Chicopee, Massachusetts. Proposal under the Small Community Air Service Development Program. Docket DOT-OST

Transcription

1 CEF Westover Metropolitan Airport -- Chicopee, Massachusetts Proposal under the Small Community Air Service Development Program Docket DOT-OST Dun & Bradstreet DUNS Number: Tax Identification Number: Two-Digit Congressional District Code: 02 June 11, 2012

2 TABLE OF CONTENTS INTRODUCTORY LETTER... 4 AIRLINE LETTER OF SUPPORT EXECUTIVE SUMMARY... 6 AIR SERVICE OVERVIEW... 7 Catchment Area and Alternate Airports... 7 Westover Currently Has No Scheduled Air Service... 8 Air Service Development Efforts... 9 AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES Hartford Capacity, Domestic Traffic and Domestic Fare Trends Hartford-Targeted Florida Market Traffic and Fare Trends STRATEGIC PLAN Proposed Use of SCASD Funding Objective Grant Amendments/Alternate Strategies PROJECT IMPLEMENTATION, MONITORING AND FUNDING Public / Private Partnerships Sources and Allocations of Project Funding Project Timeline Continuation of Project Activities Beyond the Grant Timeline PROJECT MONITORING AND FINANCIAL CONTROL Project Monitoring Legal Sponsor Financial Controls APPENDIX A: REQUIRED SUMMARY INFORMATION A. Applicant Information B. Public/Private Partnerships C. Project Proposal D. Existing Landing Aids at Local Airport E. Project Cost F. In-Kind Contributions** G. Is this application subject to review by state under Executive Order Process?

3 H. Is this applicant delinquent on any federal debt?

4 June 11, 2012 The Honorable Ray LaHood Secretary of Transportation US Department of Transportation th Street SW Washington, DC Dear Secretary LaHood, Westover Metropolitan Airport is requesting a grant from the Small Community Air Service Development Program in the amount of $200,000 with a local matching share of $50,000 and airport in-kind incentives of $374,000 for a total project of $624,000. The grant will be used to fund marketing of potential new airline service. Westover Metropolitan Airport is a joint use military-civilian facility located in Chicopee/Springfield Massachusetts which is the heart of the Pioneer Valley region. The Pioneer Valley region is the second-largest metropolitan area in Massachusetts. The airport s location between Boston, Albany, Hartford, and Brattleboro makes it strategic to being in the center of New England. There are 32 Universities and Colleges with 120,000 students within one hour of Westover earning it the reputation as being the knowledge corridor. Westover is home to the United States Air Force Reserve Command s 439 th Airlift Wing. The civilian portion of the airport is owned by Westover Metropolitan Development Corporation (WMDC), a non-profit, quasi-public industrial development corporation. WMDC manages the airport operations and the four abutting industrial parks which they have developed. The industrial parks are home to more than 60 businesses employing 3,500 people and generating tax revenue. Westover Metropolitan Airport is a Part 139 classified airport including a full-service passenger terminal renovated in 2010 with Transportation Security Administration (TSA) equipment and facilities in place and ready to accommodate airline service. The airport lost daily airline service in 2008 serving Columbus, OH and Greensboro, NC as the cost of crude oil skyrocketed forcing the startup airline to shut down. The airline locally employed approximately 45 people in a variety of capacities including ticket counter, baggage handling, security, and fueling along with airport operations. The Small Community Air Service Development Program would supplement the local WMDC funds available for marketing and advertising future airline service at Westover. The return of airline service is an important function to our community and local citizens in our region. The public benefit would be to increase job opportunities and provide competitive airfare prices to the targeted southern leisure locations. Westover and the Economic Development Council of Western Massachusetts have worked closely with MassDOT on key airport infrastructure projects in the past. The Commonwealth has made substantial investments in the Passenger Terminal, Aircraft Parking Aprons, Taxiways and Aircraft Facilities and are supportive of airline service returning to Westover. Please consider Westover Metropolitan Airport s proposal in your selection process. Sincerely, Michael W. Bolton Director, Civil Aviation Westover Metropolitan Development Corporation 255 Padgette Street Chicopee, Massachusetts TEL: (413) FAX: (413)

5 AIRLINE LETTER OF SUPPORT 5

6 EXECUTIVE SUMMARY Westover Metropolitan Airport is requesting a Small Community Air Service Development (SCASD) Grant in the amount of $300,000. SCASD funding would be supplemented with community funding totaling $50,000 in cash to market and advertise daily or less-than-daily (LTD) service to one or more leisure destinations from Westover and to provide ground handling services for the proposed services. In addition providing marketing and ground handling support services, the Airport would provide incentives, in the form of fee waivers, valued at up to $308,330 over two years for the proposed service. Allegiant Air and Spirit Airlines have been identified as the carriers that would be most likely to operate the type of service to Westover is targeting. Allegiant Air specializes in connecting small airports to large leisure destinations, and already operates service from approximately 40 communities on the East Coast and Midwest to four leisure destinations in Florida and to Myrtle Beach. The airport and Allegiant have discussed service from Westover over the last two years, and Allegiant has communicated Westover is a market that fits its criteria for service to at least one of its leisure destinations in Florida. Spirit is another carrier that may be a fit for the type of service Westover is proposing. While most of Spirit's flying connects large cities with low-fare service, Spirit recently entered markets such as Latrobe, Pennsylvania; Plattsburgh, New York and Charleston, West Virginia with service to Fort Lauderdale and Myrtle Beach. Because Westover can offer low operating costs and would have the ability to assist Spirit with a comprehensive marketing program, we believe Spirit could also be a strong candidate for service. Westover Metropolitan Airport is owned and managed under a "joint use" agreement with the Department of Defense by a non-profit industrial development corporation, Westover Metropolitan Development Corporation. The only airline service to operate at Westover was brief service operated by SkyBus Airlines using Airbus A319 aircraft from July 2007 to April 2008 and ended when SkyBus discontinued all operations in April

7 AIR SERVICE OVERVIEW Catchment Area and Alternate Airports Westover Metropolitan Airport is located in the heavily populated Northeast Corridor and is located within reasonably short drives of large population centers. 643,000 residents live within a 30 minute drive, 1.7 million live within a 60-minute drive and 4.2 million live within a 90-minute drive of the airport. Most of the Hartford metropolitan area is located within the 60-minute drive time and, many of the western suburbs of Boston are within a 90-minute drive of the airport. Bradley International Airport in Hartford (BDL) is located approximately 26 miles from Westover, the airport in Worcester (ORH) is located approximately 60 miles from Westover, and Boston Logan International Airport (BOS) is located approximately 100 miles from Westover. Exhibit 1: 30, 60 and 90-Minute Drive Times from Westover Metropolitan Airport 7

8 Westover Currently Has No Scheduled Air Service Westover Metropolitan Airport has no commercial airline service today. Westover's last airline service was operated by Skybus Airlines between July 2007 and April 2008 with one daily roundtrip to Columbus, Ohio. Service to Greensboro, North Carolina was added in January Both markets were operated with narrowbody Airbus A319 aircraft. The service ended when SkyBus discontinued operations and shut-down. Over the eight months Skybus reported data for its operations at Westover, more than 24,000 passengers were enplaned on Skybus flights, a strong indication Westover can generate significant traffic when low-cost airline service is available. Exhibit 2: Skybus Enplaned Passengers at Westover Metropolitan Airport July 2007 through February 2008 (DOT T-100 Data) Skybus operated at Westover through April 2008, but reported data only through February ,000 4,500 4,000 Enplaned Passengers 3,500 3,000 2,500 2,000 1,500 1, ,551 2,847 3,067 3,155 3,174 2,693 3,326 4,

9 Air Service Development Efforts Within the last two years, Westover Metropolitan Airport met with Allegiant Air, Direct Air, SkyKing and Vision Airlines. Direct Air (which is no longer operating), SkyKing and Vision Airlines indicated the need for the Airport to share some of the risk by providing funds to market and advertise any new air service, and all three airlines indicated the amount would need to be approximately $100,000 per route. The most meaningful discussions have been with Allegiant Air, and Allegiant has indicated it would prefer assistance with marketing and ground handling support for each route it would operate at Westover. Based on Allegiant's history, it would likely begin service at Westover with two weekly flights to Orlando Sanford International Airport near Orlando with two flights per week and would add service to St. Petersburg-Clearwater International Airport if the service to Orlando Sanford is successful. Although Allegiant has expressed a strong interest in serving Westover, and has written a letter of support for this grant proposal, Allegiant cannot guarantee it would serve Westover if the proposed grant is awarded. 9

10 AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES Hartford Capacity, Domestic Traffic and Domestic Fare Trends Westover Metropolitan Airport has no commercial airline service, and Bradley International Airport, near Hartford, is the closest airport to Westover with commercial airline service. Most residents and travelers within a 30 minute drive of Westover use Bradley when they travel, so the air service environment at Bradley is a fair representation of the air service environment, to include airline capacity and fare trends, for residents within Westover's catchment area. Fares at Bradley have risen over the last ten years as airline capacity at Bradley has trended down, and the average fare at Bradley in 2011 increased to a new high of $178. Over the last ten years, Bradley's capacity peaked in 2005 at just over 14,000 seats per day each way, but capacity is down. Since 2005, capacity has declined 31.3%, and the average domestic fare has increased 36.3% or $47 each way to $178. Exhibit 3: Bradley International Airport Seats per Day Each Way, Domestic Passengers per Day Each Way (PDEW) and Average Domestic One-Way Fare (DB1B and DOT T-100 data) Seats per Day Each Way Domestic PDEW Average Domestic One-Way Fare 16,000 $200 14,196 Seats and Passengers per Day Each Way 14,000 12,000 10,000 8,000 6,000 4,000 2,000 12,666 8,341 $136 12,075 8,021 $144 13,206 8,583 $137 9,411 $131 12,644 8,823 $153 11,549 $163 8,209 $173 10,748 7,612 $172 9,104 9,312 $156 6,759 6,808 $178 9,756 7,152 $175 $150 $125 Average One-Way Fare $100 This Section Continued on Next Page 10

11 Hartford-Targeted Florida Market Traffic and Fare Trends Because Westover Metropolitan Airport is requesting SCASD funding to assist airlines in advertising and marketing service to one or more leisure destinations, primarily destinations in Florida, it is important to understand the traffic and fare trends between Bradley International Airport and the largest markets in Florida, to include Orlando, Tampa, Miami, Ft. Lauderdale and West Palm Beach. Despite low-cost carriers such as Southwest and JetBlue operating nonstop service from Bradley to destinations in Florida including Orlando, Tampa and Ft. Lauderdale, the average Bradley-Florida one-way fare stood at $130 in 2011, an increase of 33.2% (although the average fare did decline $10 each way versus 2010) since 2005 when traffic in these markets peaked. Traffic is down 22.9% or 503 PDEW since Nonstop service from Westover to one or more destinations in Florida would likely generate a lower average fare than the average fare at Bradley. Exhibit 4: Hartford-Florida (MCO, TPA, MIA, FLL and PBI) Passengers per Day Each Way (PDEW) and Average One-Way Fare (All Carriers) (DB1B data) BDL-Florida PDEW BDL-Florida Average One-Way Fare 2,500 $175 2,193 Passengers per Day Each Way 2,000 1,500 1, ,882 $96 1,746 $110 1,995 $103 $98 1,869 $120 1,594 $134 $142 1,478 $133 $140 1,321 1,344 1,690 $130 $150 $125 $100 Average One-Way Fare $75 11

12 STRATEGIC PLAN Proposed Use of SCASD Funding Westover Metropolitan Airport is requesting SCASD funding of $300,000 to market, advertise and promote service to one or more leisure destinations and to particially fund ground handling services on a low-cost carrier such as Allegiant or Spirit Airlines. SCASD funding will be supplemented with $50,000 of cash provided by partners in the community. In addition to the cash, in-kind support from the Airport, in the form of fee waivers, is valued at $308,330 over a period of two years based an assumption of up to four flights per week. Objective As discussed, the primary objective of Westover's proposal is to secure air service to at least one leisure destination on one or more airlines. A combination of five destinations on two airlines has been identified as potential targets for the type of service Westover is seeking, and the airline/destination combinations are: Allegiant Myrtle Beach, Punta Gorda, St. Petersburg, Sanford/Orlando Spirit Ft. Lauderdale, Myrtle Beach Grant Amendments/Alternate Strategies Funds to market, advertise and promote air service and provide ground handling support for service to a leisure destination is the objective of the requested Small Community Air Service Development grant. If the Department awards Westover Metropolitan Airport the grant funding requested, but the Airport is not successful in securing service to one of the targeted leisure destinations, the Airport would request an amendment to the grant from the Department to reallocate funding for service to a different destination or for another type of air service development project. Service on Frontier to Denver may be targeted for a minimum revenue guarantee if Frontier is not interested in marketing, advertising or ground handling support if the Airport is not successful in securing service to a destination in Florida or to Myrtle Beach. 12

13 PROJECT IMPLEMENTATION, MONITORING AND FUNDING Public / Private Partnerships Westover Metropolitan Development Corporation owns and operates Westover Metropolitan Airport and is the project sponsor. Westover Metropolitan Development Corporation is a public entity. The Westover Metropolitan Development Corporation and the Economic Development Council of Western Massachusetts (EDC) have partnered in the proposal for Small Community Air Service Development funding. Westover Metropolitan Development Corporation Westover Metropolitan Development Corporation was created in 1974 by the Commonwealth of Massachusetts as a non-profit 501(c)(4) corporation for economic development of portions of the former Westover Air Force Base. Westover Metropolitan Development Corporation operates the airport under a joint use agreement with the Department of Defense. Economic Development Council of Western Massachusetts The Economic Development Council of Western Massachusetts (EDC) is a private, non-profit corporation that provides resources and information to businesses operating in or entering the region by aiding in expansion, relocation and networking. The mission of the EDC is to deliver the services and business resources that enable companies to do business in Western Massachusetts grow the region's economy through the creation of quality jobs and enhanced public and private investment. EDC accomplishes its goals through its own efforts and the coordinated efforts of seven affiliated partner organizations: the Affiliated Chambers of Commerce, Greater Springfield Convention and Visitors Bureau, Regional Technology Corporation, Westfield Business Improvement District, Northampton Business Improvement District, Springfield Business Improvement District, Westmass Area Development Corporation and the Westover Metropolitan Airport. 13

14 Sources and Allocations of Project Funding As illustrated in Exhibit 5, the total cost of the project is $658,330 to include the amounts of the requested grant, community-provided cash and the value of in-kind airport incentives. The requested amount of the grant is $300,000, and community cash funding is $50,000 to include $25,000 from the Westover Metropolitan Development Corporation and $25,000 from the Economic Development Corporation of Western Massachusetts. The Airport will be able to waive landing fees, aircraft parking/apron fees, terminal use fees and fuel flowage fees. The total value of the in-kind incentives offered by the Airport is up to $154,165 per year for two years based on an assumption of four flights per week operated with MD-80 aircraft over a 12 month period (the value would be half if two flights per week are operated). The value of the Airport's in-kind incentives over two years is up to $308,330 (the airport incentive value per departure is estimated to be $741). Exhibit 5: Sources and Types of Proposed Project Funding Funding Source Grant Cash In-Kind Total Department of Transportation $300,000 $300,000 Community $25,000 $25,000 Airport $25,000 $308,330 $333,330 Total $300,000 $50,000 $308,330 $658,330 The total cash funding of $350,000 would be divided equally between two potential routes and equally between marketing and ground handling over two years as shown in Exhibit 6. In the first year, $87,500 is proposed to be spent on marketing, and $87,500 is proposed to be spent on ground handling for a total of $175,000 on marketing plus ground handling. The same amounts would be spent in the second year. The airport incentives valued at up to $308,330 would be credited similarly on a route-by-route basis based on the number of departures operated. Exhibit 6: Proposed Allocations of Project Cash* Funding Marketing Ground Handling Year 1 Year 2 Year 1 Year 2 Total SCASD Funding Route 1 $37,500 $37,500 $37,500 $37,500 $150,000 Route 2 $37,500 $37,500 $37,500 $37,500 $150,000 Total $75,000 $75,000 $75,000 $75,000 $300,000 Community Funding Route 1 $6,250 $6,250 $6,250 $6,250 $25,000 Route 2 $6,250 $6,250 $6,250 $6,250 $25,000 Total $12,500 $12,500 $12,500 $12,500 $50,000 Total Project Funding Grand Totals $87,500 $87,500 $87,500 $87,500 $350,000 *Does not included airport in-kind incentives in the form of fee waivers 14

15 Project Timeline Westover Metropolitan Airport intends to continue its discussion with Allegiant Air throughout the evaluation period of Small Community Air Service Grant proposals, and will be prepared to execute a grant agreement with the Department as soon as awards are announced. If Westover is awarded a grant, the Airport will advise Allegiant Air of the award and determine if Allegiant is prepared to begin service and determine when service could begin. We believe Allegiant could announce service 90 days prior to beginning service. If service were to begin in January 2013, the service could be announced as early as October Regardless of when the service is launched, the proposed program would continue for two years, and the Westover Metropolitan Airport would work with Allegiant (or any other airline) to market the service, and the Airport would file all required quarterly reports. Exhibit 7: Proposed Project Timeline (Assumes SCASD Awards Are Announced in August 2012) Activity/Project Milestone Estimated Dates SCASD Grant Award Announcement August 2012 Execute Grant Agreement with DOT September 2012 Negotiation with Airline August 2012-September 2012 Announce Service October 2012 Publish Schedule October 2012 Market Route (Pre-Launch) October-December 2012 Monitor Advance Bookings October-December 2012 Adjust Marketing Plan Based on Advance Bookings October-December 2012 Begin Service January 2013 Market Route (Post-Launch) January 2013 and Beyond Operate Service January December 2014 Monitor Route Performance January December 2014 and Beyond Submit Grant Status Reports to DOT Quarterly 1Q Q 2014 Continuation of Project Activities Beyond the Grant Timeline The project sponsors are confident the proposed service will be successful, and the service would likely begin with one route, and a second route would be added once the first route proves to be successful. This optimism is based on the experience of Skybus service at Westover, and the amount of traffic carried from the region to leisure destinations and increasingly higher fare trends among the airlines providing service from other airports in the region, such as Hartford. A true low-cost alternative to the fare levels at Hartford in particular, will drive traffic to the proposed service at Westover. Given the fragile state of the economy, the volatility of fuel costs and other factors beyond the control of the airline industry, the success of the proposed service cannot be assured. The Airport will work closely with the airline or airlines operating the proposed service throughout the grant period, and beyond the two-year grant period, to monitor both the amount of traffic and the average fares to ensure they are sufficient to sustain the service. In the 15

16 event the service is not meeting the carrier's expectations, both the Westover Metropolitan Airport and the Economic Development Council of Western Massachusetts are prepared to work with the carrier to address the carrier's concerns. Both project sponsors may be able to provide additional incentives and may be able to provide additional advertising and marketing, depending on the carrier's needs. PROJECT MONITORING AND FINANCIAL CONTROL Project Monitoring The primary goal of Westover's proposal is to secure low-cost airline service to at least one leisure destination by providing marketing and advertising for an airline or airlines that agree to operate the targeted leisure service. The success metric for the proposed grant funding is simple: securing and sustaining service to one or more destinations leisure destinations to include destinations in Florida or to Myrtle Beach. 16

17 Legal Sponsor The Westover Metropolitan Development Corporation is the legal sponsor responsible for administering the proposed program, and the Westover Metropolitan Development Corporation is a government entity. Westover Metropolitan Development Corporation Westover Metropolitan Airport Michael W. Bolton Director of Civil Aviation 255 Padgette St. Chicopee, MA (office) Financial Controls As the sponsor, the Westover Metropolitan Development Corporation and its governing body, the Westover Metropolitan Development Corporation Board, will be the responsible parties for all fiscal matters and the Department's reporting requirements. The Metropolitan Development Corporation is established as a non-profit 501(c)(4) corporation and is a public governing body. 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 Westover Metropolitan Development Corporation Board understands that the Grant is a reimbursable grant, meaning the Board is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request. 17

18 APPENDIX A: REQUIRED SUMMARY INFORMATION A. Applicant Information 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: Expiration Date of Grant: B. Public/Private Partnerships Public Westover Metropolitan Development Corporation Private Economic Development Council of Western Massachusetts C. Project Proposal Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start-up Cost Offset First Service Study Secure Additional Service Other (explain below) Westover Metropolitan Airport is requesting SCASD funding to support marketing and ground handling to support low-cost commercial airline service to one or more leisure destinations. 18

19 D. Existing Landing Aids at Local Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) E. Project Cost Line Description Sub Total Total Amount 1 Federal amount requested $300,000 2 State cash financial contribution Local cash financial contribution 3a Airport cash funds $25,000 3b Non-airport cash funds $25,000 3 Total local cash funds (3a + 3b): $50,000 4 TOTAL CASH FUNDING ( ): $350,000 In-Kind contribution 5a Airport in-kind contribution** $308,330 5b Other in-kind contribution** 5 TOTAL IN-KIND CONTRIBUTION (5a + 5b): $308,330 6 TOTAL PROJECT COST (4 + 5): $658,330 F. In-Kind Contributions** For funds in lines 5a (Airport In-Kind contribution) and 5b (Other In-Kind contribution), please describe the source(s) of fund(s) for each. (5a) Westover Metropolitan Airport will waive landing, aircraft parking, apron, terminal use and office space fees for two years for up to two routes from the date the new service begins. These fees are estimated to be up to $154,165 per year based on an assumption of four weekly flights operated with a narrowbody aircraft such as an MD seats. This incentive would be offered for two years, and bring the total value of the incentive to $308,330 for four flights per week. G. Is this application subject to review by state under Executive 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

20 H. Is this applicant delinquent on any federal debt? No Yes (explain) 20