Proposal Under the Small Community Air Service Development Program. Docket DOT-OST Gulfport-Biloxi Regional Airport Authority

Transcription

1 Proposal Under the Small Community Air Service Development Program Docket DOT-OST Gulfport-Biloxi Regional Airport Authority DUNS Congressional District Code MS 04 August 2, 2011 Gulfport-Biloxi International Airport L Airport Rd Gulfport, MS Tel: Fax:

2 SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOT-OST SUMMARY INFORMATION All applicants must submit this information with their proposal, along with a completed form SF424 on A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) X 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: (LIST ORGANIZATION NAMES) PUBLIC PRIVATE 1. Gulfport-Biloxi Regional Airport Auth 1. Gulf Coast Business Council 2. Harrison County CVB 2. Gulf Coast Chamber of Commerce 3. Mississippi Development Authority 3. MS Gulf Coast Tourism Partnership C. PROJECT PROPOSAL: (CHECK ALL THAT APPLY) Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start-up Cost Offset First Service Study Secure Additional Service Other (explain below)

3 D. EXISTING LANDING AIDS AT LOCAL AIRPORT: Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) E. PROJECT COST: DO NOT ENTER TEXT IN SHADED AREA LINE DESCRIPTION SUB TOTAL TOTAL AMOUNT 1 Federal amount requested $900,000 2 State cash financial contribution Local cash financial contribution 3a Airport cash funds $50,000 3b Non-airport cash funds $200,000 3 Total local cash funds (3a + 3b) $250,000 4 TOTAL CASH FUNDING (1+2+3) $1,150,000 In-Kind contribution 5a Airport In-Kind contribution** $60,000 5b Other In-Kind contribution** 5 TOTAL IN-KIND CONTRIBUTION $60,000 (7a + 7b) 6 TOTAL PROJECT COST (4+8) $1,210,000 IN-KIND CONTRIBUTIONS** For funds in lines 7a (Airport In-Kind contribution) and 7b (Other In-Kind contribution), please describe the source(s) of fund(s) for each. Airport In-Kind contribution Air Service Development incentive program. Waiving of landing fees for new service to Ft. Lauderdale or other low cost carrier hub city in Florida. Calculated based on a minimum of 3 flights per wk.

4 F. 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 G. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF YES, PROVIDE EXPLANATION) No Yes (explain)

5 Table of Contents SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 SECTION 6 SECTION 7 SECTION 8 SECTION 9 SECTION 10 Executive Summary Outline of Proposal Market Overview Air Service Overview Air Service Deficiencies Strategic Plan Public Private Partnership Project Funding Plan Critical Milestones and Reporting Summary

6 SECTION 1 EXECUTIVE SUMMARY The past six years have presented numerous economic challenges for the MS Gulf Coast. We ve endured the worst natural disaster in American history (Hurricane Katrina), coped with record gas prices, fought through the great recession, and most recently dealt with the largest man-made disaster in our nation s history (the Deepwater Horizon oil spill). The resilience of the MS Gulf Coast has been put to the ultimate test. Air service levels from the Gulfport-Biloxi International Airport (GPT) have suffered as a result of these challenges. The noted declines in air service have and will continue to negatively affect the ability for our local economy to fully recover. More specifically, tourism related establishments have realized a decline due to the absence of vital low cost air service to key markets. The $1.6 billion dollar MS Gulf Coast tourism industry is not just important to the local economy but is also a substantial economic component for the State of Mississippi. Low cost air service access to a hub and local traffic from key Florida markets is crucial to sustaining our vital tourism sector. January 2009 marked the loss of daily service from GPT s only low cost carrier, AirTran Airways. AirTran provided a critical link to a key network over Atlanta, GA (ATL) along with daily access to Ft. Lauderdale (FLL) and Tampa, FL (TPA). Due to recent airline mergers and acquisitions, the scheduled air service offerings from GPT have declined considerably. The realistic opportunity for GPT to restore low cost air service leads us to opportunities with carriers with a presence in Florida. More specifically, Ft. Lauderdale has historically been a strong market for GPT, producing over 25,000 annual passengers at its peak in Over 68% of the FLL traffic was inbound to the MS Gulf Coast. The community and Gulfport-Biloxi Regional Airport Authority believe that funds awarded through the grant will provide the support needed in attracting and retaining critical low cost air service to currently underserved markets. We believe that our proposal meets the requirements of the Small Community Air Service Development Program. The funds requested will address a major air service deficiency for our region. GPT appreciates this opportunity and we thank you for considering our application. 1

7 SECTION 2 OUTLINE OF PROPOSAL Project Description The Gulfport-Biloxi Regional Airport Authority is seeking a grant in the amount of $900,000 from the Small Community Air Service Development Program to provide revenue and marketing support for the restoration, recruitment and development of nonstop service to Ft. Lauderdale, FL or other low cost carrier hub city located in Florida. The grant funds will be matched with $200,000 from public-private partnership, $50,000 in Airport funds, and $60,000 in Airport In-kind funds. Contact Bruce Frallic, AAE Executive Director Gulfport-Biloxi International Airport L Airport Road Gulfport, MS Tel: Fax: Project Sponsor The official sponsor of this project is the Gulfport-Biloxi Regional Airport Authority. Statement Regarding Previous SCASD Grant The Gulfport-Biloxi Regional Airport Authority was awarded a SCASG grant in The 2005 grant was amended from our original proposal due to changing needs of the airport and region as a direct result of Hurricane Katrina. Our 2011 grant proposal is substantially different in that it seeks funding for a revenue guarantee program for a carrier to provide access to key local Florida market/s which are vital to the Gulf Coast economy. Although the needed targeted Florida markets are primarily based on local traffic, they may also provide access via a low cost carrier s hub. 2

8 2005 SCASG SUMMARY Grant funds awarded in the amount of $750,000 $700,000 Revenue Guarantee $50,000 Marketing / Promo / Market Assessment American Eagle began nonstop service from GPT ORD on December 13, The revenue guarantee funds were depleted on April Due to increased operational costs associated with a significant increase in fuel costs, AE discontinued the nonstop ORD service on November GRANT FUNDING COMPARISON 2005 SCASG AWARD Recruit and build air service to CVG, or other hub that provides travelers convenient access to a broad range of destinations, thru use of a revenue guarantee, subsidy, or other financial incentive. Establish a marketing program to advertise/promote the new service. Revenue Guarantee (ORD)- $700,000 Marketing / promotion / Study - $50,000 Federal Amount- $750,000 TOTAL $750, SCASG PROPOSAL Restore, recruit, and build air service to Ft. Lauderdale or other low cost carrier hub city located in Florida through use of a revenue guarantee. Establish a marketing program to advertise/promote the new service. Revenue Guarantee - $800,000 Seat Purchase Promotion - $100,000 Marketing - $250,000 Airport In-kind (LANDING FEE WAIVER) - $60,000 Federal Amount- $900,000 TOTAL $1,210,000 3

9 SECTION 3 MARKET OVERVIEW Location and Population The Gulfport-Biloxi International Airport (GPT) is the only commercial service airport on the MS Gulf Coast. GPT is centrally located in Harrison County, the commerce, industrial, and entertainment center of the area. GPT primarily serves six counties in Southern Mississippi. The primary air service area has a population of approximately 400,000 while the overall air service influence area is comprised of a population of over 1 million. 4

10 MS Gulf Coast Economy The MS Gulf Coast is home to a diverse mix of business and industry. Military installations, space and oceanographic agencies, shipbuilding and tourism industries are critical to the local economy. Aerospace Advanced Materials Shipbuilding Defense Gaming Tourism Retail Seafood / Marine Science TOP EMPLOYERS Name County Est. # Employees Business Type Ingalls Shipbuilding Jackson Manufacturing Keesler Air Force Base Harrison Military NASA Stennis Space Center Hancock 5,286 Federal / Military Naval Construction Battalion Center Harrison 7000 Military Chevron USA, Inc. Pascagoula Refinery Jackson 1569 Manufacturing Signal International Jackson 1550 Manufacturing Mississippi Power Company Harrison 1295 Utilities Hancock Bank Harrison 1213 Financial VA Gulf Coast Veterans Health Care System Harrison 1050 Health Care DuPont DeLisle Harrison 973 Manufacturing Omega Protein Corporation Jackson 615 Manufacturing Ingalls Shipbuilding Harrison 550 Manufacturing Trinity Yachts Harrison 500 Manufacturing 5

11 Tourism Located on the Gulf of Mexico, the MS Gulf Coast is home to the world s longest man-made beach (26 miles). The tourism product consists of sport fishing, boating, water activities, numerous restaurants, cultural festivals, museums, shopping, 20 golf courses, and world class gaming offered by 11 casino properties. Gaming on the MS Gulf Coast is a critical component to the local economy. Casinos directly employ over 11,000 and indirectly are the largest contributor to over 25,000 tourism related jobs on the MS Gulf Coast. The largest amounts of gaming visitors originate primarily in Louisiana, Alabama, Georgia, and Florida. MS GULF COAST GAMING EMPLOYMENT Name County Est. # Employees Beau Rivage Resort & Casino Harrison 2889 IP Casino Resort Spa Harrison 1989 Island View Casino Resort Harrison 1170 Grand Biloxi Casino Hotel Spa Harrison 876 Hard Rock Hotel & Casino Harrison 845 Hollywood Casino Bay St Louis Hancock 733 Isle Casino Hotel Harrison 695 Boomtown Casino Biloxi Harrison 602 Palace Casino Resort Harrison 577 Treasure Bay Casino and Hotel Harrison 563 Silver Slipper Casino Hancock 552 TOTAL 11,491 6

12 VISITORS MS GULF COAST ROOM INVENTORY Pre - Katrina Current Difference Hotel Inventory - County Hancock County 1, % Harrison County 13,565 9,575 71% Jackson County 2,657 2, % Total - Hotel Inventory - County 17,534 13,207 75% Hotel Inventory - Casinos - County Hancock County % Harrison County 7,292 5,321 73% Total Hotel Inventory - Casinos - County 7,784 5,612 72% On average approximately over 2 million gaming visitors from Florida markets travel to the MS Gulf Coast every year. Availability of low cost nonstop air service access is vital in attracting and retaining these customers GAMING VISITORS 1,200,000 1,000, ,000 MISSISSIPPI 600,000 LOUISIANA FLORIDA 400,000 ALABAMA 200,000 GEORGIA OTHER 0 1Q 2Q 3Q 4Q Source: MS Gaming Commission. 7

13 Gaming, a massive revenue producer for the overall economy on the MS Gulf Coast and the State of Mississppi has been experiencing steady decline in visitors since Visitation from out of state visitors is down -7.3 million in comparison to peak levels. These declines are heavily hinged on the loss of low cost air serivce from GPT in GAMING COMPARISON Source: COA 2011 Annual Report. MS GAMING TOURISM SPENDING Source: COA 2011 Annual Report. 8

14 SECTION 4 AIR SERVICE OVERVIEW Current Air Service GPT is currently served by American, Continental / United, Delta, US Airways, and Vision Airlines. GPT has nonstop service to 5 hubs and 3 day per week service to St. Petersburg- Clearwater, FL (PIE). GPT 2011 ROUTE MAP Ops/Week Seats/Week Seats/Dep CARRIER DESTINATION Aug11 Aug11 Aug11 American Airlines Dallas/Fort Worth, TX, US 28 1, Continental Airlines Houston-Intercontinental, TX, US 33 1, Delta Air Lines Atlanta, GA, US 48 3, Delta Air Lines Memphis, TN, US US Airways Charlotte-Douglas, NC, US 20 1, Vision Airlines St. Petersburg, FL, US TOTAL 139 8, Source: OAG. 9

15 Due to the loss of low cost carrier service in and recent airline mergers, air service competition levels at GPT have declined considerably. The shrinking competitive mix has resulted in a suppressed air market with high load factors and leakage to competing airports. GPT CARRIER MARKET SHARE 2011 American 14% US Airways 12% Vision 9% Delta 48% Continential 17% Source: GPT Airline Activity Reports. 10

16 Notable declines in ATL traffic is the result of lack of competition and Delta s capacity pull downs in an effort to increase fares. GPT TOP 25 O&D CY2010 Rank Airport PAX Airport Name Code PDEW Avg Fare YOY Growth 1 ATL Atlanta Hartsfield-Jackson Intl 60 $ % 2 TPA Tampa Intl 45 $ % 3 DCA Washington Reagan National 30 $ 171-2% 4 LGA New York La Guardia 22 $ 138 0% 5 BWI Baltimore Washington Intl 22 $ % 6 IAH Houston George Bush Intl 22 $ % 7 DFW Dallas/Fort Worth Intl 22 $ % 8 LAS Las Vegas McCarran Intl 21 $ % 9 SAN San Diego Intl 19 $ 216 1% 10 ORD Chicago O'Hare Intl 18 $ % 11 PHL Philadelphia Intl 18 $ % 12 CLT Charlotte 18 $ % 13 LAX Los Angeles Intl 18 $ 236 3% 14 MSP Minneapolis Intl 17 $ % 15 BOS Boston Logan Intl 16 $ % 16 SEA Seattle/Tacoma Intl 16 $ % 17 MCO Orlando Intl 16 $ 156 7% 18 ORF Norfolk Intl 15 $ % 19 DTW Detroit Wayne County 15 $ % 20 PHX Phoenix Sky Harbor Intl 14 $ % 21 SFO San Francisco Intl 14 $ % 22 SAT San Antonio Intl 13 $ % 23 MCI Kansas City Intl 13 $ % 24 PIT Pittsburgh Intl 12 $ 120 7% 25 DEN Denver Intl 12 $ 174-1% Source: U.S. DOT, Origin-Destination Passenger Survey, CY 2010, via Data Base Products. 11

17 GPT passenger traffic is concentrated heavily in the Southeast region (27%). This is primarily due to local traffic to Atlanta and inbound tourism traffic from O&D Florida markets. Strong Mid-Atlantic (20.7%) traffic is driven by industry mix of our numerous government and military installations on the MS Gulf Coast. O&D PASSENGER TRAFFIC BY REGION 2010 *Other includes Alaska, Hawaii, Puerto Rico, U.S. Virgin Islands, Guam and Saipan Source: U.S. DOT, Origin-Destination Passenger Survey, CY 2010 via Data Base Products. 12

18 Historical Air Service GPT CY 2010 traffic is -24% below peak levels realized in 2008 when the competitive carrier mix was at its peak. It s also important to note the negative effects of the loss of AirTran Airways nonstop daily service to Atlanta, Ft. Lauderdale, and Tampa. More specifically, the loss of daily nonstop flights to Ft. Lauderdale (FLL) resulted in a loss of approximately 26,000 annual enplanements from which an average of approximately 65% originated in FLL. GPT O&D PASSENGER HISTORY Source: U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products. 13

19 Since August 2008, GPT has lost nonstop service from American Eagle (ORD), Allegiant Air (SFB), AirTran Airways (ATL, FLL, TPA). NONSTOP DESTINATION COMPARISON AUG 08 / 11 Ops/Week Seats/Week Mktg Al Org Dst Miles Aug11 Aug08 Diff Pct Chg Aug11 Aug08 Diff Pct Chg American Airlines Gulfport/Biloxi, MS, US Dallas/Fort Worth, TX, US ,358 1, American Airlines Gulfport/Biloxi, MS, US Chicago-O'Hare, IL, US Continental Airlines Gulfport/Biloxi, MS, US Houston-Intercontinental, TX, US ,650 1, Delta Air Lines Gulfport/Biloxi, MS, US Atlanta, GA, US ,688 3, Delta Air Lines Gulfport/Biloxi, MS, US Memphis, TN, US AirTran Airways Gulfport/Biloxi, MS, US Atlanta, GA, US ,638-1, AirTran Airways Gulfport/Biloxi, MS, US Fort Lauderdale, FL, US AirTran Airways Gulfport/Biloxi, MS, US Tampa, FL, US Allegiant Air Gulfport/Biloxi, MS, US Orlando-Sanford, FL, US Northwest Airlines Gulfport/Biloxi, MS, US Memphis, TN, US ,050-1, US Airways Gulfport/Biloxi, MS, US Charlotte-Douglas, NC, US ,000 1, Vision Airlines Gulfport/Biloxi, MS, US St. Petersburg, FL, US TOTAL ,412 13,133-4, Source: U.S. DOT, Origin-Destination Passenger Survey. As a result of declining competition and the loss of AirTran Airways daily service offerings in 2009, GPT average fares have increased 35% over pre-katrina levels (2005). DOT reports indicate average O&D one way fare has increased to an all-time high of $230 in Q The ultimate result will lead to increased leakage to the largest competitor in the region, MSY. Source: U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products. 14

20 GPT was served by 9 airlines to 13 nonstop destinations at its peak in Currently the airport is served by 5 airlines and 6 nonstop destinations / 2010 GPT CARRIER MARKET SHARE Myrtle Beach Direct 2% American 10% Northwest 11% US Airways 3% Skybus 7% Continential 14% 2008 Air Tran 25% ASA/Delta 25% Allegiant 3% 2011 American 14% US Airways 12% Vision 9% Delta 48% Continential 17% Source: GBRAA Airline Activity Reports 15

21 Seats GPT annual scheduled airline capacity has yet to return to levels realized in 2008 when carrier mix was diverse and low cost air service existed. Average weekly departures per week in Aug 2011 are down -31% compared to Aug Average weekly seats per week are down over - 36% in comparison to Aug GPT ANNUAL SCHEDULED AIRLINE CAPACITY HISTORY 70,000 60,000 50,000 40,000 30, ,000 10, Source: GPT Airline Activity Reports. GPT SCHEDULED DEPARTURES / SEATS PER WK COMPARISON AUG 11 / AUG 08 Ops/Week Seats/Week Mktg Al Aug11 Aug08 Diff Pct Chg Aug11 Aug08 Diff Pct Chg American Airlines ,358 1, Continental Airlines ,650 1, Delta Air Lines ,038 3, AirTran Airways ,276-3, Allegiant Air Northwest Airlines ,050-1, US Airways ,000 1, Vision Airlines TOTAL ,412 13,133-4, Source: OAG. 16

22 Passengers GPT scheduled passenger enplanements are down -30% primarily due to decline in capacity and access to key nonstop markets. This point is supported by the substantial increase in load factor since The average annual year to date load factor for 2011 is currently at 86%. These extremely high load factors or indicative of an underserved airport. GPT ANNUAL SCHEDULED PASSENGER ENPLANEMENT REPORT 50,000 45,000 40,000 35,000 30,000 25,000 20, ,000 10,000 5, Source: GPT Airline Activity Reports. 17

23 GPT ANNUAL LOAD FACTOR ANALYSIS 90% Load Factor 85% 80% 75% 70% 65% 60% 55% 50% Source: GPT Airline Activity Reports. Clearly GPT s depiction of current air service levels and challenges associated with higher fares and leakage are evident by the data provided. Air service levels point to an underserved community. Due to the numerous uncontrollable variables unique to the MS Gulf Coast our community has been adversely impacted by loss of air service access to key markets. Primarily, low cost access to Florida markets which historically provided the required link to generate vital revenues for our local economy. 18

24 Air Service Development Efforts Past 5 Years Over the past five years the Airport Authority has been proactive in its efforts to attract and retain air service. We have devised innovative approaches for supporting new and existing air service. Our air service development efforts include: airline incentive programs, aggressive marketing support initiatives, creation of public-private partnerships, air service development surveys and studies, composition of numerous business case proposals to key airline network planners. We have employed consultants to provide support with conducting air service studies and also to compose data for business case presentations to targeted airlines. We have recently completed the following studies: 2010 Airport Economic Impact and Leakage Study 2011 Airport Strategic Plan Update In 2006, immediately following Hurricane Katrina, we created and hosted an annual Economic Development Summit with a primary focus on air service development. The Summit has been a valuable tool in bringing both public and private entities together to initiate air service development efforts. We recently hosted the 6 th annual Summit this year and had representatives from 5 different airlines in attendance. We also meet to discuss existing and new service initiatives with airline network planners on a regular basis at either headquarter meetings or industry functions like Jumpstart and Network. Airline Meeting History: Delta Airlines Delta Airlines Continental Airlines US Airways US Airways Delta Airlines American Airlines United Airlines Spirit Airlines AirTran Airways AirTran Airways Vision Airlines Branson Air Express Continental Airlines Continental Airlines Spirit Airlines Skybus Delta Airlines Allegiant Air Allegiant Air American Airlines Vision Airlines United Airlines United Airlines Frontier Airlines US Airways Allegiant Air US Airways 19

25 SECTION 5 AIR SERVICE DEFICIENCIES GPT vs. MSY The Gulfport-Biloxi International Airport is located approximately 90 miles the east of the Louis Armstrong International Airport (MSY). MSY currently offers 128 daily nonstop flights to over 45 destinations. Due to low average fares and numerous nonstop options in MSY, GPT leaked over 36% of its local customers to MSY in Furthermore, the presence of numerous low cost carriers at MSY leads to tremendous obstacles in attracting a low cost carrier to GPT. This in turn adversely affects the ability for tourism entities to access key visitors, such as inbound traffic from Ft. Lauderdale and Orlando, FL. (GPT) GULFPORT-BILOXI, MS 2011 ROUTE MAP (MSY) NEW ORLEANS, LA 2011 ROUTE MAP 20

26 GPT vs. MSY MONTHLY DEPARTURE / CAPACITY COMPARISON AUG 11 Carrier Org Gulfport/Biloxi, MS, US New Orleans, LA, US Difference American Airlines Flights American Airlines Seats 5,564 51,866 Air Canada Flights 31 Air Canada Seats 2,325 JetBlue Airways Flights 88 JetBlue Airways Seats 10,350 Continental Airlines Flights Continental Airlines Seats 7,050 50,898 Delta Air Lines Flights Delta Air Lines Seats 17,336 95,476 Frontier Airlines Flights 32 Frontier Airlines Seats 3,462 AirTran Airways Flights 151 AirTran Airways Seats 17,667 United Airlines Flights 285 United Airlines Seats 28,982 US Airways Flights US Airways Seats 4,450 34,525 Vision Airlines Flights 13 Vision Airlines Seats 1,586 Southwest Airlines Flights 1,206 Southwest Airlines Seats 163,782 Grand Total Flights 586 3,745-3,159 Grand Total Seats 35, , ,347 Source: OAG Aug 11 GPT vs. MSY Average Fare Comp Time Series Gulfport/Biloxi, MS, US New Orleans, LA, US Fare Difference 2008 Q Q Q Q Q Q Q Q Q Q Q Q Q Source: U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products. 21

27 Florida Service Overview FLL / MCO (SFB) AirTran Airways provided one daily nonstop flight to FLL until Jan O&D traffic from South Florida (FLL, PBI, MIA) markets peaked at over 71,070 O&D passengers. The loss of the AirTran Airways daily service in 2009 resulted in a loss of over 27,500 enplanements. FLL HISTORICAL O&D Source: U.S. DOT, Origin Destination Passenger Survey and T-100 Data, via Data Base Products, Inc. 22

28 Allegiant Air provided less than daily service to SFB from Jun 07 to Jan 09. At its peak in 2008, O&D traffic from Orlando, FL produced over 49,000 annual passengers to GPT. MCO / SFB HISTORICAL O&D Source: U.S. DOT, Origin Destination Passenger Survey and T-100 Data, via Data Base Products, Inc. 23

29 PERCENT Historically over 68% of GPT-FLL traffic was inbound to GPT. This inbound traffic was primarily leisure oriented and was a major contributor to our local economy. GPT-FLL HISTORICAL POINT OF ORIGIN FLL GPT Q Q Q Q Q Q Q Q4 Source: U.S. DOT, Origin Destination Passenger Survey.. Since the loss of nonstop service to FLL, average fares have risen sharply from $120 to over $190 each way. Passenger traffic has fallen from 70 PDEW to 10 PDEW. FLL AVERAGE FARE / PDEW COMPARISON Q Q Q Q Q Q Q Q Q Q Q Q Q1 Passengers Average Fare Source: U.S. DOT, Origin Destination Passenger Survey.. 24

30 In 2009 (post AirTran) GPT generated 23,520 local passengers to FLL from its air service influence area but leaked over 67% or 15,669 passengers to MSY. The loss of low cost nonstop service is clearly the cause traffic generation between GPT air service influence area and Orlando, FL was nearly 47,000 annually, however GPT captured only 11,500 of these passengers. This equates to a leakage rate of greater than 75%. GPT 2009 LEAKAGE - POST AIRTRAN SERVICE Source: GPT Airport Leakage Analysis. 25

31 TOP 20 LEAKED MARKETS RANKED BY % LOST CY 2009 Market Traffic Generated Traffic Lost % Lost Reason Houston - Hobby 52,432 52, % Southwest MSY New York - JFK 19,335 16, % jetblue MSY Orlando 46,698 35, % Southwest MSY Newark 21,319 14, % Nonstops from MSY Dallas/Ft. Worth 50,438 35, % Pricing pressure on DFW service due to Southwest service MSY-DAL Fort Lauderdale 23,520 15, % Southwest MSY Denver 25,962 15, % United, Southwest & Frontier provide nonstops from MSY Nashville 14,633 8, % Southwest MSY Tampa/St. Petersburg 23,915 13, % Southwest MSY Los Angeles 30,899 16, % Southwest, United, and Delta provide nonstops from MSY Seattle/Tacoma 20,657 10, % Southwest pricing pressure Houston - Intercontinental 35,159 17, % Pricing pressure on IAH service due to Southwest service MSY-HOU Chicago - O'Hare 24,591 12, % Pricing pressure on ORD service due to Southwest service MSY-MDW; also nonstops on United & American Boston 19,440 8, % jetblue MSY Baltimore 37,639 15, % jetblue & MSY San Antonio 16,285 6, % Southwest pricing pressure San Francisco 14,634 4, % Southwest pricing pressure - UNITED RECENTLY ANNOUNCED RESTORATION OF NONSTOP SERVICE Detroit 14,848 4, % Larger capacity MSY plus Southwest pricing pressure Philadelphia 21,988 5, % Larger capacity MSY plus Southwest pricing pressure Charlotte 15,145 3, % Larger capacity MSY New York - LGA 23,039 4, % Nonstops from MSY Las Vegas 23,780 4, % Southwest MSY San Diego 18,056 3, % Southwest connecting MSY Washington - National 18,753-4, % Premium on nonstops via MSY v connecting on AirTran Atlanta 32,501-27, % GPT Other 380,419 76, % Total 1,026, , % SECTION 6 STRATEGIC PLAN Source: GPT Airport Leakage Analysis. 26

32 SECTION 6 STRATEGIC PLAN Goals GPT has four goals with its Small Community Air Service Development Grant Proposal for service to Ft. Lauderdale, FL or other low cost carrier hub cities in Florida. Restore a nonstop link to key Florida markets Specifically FLL / MCO (SFB) Lower fares and offer additional access to underserved markets Reverse the decline in GPT s O&D traffic Recapture traffic leaked to MSY Action Plan In today s volatile economic environment, air carriers are extremely risk averse. Most airlines are still pulling down capacity and opportunity for growth has become a competition between airports from coast to coast. The addition of new air service in today s environment is not just secured through the solid business case depicting adequate demand, it s also backed up with community support and in many cases a subsidy of some sort. The revenue guarantee has historically been one of the most effective risk abatement tools in securing new air service. With funds awarded through the Small Community Air Service Grant, GPT will first approach low cost carriers with a hub presence in Ft. Lauderdale, FL or other Florida cities such as Orlando, FL. The primary targeted carriers will be Spirit Airlines and JetBlue Airways. If GPT is unable to attract the aforementioned carriers we will approach O&D carriers such as Allegiant Air, and Vision Airlines to provide access to key Florida markets. Upon securing the air service through the use of a revenue guarantee, GPT will work with the carrier and public-private partners to devise an aggressive ad campaign in the Florida market to promote the new service. GPT will also create an aggressive ad campaign targeted at local customers in its air service influence area. The marketing / promotional campaign will begin at minimum of 90 days prior the service start date. GPT will assist in the preparation of an agreement with the carrier identifying the revenue guarantee support allocation details. This will include: Definition of the revenue expectations for the route and what will constitute a fair revenue performance for the airline. The agreement will contain stipulations on scheduled air service of at least 3 flights per week and reasonable pricing and availability of seat inventory on the flights. 27

33 It is intended that cost, revenue, and performance criteria will be monitored and reported on a monthly basis and that the final accounting of any revenue support will be made at the end of the first year of operation. Project Timeline ACTIVITY 2012 Negotiate Revenue Guarantee Agreement (1 yr) Announce Service Publish Schedule Market New Route Monitor Advance Bookings Begin Service Monitor Route Performance January February February February September February May May May Indefinitely Submit Grant Status Reports to DOT Q Q If the service is not initially successful and the revenue guarantee funds are depleted, GPT will work with the public-private partnership to secure additional funding for promotional / marketing support. We will also work closely with the carrier and evaluate their requested needs to continue and sustain the service. If needed, the creation of a travel bank or seat block commitment from stakeholders will be initiated. 28

34 Promotion - Seat Purchase Campaign With today s transportation challenges image advertising is not enough to entice customers to use available air service. There must be an aggressive approach that demands attention and presents itself as a valuable cost savings. Historically the Harrison County Convention and Visitors Bureau and Mississippi Development Authority have deployed innovative promotional strategies targeted at enticing visitors to the MS Gulf Coast. These strategies are premised on counteracting the negative effects of the increasing cost of transportation associated with escalating fuel prices. HISTORICAL REBATE PROMOTION SUMMARY Book two nights at a hotel property on the MS Gulf Coast and receive a promotional gas card ($75) or a cash gift card ($100). AIR SEAT REBATE PROMOTION GPT proposes a similar strategy in key Florida markets where low cost air service access is present. Book two nights at a hotel property on the MS Gulf Coast and receive one free round trip airfare valued at $250. We request that $100,000 from the grant funds be allocated to this promotion for the sole purpose of purchasing air seats directly from the targeted air carrier. We will aggressively market this offer with the $200,000 in public-private partnership advertisement funding. 29

35 SECTION 7 PUBLIC-PRIVATE PARTNERSHIP The Gulfport-Biloxi International Airport and the Mississippi Gulf Coast area businesses through a public / private partnership are working together to support air service development initiatives. The public / private partnership includes the Gulf Coast Business Council, Harrison County Convention and Visitor Bureau, The Gulf Coast Chamber of Commerce, and the recently created MS Gulf Coast Tourism Partnership. Together, their support of committing financial resources allows GPT to sustain existing air service and help attract new air service. Funds allocated ($200,000) through the partnership will be used on supporting an aggressive advertisement campaign in the targeted Florida market. The MS Gulf Coast Tourism Partnership is a consolidated tourism entity representing the three coastal counties. MS Gulf Coast Tourism Partnership and the Harrison County CVB employ the services of an advertisement firm to assist in creating strategic ad campaigns. GPT will assist and provide the performance monitoring reports to gauge the effectiveness of the campaign. GPT will offer assistance in creative, media selection, and ad placement. We will use the expertise of these tourism development entities to formulate the strategic destination campaign focused in the Florida market. We will ensure that the mechanism to monitor the effectiveness of the campaign is in place and we will work with the public-private partnership to amend the strategy as necessary. 30

36 SECTION 8 PROJECT FUNDING PLAN 31

37 SECTION 9 CRITICAL MILESTONES AND REPORTING The effectiveness of the grant proposal objectives will be gauged through closely monitoring existing air service levels and ultimately through improvements in passenger volume and service levels. GPT will closely monitor: Advanced bookings through direct airline reports Quarterly DOT traffic data O&D reports Strengths and weaknesses of ad campaign Monitor financial performance of the route GPT proposes the success of the Small Community Air Service Development Grant Award be evaluated based on the following milestones. Secure at a minimum 3 day per week low cost nonstop air service to either Ft. Lauderdale, FL or Orlando, FL. Annual O&D passenger growth of at least 10% after the first year of project implementation. The airport, as the sponsor of this grant application, will be responsible for overall administration of this program. The Gulfport-Biloxi Regional Airport Authority will provide quarterly reports to U.S. DOT regarding the progress of the ACTION PLAN objectives as well as an accounting of funds used. Community Assurances Assurances that the grant money would be spent in accordance with the grant program stipulations and the proposal outline would be in the form of an independent annual audit, transaction recording standards, functional oversight of transactions by Airport Authority Staff, reporting to elected and appointed officials (not on the Authority staff), and a contractual obligation that designates proper use and expected outcomes of the marketing efforts. Since the primary partners for the airport are municipalities, the reporting and audit requirements are stringent. An annual audit is required to be performed by an outside audit firm. The airport transactions are subject to all sampling, testing, and audit standards applied by that audit firm to ensure that the information fairly and materially states the financial condition of the entity. All transactions are recorded using Generally Accepted Accounting Principles (GAAP) as established by the Governmental Accounting Standards Board. 32

38 Compliance testing is performed to ensure that grant funds (considered restricted) are being used as designated by the awarding entity. The Finance Department has an Accountant specifically assigned to monitoring grants and reporting their status quarterly. The Executive Director is responsible for approving all transactions on a day-to-day basis and reviewing the expenditures and performance measurement results. Monthly financial reports are delivered to the elected officials (Airport Board) and the Airport Steering Committee (advisory committee for the operations of the airport). These reports are available for public review. A contract for marketing services will be written to include performance standards. These standards are intended to ensure that the grant money (should we be granted the opportunity) would be spent in a manner consistent with the requirements of this program and our proposal. The Airport Authority is traditionally very successful with monitoring grant programs, given the tools and processes in place as standard operating procedure. 33

39 SECTION 10 - SUMMARY Detailed fare information was provided explaining GPT average air fares are at their historical peak of $230 for Q The community will provide a portion of the cost of the activity from local sources other than airport revenue sources by utilizing the public-private partnerships that we have in place. The community has established a public-private partnership to facilitate air carrier service. The assistance will provide material benefits to a broad segment of the traveling public, including business, education institutions, and other enterprises. Assistance will be used in a timely manner starting in May 2012 and ending in May Geographic Location of each applicant, including proximity to larger centers of air service and low fare service alternatives. GPT is the only commercial service airport serving six counties on the MS Gulf Coast. Our largest competitor is MSY located 90 miles to the west. MSY has low fare service from numerous carriers. The proposed federal grant amount requested compared to local share is 27%. The applicant did previous receive an award in 2005 and includes an explanation of how the 2011 request is different. The community has demonstrated commitment to and participation in the proposed grant project has been illustrated through the destination marketing and promotional support presented. The Gulfport-Biloxi International Airport and its partner communities are grateful for the opportunity to apply for this grant. It is our belief that these funds are critical to the future of our airport and region. We believe the opportunities to serve the public are substantial given the potential for growth specific to our regional market. 34