Proposal Under the Small Community Air Service Development Program

Transcription

1 Proposal Under the Small Community Air Service Development Program Date: Applicants: August 2, 2011 Wilkes-Barre/Scranton International Airport Luzerne County, PA; Lackawanna County, PA DUNS Number: Number: 7531 Employee Identification Number: Congressional Districts: 10, 11 Contact: Barry J. Centini Wilkes-Barre/Scranton International Airport 100 Terminal Drive, Suite 1 Avoca, PA Phone: (570) airport@flyavp.com Docket #: DOT-OST

2 I. EXECUTIVE SUMMARY The Wilkes-Barre/Scranton International Airport and the Counties of Luzerne and Lackawanna are submitting this application for grant funds available under the Small Community Air Service Development Program to address the deficiencies in the Airport s air service, including high fares and an insufficient level of service. These deficiencies are the result of the unique characteristics of the air transportation system in the Greater Northeastern Pennsylvania region. Air travelers using the Wilkes-Barre/Scranton International Airport (AVP) pay among the highest fares of any similar sized airport around the globe. AVP has aggressively recruited both legacy and low cost airlines to enter its market for many years, but few carriers are willing to enter even AVP s top O&D markets. This is in part because there are multiple airports served by low cost carriers, as well as legacy carriers with more flights, which surround the Wilkes- Barre/Scranton International Airport. As a result, AVP s fares are not only high, but they are not competitive with the other airports. The lower fares and increased number of flights at the surrounding airports are sufficient to lure passengers from Wilkes-Barre/Scranton International Airport to airports more than 100 miles away, but these airports are not close enough to genuinely offer convenient service. The Northeastern Pennsylvania Region is a diverse economic region worthy of attention. Within the Wilkes-Barre/Scranton MSA, AVP serves a population of over 1.7 million people. The Wilkes-Barre/Scranton MSA s population is near 500,000 on its own. Further fueling the region s economic growth into the next 20 years is the massive Marcellus Shale Industry. The Marcellus Shale is a black shale formation extending deep underground from Ohio and West Virginia northeast into Pennsylvania and southern New York. Although the Marcellus Shale is exposed at the ground surface in some locations in the northern Finger Lakes area, it is as deep as 7,000 feet or more below the ground surface along the Pennsylvania border in the Delaware River valley. In Pennsylvania, the development of these historic resources, while still in their infant stages, is credited with supporting nearly 140,000 jobs in In addition, the economic activity topped $11.2 billion in This growth is expected to increase rapidly over the next several years, which will provide the Commonwealth of Pennsylvania with a steady supply of affordable, cleanburning energy. Page 2 of 29

3 The Wilkes-Barre/Scranton International Airport (AVP) is the gateway airport to the heart of the Marcellus Shale Industry in northeastern Pennsylvania and the Commonwealth of Pennsylvania as a whole. Successful attraction of a low cost air carrier to AVP s key markets has a track record of improving the cost differential in some AVP markets. However, successfully retaining those low cost carriers long-term has proven difficult. Maintaining legacy air carrier service to other AVP key markets has improved cost differentials in those markets. However, the number of seats on the legacy carriers has been steadily decreasing, which is forcing air travelers to travel to another airport for their air service needs. Our described program is designed to address these concerns. With this in mind, the Airport continues to provide exceptional service to the region, while having no control or responsibility over the main variable in air travel the customer. Currently, AVP has five legacy carriers, and three of those are handled by one airline. While airlines have in the past been more prone to provide their own employees for ground handling and customer support positions, the last few years have put that in jeopardy as airlines consolidate their employees at smaller airports. For several years, the U.S. airline industry has been struggling to control costs. Controllable costs have been dropping over the last half-decade, with carriers using methods, such as reducing airline employee wages and the actual outsourcing of on-airport jobs. Many carriers are opting not to start additional markets without the Airport and community picking up the charges for those start-up costs. Also, many carriers that have service at airports are decreasing their flights dramatically to control costs. The current trend is a continued increase in the AVP passenger market leaking to alternative airports and a serious imbalance in Pennsylvania s airport system. With no air carriers operating in some of AVP s top O&D markets, there is a significant gap between the demand for service and the level of service being provided. Past experience in these markets has proven they can be operated successfully and profitably, however, current carriers at AVP have chosen not to seek operating to those markets from AVP. The results of past efforts utilizing Air Service Development funds have been positive. Delta Connection s (formerly Northwest Airlink s) nonstop Detroit service, which began in April 2005, continues to provide a good destination to business travelers, with acceptable fares. Page 3 of 29

4 Wilkes-Barre/Scranton International Airport and its supporting communities have continually been engaged in marketing the airport and look forward to improving the air service at AVP with the additional support of the DOT Small Community Air Service Development Program. II. SERVICE DESCRIPTIONS A. Wilkes-Barre/Scranton International Airport s Service Area Wilkes-Barre/Scranton International Airport (AVP) is a non-hub airport located in Northeastern Pennsylvania serving a surrounding population of approximately one million residents. AVP is within a two-hour drive of several major east coast cities including Philadelphia and New York, is approximately eight (8) miles from Wilkes-Barre, PA and Scranton, PA, and is centrally located among four (4) major interstate highways. (Source Google Maps) The Wilkes-Barre/Scranton/Hazleton metro-area has a population of over 600,000. There are over one million potential air passengers within a one-hour drive time and just fewer than three million located within a 90- minute drive time. Page 4 of 29

5 Within a One-Hour Drive Time is a Market of Over 1 Million Potential Air Passengers (Source SH&E Analysis, US Census, Maptitude) Wilkes-Barre/Scranton s airport service is bound by Philadelphia International Airport and Lehigh Valley International Airport to the south, each offering substantially greater numbers of scheduled flights and often significantly lower fares. These two airports are approximately a 100- and 60-mile drive, respectively, from the Wilkes-Barre/Scranton International Airport. One factor of great concern to the Partnership submitting this application is that Southwest Airlines offers competing service at Philadelphia International Airport and is offering significantly lower fares to many of AVP s top markets. An additional factor is that both AirTran/Southwest and Allegiant Air provide low fare options to leisure destinations at Lehigh Valley International Airport. To the east, John F. Kennedy International Airport, Newark Liberty International Airport, LaGuardia Airport and Stewart International Airport also compete with AVP, offering travelers numerous low fare options. As large hubs, John F. Kennedy International, Newark Liberty International and LaGuardia offer substantially more scheduled flights and direct service options both domestically and internationally. In addition, to the northwest, Allegiant Air provides low fare options to leisure destinations at Elmira Corning Regional Airport. Page 5 of 29

6 B. Description of Economic Growth in Northeastern Pennsylvania As stated earlier, the region s economic growth is being fueled into the next several decades by the massive Marcellus Shale Industry. The Marcellus Shale geological formation is the largest unconventional natural gas reserve in the world. Here are some recent key findings from a July 20, 2011 study from Penn State University: During 2010, the Pennsylvania Marcellus Shale natural gas industry triggered $11.2 billion in economic activity, generated $1.1 billion in state and local taxes, and supported nearly 140,000 jobs. The Pennsylvania Marcellus industry is projected to generate more than $12.8 billion in economic activity in 2011, leading to more than $1.2 billion in state and local taxes and supporting more than 156,000 jobs. As a result of Pennsylvania Marcellus production, residential electricity and natural gas bills across the Commonwealth are $245.1 million lower [$217.4 million from lower natural gas bills and another $27.7 million from lower electricity bills]. In 2010 alone, natural gas companies paid over $1.6 billion in lease and bonus payments to Pennsylvania landowners. By 2015, Pennsylvania s Marcellus Shale could produce more than 12 billion cubic feet per day, second only to Texas in natural gas production. Marcellus Shale natural gas production could reach 17 billion cubic feet per day in 2020, potentially allowing the Marcellus to become the single largest producing gas field in the United States, if real natural gas prices do not fall significantly. The Wilkes-Barre/Scranton International Airport (AVP) is the gateway airport to the heart of the Marcellus Shale Industry in northeastern Pennsylvania and the Commonwealth of Pennsylvania as a whole. Page 6 of 29

7 Two of the sweet spots for tapping that natural gas are in Northeastern Pennsylvania and the Pittsburgh area. To reach the gas, drillers use a process called hydraulic fracturing or fracking, for short in which they shoot millions of gallons of water, laced with chemicals and sand, into the ground. Much of that water comes back to the surface along with the gas it releases. Companies eager to tap into the gas already have transformed large swaths of rural Pennsylvania, and future gas production has the potential to change residents lives for a generation or more. Marcellus shale gas has shifted global energy supplies, created instant wealth for some landholders, stimulated the state s economy by creating jobs and raised environmental concerns about toxins going into the air and water. A problem that we are finding with the travel needs of these workers is the need to get across the Commonwealth of Pennsylvania. Northeastern Pennsylvania and the Pittsburgh area are the concentrated areas for drilling in the Commonwealth. To do business on both sides of the state, workers have to drive, rather than fly, losing valuable time in that fivehour trip, when they could fly in approximately one hour. As seen below, nearly 2/3 of the work being done within the Marcellus Shale in the Commonwealth of Pennsylvania is being performed in Northeastern Pennsylvania. Page 7 of 29

8 Source: Pennsylvania Department of Environmental Protection C. Description of Community s Existing Air Service There are currently five (5) major airline networks serving the Wilkes- Barre/Scranton International Airport. These carriers are US Airways, Continental, Delta, United and American. Combined, these carriers serve a total of five (5) major hubs including Charlotte, Chicago, Detroit, Newark and Philadelphia. The table below indicates the type of aircraft flown by each carrier, equipment type, seats and frequency at AVP. It is important to note that all service to and from AVP is flown with either a regional jet or turboprop, yet O&D research and previous experience indicate that many AVP markets can support significantly larger aircraft such as Boeing 737 or the Embraer 170/190 series. Carrier Market Code A/C Stops Daily Daily Monthly Monthly Seats/ Type Depts Seats Depts Seats Flight AA Chicago ORD ERD , CO Newark CLE DH , DL Detroit DTW CRJ , UA Chicago ORD ER , US Charlotte CLT CR , US Charlotte CLT CRJ , US Philadelphia PHL CRJ , US Philadelphia PHL DH US Philadelphia PHL DH , TOTALS , Source: OAG Schedule Tapes, August 2011, via Sabre Airline Solutions Page 8 of 29

9 The chart below shows the cities serviced by AVP s current airlines from AVP. Source: OAG Schedule Tapes August 2011 AVP Primary Catchment Area Usage, Retention & Total Booked Rank Market PDEW AVP Retention AVP Primary Leakage Total Booked 1 ORD % DFW % LAS % MCO % TPA % PHX % LAX % ATL % DEN % CLT % FLL % SAN % SEA % SFO % RSW % DTW % IAH % STL % MSP % BNA % MCI % PBI % MSY % IND % JAX % CVG % SAT % MIA % SNA % AUS % Subtotal % ,092.5 Other % Total % 1, ,812.5 Source: Adjusted SABRE MIDT and D.O.T. 10% Coupon Sample Page 9 of 29

10 For 2010, Wilkes-Barre/Scranton International Airport reported 433,972 combined enplaned & deplaned passengers. However, the true Primary Catchment Area size is estimated to be triple that number (see table above), which indicates that AVP is leaking passengers to surrounding airports, with the primary reasons, based on market research, being competition from low-fare markets, frequency and available seats. US Airways has traditionally dominated the AVP market. Delta Connection recently eliminated flights over the past couple years, which increases opportunities for other airlines. In 2009, Delta Connection eliminated Cincinnati service (January 2009), which was AVP s #9 O&D Market for CY 2008, and eliminated Atlanta (August 2009), which was AVP s #5 O&D Market for CY In addition, United Express is decreasing it s service to Chicago O Hare in August 2011 (from three daily flights to two), and American Eagle is decreasing it s service to Chicago O Hare in August 2011 (from two daily flights to one daily flight plus one flight four times a week). New service in the past several years include: United Express to Washington Dulles in October 2004; Continental Connection to Boston in March 2005; Hooters Air to Orlando, Fort Lauderdale, St. Petersburg in October 2005; Myrtle Beach Direct Air to Myrtle Beach in June 2008; Continental Connection to Newark in October 2008; American Eagle to Chicago O Hare in June 2010; and Delta Connection to Atlanta in September Source: OAG Schedule Tapes August 2011; Wilkes-Barre/Scranton International Airport, YE May 2011 Page 10 of 29

11 AVP New Service During the Past Several Years New Service Airline Began Ended Reason for Ending (1) Washington-Dulles, DC United Express October 2004 August 2005 Shuttle America became US Airways carrier United did not have other aircraft to maintain route Detroit, MI Northwest Airlink April 2005 N/A Orlando, FL Hooters Air October 2005 March 2006 Rising Fuel Costs Fort Lauderdale, FL Hooters Air October 2005 March 2006 Rising Fuel Costs St. Petersburg, FL Hooters Air October 2005 March 2006 Rising Fuel Costs Myrtle Beach, SC Hooters Air March 2006 March 2006 Rising Fuel Costs Boston, MA Continental Connection March 2005 March 2007 Reduction of Continental Connection flights into BOS system wide Pittsburgh, PA US Airways Pre-1980 June 2007 Reduction of US Hub Myrtle Beach, SC Myrtle Beach Direct Air June 2008 August 2008 Seasonal service Cleveland, OH Continental Connection October 2008 Moving AVP s service from #3 CO Hub to #1 CO Hub Newark, NJ Continental Connection October 2008 N/A Cincinnati, OH Delta Connection March 1995 January 2009 Reduction of DL Hub Atlanta, GA Delta Connection May 2002 August 2009 Poor load factors; AVP-ATL route over 700 NM (too far for CRJ) Chicago, IL (O Hare) American Eagle June 2010 N/A Atlanta, GA Delta Connection September 2011 N/A (1) Reasons for Ending comments were given by Airline Representatives to AVP AVP Outbound Seats History Annual Percent Outbound Change vs. Year Seats Prior Year , , % , % , % , % , % , % , % , % , % Seats Month ('11 vs. '10) Diff (+/-) % Change January 1, % February 2, % March 3, % April 4, % May 5, % June 3, % Total for Period 21, % Source: Wilkes-Barre/Scranton International Airport Page 11 of 29

12 Losses in the past several years include: United Express to Washington Dulles in August 2005; Hooters Air to Orlando, Fort Lauderdale, St. Petersburg and Myrtle Beach in March 2006; Continental Connection to Boston in March 2007; US Airways to Pittsburgh in June 2007; Myrtle Beach Direct Air to Myrtle Beach in August 2008; Continental Connection to Cleveland in October 2008; Delta Connection to Cincinnati in January 2009; and Delta Connection to Atlanta in August With these losses, plus the increase in passenger enplanements (shown below), an increase in load factors, and the economic growth in Northeastern Pennsylvania, the problem arising is the limited amount of seats remaining in the market, which will, in turn, force air travelers to, once again, use other nearby airports for their air travel needs. AVP Enplanement History Percent Annual Change vs. Year Enplanements Prior Year , , % , % , % , % , % , % , % , % , % Enplanements Month ('11 vs. '10) Diff (+/-) % Change January 1, % February 1, % March 1, % April 2, % May 3, % June 2, % Total for Period 12, % Source: Wilkes-Barre/Scranton International Airport As seen below, since the loss of nonstop Orlando service in 2006, AVP has been on a steady decline of passengers to its #1 O&D Market Orlando. In 2005, AVP had over 45 PDEWs to Orlando, retaining nearly 50% of the Primary Catchment Market. Now, AVP captures almost 26 PDEWs, retaining only 22% of the Primary Catchment Market. With low cost Page 12 of 29

13 service to Orlando surrounding the AVP market, this has become a major detriment to AVP. AVP ORLANDO PROFILE Source: U.S. DOT O&D Survey, via Database Products, YE 1Q 2011 To the south of AVP, Lehigh Valley International Airport has been increasing seats, which we feel is a detriment to AVP. Within the past year at ABE: AirTran has increased service to Orlando from one less-than-daily flight to two daily flights using 117- and 137-seat aircraft AirTran has added new service to Fort Lauderdale with 117-seat aircraft Allegiant Air has added seasonal service to Myrtle Beach, and moved its Florida service from Orlando to Sanford with 150-seat aircraft American Eagle added new service to Chicago O Hare with three daily flights using 50-seat aircraft Delta has increased seat capacity to Atlanta from one daily 50-seat aircraft to three daily 50-seat aircraft Delta has increased service to Detroit from three to four daily flights using 50-seat aircraft United has increased service to Chicago O Hare from four to five daily flights using 50-seat aircraft United has increased service to Washington-Dulles from three to four daily flights using 34-seat aircraft US Airways has increased daily seat capacity to Philadelphia with 50-seat aircraft Page 13 of 29

14 D. Analysis of Greater Northeastern Pennsylvania Needs and Deficiencies Over the past several years, AVP experienced a severe reduction in jet service to Philadelphia and Pittsburgh, which included a reduction in the number of seats available. Additionally, the region does not currently have competitive year round low fare service to its number one O&D market: Orlando. Service to Orlando performed well when it was introduced in 2004, with the positive trend continuing in 2005 and 2006, until Hooters Air discontinued all air service due to multiple factors, including internal scheduling problems, rising fuel costs, airline scheduling problems and problems with their service model. Atlanta, another AVP top O&D market, continued to perform well since returning to AVP in 2002, but ended in August Delta s primary reason for discontinuing the flight is that the stage length was too long for a regional jet. As seen below, AVP is ranked as #6 by Delta s Load Factors at ATL. Delta Ranking by Load Factor at ATL Source: U.S. D.O.T. Report T-100 YE Dec Continental and US Airways remain at constant capacity, with no future growth on the horizon. American is cutting back beginning in August American is going from two daily flights to one daily flight plus one flight four times a week. Page 14 of 29

15 Delta has had no growth to Detroit since they began with three daily flights in April In October 2005, the Detroit flights decreased to twice daily because of problems with Mesaba Airlines. The third daily flight was reinstated in February 2009 after Delta discontinued all service from AVP to Cincinnati. However, Delta will be adding one daily flight to Atlanta in September United has had no growth to Chicago since they began with three daily flights in October In May 2003, the Chicago flights decreased to twice daily, and United has been satisfied with the performance to date with no additional increase in service. In April 2011, the third daily flight was added, however, in August 2011, the flights return to twice daily. US Airways has had recent growth to Charlotte. The service began with one daily flight in April 2005, and went to twice daily in January 2011, and has been performing well. As seen below, AVP is ranked as #3 to Charlotte, #10 to Detroit, #19 to Chicago O Hare (UA), #29 to Chicago O Hare (AA), and #43 to Philadelphia. US Airways Ranking by Load Factor at CLT Source: U.S. D.O.T. Report T-100 YE Dec 2010 Page 15 of 29

16 Delta Ranking by Load Factor at DTW Source: U.S. D.O.T. Report T-100 YE Dec 2010 United Ranking by Load Factor at ORD Source: U.S. D.O.T. Report T-100 YE Dec 2010 Page 16 of 29

17 American Ranking by Load Factor at ORD Source: U.S. D.O.T. Report T-100 YE Dec 2010 US Airways Ranking by Load Factor at PHL Source: U.S. D.O.T. Report T-100 YE Dec 2010 Although there has been little or no growth at AVP to these destinations listed above, airports near AVP, i.e. Lehigh Valley International or Elmira Regional, have been gaining seats, even though there load factors are lower than AVP s. Page 17 of 29

18 From the charts listed above: ATL, AVP was ranked #6 YE2009; ABE was ranked #72 YE2009 o Note: ABE is currently ranked #47 with Delta and #49 of 56 with AirTran CLT, AVP is ranked #3; ABE is ranked #18 DTW, AVP is ranked #10; ELM is ranked #20; ABE is ranked #55 ORD (UA), AVP is ranked #19; ABE is ranked #25 ORD (AA), AVP is ranked #29; ABE is ranked #48 PHL, AVP is ranked #43; ELM is ranked 58; ABE is ranked #70 As seen below, here are the latest load factors from AVP to specific destinations, most destinations have load factors at 80% or higher or a 12 month period. Sources: U.S. D.O.T. T-100 Reports and Wilkes-Barre/Scranton International Airport Another challenge for AVP is the fact that competing airports are marketing their low-fare service to travelers in the AVP market area, through television, newspaper, radio and billboard (as seen below). The billboard below was actually placed less than ½ mile from the entrance to AVP. In light of these circumstances, AVP continues to actively pursue competitive low-fare service, as well as maintaining or even increasing legacy air service, to its top markets. AVP s air fares remain extraordinarily high for the level of service offered and the economic demographic of the area as evidenced in the table Page 18 of 29

19 below. As shown on the charts below, AVP s fares remain above average and significantly higher than select markets with similar sized O&D passengers. AVP vs. Selected World Cities - O&D Passengers & Avg. Fare Total Daily Avg. O&D Daily O&D Rank Market Code Enp. Psgrs Enp. Psgrs Fare Psgrs Psgrs 1 Juba, Sudan JUB 217, $ ,351 1,234 2 Shreveport, LA SHV 216, $ ,359 1,171 3 Grand Junction, CO GJT 216, $ ,321 1,187 4 Wilkes-Barre/Scranton, PA AVP 219, $ ,935 1,194 5 Palmerston North, New Zealand PMR 216, $ ,947 1,192 6 Daytona Beach, FL DAB 226, $ ,485 1,237 7 La Paz, Mexico LAP 226, $ ,629 1,240 8 Redmond, OR RDM 219, $ ,104 1,203 9 Ixtapa/Zihuatanejo, Mexico ZIH 217, $ ,151 1, Bloemfontein, South Africa BFN 222, $ ,113 1, Huatulco, Mexico HUX 216, $ ,852 1, Rimini, Italy RMI 217, $ ,759 1, Freeport, Bahamas FPO 216, $ ,190 1, Belo Horizonte, Brazil PLU 216, $ ,477 1, Tsushima, Japan TSJ 219, $ ,338 1, Oujda, Morocco OUD 223, $ ,698 1, Londonderry, United Kingdom LDY 223, $98 447,363 1, Iquitos, Peru IQT 218, $98 438,713 1, Karup, Denmark KRP 221, $92 443,165 1, Pohang, South Korea KPO 222, $87 444,634 1, Monteria, Colombia MTR 221, $73 439,764 1,205 Average 219, $ ,445 1,196 (Source: O&D Survey YE May 2011, via Sabre Airline Solutions, OAG Schedule Tapes AVP vs. Selected North American Cities - O&D Passengers & Avg. Fare Total Daily Avg. O&D Daily O&D Rank Market Code Enp. Psgrs Enp. Psgrs Fare Psgrs Psgrs 1 Shreveport, LA SHV 216, $ ,359 1,171 2 Appleton, WI ATW 267, $ ,214 1,455 3 Rapid City, SD RAP 272, $ ,313 1,502 4 Peoria, IL PIA 236, $ ,225 1,302 5 Grand Junction, CO GJT 216, $ ,321 1,187 6 Wilkes-Barre/Scranton, PA AVP 219, $ ,935 1,194 7 Key West, FL EYW 274, $ ,589 1,484 8 Medford, OR MFR 278, $ ,301 1,527 9 Daytona Beach, FL DAB 226, $ ,485 1, Cozumel, Mexico CZM 241, $ ,133 1, La Paz, Mexico LAP 226, $ ,629 1, Redmond, OR RDM 219, $ ,104 1, Comox, BC, Canada YQQ 184, $ ,476 1, Juneau, AK JNU 268, $ ,268 1, Huatulco, Mexico HUX 216, $ ,852 1, Allentown, PA ABE 420,313 1,152 $ ,583 2, Newburgh, NY SWF 196, $ ,469 1, Bloomington-Normal, IL BMI 273, $ ,351 1, Abbotsford, BC, Canada YXX 245, $ ,275 1, Aguadilla, PR BQN 229, $ ,576 1, Nantucket, MA ACK 142, $95 288, Average 257, $ ,033 1,308 (Source: O&D Survey YE May 2011, via Sabre Airline Solutions, OAG Schedule Tapes Page 19 of 29

20 III. STRATEGIC PLAN FOR USING GRANT FUNDING A. Program Goals The primary goals of this grant proposal are to increase enplanements at AVP by attracting new service and expanding current service, to address insufficient air service by attracting replacement service for such services recently lost, and to address unreasonably high fares to AVP s prime markets by increasing competition between existing air carriers and new air carriers. Currently, the AVP markets are underserved and it is apparent that travelers in and outside the region are choosing to use alternative airports offering more scheduled service to a broader range of destinations with lower fare service. Historically, the Northeastern Pennsylvania market has supported new service as it enters the region and it is anticipated by all Partners in this program that this trend will continue with a high level of success. Specifically, the four program goals are as follows: 1. Secure service to leisure destinations, i.e. but not limited to, Central Florida Region (Orlando/Tampa/St. Petersburg), Fort Lauderdale, West Palm Beach, Punta Gorda, Las Vegas, and/or Myrtle Beach). 2. Restore daily service to: a. Pittsburgh International Airport b. Washington-Dulles International Airport c. Boston Logan International Airport 3. Entice existing air carriers at AVP to expand their service with additional flights/markets. From the successful implementation of these program goals, AVP anticipates a direct affect of reduced fares in key markets and a significantly increased level of service. Page 20 of 29

21 B. Target Audiences The following is a list of target audiences for AVP: Low-fare carriers 1. Allegiant Air 2. Direct Air 3. jetblue Airways 4. Southwest Airlines 5. Spirit Airlines 6. Sun Country Airlines 7. Vision Airlines Legacy carriers 1. American Airlines 2. Delta Air Lines 3. United Air Lines / Continental Airlines 4. US Airways Regional carriers 1. Cape Air 2. Colgan Air 3. Gulfstream International Airlines 4. Public Charters, Inc. 5. Streamline Air C. Plan Implementation and Timetable Key milestones for the Program will be: Securing meetings with carriers to negotiate new service (October 2011 March 2012). Announcing new service with local community marketing campaign (January 2012 June 2012). Starting up new service (January 2012 October 2012). Monitoring and analyzing monthly traffic numbers of new service (January 2012 June 2013). Monitoring and analyzing fares to the target markets (January 2012 June 2013). Page 21 of 29

22 IV. AIRPORT AND BI-COUNTY PARTNERSHIP FUNDING AND MONITORING ASSURANCES The Wilkes-Barre/Scranton International Airport will act as the sponsor of the program. The sponsorship will be managed by Barry J. Centini, Airport Director, and the program will be managed by an airport administration and bicounty partnership representing the counties of Luzerne and Lackawanna. The partnership will meet on a regularly scheduled monthly basis to review the progress and schedule of the program and more often when the program requires it. At each meeting, goals, objectives, and milestones will be evaluated to measure progress. Additionally designated members of the Partnership will be assigned to evaluate any changes in the current market environment and to identify any potential obstacles. The Partnership will prepare and submit quarterly reports to provide assurances that both the DOT and community funding are being spent in the manner proposed. At the time that new service is secured and the funding is successfully allocated, the quarterly reports will provide the DOT updates on the success of the service. V. FUNDING DESCRIPTION A. An airline or airlines to provide service to one or more nonstop leisure destinations, i.e. but not limited to, Central Florida region, Fort Lauderdale, West Palm Beach, Punta Gorda, Las Vegas and/or Myrtle Beach, minimum two (2) flights per week per destination. Risk abatement subsidy, as well as ground handling and start-up costs for provided service. FAA: $ 200,000 Luzerne County: $ 50,000 Lackawanna County: $ 50,000 Airport: $ 50,000 Total: $ 350,000 B. An airline to provide nonstop Pittsburgh, Washington (DC) and/or Boston service, minimum two (2) daily flights per weekday per destination. Risk abatement subsidy for weekday service up to six (6) months. FAA: $ 125,000 Luzerne County: $ 25,000 Lackawanna County: $ 25,000 Total: $ 175,000 Page 22 of 29

23 C. Local Market Advertising to provide needed baseline support for new and/or restored airline service with a new or present airline, as well as support of additional flights with present airline service. FAA: $ 175,000 Luzerne County: $ 25,000 Lackawanna County: $ 25,000 Airport: $ 50,000 Total: $ 275,000 D. TOTALS: FAA: $ 500,000 Luzerne County: $ 100,000 Lackawanna County: $ 100,000 Airport: $ 100,000 Total: $ 800,000 VI. COMMUNITY ACTIVITIES The Airport and supporting community organizations have been aggressively and actively marketing the airport for several years. This effort has included many initiatives all undertaken to ensure that the Northeastern Pennsylvania community is served in the best possible way. Specific activities have included: * Direct subsidy to carriers * Targeted carrier meetings * New service cost reduction incentives including: - Advertising and marketing assistance for, but not limited to, television, radio, and newspaper coverage - Waiving of landing fees and space rentals for a negotiated period - Donate local billboard advertising space and county bus system promotion - Develop and direct a new service information mailing initiative to local travel agents and community businesses * New service kick-off and promotional meetings with local travel agents * New service local community marketing support initiatives * Annual attendance and participation at ACI s annual Marketing JumpStart conference and Network USA conference Page 23 of 29

24 VII. RESULTS OF PAST AIR SERVICE DEVELOPMENT EFFORTS The results of past efforts utilizing Air Service Development funds are positive. Service continues to Detroit, MI, via Delta Airlines express carrier Pinnacle Airlines with load factors averaging 80% during 2008, and averaging 88% during 2009, and averaging approximately 89.2% for the first seven months of Detroit service began at AVP in April Service to Orlando, FL, did better than expected despite Hooters Air s end of service in March 2006 due to its own internal financial issues, with load factors averaging in the 83% to 86% range by the end of their tenure at AVP. The Detroit service continues to provide a good destination to business travelers, with acceptable fares. The Orlando service provided a great level of service for business and leisure travelers, with a very competitive fare structure. With our past history and experience of being able to utilize funds for positive gains, we are confident that an award to Wilkes-Barre/Scranton International Airport will bring positive results. VIII. PROGRAM SPONSORS Program Legal Sponsor: Program Partners: Barry J. Centini, Airport Director Luzerne County, PA Wilkes-Barre/Scranton Lackawanna County, PA International Airport Greater Pittston Chamber of Commerce 100 Terminal Drive Greater Pocono Chamber of Commerce Avoca, PA Greater Scranton Chamber of Commerce 570/ Phone Greater Wilkes-Barre Chamber of Commerce 570/ Fax Lackawanna Co. Convention & Visitors Bureau bcentini@flyavp.com Luzerne Co. Convention & Visitors Bureau Wilkes-Barre/Scranton Penguins AAA Hockey Attachments: 1) Attachment 1 Allegiant Air Letter of Support 2) Attachment 2 Gulfstream International Airlines Letter of Support 3) Attachment 3 Delta Air Lines Letter of Support 4) Attachment 4 Program Partners In-Kind Contributions Page 24 of 29

25 ATTACHMENT 1 Page 1 Order: Docket DOT-OST Ms. Aloha Ley Associate Director Office of Aviation Analysis U.S. Department of Transportation 8 th Floor, Room W New Jersey Avenue SE, Washington D.C July 28, 2011 RE: SUPPORT OF WILKES-BARRE/SCRANTON INTERNATIONAL AIRPORT S SMALL COMMUNITY GRANT APPLICATION Dear Ms. Ley, The purpose of this correspondence is to express Allegiant Air s support of the Wilkes-Barre/Scranton International Airport s (AVP) grant application under the Small Community Air Service Development Program. By way of background information, Allegiant Air is a low-cost, commercial air carrier, offering non-stop jet service to more than seventy (70) airports throughout the country. We are currently seeking to expand our network to airports that share our commitment to low costs and that fit within our business model. To that end, we have identified AVP as a potential Allegiant airport. As you know, initiating new air service can be quite risky. The availability of a small community grant to offset initial marketing costs, as well as lower airport operating expenses, can be immensely helpful in mitigating some of that risk. Of course, initiating service at AVP will depend on numerous other factors, including, among other things, the economic market, aircraft availability, and the cost of fuel. In light of the aforementioned uncertainties, it is particularly helpful to have a small community grant that can provide stability and some certainty to a new market. As such, Allegiant strongly endorses LGU s application under the small community program. Once you have had an opportunity to review the foregoing, please feel free to contact me with any questions, comments, or concerns. In that regard, I look forward to speaking with you. Best Regards, E. Keith Hansen Manager, Airport Planning Allegiant Air Page 25 of 29

26 ATTACHMENT 2 Page 1 Order: Docket DOT-OST Ms. Aloha Ley Date: August 1, 2011 Associate Director Office of Aviation Analysis U.S. Department of Transportation 8 th Floor, Room W New Jersey Avenue SE, Washington D.C Dear Ms. Ley, I am writing today in support of Wilkes-Barre/Scranton International Airport and their application for a Small Community Air Service Development Grant. As you may be aware, the dissolution of the former US Airways hub in Pittsburgh has left a huge hole in terms of regional air service in western Pennsylvania. More than thirty cities within 350 miles of Pittsburgh that formerly enjoyed non-stop service remain without that link. Besides being the second largest city in Pennsylvania, Pittsburgh is a true regional business center and while the Greater Pittsburgh International Airport has done a tremendous job of restructuring itself as a true Origin/Destination traffic generator, it is noteworthy that the only other Pennsylvania city being served by air from Pittsburgh is Philadelphia. Despite being the anchor of western Pennsylvania business, cities such as Latrobe, Erie, Wilkes-Barre/Scranton, Williamsport, and even the State Capital in Harrisburg remain without a direct air link. Pennsylvania is the sixth largest state in the union in terms of population and this lack of regional access is problematic and economically restrictive. Gulfstream International Airlines continues to work diligently to restore service from the Greater Pittsburgh International Airport to airports throughout the region and would welcome the possibility of adding Wilkes-Barre/Scranton as a destination. Conceived in cooperation with the Greater Pittsburgh International Airport, the Pittsburgh Connector has the intent of restoring service in several regional markets, focusing on Pittsburgh International Airport as its hub. We remain very interested in serving the Wilkes-Barre/Scranton Pittsburgh market and restoring that community s link to the business center of western Pennsylvania. As with any new venture, the start-up costs constitute a good deal of our forecast outlay. We fully endorse Wilkes-Barre/ Scranton s effort to secure a SCASD Grant to aid in launching and marketing this venture. We are confident that the restoration of this vital air link will benefit economic development in Pennsylvania. These funds will assure a means to grow and promote this new travel option and allow Gulfstream International to focus on providing seamless connectivity and operational reliability to assure this new service succeeds and the people of Pennsylvania benefit. Very truly yours, Mickey Bowman Vice President of Essential Air Service Gulfstream International Airlines 1100 Lee Wagener Blvd., Suite 201 Ft. Lauderdale, FL Page 26 of 29

27 ATTACHMENT 3 Page 1 Order: Docket DOT-OST Page 27 of 29

28 ATTACHMENT 4 Page 1 Order: Docket DOT-OST In-Kind Contributions Wilkes-Barre/Scranton International Airport Small Community Air Service Grant Luzerne County Convention and Visitors Bureau In-Kind Item Amount Staff Fulfillment $2, Mailing and Distribution of Visitor Guide $ Attendance at Trade Shows $2, Ad Placement - Annual Visitors Guide $2, Ad Placement - Pennsylvania Pursuits Magazine $1, Total In-Kind: $8, Lackawanna County Convention and Visitors Bureau In-Kind Item Amount Staff Fulfillment $3, Mailing and Distribution of Visitor Guide $1, Attendance at Trade Shows $2, Half Page Ad Placement - This Week in The Poconos $1, Total In-Kind: $8, Greater Pittston Chamber of Commerce In-Kind Item Amount Insert in Monthly Newsletter for 12 months $3, Total In-Kind: $3, Greater Pocono Chamber of Commerce In-Kind Item Amount Ad Placement - Annual Bizzy Awards $2, Ad Placement Annual Dinner Program $1, Total In-Kind: $3, Greater Wilkes-Barre Chamber of Commerce In-Kind Item Amount Full Page Ad Placement - Annual Dinner Program $ Full Page Ad Placement - Legislative Breakfast $ Full Page Ad Placement - Awards Luncheon Program $ Staff Fulfillment $2, Total In-Kind: $3, Page 28 of 29

29 ATTACHMENT 4 Page 2 Order: Docket DOT-OST Wilkes-Barre/Scranton Penguins AAA Hockey Team In-Kind Item Amount Distribution of Airport Fliers at Two Home Games $2, Total In-Kind: $2, Greater Scranton Chamber of Commerce In-Kind Item Amount Ad Placement in News Briefs Newsletter $2, Web Site Exposure Total In-Kind: $2, Page 29 of 29