AVP PROGRAM GOALS FOR USING GRANT FUNDING
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- Elaine Porter
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1 AVP PROGRAM GOALS FOR USING GRANT FUNDING 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 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 year round service to AVP s #1 O&D market Orlando. 2. Maintain seasonal service with Myrtle Beach Direct Air to Myrtle Beach. 3. Restore daily service between AVP and the following three markets: Boston, Pittsburgh and Baltimore/Washington, DC. 4. 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 to at least three (3) prime markets. The primary method of funds usage will be providing airport-funded ground handling service for the participating airlines in the selected markets. The secondary method of funds usage will be marketing. All marketing will use a variety of print and non-print communications. By providing ground-handling services in-house, AVP will be better able to control the crucial passenger-airline dialogue, while lowering the cost of services. At the time this proposal was written, rising fuel costs are the trouble for many carriers. With oil over $130 a barrel, there is no way to predict what the outcome will be for fuel, which is why AVP has chosen to assist airlines with ground-handling. For any airline utilizing in-house ground handling services, it removes some start-up barriers that airlines have when entering a new market, as well as reduces some of their initial risk. Also, AVP includes additional in-kind contributions to any new airline, including waiving of landing fees and space rental fees for an agreed upon length of time. In addition, such services and the resulting cost reductions will allow the Airport to better market its cost advantage to airlines that may be recruited to provide additional service to the community, decreasing start-up costs and lowering the barriers to entry tremendously. By providing some marketing support for new or expanded air service, experience indicates those efforts would be significantly less effective if minimal or no advertising were done to promote the new or expanded service. AVP offers multiple avenues for marketing, including: video, audio, web and print advertising; billboards; direct mailing; and bus wraps on county transportation systems.
2 Proposal Under The Small Community Air Service Development Program Date: June 6, 2008 Legal Sponsor: Wilkes-Barre/Scranton International Airport Partners: Luzerne County, PA; Lackawanna County, PA DUNS Number: Contact: Docket #: Barry J. Centini Wilkes-Barre/Scranton International Airport 100 Terminal Drive, Suite 1 Avoca, PA Phone: (570) airport@flyavp.com DOT-OST
3 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 in the country. 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. 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. Maintaining legacy air carrier service to other AVP key markets has improved cost differentials in other AVP markets. Successfully retaining those low cost carriers long-term has proven difficult. Our described program is designed to address both of these concerns. With this in mind, the Airport continues to provide exceptional service to its community, while having no control or responsibility over the main aspect of air travel the customer. Currently, AVP has five legacy carriers, and four of those are handled by one airline. In addition, a sixth airline will provide seasonal service to one destination beginning June 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, from airline employee wages to the actual outsourcing of 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. Page 2 of 14
4 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. Northwest Airlink s nonstop Detroit service, which began in April 2005, 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. 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 with one of the above carriers 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) Page 3 of 14
5 The Wilkes-Barre/Scranton/Hazleton metro-area has a population of over 600,000. There are over one million potential air passengers within a onehour drive time and just fewer than three million located within a 90- minute drive time. 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. To the east, Newark Liberty International Airport and Stewart International Airport also competes with AVP offering travelers numerous low fare options (such as service by AirTran and JetBlue). As a large hub, Newark Liberty International offers substantially more scheduled flights and direct service options. B. 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, Page 4 of 14
6 Delta, United, Northwest, and Continental. Combined, these carriers serve a total of seven (7) major hubs including Atlanta, Charlotte, Chicago, Cincinnati, Cleveland, Detroit and Philadelphia. A sixth airline, Myrtle Beach Direct Air, will provide seasonal service to Myrtle Beach beginning June The table below indicates the type of aircraft flown by each carrier, equipment type, seats, frequency and average available fares at AVP. With the exception of Myrtle Beach Direct Air, 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 new Embraer 170/190 series. Carrier Market Code A/C Stops Daily Daily Weekly Weekly Seats/ Avg. Type Depts Seats Depts Seats Flight Fares (1) CO Cleveland CLE DH $ 131 D1 Myrtle Beach MYR $ 129 DL Atlanta ATL CRJ $ 243 DL Cincinnati CVG CRJ $ 280 DL Cincinnati CVG ER $ 280 NW Detroit DTW CRJ $ 128 UA Chicago ORD CRJ $ 190 US Charlotte CLT CR $ 193 US Philadelphia PHL CRJ $ 181 US Philadelphia PHL DH $ 181 TOTALS (Source OAG Schedule Tapes, August 2008, US DOT O&D Survey, via Sabre Airline Solutions) (Additional Source: Myrtle Beach Direct Air Published Schedule August 2008) (1) CY 2007 Industry Average OW Fare from AVP Page 5 of 14
7 (Source OAG Schedule Tapes August 2008) (Additional Source Myrtle Beach Direct Air Schedule August 2008) The chart above shows the cities serviced by AVP s current airlines from AVP. For 2007, Wilkes-Barre/Scranton International Airport reported 438,895 combined enplaned & deplaned passengers. However, the true market size is estimated to be triple that number, 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 has recently reduced available seats and cut flights, which increases opportunities for other airlines. In addition, Atlanta, AVP s #2 O&D Market for CY 2006, is not AVP #5 O&D Market for CY This market is served by Delta Connection, and has been drastically cut to two (2) daily departures. Delta s fares also remain high and their only other direct destination is Cincinnati, OH. Page 6 of 14
8 AVP Seats History Percent Annual Change vs. Year Seats Prior Year , , % , % , % , % , % , % Seats Month ('08 vs. '07) Diff (+/-) % Change January -4, % February -2, % March -1, % April -1, % Source: Wilkes-Barre/Scranton International Airport Losses in the past two years include: Hooters Air to Orlando, Fort Lauderdale, St. Petersburg and Myrtle Beach in March 2006; Continental Connection to Boston; US Airways to Pittsburgh in June These losses, as well as the significant reduction in available seats (shown above) by Delta, United and US Airways throughout 2007 on destinations from AVP, it is anticipated that the increase in passenger enplanements (shown below), as well as the increase in load factors, shown in January through April 2008, will continue to break even or soon begin to drop throughout the remainder of 2008, if an additional airline does not add service. Page 7 of 14
9 AVP Enplanement History Percent Annual Change vs. Year Enplanements Prior Year , , % , % , % , % , % , % Enplanements Month ('08 vs. '07) Diff (+/-) % Change January % February % March % April % Source: Wilkes-Barre/Scranton International Airport C. Analysis of Greater Northeastern Pennsylvania Needs and Deficiencies Immediately following 9/11, 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, Florida. 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 rising fuel costs. Atlanta, another AVP top O&D market, continues to perform well since returning to AVP in However, Delta has significantly reduced its service to both ATL and CVG, due to their own financial problems. Airlines, including Continental Connection and US Airways, have reduced capacity at AVP and continue to do so in Other airlines, including Northwest and United, remain at constant capacity, with no future growth on the horizon. Another challenge for AVP is the fact that competing airports are marketing their low-fare service to travelers in the AVP market area. In light of these circumstances, AVP is actively pursuing competitive low-fare service, as well as maintaining or even increasing legacy air service, to its top markets. Page 8 of 14
10 AVP s airfares remain extraordinarily high for the level of service offered and the economic demographic of the area as evidenced in the table below. As shown on the chart below, AVP s fares remain above average and significantly higher than select markets with similar sized O&D passengers. AVP vs. Selected U.S. Cities - O&D Passengers & Avg Fare Total O&D Avg Daily Enpl. Daily Rank Market Code State Psgrs Fare O&D Psgrs Psgrs Enpl Psgrs 1 Montgomery MGM AL 326,850 $ , Jackson JAC WY 507,170 $ , Rapid City RAP SD 438,520 $ , Bristol/Kngspt/Jn TRI TN 371,090 $ , Bangor BGR ME 374,070 $ , Vail/Eagle EGE CO 431,690 $ , Pasco PSC WA 448,110 $ , Kalamazoo AZO MI 333,160 $ , Traverse City TVC MI 368,100 $ , Evansville EVV IN 390,050 $ , Melbourne MLB FL 252,500 $ , Saginaw/By Cty/Mdld MBS MI 312,730 $ , Wilkes-Barre/Scranton AVP PA 407,300 $ , Lincoln LNK NE 296,060 $ , Juneau JNU AK 487,380 $ ,877 1, Chattanooga CHA TN 546,360 $ , Peoria PIA IL 486,370 $ , Erie ERI PA 259,630 $ , Toledo TOL OH 309,360 $ , Bloomington-Normal BMI IL 498,090 $ , Newburgh SWF NY 897,130 $119 1, ,565 1, St Petersburg PIE FL 716,500 $ ,564 1,023 Average 429,919 $ , (Source US DOT O&D Survey (CY 2007), via Sabre Airline Solutions, OAG Schedule Tapes) 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 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. Page 9 of 14
11 Specifically, the four program goals are as follows: 1. Secure year round service to AVP s #1 O&D market Orlando. 2. Maintain seasonal service with Myrtle Beach Direct Air to Myrtle Beach. 3. Restore daily service between AVP and the following three markets: Boston, Pittsburgh and Washington, DC. 4. 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 to at least three (3) prime markets. The primary method of funds usage will be providing airport-funded ground handling service for the participating airlines in the selected markets. The secondary method of funds usage will be marketing. All marketing will use a variety of print and non-print communications. By providing ground-handling services in-house, AVP will be better able to control the crucial passenger-airline dialogue, while lowering the cost of services. At the time this proposal was written, rising fuel costs are the trouble for many carriers. With oil over $130 a barrel, there is no way to predict what the outcome will be for fuel, which is why AVP has chosen to assist airlines with ground-handling. For any airline utilizing in-house ground handling services, it removes some start-up barriers that airlines have when entering a new market, as well as reduces some of their initial risk. Also, AVP includes additional in-kind contributions to any new airline, including waiving of landing fees and space rental fees for an agreed upon length of time. In addition, such services and the resulting cost reductions will allow the Airport to better market its cost advantage to airlines that may be recruited to provide additional service to the community, decreasing start-up costs and lowering the barriers to entry tremendously. By providing some marketing support for new or expanded air service, experience indicates those efforts would be significantly less effective if minimal or no advertising were done to promote the new or expanded service. AVP offers multiple avenues for marketing, including: video, audio, web and print advertising; billboards; direct mailing; and bus wraps on county transportation systems. Page 10 of 14
12 B. Target Audiences The following is a list of, but not limited to, target audiences for AVP: Legacy carriers: i. American ii. Continental iii. Delta iv. Northwest v. United vi. US Airways Low-fare carriers: i. AirTran Airways ii. Allegiant Air iii. JetBlue Airways iv. Midwest Airlines New start-up carriers: i. Myrtle Beach Direct Air Regional carriers i. Cape Air ii. Gulfstream International Airlines iii. Pinnacle Airlines iv. Trans States Airlines Local air travelers living in the AVP market who are electing to use another airport. C. Plan Implementation and Timetable Key milestones for the Program will be: Securing meetings with carriers to negotiate new service (July 2008 December 2008). Announcing new service with local community marketing campaign (January 2009 June 2009). Starting up new service (January 2009 October 2009). Monitoring and analyzing monthly traffic numbers of new service (January 2009 June 2010). Monitoring and analyzing fares to the target markets (January 2009 June 2010). 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, Page 11 of 14
13 and the program will be managed by an airport administration and bi-county 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. A low-cost airline to begin Orlando Service, minimum two (2) flights per week, beginning Fall 2008 through Indirect subsidy to provide ground-handling services for twelve (12) months, as well as local market advertising for the new service. FAA: $ 175,000 Luzerne County: $ 17,500 Lackawanna County: $ 17,500 Airport: $ 20,000 Total: $ 230,000 (NOTE: Ground-Handling Services: $130,000; Local Market Advertising: $100,000) B. Myrtle Beach Direct Air to maintain Myrtle Beach service in 2009, minimum two (2) flights per week. Indirect subsidy to provide groundhandling services for nine (9) months, as well as local market advertising for the continued service. FAA: $ 100,000 Luzerne County: $ 25,000 Lackawanna County: $ 25,000 Total: $ 150,000 (NOTE: Ground-Handling Services: $100,000; Local Market Advertising: $50,000) Page 12 of 14
14 C. An airline to restore service to Boston, Pittsburgh and/or Baltimore/Washington, minimum one (1) flight per day per destination. Indirect subsidy to provide ground-handling services for six (6) months for a new airline, or local market advertising for a carrier already serving AVP. FAA: $ 75,000 Luzerne County: $ 12,500 Lackawanna County: $ 12,500 Total: $ 100,000 D. Local Market Advertising to provide needed baseline support for restored airline service with a new airline (see C. above), as well as support of additional flights with present airline service. FAA: $ 150,000 Luzerne County: $ 17,500 Lackawanna County: $ 17,500 Airport: $ 65,000 Total: $ 250,000 E. TOTALS: FAA: $ 500,000 Luzerne County: $ 72,500 Lackawanna County: $ 72,500 Airport: $ 85,000 Total: $ 730,000 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 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 Page 13 of 14
15 - 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 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 Northwest Airlines express carrier Pinnacle Airlines with load factors averaging approximately 80% over the past 12 months. Detroit service began to 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: Barry J. Centini, Airport Director Wilkes-Barre/Scranton International Airport 100 Terminal Drive Avoca, PA / Phone 570/ Fax bcentini@flyavp.com Program Partners: Luzerne County, PA Lackawanna County, PA Page 14 of 14
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