MLB ORLANDO MELBOURNE INTERNATIONAL AIRPORT Serving Florida s Space Coast

Transcription

1 MLB ORLANDO MELBOURNE INTERNATIONAL AIRPORT Serving Florida s Space Coast Small Community Air Service Development Grant Proposal Docket DOTOST Dun & Bradstreet DUNS Number: Tax Identification Number: Two Digit Congressional District Code: FL08 May 2, 2016

2 APPLICATION UNDER SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOTOST SUMMARY INFORMATION A. PROVIDE THE LEGAL SPONSOR AND ITS DUN AND BRADSTREET (D&B) DATA UNIVERSAL NUMBERING SYSTEM (DUNS) NUMBER, INCLUDING +4, EMPLOYEE IDENTIFICATION NUMBER (EIN) OR TA ID. LEGAL SPONSOR NAME: MELBOURNE AIRPORT AUTHORITY NAME OF SIGNATORY PARTY FOR LEGAL SPONSOR: GREG DONOVAN, EECUTIVE DIRECTOR DUNS NUMBER: EIN/TA ID: B. LIST THE NAME OF THE COMMUNITY OR CONSORTIUM OF COMMUNITIES APPLYING: 1. MELBOURNE, FLORIDA C. PROVIDE THE FULL AIRPORT NAME AND 3LETTER IATA AIRPORT CODE FOR THE APPLICANT(S) AIRPORT(S) (ONLY PROVIDE CODES FOR THE AIRPORT(S) THAT ARE ACTUALLY SEEKING SERVICE). 1. ORLANDO MELBOURNE INTERNATIONAL AIRPORT (MLB) THE AIRPORT SEEKING SERVICE IS NOT LARGER THAN A SMALL HUB AIRPORT: UNDER FAA HUB CLASSIFICATIONS EFFECTIVE ON THE DATE OF SERVICE OF THE ATTACHED ORDER AS OF CALENDAR YEAR 1997 DOES THE AIRPORT SEEKING SERVICE HOLD AN AIRPORT OPERATING CERTIFICATE ISSUED BY THE FEDERAL AVIATION ADMINISTRATION UNDER 14 CFR PART 139? (IF NO, PLEASE EPLAIN WHETHER THE AIRPORT INTENDS TO APPLY FOR A CERTIFICATE OR WHETHER AN APPLICATION UNDER PART 139 IS PENDING.) Yes No (explain) D. SHOW THE DRIVING DISTANCE FROM THE APPLICANT COMMUNITY TO THE NEAREST: 1. Large hub airport: ORLANDO INTERNATIONAL AIRPORT 63 MILES 2. Medium hub airport: WEST PALM BEACH INTERNATIOINAL AIRPORT 114 MILES 3. Small hub airport: SANFORD INTERNATIONAL AIRPORT 75 MILES 4. Airport with jet service: ORLANDO INTERNATIONAL AIRPORT 63 MILES E. LIST THE 2DIGIT CONGRESSIONAL DISTRICT CODE APPLICABLE TO THE SPONSORING ORGANIZATION, AND IF A CONSORTIUM, TO EACH PARTICIPATING COMMUNITY. 1. FL08

3 F. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) Not a Consortium Interstate Consortium Intrastate Consortium Community currently receives subsidized Essential Air Service, or receives assistance under the Alternate Essential Air Service Pilot Program Community (or Consortium member) previously received a Small Community Air Service Development Program Grant If previous recipient: Provide year of grant(s): 2006; and, the text of the grant agreement section(s) setting forth the scope of the grant project: G. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES) PUBLIC PRIVATE 1. ORLANDO MELBOURNE INT L AIRPORT 1. TOURISM DEVELOPMENT COUNCIL OF BREVARD COUNTY 1a. GRANT GOALS: (CHECK ALL THAT APPLY) Launch New Carrier Secure Additional Service Upgrade Aircraft First Service New Route Service Restoration Regional Service Surface Transportation Professional Services Other (explain) 1b. GRANT GOALS: (SYNOPSIS) Concisely describe the scope of the proposed grant project. PROVIDE A REVENUE GUARANTEE TO AMERICAN AIRLINES FOR NONSTOP SERVICE FROM ORLANDO MELBOURNE INTERNATIONAL AIRPORT (MLB) TO WASHINGTON REAGAN AIRPORT (DCA).

4 2. FINANCIAL TOOLS TO BE USED: (CHECK ALL THAT APPLY) Marketing (including Advertising): promotion of the air service to the public Startup Cost Offset: offsetting expenses to assist an air service provider in setting up a new station and starting new service (for example, ticket counter reconfiguration) Revenue Guarantee: an agreement with an air service provider setting forth a minimum guaranteed profit margin, a portion of which is eligible for reimbursement by the community Recruitment of U.S. Air Carrier: air service development activities to recruit new air service, including expenses for airport marketers to meet with air service providers to make the case for new air service Fee Waivers: waiver of airport fees, such as landing fees, to encourage new air service; counted as inkind contributions only Ground Handling Fee: reimbursement of expenses for passenger, cabin, and ramp (below wing) services provided by third party ground handlers Travel Bank: travel pledges, or deposited monetary funds, from participating parties for the purchase of air travel on a U.S. air carrier, with defined procedures for the subsequent use of the pledges or the deposited funds; counted as inkind contributions only Other (explain below) I. EISTING LANDING AIDS AT LOCAL AIRPORT: Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (GPS Approach)

5 J. PROJECT COST: DO NOT ENTER TET IN SHADED AREA REMINDER: LOCAL CASH CONTRIBUTIONS MAY NOT BE PROVIDED BY AN AIR CARRIER (SEE TYPES OF CONTRIBUTIONS FOR REFERENCE). LINE DESCRIPTION SUB TOTAL TOTAL AMOUNT 1 Federal amount requested $500,000 2 State cash financial contribution $0 Local cash financial contribution 3a Airport cash funds $150,000 3b Nonairport cash funds $250,000 3 Total local cash funds (3a + 3b) $400,000 4 TOTAL CASH FUNDING (1+2+3) $900,000 InKind contribution 5a Airport InKind contribution** $41,172 5b Other InKind contribution** $50,000 5 TOTAL INKIND CONTRIBUTION (5a + 5b) $91,172 6 TOTAL PROJECT COST (4+5) $991,172 K. INKIND CONTRIBUTIONS For funds in lines 5a (Airport InKind contribution) and 5b (Other InKind contribution), please describe the source(s) of fund(s) and the value ($) of each. ORLANDO MELBOURNE INTERNATIONAL AIRPORT WILL WAIVE LANDING FEES FOR A PERIOD OF UP TO TWO YEARS FOR THE PROPOSED WASHINGTON SERVICE. BASED ON THE AIRPORT S LANDING FEE OF $1.20 PER 1,000 POUNDS, AND THE MAIMUM LANDING WEIGHT OF 47,000 POUNDS FOR THE CRJ200, THE TOTAL VALUE OF THE WAIVED LANDING FEES IS $41,172 OVER THE TWO YEAR LIFE OF THE PROPOSED INCENTIVE. THE TOURISM DEVELOPMENT COUNCIL OF BREVARD COUNTY WILL PROVIDE HOTEL ROOM NIGHTS VALUED AT UP TO $50,000 FOR EITHER FLIGHT CREW OR VACATION PACKAGING BY THE AIRLINE. L. IS THIS APPLICATION SUBJECT TO REVIEW BY AN AFFECTED STATE UNDER EECUTIVE ORDER PROCESS? a. This application was made available to the State under the Executive Order Process for review on (date). b. Program is subject to E.O , but has not been selected by the State for review. c. Program is not covered by E.O

6 M. IS THE LEAD APPLICANT OR ANY COAPPLICANTS DELINQUENT ON ANY FEDERAL DEBT? (IF YES, PROVIDE EPLANATION) No Yes (explain)

7 Table of Contents LETTER OF INTRODUCTION... 1 AMERICAN AIRLINES LETTER OF SUPPORT... 2 EECUTIVE SUMMARY... 3 Introduction and Background... 3 Previous Small Community Air Service Development Award... 3 MELBOURNE MARKET OVERVIEW... 4 Catchment Area and Population... 4 The Space Coast s Economy... 4 Economic Output... 4 Aerospace Industrial Sector... 5 Tourism... 6 Airline Capacity, Traffic and Fare Trends... 7 Capacity Trend... 7 Historical Air Service by Carrier and Market... 7 Melbourne Capacity Trend Relative to the Average Lower 48 Airport... 8 Domestic and International Traffic Trends... 9 Melbourne Domestic Traffic Trend Relative to the Average Lower 48 Airport... 9 Domestic and International Fare Trend Melbourne Versus Orlando Domestic Fare Trend Melbourne Domestic Fares versus Domestic Fares at Other Florida Airports Air Service Development Efforts Current Deficiencies in Air Service Seats per Capita, Number of Destinations and Number of Airlines Leakage to Other Airports in the Region MelbourneWashington/Baltimore Market Size Connecting Traffic beyond Washington STRATEGIC GOALS AND OBJECTIVES Potential Alternate Strategies PublicPrivate Partnership Funding Plan and Grant Request, Implementation Timeline and Monitoring Funding Plan and Grant Request Implementation Timeline Legal Sponsor and Financial Controls... 21

8 LETTER OF INTRODUCTION

9 AMERICAN AIRLINES LETTER OF SUPPORT

10 EECUTIVE SUMMARY Introduction and Background Orlando Melbourne International Airport is requesting a Small Community Air Service Development Grant in the amount of $500,000 for a minimum revenue guarantee for service to Washington Reagan Airport on American Airlines. Collectively, the three airports serving the Washington/Baltimore region generated 42 passengers per day each way (PDEW) in 2015 to and from Melbourne based on DOT data. A leakage study recently completed using yearend third quarter 2015 data estimated 215 PDEW leak from Orlando Melbourne International Airport to other airports in the region. Coupled with the 42 PDEW retained and the 215 PDEW that leak, the true market size of the MelbourneWashington/Baltimore market is estimated to be 257 PDEW. While we don t have leakage data for other U.S. airports, we can say with a high degree of certainty Melbourne is likely the largest market in the U.S. without nonstop service to at least one of the three Washington/Baltimore area airports when the leaked traffic is considered. While MelbourneWashington service would be aimed primarily at local travelers to and from Washington, Washington service on American would also complement American s existing Melbourne Charlotte service and offer logical connecting opportunities to at least 26 other airports American serves from Washington Reagan. Both airline capacity and traffic are down at Orlando Melbourne International Airport over the last 21 years since Capacity peaked in 1996 when three airlines served three destinations from Melbourne. As many as three airlines have served Melbourne to six destinations simultaneously. In 2001, Melbourne had service on Delta, Continental and Spirit to Atlanta, Cincinnati, Newark, Ft. Lauderdale, Washington Reagan and New York LaGuardia. Previous Small Community Air Service Development Award In 2006, the Melbourne Airport Authority was awarded a Small Community Air Service Development Grant in the amount of $800,000 (as described in the 2006 application), to initiate US Airways service from MLB to Charlotte Douglas International Airport (CLT) with 70seat regional jet aircraft. The current proposed project represents a new project and does not violate the Same Project limitation as described in the Notice of Order Soliciting Community Proposals. The key components of the means by which goals and objectives of the previous grant were achieved are similar in this proposal however, the previous grant provided funding for a project that has proven to be extremely successful, and the Melbourne Airport Authority believes this proposal can result in similar success. Melbourne s current air service is limited to just Atlanta and Charlotte service on Delta and American, and the proposed Washington service in this proposal will provide service to a third destination.

11 MELBOURNE MARKET OVERVIEW Catchment Area and Population As illustrated in Exhibit 1, the immediate catchment area of Orlando Melbourne International Airport includes most of Brevard County, extending from the southern border of Brevard County to just south of its northern border, along with all of Indian River County and the City of Vero Beach (to the south of Brevard County). The catchment area is relatively limited due to the proximity of other airports in the region, notably Orlando International Airport, Sanford International Airport and West Palm Beach International Airport, and by Melbourne s limited existing service. The population of the catchment area, which is also defined by the U.S. Census Bureau as the Palm BayMelbourneTitusville Metropolitan Statistical Area (MSA) was estimated at residents in 2015, an increase of 11,203 residents versus The yearoveryear increase in 2015 translates to the population increasing by 30.7 residents per day. The population of the Vero BeachSebastian Metropolitan Statistical Area was estimated at 147,919 in 2015, and increase of 3,147 residents versus Exhibit 1. Catchment Area of Orlando Melbourne International Airport. The Space Coast s Economy Economic Output Using gross metropolitan product (GMP) to measure the relative size of Melbourne s economy, the economy ranked as the 121st largest economy among all U.S. metropolitan statistical areas in 2014 and was estimated at $19.0 billion. As illustrated in Exhibit 2, Melbourne s economy was slightly smaller than the economies of metro areas such as Spokane, Reno and Ft. Wayne, and slightly larger than the

12 economies of Mobile, Sioux Falls and McAllen. In the fouryear period from 2013 to 2016, Melbourne s economy is expected to grow 14.8% to $21 billion; this compares to growth of 9.9% for all of Melbourne s peer group metro areas on the list in Exhibit 2. Exhibit 2. Metropolitan Statistical Areas Ranked by 2014 Gross Metropolitan Product ($ Billions); 25 Metropolitan Statistical Areas Ranked #105 through #129 (Source: U.S. Conference of Mayors/IHS Global Insight) Growth Rank Metropolitan Statistical Area (Actual) (Actual) (Projected) (Projected) Absolute Percent 105 Shreveport Bossier City, LA $23.6 $24.0 $23.8 $24.8 $ % 106 Chattanooga, TN GA $22.2 $22.7 $23.6 $24.7 $ % 107 Santa Rosa, CA $21.9 $23.0 $23.5 $24.6 $ % 108 Boulder, CO $21.3 $22.2 $22.7 $23.8 $ % 109 Spokane Spokane Valley, WA $21.4 $21.8 $22.6 $23.6 $ % 110 Scranton Wilkes Barre Hazleton, PA $21.2 $21.7 $22.4 $23.3 $ % 111 Augusta Richmond County, GA SC $20.8 $21.3 $22.2 $23.2 $ % 112 Provo Orem, UT $19.1 $20.4 $21.7 $23.1 $ % 113 Ann Arbor, MI $20.4 $21.1 $21.9 $23.0 $ % 114 Reno, NV $20.2 $20.9 $21.7 $22.8 $ % 115 Lansing East Lansing, MI $20.4 $21.1 $21.8 $22.6 $ % 116 Salinas, CA $20.3 $21.0 $21.6 $22.4 $ % 117 Fort Wayne, IN $19.6 $20.3 $20.9 $21.7 $ % 118 Peoria, IL $20.5 $20.4 $20.8 $21.6 $ % 119 Lakeland Winter Haven, FL $18.7 $19.5 $20.4 $21.5 $ % 120 Davenport Moline Rock Island, IA IL $19.4 $19.9 $20.3 $21.0 $ % 121 Palm Bay Melbourne Titusville, FL $18.3 $19.0 $19.8 $21.0 $ % 122 Mobile, AL $18.4 $19.1 $19.7 $20.6 $ % 123 Modesto, CA $18.1 $18.9 $19.5 $20.4 $ % 124 Youngstown Warren Boardman, OH PA $18.9 $19.0 $19.4 $20.1 $ % 125 Sioux Falls, SD $17.5 $18.2 $18.9 $19.9 $ % 126 McAllen Edinburg Mission, T $17.0 $17.7 $18.2 $19.4 $ % 127 Lincoln, NE $16.6 $17.5 $18.4 $19.3 $ % 128 Cedar Rapids, IA $17.2 $17.7 $18.2 $19.0 $ % 129 Kingsport Bristol Johnson City, TN VA $17.1 $17.5 $18.1 $18.8 $ % Metro Areas Ranked #105 through #129 $490.1 $505.9 $522.1 $546.2 $ % Aerospace Industrial Sector Dating back to the 1950s, when NASA began developing the Kennedy Space Center, the aerospace sector has been the foundation of Melbourne s economy. While NASA, the Kennedy Space Center and a few NASA contractors provided a high concentration of employment for many years, the aerospace sector is much more diverse today, and Orlando Melbourne International Airport is the geographic center for the region s aerospace employment. Within a mile of the terminal, and as illustrated in Exhibit 3, Harris Corporation, General Electric, Rockwell Collins, Northrop Grumman, C.A.I., Embraer, DRS, MIMA and L3 each have sprawling corporate campuses where thousands of workers are employed. Each of the aerospace companies with a campus near the airport, along with NASA and its contractors located in Brevard County, do significant business with the federal government and/or the U.S. military, and therefore generate significant amounts of travel to Washington, DC. Business travelers must connect in Atlanta or Charlotte when using Orlando Melbourne International Airport, but most of the time, Melbourne loses this traffic to the nonstop service available to one of the Washington area airports from Orlando International Airport.

13 Exhibit 3. Illustration of Aerospace Sector Corporate Campuses Located within Close Proximity to Orlando Melbourne International Airport. The most noteworthy corporate user of potential MelbourneWashington service will likely be Northrop Grumman. The Department of Defense recently awarded Northrop Grumman the contract to design, engineer and build the next generation stealth bomber, designated as the B21. The initial contract is for 21 aircraft with the potential for up to 200 aircraft, with the first delivery in the mid2020s. All design and engineering for the aircraft will take place at Northrop Grumman s campus located at Orlando Melbourne International Airport, and require Northrop Grumman to supplement its existing Melbourne workforce of 2,600 employees with an additional 1,800 employees. The design and engineering work will generate significant business travel to the Washington, DC, metro area, and nonstop service in the Melbourne Washington market will likely promote business trips not otherwise taken. Tourism Given Brevard County s strength in the aerospace and defense sectors, the economy of the Space Coast is much more diverse than the economies of most Florida economies, but the Space Coast is not without a strong tourism sector. Combining the attractions in the Orlando area such as Walt Disney World and Seaworld, with the attractions in Brevard County such as the Kennedy Space Center, Port Canaveral and the beaches, nearly 60 million people visited Central Florida in 2013, and 11.5 million of the 60 million visitors nearly 20% either visited attractions in Brevard County in addition to visiting Orlando area attractions, or visited the attractions in Brevard County alone without visiting an Orlando area attraction.

14 Airline Capacity, Traffic and Fare Trends Capacity Trend Over the last 21 years, Melbourne s airline capacity has trended down. As illustrated below in Exhibit 4, capacity was at its highest point in 1996 with airlines operating an average of 1,193 seats per day; in 2015, airlines operated just 707 seats per day each way at Melbourne, a decline of 40.7% or 486 seats per day each way. Capacity declined to as few as 368 seats per day each way in 2009 and increased to 588 seats per day each way in 2010 when US Airways added reinstated service to Charlotte (after a 12 year hiatus) and Delta subsequently added more capacity to Atlanta. Capacity trended up from 2010 to 2013, but has plateaued since 2012 in a narrow range. Exhibit 4. Melbourne Industry Seats per Day Each Way (DOT T100 Data) MLB Industry Seats per Day Each Way 1,250 1,155 1,193 1,062 1,122 1, , Seats per Day Each Way Historical Air Service by Carrier and Market While Melbourne s capacity was at its highest point over the last 21 years in 1996 as Exhibit 5 illustrates, seven different airlines, American, US Airways, Delta, Continental, Gulfstream, Spirit and USA 3000, have served Melbourne at one time or another between 1995 and These airlines operated service to a wide variety of destinations, including Miami, Cincinnati, Dallas/Ft. Worth, all three primary airports serving New York (LGA, EWR and JFK) and all three airports serving the Washington/Baltimore area (DCA, IAD and BWI) the target of this proposal. While there are many reasons airlines no longer serve these markets, the table in Exhibit 5 provides clear insight into the deficiency in air service at Melbourne. Over the last 21 years, only Delta s Atlanta service has operated on a continuous basis. Melbourne s current Charlotte service has operated only since 2010 after a 12year absence created when US Airways discontinued Charlotte service in 1997.

15 Exhibit 5. Melbourne Industry Seats per Day Each Way by Carrier and Destination (DOT T100 Data) Airline Destination American/US Airways CLT JA 11 MCO 25 1 MIA 44 Total Continental EWR Total Delta ATL CVG DCA DFW 7 IAD 41 JFK 97 RSW 45 Total Gulfstream TPA 9 0 Total 9 0 Spirit DCA FLL LGA Total USA 3000 BWI 3 47 Total 3 47 All Carriers/Destinations 1,155 1,193 1, , , Melbourne Capacity Trend Relative to the Average Lower 48 Airport Melbourne s capacity trend has fared much worse since 1995 years relative to the average U.S. Lower 48 airport. As shown in Exhibit 6, capacity at the average U.S. Lower 48 airport in 2015 has increased slightly (up 3%) relative to the capacity airlines operated in 1995, but Melbourne s capacity in 2015 is at just 61% of its 1995 level. Although Melbourne s capacity has increased since its low point in 2009 of 368 seats per day each way, getting back to the 1995 level would require an additional 486 seats per day each way versus the 707 seats per day each way airlines operated at MLB in Exhibit 6. Melbourne Capacity Index Versus Average Lower 48 Airport Capacity Index Relative to 1995 (DOT DB1A) Data) MLB Capacity Index Average Lower 48 Airport Capacity Index Capacity Index

16 Domestic and International Traffic Trends Like capacity, Exhibit 7 illustrates Melbourne traffic has trended down since 1995 and stood at 573 domestic, 23 international and 596 total passengers per day each way (PDEW) in Since 1995, traffic was at its highest point in 1996, with 861 total PDEW the same year capacity was at its highest point with 1,193 seats per day each way. The decline in total traffic equates to 30.8% or 265 PDEW, compared to the 40.7% decline in capacity of 486 seats per day each way. Exhibit 7. Melbourne Domestic, International and Total Passengers per Day Each Way (PDEW) (DOT DB1A Data) Domestic PDEW International PDEW Total PDEW 1, Passengers per Day Each Way Melbourne Domestic Traffic Trend Relative to the Average Lower 48 Airport In 2015, Melbourne domestic traffic was down to just 76% of its 1995 level, while domestic traffic at the average Lower 48 airport was up 36% over the same period, as illustrated in Exhibit 8. In fact, Melbourne only generated traffic above its 1995 level in 1996 and 1997 (with a decline from 1996 to 1997) and remained below the 1995 level in every year after While traffic at the average Lower 48 airport experienced yearoveryear declines beginning in 2001 and again beginning in 2008, traffic at the average Lower 48 airport has never declined below the 1995 level and increased to an alltime high in 2015.

17 Exhibit 8. Melbourne Domestic Traffic Index Versus Average Lower 48 Airport Domestic Traffic Index Relative to 1995 (DOT DB1A Data) MLB Domestic Traffic Index Average Lower 48 Airport Traffic Index Domestic Traffic Index Domestic and International Fare Trend As illustrated in Exhibit 9, Melbourne s average domestic oneway fare stood at $180 in 2015, the fourth highest level since The average international fare stood at $728 in 2015, and the blended domestic and international fare was $201 in Exhibit 9. Melbourne Average Domestic, International and Blended One Way Fare (DOT DB1A Data) Domestic OneWay Fare International OneWay Fare Domestic + International OneWay Fare $1,000 $800 $841 $793 $765 $761 $744 $730 $732 $728 Average OneWay Fare $600 $400 $200 $644 $606 $587 $564 $576 $580 $561 $526 $522 $506 $533 $463 $473 $204 $216 $216 $203 $163 $154 $155 $158 $158 $168 $163 $167 $169 $169 $172 $183 $191 $200 $208 $201 $145 $181 $191 $179 $171 $152 $141 $141 $142 $144 $151 $146 $151 $151 $147 $151 $160 $166 $173 $183 $180 $131 $0

18 Melbourne Versus Orlando Domestic Fare Trend 71.5% of the traffic generated in Brevard and Indian River County leaks to Orlando International Airport and Orlando s average domestic fare has always been lower than Melbourne s average domestic fare. As illustrated in Exhibit 10, although Melbourne s average domestic fare declined 1.8% versus 2014 to $180 in 2015, the average fare at Orlando International Airport declined to $151 or 5.8% relative to Orlando s rate of decline was 3.2 times greater than Melbourne s rate of decline. Exhibit 10. Melbourne Average Domestic OneWay Fare Versus Orlando Average Domestic OneWay Fare (DOT DB1A Data) Melbourne Domestic OneWay Fare Orlando Domestic OneWay Fare Average OneWay Fare $200 $175 $150 $125 $100 $75 $50 $191 $181 $183 $179 $180 $171 $173 $166 $160 $152 $151 $141 $141 $142 $144 $146 $151 $151 $151 $147 $160 $131 $146 $151 $151 $139 $130 $129 $126 $119 $121 $122 $123 $123 $119 $114 $115 $115 $117 $111 $111 $112 $25 $0 Melbourne Domestic Fares versus Domestic Fares at Other Florida Airports Melbourne s average domestic fare is higher than the average domestic fare at the average airport in Florida. Melbourne s average domestic fare of $180 in 2015 exceeded the average domestic fare of $157 at the average Florida airport. As illustrated in Exhibit 11, Melbourne s average domestic fare was higher than the average domestic fare at airports such as West Palm Beach, Ft. Myers, Tampa, Orlando and Ft. Lauderdale. Among the largest airports in Florida, only Miami and Jacksonville had a higher average domestic fare than Melbourne s average domestic fare in 2015

19 Exhibit 11. Average Domestic Fare at Orlando Melbourne International Airport Versus Other Airports in Florida with at Least 100, 000 Domestic O&D Passengers Full Year 2015 (DB1A data) $250 Average Domestic OneWay Fare $200 $150 $100 $50 $245 $237 $227 $222 $210 $193 $188 $184 $183 $182 $180 $169 $162 $157 $152 $151 $142 $87 $81 $72 $71 $0 Air Service Development Efforts Orlando Melbourne International Airport is actively seeking new air service and has met with each of these airlines at least once over the last year: Southwest and United (as well as several smaller airlines). Allegiant, American, Delta, Frontier, JetBlue, Silver, Since May 2015, Orlando Melbourne International Airport has attended four major air service development conferences to present business cases for new service at Melbourne: Jumpstart (Seattle) June 2015 Sixel Airports Conference (Northwest Arkansas) October 2015 Routes Americas (San Juan) February 2016 Sixel Airports Conference (Tallahassee) April 2016 In addition to these conferences, and also since May 2015, the Airport has met with airlines at three airline headquarters locations. One meeting, with Porter Airlines in Toronto, resulted in Porter initiating nonstop weekly seasonal service between December 2015 and April 2016 from Melbourne to Toronto. Porter has published schedules to reinstate the service for the winter/spring 2016/2017 season. Current Deficiencies in Air Service Seats per Capita, Number of Destinations and Number of Airlines Calculating the number of scheduled airline seats per capita (based on U.S. Census Bureau metro area population estimates) and comparing this metric to communities with a similar number of residents is an objective method of comparing the quality of a community s air service.

20 The 2015 population of the Palm BayMelbourneTitusville Metropolitan Statistical Area (MSA) was 568,088 residents based on the latest U.S. Census Bureau estimate. To compare the quality of Melbourne s air service with the quality of air service in communities of similar populations, we evaluated all MSAs within +/ 100,000 residents of Melbourne s population. The smallest MSA included in the analysis is Lansing, Michigan, with a population of 472,276 residents, and the largest MSA included in the analysis is Syracuse, New York, with a population of 660,458 residents. As shown in Exhibit 12, a total of 25 metro areas fit the criteria of +/ 100,000 residents of Melbourne s population. Dividing the number of scheduled departing seats for all carriers in the 12month period between September 2015 and August 2016, for each metro area with commercial air service by the 2015 MSA population, results in the seats per capita metric. As shown in Exhibit 12, airlines serving Melbourne have published.48 seats per capita in the 12month period studied, and the quality of Melbourne s air service ranks #17 among the 25 metro areas included in the analysis. With.48 departing seats per capita, Melbourne has less than onehalf of one seat per resident, while the community with the most seats per capita, Spokane, Washington, has 3.5 seats per capita, and the community with the second most seats per capita, Des Moines, Iowa, has 2.3 seats per capita. The average metro area in the analysis has 1.0 seats per capita. With yearround service to only Atlanta and Charlotte, Melbourne has yearround service to fewer destinations than most metro areas with a similar population (Melbourne has lessthandaily seasonal winter/spring service to Portland, Maine and Toronto). While Lakeland, Provo and Modesto have no air service, only Augusta and Lancaster also have yearround service to only two destinations. Among the 25 metro areas included in the analysis, the average metro area has service to eight destinations versus the two yearround destinations served from Melbourne. Most metro areas with a similar population also have service by more than two airlines. Only Youngstown and Lancaster have service on just one airline, while Lakeland, Provo and Modesto have no air service. The average metro area included in the analysis has service on four airlines.

21 Exhibit MSA Population, September 2015 through August 2016 Scheduled Seats, Scheduled Seats per Capita, Number of Destinations and Number of Airlines in MSAs with Populations within (+/) 100,000 Residents of Melbourne s MSA Population. Sep 2015Aug 2016 Scheduled Seats (Departing) Scheduled Seats per Resident Airport 2015 MSA Number of Number of Rank Metro Area Code Population Destinations* Airlines* 1 Spokane, WA GEG 547,824 1,930, Des Moines, IA DSM 622,899 1,457, Pensacola, FL PNS 478, , Portland, ME PWM 526,295 1,047, Syracuse, NY SYR 660,458 1,236, Northwest Arkansas, AR NA 513, , Madison, WI MSN 641,385 1,104, Lexington, KY LE 500, , Wichita, KS ICT 644, , Harrisburg, PA MDT 565, , Jackson, MS JAN 578, , Chattanooga, GA CHA 547, , Daytona Beach FL DAB 623, , Lafayette, LA LFT 490, , Augusta, GA AGS 590, , Scranton/WilkesBarre, PA AVP 558, , Melbourne, FL MLB 568, , Lansing, MI LAN 472, , Santa Rosa, CA STS 502, , Toledo, OH TOL 605, , Youngstown, OH YNG 549,885 61, Lancaster, PA LNS 536,624 17, Lakeland, FL LAL 650, Provo, UT PVO 585, Modesto, CA MOD 538, Averages 563, , * Includes service to seasonal destinations and service by airlines operating on a seasonal basis. In MLB's case, Toronto is operated on a seasonal basis by Porter Airlines and Portland, ME is operated on a seasonal basis by Elite Airways. Leakage to Other Airports in the Region The deficiencies in Melbourne s air service are apparent based on a leakage study completed in February 2016 using yearend third quarter 2015 data. The catchment area of Orlando Melbourne International Airport generates and estimated 4,720 passengers per day each way, or more than 3.4 million O&Ds on an annual basis, but only 12.5% of the traffic generated in the catchment area is captured at Orlando Melbourne International Airport. 71.5% of the traffic or 3,375 passengers per day each way leak to Orlando International Airport. The airports in Sanford (5.1% / 241 PDEW), Miami (4.4% / 208 PDEW), West Palm Beach (3.4% / 163 PDEW) and Ft. Lauderdale (3.0% / 141 PDEW) capture the remainder of the traffic (see Exhibits 13 and 14).

22 Exhibit 13: Share of Traffic Captured by Airport of the Traffic Generated in the Catchment Area of Orlando Melbourne International Airport (YearEnd Third Quarter 2015 Data) West Palm Beach 3.4% Ft. Lauderdale 3.0% Sanford 5.1% Miami 4.4% Melbourne 12.5% Orlando 71.5% Exhibit 14: Passengers per Day Each Way (PDEW), Share and Average OneWay Fare of Traffic Captured by Airport of the Traffic Generated in the Catchment Area of Orlando Melbourne International Airport (YearEnd Third Quarter 2015 Data). Domestic + International Traffic Domestic Traffic International Traffic Airport Location Total O&D Passengers PDEW Share Total O&D Passengers PDEW Share Total O&D Passengers PDEW Share Melbourne 431, % 414, % 16, % Orlando 2,464,113 3, % 2,228,007 3, % 236, % Sanford 176, % 176, % % Miami 151, % 105, % 46, % West Palm Beach 118, % 115, % 3, % Ft. Lauderdale 103, % 90, % 12, % Totals 3,445,469 4, % 3,129,792 4, % 315, % The magnitude of Melbourne s leakage can be seen below in Exhibit 15 where the blue segment of the bar represents the traffic (in terms of PDEW) captured at Orlando Melbourne International Airport and the red segment of the bar represents the traffic leaked to other airports. Exhibit 14 illustrates the actual market sizes are much larger than the market sizes indicated in the DOT DB1A data. DOT data indicates the MelbourneNew York/Newark market size was 31 PDEW in the yearend third quarter 2015, but 513 PDEW leaked to other airports (primarily to Orlando International Airport). The situation for the Washington Baltimore market is similar; DOT data shows the market size at 43 PDEW, but 215 PDEW leaked from Melbourne, making the true market size 248 PDEW large enough to support multiple nonstop flights between Melbourne and Washington.

23 Exhibit 15. DOT DB1A Melbourne Market Sizes and Leakage Study True Market Sizes (Passengers per Day Each Way; YearEnd Third Quarter 2015 Data). New York / Newark 1 31 Washington / Baltimore 2 43 Chicago 3 13 Philadelphia Atlanta Boston Los Angeles Basin 7 11 Dallas / Ft. Worth 8 10 Detroit 9 9 San Juan Minneapolis 11 6 Denver 12 6 Hartford Houston 14 6 San Francisco Bay Area 15 8 Providence 16 5 Buffalo 17 7 Pittsburgh Indianapolis 19 9 Cleveland 20 5 Milwaukee 21 6 Las Vegas Charlotte 23 St Louis Nashville Retained at MLB (DOT Data) Leaked from MLB Passengers per Day Each Way (PDEW) 513 Proposed MelbourneWashington Service MelbourneWashington/Baltimore Market Size Using DOT DB1A data and combining the market sizes for each of the three airports in the Washington/Baltimore area (DCA, IAD and BWI), the total market size stood at 42 PDEW in the yearend first quarter Washington Reagan (DCA) generated 39.5% of the traffic, Baltimore (BWI) generated approximately 39.9% of the traffic and Washington Dulles (IAD) generated approximately 20.6% of the traffic in Three airlines have operated nonstop service from Melbourne to one of the Washington area airports within the last 21 years, and the resulting traffic stimulation can be seen on the trend lines in the chart in Exhibit 16. For a period in 2000 and 2001, Spirit operated MelbourneWashington Reagan service, and the Washington Reagan market size increased to 56 PDEW (+96% versus 1999). In 2005, Delta operated MelbourneWashington Dulles service with a resulting market size of 34 PDEW (+151% vs. 2004). USA 3000 operated mainline aircraft with a lessthandaily schedule to Baltimore in 2008, and the market size increased to 42 PDEW (+250% vs. 2007). In each case, nonstop service to the respective airport stimulated the market size (at a minimum of 96% to Washington Reagan when Spirit operated service and stimulated the market size to 56 PDEW). Leakage study data indicates the true size of the MelbourneWashington market to be 248 PDEW, versus the DOT DB1A MLBDCA/IAD/BWI market size of just 43 PDEW in yearend third quarter 2015.

24 Exhibit 16. MelbourneWashington Market Size (PDEW) by Washington Area Airport (DOT DB1A Data) 100 MLBDCA PDEW MLBIAD PDEW MLBBWI PDEW MLBDCA+IAD+BWI PDEW Passengers per Day Each Way (PDEW) Connecting Traffic beyond Washington In addition to serving the local MelbourneWashington market, the proposed service would provide opportunities for American to connect traffic beyond Washington. American service to Washington Reagan would enable connections in up to 26 airports as illustrated on the map in Exhibit 17. Exhibit 17. Potential Connecting Markets American Could Serve with MelbourneWashington Reagan Service. While Washington/Baltimore is the largest market American could serve with the proposed service, the connecting markets illustrated on the map in Exhibit 17 generated a total of 135,020 O&D passengers or

25 185 PDEW in As illustrated in Exhibit 18, New York/Newark, Boston, Philadelphia and Chicago are the four largest O&D markets American could serve via its hub at Washington Reagan. Our proposed service fulfills one of the Department s primary selection criteria to provide material benefits to a broad segment of the traveling public in a large metro area such as Melbourne with limited access to the national air transportation system. Exhibit 18. Annual O&D Passengers and Passengers per Day Each Way (PDEW) in the Markets American could logically serve via Washington Reagan (DOT DB1A 2015 Data). DCA/IAD/BWI 1 LGA/JFK/EWR 2 BOS 3 PHL 4 ORD/MDW 5 BDL 6 DTW 7 PIT 8 SYR 9 ORF/PHF 10 CMH 11 ROC 12 IND 13 BUF 14 ALB 15 PVD 16 PWM 17 CVG 18 CAK 19 MHT 20 YYZ 21 HPN 22 9,950 9,260 9,010 8,490 7,670 7,610 6,910 6,650 6,500 6,210 6,070 5,050 4,210 3,140 3,120 2,870 2, , , , BTV BGR LAN ,460 30, ,000 8,000 12,000 16,000 20,000 24,000 28,000 32, Annual O&D Passengers Passengers per Day Each Way (PDEW) 42.0 STRATEGIC GOALS AND OBJECTIVES Success of the proposed use of grant funds will ultimately be whether American adds service from Melbourne to Washington Reagan. Secondary success metrics will be growth of the DB1A Washington/Baltimore market size, less Washington/Baltimore leakage to competing airports and potentially, a lower average fare in the Washington Reagan market. The Airport will work closely with American to monitor the performance of the Washington service. Even before service begins, we will communicate with the airline on a weekly basis to monitor advance bookings and weekoverweek advance bookings. Marketing and promotional activities can be adjusted if advance bookings are weak or are not booking at a rate satisfactory to the airline.

26 Exhibit 19: Project Goals and Success Metrics Project Goals Establish nonstop service from Melbourne to Washington Reagan Airport on American Growth of the Melbourne Washington/Baltimore market size Reduce leakage to other airports Lower airfares to Washington/Baltimore area airports Reduced dependence on the MRG subsidy as the market matures and eventual ability for the market to operate without the proposed subsidy Success Metric Introduction of nonstop service from Melbourne to Washington Reagan Airport on American A larger yearoveryear quarterly DB1A MLBDCA market size and overall growth in the combined DCA, BWI and IAD market size Retain higher shares of Washington/Baltimore at Orlando Melbourne International Airport and higher shares of traffic captured in 26 markets American could serve via Washington Reagan Lower yearoveryear quarterly DB1A MLBDCA, IAD and/or BWI fares Reduced MRG subsidy payments and subsidyfree service prior to the end of the project timeline. Once service begins, the Airport will rely on traffic and revenue data provided directly by American and the amount of minimum revenue guarantee reimbursements requested by the airline as indications of project success. T100 data and DB1A data will also be analyzed to compare yearoveryear market size growth on a quarterly basis. In addition, the airport will analyze leakage once the service has operated for a full quarter to determine the trend in leakage to other airports. The Airport will report its success metrics in the quarterly grant reports to the Department. Potential Alternate Strategies In the event Orlando Melbourne International Airport is not successful in securing service on American to Washington Reagan, the Airport may seek to redirect grant funding to an alternate large hub airport in the Northeast, including Washington Dulles, Baltimore, Philadelphia, New York LaGuardia, New York JFK or Newark. PublicPrivate Partnership The airport, local governments and business leaders on the Space Coast understand the importance of better air service, and the relationship between good air service and economic growth. Orlando Melbourne International Airport has partnered with the Tourism Development Council of Brevard County (TDC) for the proposed project, and the TDC has committed $250,000 in cash to be applied toward the revenue guarantee, plus inkind funding in the form of hotel room nights valued at up to $50,000 the airline can resale in vacation packages or use for crew accommodations.

27 Funding Plan and Grant Request, Implementation Timeline and Monitoring Funding Plan and Grant Request In addition to the grant funding of $500,000 requested from the Department, the Tourism Development Council of Brevard County (TDC) has pledged cash funding of $250,000 to be applied to the minimum revenue guarantee and $50,000 the airline can resale in vacation packages or use for crew accommodations. The Airport will provide cash of $150,000 for marketing the new route and estimates the value of its inkind contributions from waived landing fees at $41,172 over twoyears. The total value of cash contributions from the community and the airport is valued at $400,000 or 80% of the $500,000 requested in the form of federal SCASD funding. A summary of funding sources is shown in Exhibit 20. Exhibit 20: Summary of Sources and Types of Project Funding Funding Source DOT Grant Cash InKind Total Department of Transportation $500,000 $500,000 Tourism Development Council of Brevard County $250,000 $50,000 Total Community Funding $250,000 $50,000 $300,000 Advertising and Marketing $150,000 Landing Fee Waiver $41,172 Melbourne International Airport $150,000 $41,172 $191,172 Total Cash Value $500,000 $400,000 $900,000 Total Project Value $500,000 $400,000 $91,172 $991,172 Implementation Timeline The proposed implementation timeline for the project, illustrated in Exhibit 21, assumes the Department will award Small Community Grant Funding in July Once the award is announced, Orlando Melbourne International Airport will advise American of the grant award. Based on American s planning lead times and the need for advance bookings, an optimistic assumption for beginning new service would be in January 2017, at the earliest. The first two milestones on the Airport's timeline are to execute the grant agreement with the Department and to negotiate the minimum revenue guarantee agreement with American. Once service is announced and schedules are published, American, the Airport and the community would begin marketing the new route and working with the airline to monitor advance bookings. The Airport will continue its marketing program and continue to work with the airline to monitor the route once service begins. The Airport will submit grant status reports on a quarterly basis to the Department throughout the proposed twoyear term of the minimum revenue guarantee.

28 Exhibit 21: Proposed Project Implementation Timeline Activity/Project Milestone Legal Sponsor and Financial Controls Melbourne Airport Authority is the legal sponsor responsible for administering the program. Melbourne Airport Authority is a government entity. Estimated Dates SCASD Grant Award Announcement July 2016 Execute Grant Agreement with DOT July/August 2016 Airline Meetings/Dialogue July/August 2016 Announce Service September/October 2016 Publish Schedule September/October 2016 Market Route (PreLaunch) October 2016 through December 2016 Monitor Advance Bookings October 2016 through December 2016 Adjust Marketing Plan Based on Advance Bookings October 2016 through December 2016 Begin Service January 2017 Market Route (PostLaunch) January 2017 through December 2018 Operate Service with MRG January 2017 through December 2018 Monitor Route Performance January 2017 through December 2018 Submit Grant Status Reports to DOT Quarterly 1Q Q 2018 Melbourne Airport Authority Greg Donovan, Executive Director One Air Terminal Parkway, Suite 220 Melbourne, FL Phone: (321) As the sponsor, Melbourne Airport Authority and its governing body, the Melbourne Airport Authority Board of Directors, will be the responsible parties for all fiscal matters and the Department's reporting requirements. As a public entity, the Department can be assured that proper financial controls are in place to guarantee that the Department s Grant will be used in accordance with any subsequent agreement. The Melbourne Airport Authority Board understands that the Grant is a reimbursable grant, meaning the Airport is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request.