St. Joseph County Airport Authority South Bend, Indiana Proposal Under the Small Community Air Service Development Program Docket DOT-OST

Transcription

1 St. Joseph County Airport Authority South Bend, Indiana Proposal Under the Small Community Air Service Development Program Docket DOT-OST Dun & Bradstreet DUNS Number Two Digit Congressional District Code: 02

2 TABLE OF CONTENTS INTRODUCTORY LETTER... 4 EXECUTIVE SUMMARY... 5 AIR SERVICE OVERVIEW... 6 South Bend Regional Airport's Catchment Area... 6 Alternate Airports... 8 Routes Served from South Bend Regional Airport... 9 Frequencies by Market and Carrier Air Service Development Efforts AIR SERVICE DEVELOPMENT NEEDS AND DEFICIENCIES Declining Network Carrier Capacity Network Carrier Capacity Trends by Carrier Allegiant's South Bend Service Declining Traffic Leakage Rising Fares (Year-End Data) Rising Fares (Quarterly Data) South Bend Fares Relative to Surrounding Airports South Bend Fares Versus Chicago Fares STRATEGIC PLAN Goals Target Airline Support Local Traffic and Revenue Trends in the South Bend-Denver Market Connecting Traffic and Revenue Via Frontier's Denver Hub Proposed Schedule Alternate Strategies PROJECT FUNDING, IMPLEMENTATION AND MONITORING Public / Private Partnerships Project Funding Implementation Timeline Start-Up Period and Sustainability of the Market PROJECT MONITORING AND FINANCIAL CONTROL

3 Success Metrics Legal Sponsor Financial Controls Continuation of the Program Beyond the Grant Period 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. Enplanements G. Is this application subject to review by state under Executive Order Process? H. Is this applicant delinquent on any federal debt? APPENDIX B: AIRLINE LETTER OF SUPPORT APPENDIX C: COMMUNITY BACKGROUND South Bend Regional Airport The City of South Bend Economic Overview Source: Chamber of Commerce of St. Joseph County What s New in South Bend Higher Education Points of Interest APPENDIX D: LETTERS OF SUPPORT

4 INTRODUCTORY LETTER 4

5 EXECUTIVE SUMMARY South Bend Regional Airport is proposing a Small Community Air Service Development Grant from the Department of Transportation in the amount of $750,000 to supplement community and airport funding totaling $525,000 to provide a minimum revenue guarantee and marketing for one roundtrip operated by Frontier Airlines in the South Bend-Denver market. The community believes an award for Frontier service to Denver will reverse declining traffic at South Bend Regional Airport and lower the cost of air travel for residents and visitors to the area. South Bend Regional Airport serves as the primary commercial service airport to communities Northwestern Indiana and Southwestern Michigan. The primary catchment area served by the airport has a population of approximately 1,230,000 residents, and the South Bend metropolitan statistical area (MSA) is the fourth largest MSA in Indiana with a population of nearly 318,000 residents. South Bend is most famous as the home of The University of Notre Dame, with enrollment of 11,816 students and 1,045 faculty members. Over the past ten years, the community has lost a significant amount of airline capacity. Since the year-end first quarter 2001, South Bend has lost 887 seats per day each way, or 48% of the seats operated by network airlines in Four airlines have discontinued service to five destinations since, and the merger of Delta and Northwest in 2008 eliminated a competitor from the market. The decline capacity at South Bend has resulted in traffic declining 44% since the year-end first quarter 2001 and average domestic fares increasing 27.6% from their low-point in the year-end first quarter While South Bend's fares declined from Summer 2008 "cost of oil highs" to two-year "recession lows" in second quarter 2009, the average ex-allegiant domestic one-way fare in first quarter 2010 increased to $184 higher than the "cost of oil highs" in Summer South Bend retains just 50.5% of the traffic in its catchment area, with approximately 30% of its catchment area traffic lost to one of the two Chicago airports. Traffic is lost to the Chicago airports primarily because fares are lower. In the year-end first quarter 2010, South Bend's average ex-allegiant domestic one-way fare was $171, but the average domestic one-way fare at Chicago Midway was just $116 $55 lower each-way than the South Bend fare. Travelers in South Bend's catchment area drive as far as Indianapolis (158 miles) and Detroit (201 miles) for air service. Denver service on Frontier would not only provide service in the local South Bend-Denver market, but it would also provide travelers with the ability to connect to at least 27 destinations Frontier serves from its Denver hub. 5

6 South Bend Regional Airport believes a Small Community Air Service Development Grant for its proposed service would achieve both the goals of this proposal and the goals of the program by reversing declining traffic and lowering fares at the Airport. AIR SERVICE OVERVIEW South Bend Regional Airport's Catchment Area As illustrated in Exhibit 1, South Bend Regional Airport is the primary airport serving Northwestern Indiana and portions of Southwestern Michigan. The catchment area has a population of 1.2 million residents and includes South Bend and Elkhart in Indiana and Benton Harbor-St. Joseph in Michigan. Exhibit 1: Primary Catchment Area of South Bend Regional Airport (shaded in green) 6

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8 Alternate Airports South Bend Regional Airport is the primary airport for travelers in the South Bend area; however, there are other airports in the region that can be considered alternates to South Bend. Midway and O'Hare Airport in Chicago serve as large hubs for multiple airlines and are the closest alternate large airports to South Bend. Midway is 97 from South Bend, while O'Hare is 109 miles from South Bend. The drive to Ft. Wayne is 108 miles, while Indianapolis is 158 miles and Detroit is 201 miles from South Bend. See Exhibit 2. Exhibit 2: Location of South Bend South Bend Regional Airport Relative to Other Airports in the Region, Distances and Drive Times from South Bend to Other Airports 8

9 Routes Served from South Bend Regional Airport South Bend is currently served by Delta/Delta Connection with regional jet service to Atlanta, Cincinnati, Detroit and Minneapolis/St. Paul. United/United Express operate regional jets to Chicago O'Hare, and Continental serves Cleveland with 37-seat turboprop aircraft (Exhibit 3). In addition to this network carrier service, Allegiant Air provides less-than-daily MD-80 service from South Bend to Las Vegas, Mesa/Phoenix (AZA), St. Petersburg/Tampa (PIE) and Sanford/Orlando (SFB). Exhibit 3: Current Routes Operated from South Bend Regional Airport 9

10 Frequencies by Market and Carrier November 2010 schedule data, illustrated in Exhibit 4, indicates the network carriers serving South Bend have scheduled 18 5/7 flights per day to the six destinations served. Delta operates the most service in South Bend and will operate 1 6/7 flights per day to Atlanta, 5 4/7 flights to Detroit, to daily roundtrips to Cincinnati and one daily roundtrip to Minneapolis. Continental will operate 2 2/7 flights on 37-seat Dash-8 turboprops to Cleveland and United will operate six daily roundtrips to Chicago with a mix of 50 and 70-seat regional jets. Exhibit 4: Departures per Day, Seats per Departure and Seats per Day by Market and Carrier at South Bend November 2010 Carrier Destination Departures per Day Seats per Departure Seats per Day Continental CLE 2 2/ Total 2 2/ Delta ATL 1 6/ CVG DTW 5 4/ MSP Total 10 3/ United ORD Total /

11 Air Service Development Efforts South Bend Regional Airport meets with airlines on a regular basis to provide the airlines with updates on the market, the economy of the region and to discuss potential new service. Over the last year, the Airport has met with 10 airlines in headquarters meetings or at air service development conferences: 1. AirTran 2. Allegiant 3. American Eagle 4. Continental 5. Delta 6. Frontier 7. JetBlue 8. Spirit 9. Sun Country 10. United South Bend Regional Airport aggressively markets existing service to travelers in the catchment area. In 2009, South Bend Regional Airport spent nearly $236,000 on marketing, promotion and advertising. Over the last five years, South Bend's marketing expenses have averaged approximately $269,000 per year. Exhibit 5: 2009 South Bend Regional Airport Marketing Expenses Category Amount Advertising $139,372 Research $31,810 Marketing Representative $23,966 Lobbying $12,207 Items $7,661 Sponsorships $7,125 Co-Op Advertising $5,737 Website $3,045 Events $2,334 Misc. $1,450 Newspaper Clipping $939 Total Marketing Expense $235,646 11

12 Seats per Day Each Way AIR SERVICE DEVELOPMENT NEEDS AND DEFICIENCIES Declining Network Carrier Capacity South Bend has lost 48% of the capacity (in terms of seats per day each way) network airlines and their regional partners serving the airport operated in the year-end first quarter 2001 (this number excludes Allegiant data). In the year-end first quarter 2010, network carriers serving South Bend operated just 947 seats per day each way, a decline of 887 seats per day each way since year-end first quarter 2001 (Exhibit 6). 887 seats per day is roughly the equivalent of the capacity provided by seat regional jets. The largest decline in capacity came between the year-end first quarter 2005 and 2006 when capacity declined by 294 seats per day each way. This decline as ATA and US Airways exited the South Bend market. Note: Allegiant Air is not considered a network carrier, and Allegiant data is not included in the figures above or in the exhibit below. Exhibit 6: Ex-Allegiant Seats per Day Each Way at South Bend Regional Airport Year-End First Quarter (DOT T- 100 data) Seats per Day Each Way (Ex-Allegiant) 2,000 1,834 1,800 1,600 1,637 1,626 1,596 1,538 1,400 1,200 1,244 1,098 1,197 1,152 1,

13 Seats per Day Each Way Network Carrier Capacity Trends by Carrier South Bend's capacity is down over the last ten years because American, US Airways and ATA exited the market and because Delta/Northwest reduced its capacity in South Bend (Exhibit 7). United's capacity is actually up about 50% relative to year-end first quarter 2001, but United's growth came at the expense of loosing American's service to Chicago O'Hare and to St. Louis. Four airlines have discontinued their South Bend service in five markets since year-end first quarter Lost service includes American to Chicago O'Hare (2001), American to St. Louis (2004), ATA to Chicago Midway (2005), US Airways to Pittsburgh (2005) and Cape Air to Indianapolis (2008). The only new network carrier service introduced at South Bend since the year-end 2001 was Northwest service to Minneapolis/St. Paul in Cape Air operated point-to-point service to Indianapolis for a short period ending in the year-end first quarter Exhibit 7: Ex-Allegiant Seats per Day Each Way by Carrier at South Bend Regional Airport Year-End First Quarter (DOT T-100 data) 2,000 DL/NW UA CO US AA Others 1, ,500 1,250 1,

14 Seats and Passengers per Day Each Way Average One-Way Fare Allegiant's South Bend Service Allegiant began South Bend service in third quarter 2005 with less-than-daily flights to Las Vegas, followed by service to Sanford/Orlando in fourth quarter 2005 and St. Petersburg/Tampa in fourth quarter Most recently, Allegiant added Mesa/Phoenix to the destinations it serves from South Bend. Allegiant's traffic has increased to 163 PDEW in the most recent year at an average fare of $85 (Exhibit 8). While the Airport appreciates the service provided by Allegiant, Allegiant operates point-to-point service that does not connect with a network, and the destinations served by Allegiant are primarily outbound leisure destinations. Unfortunately, this type of air service does little to enhance the economic development activity of the region. Exhibit 8: Allegiant Passengers per Day Each Way (PDEW) Seats per Day Each Way and Average One-Way Fare at South Bend Regional Airport Year-End First Quarter (DB1B data) Seats per Day Each Way (Allegiant) Domestic PDEW (Allegiant) One-Way Domestic Fare (Allegiant) 200 $ $ $ $ $ $125 $ $85 $ $50 14

15 Declining Traffic The decline in South Bend's capacity has resulted in a decline in traffic. As shown in Exhibit 9, South Bend's domestic and international ex-allegiant traffic has declined by 368,680 passengers or 44% since year-end first quarter Ex-Allegiant domestic O&D traffic has fallen 45% nearly 359,000 passengers, and international traffic has fallen 26% 9,750 passengers. Allegiant's service in the market has softened the decline in South Bend's overall traffic, but Allegiant's service is limited to just four point-to-point leisure destinations and carries mostly outbound traffic. Exhibit 9: Annual Domestic and International Origin and Destination (O&D) Passengers at South Bend Regional Airport Year-End First Quarter (DB1B data) 900,000 Annual Domestic O&D (Ex-Allegiant) Annual Domestic O&D (Allegiant) Annual International O&D 800, , ,000 36,800 27,630 33,070 31,630 33,940 33,570 34,700 32,860 34,740 83, ,510 32,330 99,900 27, , , , , , , , , , , , , , , , ,

16 Translated to passengers per day each way (PDEW) in Exhibit 10, South Bend generated 1,101 ex-allegiant domestic PDEW in the year-end first quarter 2001; in the year-end first quarter 2010, South Bend generated 609 domestic PDEW a decline of 492 PDEW. International traffic also declined, from 50 PDEW in the year-end first quarter 2001, to 37 PDEW in the most recent year. Allegiant's traffic has increased to 163 PDEW since service began five years ago. Exhibit 10: Annual Domestic and International Passengers per Day Each Way (PDEW) at South Bend Regional Airport Year-End First Quarter (DB1B data) Domestic PDEW (Ex-Allegiant) Domestic PDEW (Allegiant) International PDEW 1, , ,054 1,

17 Leakage South Bend Regional Airport retains only slightly more than half of the traffic generated in its catchment area. Based on analysis of 24,933 tickets sold in the catchment area between September 1, 2007 and October 31, 2008, 49.5% of the traffic in South Bend's catchment area uses one of five other airports in the region South Bend retains 50.5% of the traffic. 30.4% of South Bend traffic is lost to Chicago airports with nearly one-fourth of the traffic lost to Chicago O'Hare and 6.5% lost to Chicago Midway. 9.1% of the traffic is lost to Detroit, 4.2% of the traffic is lost to Ft. Wayne, and 4.1% of the traffic in the catchment area is lost to Indianapolis (Exhibit 11). Based on the leakage data, South Bend's catchment area generated slightly more than 1,300 domestic and international ex-allegiant passengers, 659 more PDEW than the traffic reported in DOT data. 659 PDEW is the equivalent capacity of more than regional jets. Traffic leaked to other airports leaked because South Bend Regional Airport average fares were lower at the alternate airports or because nonstop service was available to a traveler's final distination. Exhibit 11: Airport Origin for South Bend Catchment Area Traffic (January 2010 Leakage Study) 23.9% 50.5% 9.1% 6.5% 4.2% 4.1% 17

18 Seats per Day Each Way Average One-Way Fare Rising Fares (Year-End Data) While South Bend travelers benefited from declining fares from year-end first quarter 2001 through 2003 and fares remained reasonable through 2005, South Bend's average fare increased in the year-end first quarter 2006 to $166 and remained in a range between $165 and $175 between year-end first quarter 2006 and 2010 (Exhibit 12). Exhibit 12: Ex-Allegiant Seats per Day Each Way and Average Domestic Fare at South Bend Regional Airport Year-End First Quarter (DOT T-100 and DB1B data) Seats per Day Each Way (Ex-Allegiant) One-Way Domestic Fare (Ex-Allegiant) 2,000 $200 1,800 1,834 1,600 1,400 $170 1,637 1,626 1,596 1,538 $166 $165 $168 $175 $171 $175 1,200 1, $152 $134 $137 $142 1,244 1,098 1,197 1, $ $ $100 18

19 Seats per Day Each Way Average One-Way Fare Rising Fares (Quarterly Data) Quarterly data indicates South Bend's average domestic one-way fare increased from a low of $160 in second quarter 2009 to $184 in first quarter So while the average fare for the year-end first quarter 2010 was $171, the average fare for the most recent quarter was $184. The quarterly data is particularly disturbing because it indicates South Bend's average domestic one-way fare is higher than the average domestic fares in second and third quarter 2008, when carriers increased fares to offset record high oil prices (Exhibit 13). It should also be noted with the quarterly data that South Bend's capacity is at a ten-year low with just 871 seats per day each way in first quarter 2010 a decline of 130 seats per day versus first quarter 2009 and a decline of 395 seats per day each way, or 31.2% versus third quarter Exhibit 13: Ex-Allegiant Seats per Day Each Way and Average Domestic Fare at South Bend Regional Airport Quarterly Data First Quarter 2008 through First Quarter 2010 (DOT T-100 and DB1B data) Seats per Day Each Way (Ex-Allegiant) One-Way Domestic Fare (Ex-Allegiant) 1,400 $200 1,200 1, $171 1,125 $178 1,230 $180 1,266 $173 1,108 1,001 1,014 1,007 $169 $165 $160 $ $ $175 $ $ Q Q Q Q Q Q Q Q Q1 $100 19

20 Average Domestic Fare (Ex-Allegiant) South Bend Fares Relative to Surrounding Airports Year-End first quarter 2010 data indicates, with the exception of Ft. Wayne, airports surrounding South Bend had lower domestic ex-allegiant fares. Chicago Midway had the lowest fare at $116 each way, and the weighted average of the six airports was $141 each way $30 lower than South Bend's average one-way fare (Exhibit 14) Exhibit 14: Ex-Allegiant Average Domestic Fares at South Bend and Airports Surrounding South Bend Year-End First Quarter 2010 (DB1B data) $200 $175 $150 $125 $100 $75 $50 $116 $136 $141 $149 $149 $171 $184 $25 $0 MDW IND Weighted Average DTW ORD SBN FWA 20

21 South Bend Fares Versus Chicago Fares As the closest large airports to South Bend, average fares at Chicago Midway and Chicago O'Hare are most relevant to our analysis of South Bend's fares. Among South Bend's 30 largest domestic ex-allegiant markets in the year-end first quarter 2010, South Bend had a lower fare than Chicago Midway or Chicago O'Hare in only two markets, Cincinnati and Harrisburg. The most notable differences in South Bend's average fare versus the Chicago airports was in the Atlanta market, where South Bend's average fare was $114 higher each way and in the Minneapolis market, where the average fare was $138 higher each way in South Bend. The average South Bend ex-allegiant domestic one-way fare in the 30 largest markets was $39 higher than the fare at the Chicago airports (Exhibit 15). (In all cases, Midway's average fare was lower than the average fare at Chicago O'Hare.) Exhibit 15: PDEW and Average One-Way Fare in South Bend's 30 Largest Ex-Allegiant Domestic Markets Versus Average Fares at Chicago Midway and Chicago O'Hare Year-End First Quarter 2010 (DB1B data) South Bend Midway O'Hare Average Average Average South Bend vs. Rank Market PDEW One-Way Fare One-Way Fare One-Way Fare Lowest Fare 1 LGA/JFK/EWR 58.0 $116 $111 $138 $5 2 DCA/IAD/BWI 37.5 $133 $114 $135 $19 3 LAX/SNA/ONT/BUR/LGB 26.1 $208 $149 $180 $59 4 MIA/FLL/PBI 24.1 $153 $113 $133 $40 5 CLE 23.3 $104 $85 $103 $20 6 MCO/SFB 19.8 $149 $105 $116 $44 7 ATL 19.6 $213 $99 $126 $114 8 PHX/AZA 18.7 $186 $141 $149 $45 9 DFW/DAL 16.4 $185 $142 $169 $44 10 RSW 16.3 $146 $116 $122 $30 11 BOS 14.1 $175 $105 $130 $70 12 TPA/PIE 13.6 $141 $110 $122 $31 13 CVG 13.5 $102 $159 $153 ($58) 14 PHL 13.2 $160 $119 $131 $41 15 LAS 12.9 $183 $140 $156 $43 16 SFO/OAK/SJC 12.9 $206 $148 $198 $58 17 SEA 11.5 $187 $155 $179 $33 18 CLT 10.9 $166 $113 $154 $54 19 SAN 9.7 $199 $143 $170 $57 20 DEN 9.6 $187 $107 $148 $80 21 RDU 8.3 $148 $111 $121 $36 22 MSP 8.0 $218 $80 $89 $ IAH/HOU 6.9 $211 $134 $143 $77 24 PDX 6.9 $228 $160 $203 $68 25 BDL 6.6 $179 $137 $156 $43 26 MCI 6.6 $136 $93 $98 $44 27 SAT 6.0 $183 $126 $153 $57 28 JAX 5.6 $169 $108 $151 $61 29 MDT 5.4 $134 $178 $194 ($44) 30 BNA 5.1 $140 $84 $96 $57 30 Largest SBN Markets $160 $117 $145 $39 21

22 STRATEGIC PLAN Nonstop service from South Bend to Denver on Frontier would begin to reverse the deficiencies in South Bend's air service by lowering fares and increasing traffic. Goals South Bend's strategic plan has two primary goals: Lower fares in the local and connecting markets Frontier could serve via Denver Increase origin and destination traffic by stimulating with traffic with lower fares and recapturing catchment area traffic lost to other airports Target Airline Support There are several options South Bend Regional Airport could have pursued with a proposal for a Small Community Air Service Development grant. The Airport selected the Frontier Denver option because it is the best option to enable the Airport to achieve its goals of lower fares and increased traffic. Frontier is considered a lowcost carrier, and generally prices origin and destination markets lower than the legacy airlines price the same markets prior to Frontier entering a market. Once Frontier enters the market, other airlines match Frontier's pricing, and traffic at the airport increases by a wider margin than the traffic carried by just Frontier. While the Airport recognized and identified the benefits Frontier service would bring to the community, Frontier has expressed interest in serving the market. Frontier has written a letter of support for South Bend Regional Airport's Small Community Air Service Development grant proposal, and Frontier's letter is attached in Appendix B. 22

23 Passengers per Day Each Way (PDEW) Average One-Way Fare Local Traffic and Revenue Trends in the South Bend-Denver Market Although South Bend-Denver year-end first quarter traffic has declined over the last ten years, Denver has generated as many as 29.2 PDEW at an average one-way fare of $112 and 28.2 PDEW at an average one-way fare of $121 in the year-end first quarter 2003 and 2004, respectively (Exhibit 16). In the most recent year, South Bend-Denver had declined to 9.2 PDEW at an average fare of $187 each way. Exhibit 16: South Bend-Denver PDEW and Average One-Way Fare Year-End First Quarter (DB1B data) SBN-DEN PDEW SBN-DEN Average Fare 35 $193 $187 $ $ $160 $157 $ $ $138 $ $112 $121 $ $125 $ $75 $50 5 $ $0 23

24 Passengers per Day Each Way (PDEW) Average One-Way Fare Analysis of quarterly data indicates Denver traffic was down year-over-year in each of the last five quarters, but the decline can't be blamed on higher fares. In the last three quarters, the average South Bend-Denver fare was slightly lower year-over-year (Exhibit 17). The decline in Denver traffic, both at annual and quarterly levels, is more likely a direct result of the decline in South Bend's decline in capacity. Fewer seats to hub airports from South Bend provide fewer opportunities for potential South Bend-Denver traffic to connect at the hub airports. Exhibit 17: South Bend-Denver and Average One-Way Fare Quarterly Data First Quarter 2008 through First Quarter 2010 (DB1B data) SBN-DEN PDEW SBN-DEN Average Fare 35 $ $160 $172 $205 $201 $196 $178 $190 $200 $182 $225 $200 $175 $ $ $ $75 $50 $ Q Q Q Q Q Q Q Q Q1 $0 * 24

25 Connecting Traffic and Revenue Via Frontier's Denver Hub While the local South Bend-Denver market will generate some traffic for Frontier and would likely emerge as Frontier's single largest South Bend market, the primary benefit of service on Frontier to Denver is the ability for South Bend travelers to connect to points on Frontier's network beyond the Denver hub. Assuming circuity no greater than 67%, travelers could connect to 27 destinations beyond the Denver hub, and the cumulative number of passengers connecting beyond Denver will be greater than the number of local Denver passengers. The connecting markets include markets in the Rocky Mountain West, the Southwest, the West Coast, two markets in Mexico and San Jose, Costa Rica (Exhibit 18). Exhibit 18: Non-Circuitous Markets Frontier Could Serve with South Bend-Denver Service (circuity not greater than 67%) 25

26 The markets Frontier could serve with South Bend-Denver service generated 180 passengers per day each way at an average one-way fare of $174 in the year-end first quarter 2010 (Exhibit 19). The largest markets Frontier could serve with service via its Denver hub are Las Vegas, the Los Angeles metro area, Phoenix, the San Francisco Bay area and Seattle markets that each produced more than 10 PDEW in the year-end first quarter The size of the local market, plus the cumulative size of connecting markets via Denver at relatively high average fares should make South Bend-Denver an attractive opportunity for Frontier. (Allegiant data is included in Exhibit 18 below, but only appears in the Las Vegas data since Las Vegas was the only market served on the list in the year-end first quarter 2010) Exhibit 19: Annual O&D Passengers, Passengers per Day Each Way (PDEW) and Average One-Way Fares in the Markets Frontier Could Serve with South Bend-Denver Service (Includes Allegiant Data) Year-End First Quarter 2010 (DB1B data) Rank Market Annual O&D PDEW Average One-Way Fare 1 LAS 45, $123 2 LAX/SNA/ONT/BUR/LGB 19, $208 3 PHX/AZA 13, $186 4 SFO/OAK/SJC 9, $206 5 SEA 8, $187 6 SAN 7, $199 7 DEN 7, $187 8 PDX 5, $228 9 SAT 4, $ SMF 2, $ SLC 1, $ ABQ 1, $ TUS 1, $ COS 1, $ GEG $ BOI $ BZN $ SBA $ SJD $ BIL $ PVR $ DRO $ ANC $ JAC $ FAI $ RAP $ ASE $ SJO $194 Total 131, $174 26

27 Proposed Schedule A one roundtrip pattern using an Embraer 190 timed to connect with flights at Frontier's Denver hub to/from destinations west of Denver will maximize Frontier's profitability in South Bend (Exhibit 20). Exhibit 20: Proposed South Bend-Denver Schedules South Bend to Denver (969 Miles) Depart Arrive Block Aircraft Frequency 8:00PM 8:40PM 2:40 E90 Daily Denver to South Bend (969 Miles) Depart Arrive Block Aircraft Frequency 2:55PM 7:20PM 2:25 E90 Daily Alternate Strategies If Frontier is not able to launch service between South Bend and Denver, South Bend Regional Airport would like to offer the Small Community Air Service Development grant and the community funding of the project to Frontier for regional jet service to its hub in Milwaukee or to American Airlines for regional jet service from South Bend to Dallas/Ft. Worth. 27

28 PROJECT FUNDING, IMPLEMENTATION AND MONITORING Public / Private Partnerships Public St. Joseph County Airport Authority State of Indiana City of South Bend, Indiana Private University of Notre Dame American Electric Power NIPSCO Project Future Project Funding In addition to the Small Community Air Service Development Grant of $750,000 requested from the Department, the State of Indiana can provide $100,000 in cash, various organizations in the community can provide $100,000 in cash, and the Airport can provide $75,000 in cash for the project. The final amount offered to Frontier as cash for the minimum revenue guarantee will be subject to agreement between the Airport, the Department and Frontier. The Airport believes a significant portion of the $275,000 in cash offered by the State, community organizations and the Airport should be used for marketing and advertising the proposed service. Airport in-kind funding, in the form of waived fees and charges, is valued at $200,000 over the proposed two year life of the project. Community in-kind funding, in the form of advertising placement, is valued at $50,000 over two years. The total value of the project is $1,275,000 Exhibit 21: Types and Amounts of Project Funding by Source Grant Cash In-Kind Total U.S. Department of Transportation $750,000 $750,000 State $100,000 $100,000 Local Community $100,000 $50,000 $150,000 Airport $75,000 $200,000 $275,000 Total $750,000 $275,000 $250,000 $1,275,000 28

29 Implementation Timeline The proposed implementation timeline for the project assumes the Department will award Small Community Grant Funding in December 2010 (Exhibit 22). Once the award is announced, South Bend Regional Airport will begin discussions with Frontier to begin service. Based on airline planning lead times and the need for advance bookings, we assume Frontier would not be able to begin service until at least June The first two milestones on the Airport's timeline are to execute the grant agreement with the Department and the minimum revenue guarantee agreement with Frontier. Once service is announced and schedules are published, the Airport would begin marketing the new route and working with Frontier to monitor advance bookings. The Airport will continue its marketing program and continue to work with Frontier to monitor the route once service begins. The Airport will submit grant status reports on a quarterly basis to the Department throughout the proposed two year term of the minimum revenue guarantee. Exhibit 22: Proposed Project Timeline (assumes grant announcements in December 2010 and service launch in June 2011) Activity/Project Milestone Start-Up Period and Sustainability of the Market Estimated Dates SCASD Grant Award Announcement December 2010 Execute Grant Agreement with DOT January 2011 Negotiate Minimum Revenue Guarantee with Airline January 2011 Announce Service February 2011 Publish Schedule February 2011 Market Route (Pre-Launch) March-May 2011 Monitor Advance Bookings March-May 2011 Begin Service June 2011 Market Route (Post-Launch) June 2011 and Beyond Operate Service with MRG June May 2013 Monitor Route Performance June May 2013 and Beyond Submit Grant Status Reports to DOT Quarterly 2Q Q 2013 The Airport will aggressively market the new service to business and leisure travelers in the catchment area. A benefit of beginning service in June 2011 is to capture the peak of traffic seasonality in the U.S. domestic and international air travel market. Beginning service in the summer will provide a strong start for the service and provide two-and-a-half to three months to build business traffic in the market before leisure traffic demand falls in mid-august to early September. Business travel will become more important for the success of the route as leisure travel declines in the Fall. The Airport expects the route to be self-sustaining within the first two years of service and will include Denver as part of its on-going marketing and promotional campaigns of the airport. 29

30 PROJECT MONITORING AND FINANCIAL CONTROL Success Metrics The success of the program will be based on achieving the objectives of the program. The Airport will continuously monitor the performance of the route. Even before service begins we will communicate with Frontier on a weekly basis to monitor advance bookings and week-over-week of advance bookings. Marketing and promotional activities can be adjusted if advance bookings are weak or are not booking at a rate comparable to other Frontier Denver markets. Project Goals Lower fares in the local and connecting markets Frontier could serve via Denver Increase origin and destination traffic by stimulating with traffic with lower fares and recapturing catchment area traffic lost to other airports Success Metric Lower quarterly year-over-year fares in both the local and connecting markets Increased traffic (among all carriers) in the markets Frontier serves via Denver Once service begins, the Airport will rely on traffic and revenue data provided directly by the airline and the amount of reimbursements requested by the airline as indications of project success. T-100 data and DB1B data will also be analyzed to compare year-over-year market size growth on a quarterly basis. In addition, the airport will analyze leakage once the service has operated for a full year to determine the trend in leakage to other airports. The Airport will report its success metrics in the quarterly grant reports to the Department. Legal Sponsor St. Joseph County Airport Authority is the legal sponsor responsible for administering the program. St. Joseph County Airport Authority is a government entity. St. Joseph County Airport Authority 4477 Progress Drive South Bend, IN John C. Schalliol, A.A.E., Executive Director Financial Controls As the sponsor, St. Joseph County Airport Authority will be the responsible party for all fiscal matters and the Department's reporting requirements. The Commission is established as a public governing body. As a public entity, the Department can be assured that proper financial controls are in place to guarantee that the 30

31 Department s Grant will be used in accordance with any subsequent agreement. The South Bend Airport Commission 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. Continuation of the Program Beyond the Grant Period The purpose of the proposed Small Community Air Service Development Grant for a minimum revenue guarantee for service to Denver on Frontier Airlines is to offset any losses Frontier might incur in the start-up period of its service. The minimum revenue guarantee would be offered to Frontier for a period of two years to establish itself in the South Bend market. After the two-year start-up period, Frontier's service to Denver would be included in the Airport's on-going marketing and promotional campaigns. 31

32 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 St. Joseph County Airport Authority State of Indiana City of South Bend, Indiana Private University of Notre Dame American Electric Power NIPSCO Project Future C. Project Proposal Marketing Upgrade Aircraft New Route Personnel Increase Frequency Low Fare Service Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Other (specify) Revenue Guarantee Launch New Service Start-Up Cost Offset First Service Study Secure Additional Carrier 32

33 D. Existing Landing Aids at Local Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) E. Project Cost 1. Federal amount requested: $750, State cash financial contribution: $100, Local cash financial contribution: $175,000 3a. Airport cash funds: $75,000 3b. Non-airport cash funds: $100,000 3c. Total local cash funds (3a + 3b): $175, TOTAL CASH FUNDING ( c): $1,025, Local funds contributed from alreadyexisting programs or projects included in $50,000 line 3c amount: 6. Local funds contributed from new commitments or new resources included in line 3c amount: $100, Airport in-kind contribution: (waived fees) $200, Other in-kind contribution: (advertising/media placement) $50, TOTAL IN-KIND CONTRIBUTION (7 + 8): $250, TOTAL PROJECT COST (4 + 9): $1,275,000 F. Enplanements , , , , , , , , , ,562 33

34 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 H. Is this applicant delinquent on any federal debt? No Yes (explain) 34

35 APPENDIX B: AIRLINE LETTER OF SUPPORT 35

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37 APPENDIX C: COMMUNITY BACKGROUND South Bend Regional Airport South Bend Regional Airport is located a few miles south of the City of South Bend, in the very northern part of the State of Indiana and close to the state border of Michigan, as well as within a 35-mile drive west to the shores of Lake Michigan. The airport has easy access to Interstate 80/90 and to State Hwy 20/31. South Bend is home to famed Notre Dame University and four other universities & colleges. Thanks to a multi-modal transportation complex in the Michiana Region, South Bend Regional Airport is the only small airport in the United States featuring air, interstate rail, and interstate bus services at one multi-modal terminal location. Currently the passenger terminal offers the following amenities: Fee-based Wi-Fi internet access throughout the Airport; Air Host/Cafe; Sugar & Spice--a candy store; the Gift Shop; and the Business Center offering WiFi access, laptop charging stations, work desks and comfortable chairs. The South Bend Regional Airport has two runways. Runway 18/36 was extended by 1,100 feet in 2007 for a total of 7,100 feet and is asphalt. The second runway, 9L/27R, is also asphalt and in 4,300 feet in length. Expansion of the passenger terminal has started and should be completed by The new 45,000 square foot concourse expansion will include 5 new gates, dining room, lounge and gift shop and a children s room, and will consolidate passenger screening operations into a single expanded location. The expansion will extend from the east side of the Concourse A holding room past the existing Concourse C walkway, which will be demolished. An arching translucent panel roof will provide bright daylight and large windows. COMMUNITY PROFILE 37

38 The City of South Bend With a 2010 population of 103,807 South Bend is of Northern Indiana's fastest growing areas and metro area ranks third in population in Indiana. cultural and entertainment diversity is enhanced the University of Notre Dame and 5 other area colleges. Century Center on the river in the downtown area plays host to many business and cultural events and trade shows. South Bend is home to a striking new College Football Hall of Fame facility which attracts visitors throughout year and plays host to the annual enshrinement activities attracting national media. one the The by now the The park system consists of 75 local parks and facilities which include Coveleski Stadium, the home of the South Bend Silverhawks, a class A minor league baseball franchise. South Bend is also the home of two unique features that were originally the first of their kind. The Potawatomi Zoo constructed in 1902 is currently the oldest accredited zoo in the state of Indiana. Also, our East Race Waterway constructed in 1984, was the first and only man made white water rapids facility in the entire North American Hemisphere. These facilities and many others have provided our residents and guests the opportunity to recreate and enjoy their leisure activities in South Bend. A vibrant community, rich in history, rich in tradition. A golden glow illuminates this city where the river bends in northern Indiana. From pigskin pageantry and game day excitement at the College Football Hall of Fame, the rushing rapids of the East Race Waterway, the opulence of Copshaholm, the Oliver Mansion, the rich transportation history at the Studebaker National Museum, the tranquility of Shirojiri Niwa Gardens to the hustle and bustle of the Grape Road shopping area, South Bend is full of great places to explore. 38

39 Economic Overview Major Employers in St. Joseph County Employer Employee University of Notre Dame 4,707 Memorial Health System 3,545 South Bend Community School Corporation 3,212 AM General 2,400 Saint Joseph Regional Medical Center Inc. 2,123 City of South Bend 1,361 1st Source Bank 1,257 Martin's Supermarkets Wal-Mart Penn-Harris-Madison School Corporation 998 School City of Mishawaka 986 Indiana University South Bend 900 St. Joseph County 900 Madison Center 871 Honeywell 777 Bayer Corporation 700 Source: Chamber of Commerce of St. Joseph County The median family income in South Bend is $51,354, with a higher purchasing power of $55,698. The current unemployment rate of 11.5% (May 2010) is only slightly higher than the US average (9.5%). However, new business and enterprises, as well as the rebound of current companies, are improving the economy of the region. There are signs of regional economic development efforts, such as the rise of the eye-catching Innovation Park at Notre Dame, with its growing number of client companies. Recognizing that new business opportunities will continue to form a portion of the regional economy, local non-profit business organization, Project Future, is focusing its recent economic development efforts on several key strategies: promoting the entire region, highlighting common strengths, and capitalizing on the innovative companies that made the region famous. 39

40 What s New in South Bend Innovation Park at Notre Dame Located adjacent to the University of Notre Dame, Innovation Park provides client companies with first-class space, resources and services to help them identify and meet key commercialization milestones. Innovation Park is designed to serve early-stage businesses in varying stages of development, including ventures with expected commercial applications from Notre Dame research areas as well as ventures that can benefit from access to expertise and resources available through the park. The park s first 55,000-square-foot facility includes private, build-to-suit office suites and laboratory space, incubation space in the Greenhouse area and high-technology collaborative areas. RV s heading to South Bend Thor Industries subsidiary Redwood RV announced in August 2010 that it has bought a closed factory in northern Indiana where it plans to start building a new line of luxury trailers in the coming months. It purchased the factory in Syracuse that was formerly owned by Ameri-Camp RV, which shut down in Redwood president Don Emahiser says the company has already hired some staffers and is developing a prototype fifth wheel trailer that it will display during the National RV Trade Show in Louisville, Ky., from Nov. 30 to Dec. 2. Emahiser says some renovations will be done at the factory in the next few months and that Redwood expects to hire between 60 and 80 employees during its first year. Saint Joseph Regional Medical Center Opened The new Saint Joseph Regional Medical Center opened on December 14, The new $355 million hospital includes 254 private inpatient rooms, a beautifully landscaped 90-acre campus and the most advanced healthcare technology the South Bend area has ever seen. The entire campus was designed to promote safety, efficiency and healing in a soothing environment. This project was a massive undertaking that could not have been possible without the dedication, support and hard work of our Associates, our Physicians, our partners in design and construction and every member of the community. Facilities include a top emergency department, state-of-the art Neonatal Intensive Care Unit and world-class patient rooms. 40

41 Higher Education The South Bend area is a major center of higher learning and is home to five major colleges and universities, as well as seven smaller institutions of higher education. Total Enrollment of the Five Major South Bend Region Institutions - Fall 2009 Institution Enrollment University of Notre Dame 11,816 Indiana University South Bend 8,394 Bethel College 2,165 Saint Mary s College 1,664 Holy Cross College 445 Total Enrollment 24,484 Source: National Center for Education Statistics University of Notre Dame The University of Notre Dame, founded in 1842 by Rev. Edward F. Sorin, C.S.C., of Congregation of Holy Cross, is an independent, national Catholic university located Notre Dame, Ind., adjacent to South Bend and approximately 90 miles east of Chicago. the in The University is organized into four colleges Arts and Letters, Science, Engineering, and the Mendoza College of Business the School of Architecture, the Law School, the Graduate School, six major research institutes, more than 40 centers and special programs, and the University library system. The source of the University s academic strength is its faculty, which since 1988 has seen the addition of some 500 members and the establishment of more than 150 new endowed professorships. Notre Dame faculty members have won 37 fellowships from the National Endowment for the Humanities in the past ten years, more than for any other university in the nation. With 1,250 acres containing two lakes and 138 buildings with a total property replacement value of $2.8 billion, Notre Dame is well known for the quality of its physical plant and the beauty of its campus. The Basilica of the Sacred Heart, the 14 story Hesburgh Library with its 132 feet high mural depicting Christ the Teacher, and the University s beautifully renovated 130 year old Main Building with its famed Golden Dome are among the most widely known university landmarks in the world. 41

42 Indiana University South Bend (IUSB) Indiana University South Bend is the only comprehensive public university in North Central Indiana and the third largest campus in the Indiana University system. We re a university grounded in academic excellence that also offers the full collegiate experience including student housing, more than 100 degree programs, men s and women s NAIA basketball and a full complement of activities to enhance your college career. Saint Mary s College Saint Mary s College is a four-year, Catholic, women's institution, with a community more than 1,600 students, talented professors, and dedicated staff. Saint Mary's College ranks among the top 100 Best National Liberal Arts Colleges in the U.S.News & World Report 2011 College Guide. Saint Mary's has six nationally accredited academic programs: social work, art, music, teacher education, chemistry, and nursing. of Bethel College Bethel College is a Christian liberal arts institution located in Mishawaka, Indiana. It was established in 1947 by a Mennonite group which was one of the founding members of the Missionary Church. The Bethel College faculty is composed of about 115 full-time members. Bethel College offers 17 sports, as well as cheerleading and competes in the Mid-Central Conference of National Association of Intercollegiate Athletics Division 1. Holy Cross College Holy Cross College is a Roman Catholic, co-educational, residential institution of higher education in Notre Dam. The college was founded in 1966 and is administered by members of the Congregation of Holy Cross. Holy Cross athletic teams are known as the Holy Cross Saints. HCC competes in the NAIA's Chicagoland Collegiate Athletic Conference for most sports. 42

43 Points of Interest College Football Hall of Fame Opening its doors in August 1995, the College Football Hall of Fame re-located to South Bend, IN from Kings Mills, OH. The state of the art 55,000 square-foot facility that honors the history and tradition of college football has been witness to history as well. Being located just off the busy east-west I-80/I-90 corridor, the Hall is toured each season by numerous college football teams as they travel. The museum displays priceless artifacts from every era of the game's 140- year history. The South Bend Museum of Art The SBMA's exhibition program highlights current art activity taking place on a local, regional and national basis, features critical social and art historical themes, and provides opportunities to artists for in-depth solo exhibitions. This includes group and traveling exhibitions and shows organized by the museum's curatorial and education staff or guest curators. The Permanent Collection of the South Bend Museum of Art presents over 60 years of acquisition. The collection features the work of historical Indiana artists, and significant contemporary regional artists, which makes it a unique collection for the community it serves. The Studebaker National Museum The Studebaker National Museum is a state-of-the- art, 55,00 0-square-foot facility that opened in October The building is on three levels and features fully climate-controlled galleries and storage facilities to ensure the best possible care for the collection. The Studebaker National Museum was designed by South Bend s own James Childs Architects and features several design elements from Studebaker s factory buildings. 43

44 The South Bend Chocolate Museum The South Bend Chocolate Company s Chocolate Museum houses a collection that is among the world s largest, specializing in North American chocolate companies. The collection includes rare boxes, tins, pots and containers of every size, shape and color. There s also posters, signs, books and other chocolate related memorabilia. Visitors get an opportunity to watch behind the scenes production and packaging, learn about where chocolate comes from, and sample. HealthWorks! Children s Museum HealthWorks! is an interactive, hands-on health education center for children (Kgrade) infectiously contaminating them with ways to stay healthy and unlock the mysteries of the human body. Let's Play Grossology, Off the Wall, Patients Please, live demonstrations and more are just the beginning of your fun filled experience. 6th Parks The South Bend area offers visitors numerous state and local parks to explore. Spicer Lake Nature Preserve is a 320 acre state-dedicated nature preserve that features kettle-hole lakes and wetlands abundant with rich plant life. Several state endangered plants and animals live here. Over 6 miles of trails and a quarter-mile boardwalk are ideal for bird watching and nature study. St. Patrick s County Park offers 398 acres of wooded trails, picnic shelters, hiking trails and a playground. This park is a popular destination for visitors from around the region. In winter, innertubing, cross-county ski rentals and groomed trails transform the park into winter wonderland. Canoe and kayak rentals are offered on the St. Joseph River May through early October. The Red Barn and nearby farm buildings are on the State Listing of Historic Sites. There is also a recreated orchard with heirloom apple trees and grapes and the Goodhew Gazebo. Potato Creek State Parks is a 3,800-acre park that abounds with diverse habitats and wildlife and has been designated as an Important Bird Area by the National Audubon Society and Birdlife International. The Potawatomi Greenhouse and Conservatory features the lush jungle feel of the Morris Conservatory with its large rubber trees, bamboo and citrus trees and the relaxing sound of the small waterfall surrounded by bougainvillea, bird of paradise and many other exotic plants. It features growing houses that grow the flowers and plants for three seasonal flower shows and supply the conservatories and South Bend parks, as well as an Arizona Desert Dome. 44

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