primary runway at the Airport is 10,165 feet long and 150 feet wide. Tenants and vendors at the Airport provide a full range of aviation services including fuel service, student instruction, charter flights, aircraft and engine repair, and aircraft storage. Air Service History The Airport passed from military control to ownership by Natrona County in The Airport is governed by a five member Board of Trustees that are each appointed for a five year term. The Airport has had scheduled air service since the early 1950 s. Prior to the Airline Deregulation Act of 1978, the Casper/Natrona County International Airport had frequent service by Western Airlines to Denver, Salt Lake City, Minneapolis, and through points in Montana to Calgary, Canada with B-737 aircraft. The peak year for enplaned passengers for CPR was 1979 with 142,079. In the 1990 s, service at the Airport was transferred from the mainline air carriers to the regional airline partners of Delta Air Lines and United Airlines. Flights were provided with commuter turboprop aircraft. Northwest Air Link established service to Minneapolis in the summer of 2004 with 50 seat regional jets. Allegiant Airlines started service to Las Vegas in the fall of 2008 with MD-83 aircraft. The flights to Minneapolis were eliminated when Delta acquired Northwest in early Flights declined but seats remained somewhat constant due to United Express replacing turbo prop aircraft with regional jet aircraft. HISTORICAL NONSTOP SERVICE AT CPR Year Nonstop Markets Weekly Flights Weekly Seats 2000 DEN, SLC 83 2, DEN, SLC 89 2, DEN, SLC 68 2, DEN, SLC 76 2, DEN, SLC, MSP 77 2, DEN, SLC, MSP 88 2, DEN, SLC, MSP 69 2, DEN, SLC, MSP 76 2, DEN, SLC, MSP, ORD, LAS 77 3, DEN, SLC, LAS 43 2, DEN, SLC, LAS 42 2, DEN, SLC, LAS 43 2,030 Source: Official Airline Guide, summer issue Since 1995, the Airport has experienced a growth in passengers. For the fifteen year period, the Airport saw enplaned passengers increase 42%. There was a drop in passengers in 2002 after the impact of 9/11, but growth thereafter. Passenger enplanements leveled off with the switchover to regional jet aircraft where the airline reduced flights but added larger aircraft. The Small Community Air Service Development Program Page 4

10 major contributor to recent growth in enplaned passengers is due to the addition of Allegiant Airlines service to Las Vegas. CASPER/NATRONA COUNTY INTERNATIONAL AIRPORT PASSENGERS 100,000 80,000 60,000 40,000 Enplaned Passengers 20, Source: Casper/Natrona County International Airport Data Current Air Service As of August 2011, Casper/Natrona County International Airport had nonstop service to Denver, Las Vegas, and Salt Lake City. The service to Denver is provided by SkyWest Airlines operating as United Express. There are 25 nonstop flights per week with 50 seat CRJ-200 aircraft. Allegiant Airlines operates two flights per week to Las Vegas with 150 seat MD-83 aircraft. The service to Salt Lake City is provided by SkyWest Airlines operating as Delta Connection. There are 16 flights per week with 30 seat EMB-120 aircraft. Small Community Air Service Development Program Page 5

11 CASPER AIR SERVICE AUGUST 2011 Market Airline Depart Arrive Aircraft Frequency CPR-DEN United Express 6:07 am 7:16 am CRJ x Sa. United Express 6:24 am 7:30 am CRJ Sa. United Express 10:21 am 11:20 am CRJ x Sa., Su. United Express 12:44 pm 1:45 pm CRJ Daily United Express 5:03 pm 6:02 pm CRJ Daily DEN-CPR United Express 8:57 am 9:57 am CRJ x Sa., Su. United Express 11:22 am 12:21 pm CRJ Daily United Express 3:32 pm 4:37 pm CRJ Daily United Express 6:45 pm 7:46 pm CRJ Sa United Express 10:23 pm 11:31 pm CRJ x Sa. CPR-LAS Allegiant 6:05 pm 7:00 pm MD-83 Mo, Fr. LAS-CPR Allegiant 2:35 pm 5:25 pm MD-83 Mo, Fr. CPR-SLC Delta Connection 6:00 am 7:48 am EM-120 Daily Delta Connection 11:30 am 1:15 pm EM-120 Sa, Su. Delta Connection 12:50 pm 2:35 pm EM-120 x Sa, Su Delta Connection 5:32 pm 7:20 pm EM-120 Sa, Su SLC-CPR Delta Connection 9:40 am 11:15 am EM-120 Sa, Su Delta Connection 11:00 am 12:35 pm EM-120 x Sa, Su Delta Connection 3:20 pm 4:55 pm EM-120 Sa, Su Delta Connection 9:55 pm 11:30 pm EM-120 Daily Source: Official Airline Guide, August 2011 Casper/Natrona County Community Profile The Casper/Natrona County community is a growing, diverse area that needs and depends upon airline service to connect its populace to the nation s air transportation system and to assist others who serve and visit the area from throughout the United States and abroad. Casper is the number one market for the state of Wyoming. The Airport catchment area now covers almost half of the state s residents. The Casper/Natrona County area has a diverse group of employers, a low cost of living, and a relatively high median household income. The main industries are in retail/wholesale trade, services, natural resources, and medical. Oil and gas plays a prominent role in the community. In 2010, Casper was ranked as the highest rated family-friendly small city in the West and ranked eighth overall in the nation. In 2010 Wyoming ranked third in business tax friendly climate. Casper also topped the list of happiest people in The June 2011 unemployment rate was reported as 5.9%, down from 7.7% in 2009, and significantly lower than the national average of 9.2%. Small Community Air Service Development Program Page 6

12 NATRONA COUNTY HAS A DIVERSE ECONOMY Sector % of Employment Retail/wholesale Trade 19.7% Government 14.5% Services 14.3% Health Care 12.7% Hospitality/entertainment 10.9% Mining 8.8% Construction 7.7% Finance/real estate 5.1% Manufacturing 4.7% Transportation 2.3% Source: Casper Area Economic Development Alliance The business market is strong and diverse in Natrona County. Community leaders will continue to support existing employers while attracting new businesses that will contribute to the economic well being of the area. The major employers have indicated that they will use the air service to Denver if there is a reasonable fare. MAJOR EMPLOYERS IN THE AREA Casper College City of Casper Hilltop National Bank Mountain View Regional Hospital Natrona County Natrona County School District Poplar Living Center Sheppard of the Valley Care Center True Companies U.S. Postal Service Walmart Westech/WOTCO Wyoming Behavioral Institute Wyoming Machinery Wyoming Medical Center It should also be noted that Casper is the media and communications center for the state of Wyoming. There are nine television stations in Wyoming with five of them based in Casper (all of the networks plus PBS). There are eight radio stations based in Casper. The largest newspaper in the state is the Casper Star Tribune. Economic Indicators In 2010, the Casper/Natrona County International Airport total catchment area had a population of approximately 254,260 residents with 113,370 housing units. Total retail sales for the Airport primary catchment area was approximately $51,632 per household. The effective buying income for the Airport primary market area was $49,900 per household. Approximately 40% of the area households have an annual buying income in excess of $50,000. The economic indicators for the Airport market area are about the same as the average for the state of Wyoming. Small Community Air Service Development Program Page 7

13 Unique Air Travel Problems of the Market Area Due to the high airfares of United Airlines to Denver and beyond, a majority of passengers are driving to Denver as their final destination and a significant number originating their flights at DEN to take advantage of the lower fares of Frontier Airlines and Southwest Airlines. Most all of the other airports in Wyoming have air service to Denver by Great Lakes Airlines. Even though Great Lakes operates smaller and less efficient aircraft, the fares are mostly lower than the fares from Casper to Denver. Passenger Market for Casper Local Market Demand An analysis of passenger bookings was developed by Sabre Airline Solutions for the twelve months ending June The analysis came up with 203 outbound passenger bookings per day from the Casper/Natrona County International Airport primary catchment area. This equated to 74,000 outbound passengers and total 296,000 origin and destination passengers. There were passengers per day for the total catchment area. This equates to 773,000 total origin and destination passengers for the total catchment area. Even though there are 12 airports in the total catchment area, the low fare service by Allegiant Airlines to Las Vegas from Casper/Natrona County International Airport has been responsible for capturing 65.5 outbound passengers per day or 79% of the total passengers from the primary and secondary catchment areas. On the other hand, the high fare service of United Airlines to Denver only captured 23% share of the total market. This indicates a leakage rate of 77%. CHOICE OF AIRPORT FOR CPR AREA PASSENGERS Small Community Air Service Development Program Page 8

14 The Sabre Study presented the passenger bookings from the Global Distribution System for the total Casper/Natrona County International Airport total catchment area for a twelve-month period. Approximately 239 passengers per day originated at Casper/Natrona County International Airport and approximately 290 passengers per day went to other airports to originate their trips. Overall, Casper was able to retain 45% of the total passenger from its total catchment area. Market Stimulation TOP CPR DESTINATIONS FROM SABRE STUDY Annual Outbound Market PDEW Passengers LAS* ,222 PHX ,935 DEN* ,752 MCO ,840 LAX ,511 IAH ,037 ATL ,855 SLC* ,380 SEA ,198 SAN ,650 DTW 9.5 3,468 MCI 9.0 3,285 DFW 8.9 3,249 SFO 8.8 3,212 DCA 8.1 2,956 * Current Markets Served Source: Sabre MIDT data YE June 2010 The air service by Allegiant Airlines to Las Vegas provides an excellent example of what low fares will do for the Casper market. In 2007, prior to the entry of Allegiant Airlines, the average one way fare between Casper and Las Vegas was $ In 2009, after the entry of Allegiant Airlines, the average one way fare between Casper and Las Vegas was lowered to $79.78, a reduction of 61.5%. It is interesting to note that this new low fare air service was able to increase the passengers in the Casper-Las Vegas market 406% (2007 vs. 2009). High Air Fares As mentioned earlier, the Casper air traveler is paying very high fares for travel to Denver and beyond. The average fare between Casper and Denver since 2006 has ranged from $.96 per mile to $1.21. The average fare for markets in the mile range in the United States in 2010 was 34.2 cents per mile. Prior to that time, the average fare was around $.49 from 1990 to Both now and prior to 2006, Casper had a fare level that greatly exceeded the national average. The high fares have forced many customers to drive to Denver. The table on the next page shows that as fares have doubled, the passenger demand has dropped more than half. Small Community Air Service Development Program Page 9

15 PASSENGER HAVE DECLINED WHILE FARES HAVE INCREASED IN THE CASPER-DENVER MARKET Local O&D Average Year Passengers Fare Yield ,500 $ $ , , , , , , , , Source: U.S. DOT O&D data When compared to other regional markets from Denver, the Denver-Casper fare is two to three times higher. Most of these markets are exclusive United Airlines markets and are flown with regional jet aircraft so the disparity makes no sense. THE CASPER-DENVER FARE IS THE HIGHEST FARE AND YIELD IN THE REGION Average Market One way Fare Miles Yield DEN-CPR $ $.991 DEN-BZN DEN-COD DEN-FAR DEN-JAC DEN-LNK DEN-RAP DEN-RKS DEN-FSD Source: DOT O&D and Fare data, 2010 The high fares continue today. A survey of current fares listed on United Airlines website for travel to Denver from Casper in August shows that travel on one day notice results in a one way fare without tax of $611. Booking one week in advance results in a one way fare without tax of $ This is the same fare for booking 14 days in advance. If you book 21 days in advance, the one way fare without tax is $219. Booking one month in advance results in a one way fare without tax of $ With yields ranging from $1.35 to $2.65 per mile travelers are driving four hours to Denver. Small Community Air Service Development Program Page 10

16 As a comparison, Great Lakes Airlines operates routes from Denver to markets in Wyoming and Colorado with rates 30% to 50% of the rates in Casper. THE GREAT LAKES AIRLINES FARES IN THE REGION ARE MUCH LOWER THAN THE CASPER-DENVER FARES Average Market One way Fare Miles Yield DEN-CPR $ $.991 DEN-ALS DEN-CEZ DEN-DRO DEN-FMN DEN-GCC DEN-LAR DEN-PUB DEN-RIW DEN-SHR Source: DOT O&D and Fare data, 2010 The addition of air service by Frontier Airlines in the Casper-Denver market will lower the fares and boost passenger demand. Frontier is a low cost carrier and a low fare carrier and has the ability to stimulate passenger demand with lower fares. Five markets in the Mountain West region served by Frontier Airlines exhibit fare levels 50% to 75% lower than what the current fares are in the Casper-Denver market. AVERAGE FARES IN MARKETS IN THE REGION SERVED BY FRONTIER Average Market One way Fare Miles Yield DEN-ABQ $ $.228 DEN-BIL DEN-BZN DEN-DRO DEN-OMA Source: DOT O&D and Fare data, 2010 If Frontier Airlines reduces the average fare to an attractive rate of $99 each way, the market will still have a rate per mile or yield of $.43. This is an economically viable fare level and should stimulate passenger demand in the local market and for beyond travel. Passenger Forecast It was previously mentioned that the Sabre leakage analysis indicated that Casper/Natrona County International Airport was only capturing approximately 23% of the total passengers in Small Community Air Service Development Program Page 11

17 the catchment area that were booking travel to Denver or from Denver to a beyond point. In total, the Casper/Natrona County International Airport captured approximately 45% of the total passengers in the catchment area to all destinations. On the other hand, the low fare service by Allegiant to Las Vegas is capturing 93% of the passengers in the Casper-Las Vegas market. Over the past five years, the local Casper-Denver passengers have averaged 6,600 per year. Total onboard passengers have been approximately 100,000 per year. There will be stimulation for the new low fare service and the recapture of the leaked passengers. Taking the stimulation and leakage into consideration, it is forecasted that there are approximately 47,300 passengers available for the low fare service by Frontier Airlines, 16,300 local passengers and 31,000 beyond passengers. Based on one round trip flight per day, the estimated load factor is 65.4%. PASSENGER FORECAST FOR FRONTIER AIRLINES IN THE CASPER-DENVER MARKET Local Beyond Total Segment Passengers Passengers Passengers Current 6,600 93, ,000 Leaked 22, , ,000 Total 28, , ,000 Capture Adjustment 80% 60% Available Passengers 22, , ,300 United Passengers 6,600 93, ,000 Frontier Passengers 16,300 31,000 47,300 Frontier Seats 72,270 Frontier Load Factor 65.4% Action Plan Action Plan Elements The goal of the Action Plan is to address issues associated with the proposed air service that are critical to the long-term success of that service. In this regard, this action plan will address three areas for Casper/Natrona County International Airport: (1) funding for marketing, advertising and promotion for the new air service and for existing air service; (2) funding to offset the start up cost of new air service by Frontier Airlines at CPR; and (3) funding for a revenue guarantee for initial air service losses by Frontier Airlines in the CPR-DEN market. Marketing Program We believe that the success of the previous grants under the Small Community Air Service Development Program was due to strong marketing and advertising programs developed by the sponsors and the airlines. For this project, we are allocating $234,240 to advertising and marketing for the new air service by Frontier Airlines to Denver and by Allegiant Airlines to Phoenix and $50,000 for the existing air service. If we include advanced ticket sales, then the Small Community Air Service Development Program Page 12

18 marketing, advertising, public relations, and sales accounts for $434,240 or 53% of the total project. The advertising, promotions, and public relations program are all part of a marketing plan to support new air service. The target market for Casper air service is a combination of local business, leisure travel, and visiting friends and relatives in the Casper market area. The marketing in the local area will include advertising, promotions, and public relations in the twelve county region served by CPR. These mediums will be combined in a campaign to introduce and promote the new air service and promote existing air service to Las Vegas, Salt Lake City, and Denver. The strong marketing and advertising program instituted by the community in the Casper market will allow Frontier Airlines to concentrate its marketing and advertising funds in the Denver market. The most effective way to contact the new customer is by targeting: (1) the traveler; (2) the travel agent; (3) the corporate travel coordinator; (4) the business associations, and (5) social media. All of these targets can be approached utilizing the same advertising media television, radio, newspaper, magazine, direct mail, , internet, and billboards. Marketing and Media Selection The market in the Casper/Natrona County International Airport total catchment area can best be reached by using television, newspaper, radio, billboards, direct mail, online advertising via the internet, and social media. Upon review of the local medium for the market, the following is recommended. SELECTED MEDIA FOR NEW AIR SERVICE Media Type Media Selected Location Television KTWO ABC Casper KCWY NBC Casper KGWC CBS Casper Newspaper Casper Star Tribune Casper Casper Journal Casper Radio KWYY-FM Country Casper KRNK-FM Rock Casper KQLT-FM Country Casper KZQL-FM Hits Casper KTWO-AM Talk Casper KVOC-AM Talk Casper KKTL-AM Sports Casper As can be seen, Casper is the media capital for central Wyoming. The media based in Casper will give the advertiser reach throughout the entire state. The media plan goes heavy on electronic media with a good budget for public relations, and social media. The budget listed Small Community Air Service Development Program Page 13

19 below will cover the ninety day period to start of service and for six months after the air new air service has started. ESTIMATED MARKETING AND ADVERTISING EXPENDITURES Cash In Kind Total Advertising Television $50,000 $20,000 $70,000 Newspaper $30,000 $15,000 $45,000 Radio $30,000 $10,000 $40,000 Outdoor (Billboards) $15,000 $5,000 $20,000 Production $20,000 $5,000 $25,000 Internet $10,000 $5,000 $15,000 Direct Mail $10,000 $10,000 Public Relations $25,000 $25,000 Chamber of Commerce $9,240 $9,240 Outside Marketing Services $25,000 $25,000 Total $215,000 $69,240 $284,240 Advance Ticket Sales Program (Travel Bank) The Airport will coordinate the advanced ticket sales program in cooperation with a local bank or credit union. Based on the previous programs, it is estimated that approximately $150,000 of tickets for service on Frontier Airlines will be purchased by various corporate accounts. The local Bank or Credit Union will accept deposits and issue debit cards that can be used for travel on Frontier Airlines. Allegiant Airlines targets the leisure traveler and will not need a travel bank to support new service to Phoenix/Mesa Airport. Cost Offset Program There will be a cost to Frontier Airlines for the start of new air service to Casper/Natrona County International Airport. The cost will include preparation of the facilities at the Airport, hiring and training new employees for Casper, installation of communications equipment at the Airport, and an open house to introduce the new air service. It is estimated that the cost of these activities will be approximately $25,000. Revenue Guarantee Frontier Airlines has told the Casper/Natrona County International Airport Manager that they would need a risk mitigation program that includes a revenue guarantee to cover initial operating losses. Based on the analysis of our consultants, it is believed that a $375,000 revenue guarantee should be sufficient to support the new air service. The passenger forecast on page 12 estimates 47,300 passengers per year for Frontier. This equates to approximately 130 passengers per day in each direction. It is estimated that Frontier Airlines will be able to have an average one way fare of $99 (after start up promotions). This equates to passenger revenue of $6,435 per flight or $386,100 per month for thirty round trip flights. Small Community Air Service Development Program Page 14

20 It is assumed that there will be a ramp-up of passengers during the start-up period. Load factors are estimated to be 40% for the first month and increasing to 65% by the sixth month. It is also assumed that the average fares will be lower in the first few months as a motivator for air travel. The fare for the first two months is estimated to be $69, a discount of approximately 30%. It is estimated that the average fare will increase until the average of $99 per local passenger is reached. It is also assumed that there will be through passengers on board the aircraft and the dilution for their beyond fares has been estimated to be 20%, netting a fare of $79. The expense forecast is based on the estimated cost per block hour for the Frontier E-190 aircraft flying from CPR to Denver and return. It is estimated that Frontier Airlines will fly at the same block times as the regional existing jet service. It is estimated that the market will breakeven in month six at a load factor of approximately 65%. Allegiant Airlines does not require a revenue guarantee. They already provide service at Casper to Las Vegas which has been very successful. Allegiant only requires marketing support. ESTIMATED REVENUE GUARANTEE TO COVER FRONTIER AIRLINES INTIAL OPERATING LOSSES FOR SERVICE FROM CASPER TO DENVER Month Passengers Revenue Block Hrs. Expense Profit/(Loss) One 2,370 $163, $297,000 ($133,060) Two 2,670 $204, $297,000 ($92,760) Three 2,970 $219, $297,000 ($77,220) Four 3,260 $241, $297,000 ($55,760) Five 3,560 $281, $297,000 ($15,760) Sub Total 14,830 $1,110, $1,485,000 ($374,560) Total Revenue Guarantee ($375,000) Total Support Package Combining the Small Community Air Service Development Program grant and local participation, the Casper/Natrona County International Airport will be able to offer a very complete package to support new service and help promote the existing air service. The combined incentive package will create an extremely strong marketing component, cost offset program, flight guarantee program, and a strong public/private partnership. The total package will be $815,480. Total Federal participation requested is $500,000 with the community providing $90,000 in cash, $75,480 of in-kind advertising/services, and $150,000 in a travel bank. It is estimated that $434,240 (53%) of the incentive package will be spent on advertising, marketing, and ticket sales. The sponsors will contribute 38.7% of the total incentive package and 10.2% of the total cash for the incentive package. Small Community Air Service Development Program Page 15

21 SUMMARY OF INCENTIVE PACKAGE FOR NEW AIR SERVICE Federal Local Total Flight Guarantee/ Cost Offset $375,000 $375,000 Marketing, Advertising, In-Kind $125,000 $165,480 $285,000 Pre-purchased tickets $150,000 $150,000 Total $500,000 $335,480 $815,480 Innovative Marketing Program The Airport has been successful in utilizing traditional and non-traditional advertising and marketing programs. The Airport would support additional service by a comprehensive marketing program which could/would include: Extensive exposure on the Airport s website; Extensive exposure on the Airport s Facebook; Extensive exposure on the Airport s Twitter; Chamber of Commerce blasts; Airport speaking engagements at civic and social groups; Live television and radio broadcasts; Exposure at area events; Utilization of giveaways, contests, etc.; Extensive exposure during the I Fly Casper night and advertising exposure on the Airport s dasherboard (Wyoming Cavalry IFL Football); Advertising on the Airport s outfield wall (Casper Ghosts Pioneer League Baseball). Economic Stimulus The proposed new air service will act as an economic stimulus and generate new revenue for the community and the Airport. The new service will bring passengers from Denver and points beyond and will make an economic impact to the Casper market area during this recessionary period and in the future. It is estimated that the new Frontier Airlines flight will deplane approximately 24,000 passengers in Casper. Approximately ½ will be new visitors (12,000) projected to visit Casper. Allegiant Airlines will be selling Phoenix as a destination market for the Casper air traveler. Based on the Casper-Las Vegas experience of Allegiant Airlines, approximately 80% of the total passengers originated in the Casper market area. Based on this experience, it is projected that Allegiant service will produce approximately 3,000 new visitors per year to the Casper market area. Using information derived from a recent survey developed by the Casper Area Convention and Visitors Bureau (August October, 2010) regarding average stays and average expenditures, the new service alone is projected to contribute close to $10 million to the local economy. Small Community Air Service Development Program Page 16

22 VISITOR EXPENDITURES FOR NEW AIR SERVICE Frontier Allegiant Total Estimated Visitors 12,000 3,000 15,000 Estimated Visitor Days in the area 42,000 10,500 52,500 Average Daily Expenditure $230 $230 $230 New Visitor Expenditures $9,660,000 $2,415,000 $12,075,000 The new air service will also create new jobs at the Airport and in the local hospitality and tourism industry. Based on industry averages for staffing and wages, an estimate of the number of jobs has been developed. It is estimated that the new air service will create 50 jobs in the area and an annual payroll increase of $2.2 million. Performance Measurement and Schedule Performance Measurement The support package as outlined in this application focuses on the Casper market area. The marketing, advertising, and promotional program presented herein should develop good awareness for new airline service. Passenger response can be measured by the reservations volume at the airline and by the passengers enplaned and deplaned at the Casper/Natrona County International Airport. The performance of the proposed air service will be tracked on a monthly and quarterly basis. This tracking will measure the number of passengers using the new air service and monitor the airline revenue and related incentive requirements. Monthly. The airline will provide flight segments flown, on-board passengers and gross revenue data. This data will be compared to the forecast projections to measure the performance of the program. Quarterly. The Sponsor will aggregate the year to date flight data, passenger statistics and gross revenue date. The goal is for the passengers carried and the gross revenue to exceed the projections by the sixth month. By accepting the support package as outlined, Frontier Airlines will be requested to agree to accept the support package and the joint marketing program for a period of not less than twelve months. This should be sufficient time to establish the viability of the new service. During this twelve-month period we will work with Frontier, and if they are missing their projections, then we will re-evaluate options and work with them to adjust their service and our support program in order to achieve sustainable operations. After the twelve month period has lapsed, the community and the Airport will continue to work with Frontier in supporting its air service similar to what has been done with Allegiant Airlines. Small Community Air Service Development Program Page 17

23 Schedule It is the assumption of the Casper/Natrona County International Airport that the following schedule would be employed should the grant application be successful. The Casper/Natrona County International Airport commits to the completion of the grant, if awarded, within twentyfour months of acceptance and will diligently pursue an earlier closeout. The Casper/Natrona County International Airport proposes the following timeline: PROPOSED TIMELINE Item Time Frame Estimated Date Submission of Grant Proposal August 2, 2011 Execution of Grant Agreements December 2011 Airline Negotiations two months January-February 2012 Marketing Program Commencement 90 days prior to Service March 2012 Completion 1 yr. after start of service Start of Service June 2012 Small Community Air Service Development Program Page 18

24 Community Support The following is only a partial list of some of the community agencies and organizations who have consistently supported the Casper/Natrona County International Airport and air service in the Casper area. Natrona County City of Casper Town of Edgerton Town of Midwest Casper Area Chamber of Commerce Casper Area Economic Development Alliance Casper Journal Casper Star Tribune KCWY News 13 Townsquare Media Casper Area Convention & Visitors Bureau Atlantic Aviation Casper KTWO Television Small Community Air Service Development Program Page 19

25 Assurances The Casper/Natrona County International Airport (hereinafter referred to as Sponsor ) hereby provides the U.S. Department of Transportation with the following assurances: The Sponsor will comply with all of the applicable Federal laws, regulations, executive orders, policies, guidelines, and requirements as they relate to the application, acceptance, and use of the Federal funds for this project. The Sponsor has the legal authority to apply for the Small Community Air Service Development Program grant, and to finance and carry out the proposed project; that a resolution, motion, or similar action has been duly adopted or passed as an official act of the applicant s governing body authorizing the filing of the application, including all understanding and assurances contained herein, and directing and authorizing the person identified as the official representative of the applicant to act in connection with the application and to provide such additional information as may be required. The Sponsor has access to the funds available for that portion of the project which are not to be paid by the United States government. The Sponsor has sufficient funds to assure operating and maintenance of items funded under the grant agreement, which it will own or control. The Sponsor shall keep all project accounts and records which fully disclose the amount and disposition by the recipient of the proceeds of the grant, the total cost of the project in connection with which the grant is given or used, and the amount or nature of that portion of the cost of the project supplied by other sources, and such other financial records pertinent to the project. The accounts and records shall be kept in accordance with an accounting system that will facilitate an effective audit in accordance with the Single Audit Act of The Sponsor shall make available for the purpose of audit and examination, any books, documents, papers, and records of the recipient that are pertinent to the grant. The Sponsor will execute the project in accordance with the approved program narrative contained in the project application or with the modifications similarly approved. The Sponsor will furnish such periodic reports as required pertaining to the project and activities. Small Community Air Service Development Program Page 20

26 Frontier Airline Letter of Support Small Community Air Service Development Program Page 21

27 Allegiant Air Letter of Support Small Community Air Service Development Program Page 22

28 Small Community Air Service Development Program Page 23

29 Letters of Support Small Community Air Service Development Program Page 24

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