PROPOSAL UNDER THE SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

Transcription

1 PROPOSAL UNDER THE SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET OST Legal Sponsor: City of Tallahassee, Tallahassee Regional Airport DUNS # April 27, 2007 Kenneth M. Austin, Director of Aviation

2 TABLE OF CONTENTS 1.0 SUMMARY OF PROPOSAL The Tallahassee Service Area... 3 Catchment Area and Demographics...3 Leakage Tallahassee Air Service... 6 Current Air Service...6 Historical Service...7 Air Service Development Efforts...7 Traffic History...8 Fares Air Service Deficiencies...10 Traffic and Revenue Forecasts Grant Administration...17 Grant Request Summary...17 Use of Funds...17 Program Structure...18 Continuation After the Grant Period...18 Program Responsibility...18 APPENDICES I. SUMMARY INFOMRATION (APPENDIX B OF ORDER) II. LETTERS OF SUPPORT 1. Bill Nelson, U.S. Senator 2. F. Allen Boyd, Jr., Member of the U.S. House of Representatives 3. John R. Marks III, Mayor of the City of Tallahassee 4. Randall Hanna, Chairman, Greater Tallahassee Chamber of Commerce 5. Sue Dick, President, Economic Development Council of Tallahassee/ Leon County 6. Sharon Liggett, President/CEO, Tallahassee Area Convention and Visitors Bureau

3 1.0 SUMMARY OF PROPOSAL Tallahassee Regional Airport (TLH) hereby respectfully submits its proposal for a grant under the Small Community Air Service Development (SCASD) Program. Tallahassee s proposal aims to reverse a serious downturn in traffic caused by:! A 45 percent increase in airfares over the past two years! The loss of over 30 percent of area passengers to alternate airports! A lack of hub competition and service in key origin and destination (O&D) markets from our airport Reasonably priced, easily accessible air service is an essential component of economic vitality. While the Tallahassee area s economy has diversified in recent years, the recent passenger decline at our airport is a grim reminder that such gains will quickly erode as affordable and convenient air service becomes rarer. New service in Tallahassee s key strategic markets is therefore critical and can be achieved through the program for which TLH seeks support through this grant. The Big Bend area of Florida which Tallahassee serves is famous for its beaches, academic institutions and role as a government center, but it is rapidly establishing itself as a major high technology center. The presence of the U.S. National Magnetic Lab in Tallahassee is a driver of the growth in this sector and the region now boasts a number of software and technical design firms with operations throughout the U.S. and abroad. General Dynamic, Danfoss Turbocor and Hummingbird are just a few of the firms who have a major presence in our market. All of Tallahassee s economic sectors depend on convenient air service to connect to the national and international transportation networks generally, and to top markets in particular. Tallahassee currently has no service to any point north of Charlotte, while New York and Washington, DC remain our top unserved markets. Thus, connectivity to additional air carrier hubs is important for our community, particularly hubs in the northeast such as New York, Philadelphia and Washington, DC. In fact, Tallahassee is just one of two southern state capitals not to have nonstop service to Washington. Although service to the Northeast is of utmost importance, restoration of service to Dallas/ Fort Worth (lost when Delta removed its DFW hub) is also a priority for our community because of increased business traffic in Western U.S. markets. The resultant hub and potential carrier competition that service to these markets would provide would help stem a loss of passenger traffic at TLH, a service loss that we believe is driven by high airfares and the availability of nonstop services at competing airports. Competing airports are, however, not practical for the business traveler as they are at least a two hour drive from Tallahassee s business district. 1

4 The goal of the program for which Tallahassee requests funding is therefore to attract new nonstop hub service for markets identified in the airport s strategic plan, specifically (in order of priority):! Washington, DC (United Express to Dulles)! New York (Continental Express to Newark or Delta Express to JFK)! Philadelphia (US Airways Express)! Dallas/Ft. Worth (American Eagle) The importance of obtaining service to a new hub has led the Greater Tallahassee Chamber of Commerce to form a public/private partnership with the City of Tallahassee and the Airport to support the program The program will accomplish its goal by reducing the financial risks that air carriers face when adding new air service. Based on conversations with the potential air carriers, we know that incumbent carriers face slightly different risks than new entrants. Consequently, we intend to use the program funds as a risk-offset matched to the carrier s needs. The funds will be used as a risk offset either by 1) offsetting operating costs such as ground handling or 2) compensating for unmet revenue goals and, in either case, for marketing, operational assistance and/or rebate or waiver of airport rates and charges. The program thus provides an important level of flexibility that will enable us to best meet specific needs of carriers, rather than tie any given carrier to a specific risk offset formula. TLH believes that this program will provide a solid foundation for attracting new air service and thus provide a meaningful improvement to our country s national air transport system. TLH, the City, and the Chamber of Commerce appreciate the opportunity to submit this application. Any questions or clarifications regarding the application should be addressed to the project director: Mr. Philip F. Inglese, C.P.A. Assistant Director of Aviation Tallahassee Regional Airport 3300 Capital Circle, S.W. Suite One Tallahassee, Florida Phone: Fax: inglesep@talgov.com 2

5 2.0 The Tallahassee Service Area Catchment Area and Demographics Tallahassee Regional Airport serves the tri-state area of North Central Florida, Southeast Alabama and Southwest Georgia. The blue line on the following map represents the perimeter of TLH s Natural Catchment Area, defined as those points within a two-hour drive of the Airport. The Natural Catchment Area s population is 757,086 including Tallahassee itself with an MSA population of 336, The orange line represents a three-hour drive time from TLH that defines the unconstrained Extended Catchment Area. Passengers in the Extended Catchment Area are generally expected to choose an alternative airport in lieu of TLH, but sometimes use TLH as their secondary airport when price or schedule makes it compelling to do so. The true (i.e., constrained) Extended Catchment Area eliminates areas that are well within the Natural Catchment area of other large airports, such as Jacksonville, and is defined by the shaded area on the above map. The population of the true ECA is estimated at 1.8 million people. 1 MSA = Metropolitan Statistical Area; data from census.gov based on July 2006 estimates. 3

6 Per Bureau of Labor Statistics Data, the major employment sectors are typical of a state capital. While the majority of workers in Tallahassee are in private industry, the government primarily state -- employs approximately 36 percent of the workforce. Florida s geography requires a high level of intrastate air travel, but Washington, DC is the most important out-of-state destination for both the federal and state governments. The top sectors after government are education, health care, professional trades and retail. The top private, non-retail employers are: Employer Total Employees Tallahassee Memorial Healthcare 2,750 Alltel Florida Inc 1,000 Tallahassee Leon County Civic Ctr 672 Quincy Corp 575 Capital Regional Medical Center 572 Meridian Healthcare Group 500 Branch Banking & Trust Co 403 Interim Healthcare of NW 400 General Dynamics Land Systems 367 Stanadyne Automotive Corp 300 Sodexho Inc 300 Talla-Com Tallahassee Communications 300 American Homepatient Inc 300 Management Services, Florida 300 Presbyterian Retirement 300 Source: Tallahassee Economic Development Council Travel in these sectors is related to headquarters meetings and travel to major cities such as Miami, New York and Washington. The Tallahassee region has experienced strong growth in the high-tech sector. Although the average size of these firms is below 200, the number of these firms in North Central and West Florida has surpassed 100 and is growing. Their demand for air travel, particularly to New York, Seattle and California is higher than that of other industries such as manufacturing. Tourism is growing in the Big Bend region, particularly in Bay and Gulf Counties as the number of retirees locating to these areas increases and real estate developers such as the St. Joe Company are creating new properties to meet this demand. In addition to its workforce, Tallahassee is home to a student population of close to 65,000 among Florida State University (FSU), Florida A&M University (FAMU) and Tallahassee Community College (TCC). The reputations of these local institutions go well beyond Florida s borders and have led to an increase in international students at both FSU and FAMU, particularly from Europe and China. 4

7 Leakage Tallahassee Regional Airport periodically conducts passenger leakage analyses, with the most recent covering calendar year The results demonstrate a troubling change in the airport s ability to retain passengers: Whereas the previous study, for year ending September 2005, showed TLH retained 80.4 percent of all passengers, the most recent study showed only 68.9 percent were retained. In other words, whereas TLH was losing 20 percent of potential passengers in 2005, it is now losing over 30 percent of its potential traffic. It is no surprise that both Washington (including Baltimore) and New York are the leading markets for leakage in terms of passenger volume. New York also had the highest share of leaked passengers. TLH Catchment Area Leakage by Market Bookings from Share Destination Competing Airport Total incl TLH Leaked Washington D.C./Baltimore 1,816 6, % New York 1,953 3, % Dallas/Ft. Worth 441 1, % Philadelphia 689 1, % Source: Bookings data via BACK Aviation Solutions, 2006 Leakage is likely to increase this year. As discussed in the Section 3.0, traffic for calendar year 2006 is down 13.5 percent and the first quarter of 2007 is down over 11 percent versus first quarter While some passengers may simply not be traveling by air, much of this decline is likely traveling from competing airports. Only with additional capacity to the destinations and hubs most useful to travelers so that can TLH re-gain its passenger volume. 5

8 3.0 Tallahassee Air Service Current Air Service Tallahassee Regional Airport is served by four major airline groups: Continental Air Lines, Delta Air Lines, Northwest Airlines and US Airways. Together, the carriers serve nine destinations, only four of which are outside Florida. TLH s route map is striking in its lack of nonstop service to any point outside the Southeast. Memphis Atlanta Charlotte Houston TALLAHASSEE Tampa Orlando West Palm Beach Ft. Lauderdale Miami Only Delta serves TLH with mainline equipment: Frequency and Capacity at TLH April 2007 One-Way Daily Averages Market Operator Equipment Flights Seats Atlanta Delta /MD Delta Connection CRJ-200/CRJ-700/EMB Charlotte US Airways Express CRJ-200/CRJ-700/CRJ Ft. Lauderdale Delta EMB Houston Bush Continental Express EMB Memphis Northwest Airlink CRJ Miami Delta Connection EMB Orlando Delta Connection EMB Continental Connection BEC Tampa Continental Connection BEC Delta Connection EMB West Palm Beach Continental Connection BEC Totals 35 1,914 Source: BACK OAG inet 6

9 On-line connections from each of the hubs are as follows: Number of Connecting Destinations * from TLH Hub Carrier Domestic International Total Atlanta Delta Charlotte US Airways Houston Bush Continental Memphis Northwest Source: BACK Aviation Connections Builder, April 2007 *On-line connections with less than 40% itinerary circuity None of the hubs currently served offer nonstop connections to China, which has nonetheless recently become an important market for Tallahassee due to an agreement by Flightline Group s Tallahassee facility to provide training for Chinese pilots under the Commercial Airline Pilot Training (CAPT) program. For the summer, capacity will decline as Delta temporarily reduces its mainline service to just one flight per day as it moves equipment to larger markets that in turn will lose their wide-body equipment to European markets. Although Delta will increase mainline service in the fall, the temporary decline will result in even higher fares this summer and frustration for both business and leisure travelers. Historical Service The current volume of 35 daily flights is down from the high of 45 reached in March 2005 (and peak capacity of 2,553 daily seat departures, 25 percent higher than today) when TLH offered service to 12 destinations. The additional markets served, all by Delta Connection regional jets, were to Delta s hubs at Cincinnati, Dallas/Ft. Worth and New York Kennedy. This peak era of service was even after the withdrawal of AirTran service seven months prior. Thus, while higher air fares were in part due to AirTran s departure, the real challenge came as a result of Delta s dehubbing of Dallas/Ft. Worth and downsizing at its other hubs. TLH residents and visitors now have fewer choices when traveling both domestically and abroad. They find themselves competing for fewer seats over fewer hubs. That translates into higher fares and/or less convenient flights. Through this grant application, the Airport is seeking to restore hub competition and flexibility that our passengers so desperately need. Air Service Development Efforts TLH utilized a series of revenue guarantees to attract and maintain service by AirTran between November 2001 and September Following the loss of that service, due mainly to AirTran s difficulties in competing with Delta, TLH stepped up its air 7

10 service development efforts to attract and enhance service to additional hubs by a greater variety of carriers. The need for new service was exacerbated by the elimination of service to three different Delta hubs in 2005 (Cincinnati, Dallas/Ft. Worth and New York Kennedy) and by Delta s capacity reductions at Atlanta. To preserve connection opportunities to the west, TLH has worked closely with Continental to increase Express service to its Houston Bush hub, having successfully introduced a third daily flight in TLH has also worked diligently with US Airways on its Charlotte service, first in 2003 to upgrade service from Dash-8 propeller equipment to regional jets, and in 2006 to further upgrade from 50- to 70- seat equipment in 2006 along with an increase in frequencies to four daily. In 2004, TLH began attending ACI-Jumpstart and in 2006 supplemented these efforts with attendance at Network to increase the number and frequency of airline contacts. TLH prepares and presents numerous route forecasts for these events all in relation to obtaining service in the key strategic hub markets. These forecasts have generated enough carrier interest that the Airport has been asked to attend more in-depth meetings with carriers at their headquarters, most significantly those of American, Southwest and United in the past two years. Traffic History TLH, because of AirTran s presence, was one of the few airports to experience an increase in traffic in the year following the September 11, 2001 terrorist attacks. CY1997 CY1998 CY1999 CY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006 Projected 2007 [90% of 2006] Enplanements 480, , , , , , , , , , ,994 Deplanements 476, , , , , , , , , , , , , , , ,626 1,082,585 1,113,243 1,155,072 1,129, , ,590 1,200,000 TALLAHASSEE REGIONAL AIRPORT 10-YEAR PASSENGER TRAFFIC 1,100,000 1,000, , , , , , , , , ,000 0 CY1997 CY1998 CY1999 CY2000 CY2001 CY2002 CY2003 T o t a l P a s s e n g e r s CY2004 CY2005 CY2006 Projected 2007 [90% of 2006] Enplanements Deplanements 8

11 Even after AirTran left TLH, enplanements remained strong due to the variety of destinations served. However, Delta s significant contraction in late 2005 and the associated increase in average fares resulted in a 13.5 percent decline in passenger enplanements in Assuming fares and service at status quo, the Airport projects a further 10 percent decrease in passengers for 2007 which will reduce passenger volume at TLH to its lowest level in 14 years. The worst may be yet to come: first quarter 2007 traffic was down 11.2 percent on the year earlier period. Fares Fares in TLH s nonstop markets are high within the 7-day booking window. As in much of US, fares at TLH have increased over the past several years. However, whereas the average fare in 3Q06 versus 3Q04 increased just 14.1 percent nationally, TLH fares rose 44.7 percent. After AirTran left TLH, fares were only 15 percent higher than the national average while capacity was Low est A vailable Fares for N on-stop Service M arket 21-day 7-day 0-day Atlanta $238 $598 $797 C harlotte $319 $547 $772 Ft. Lauderdale $319 $418 $637 H ouston $217 $868 $1,147 O rlando $258 $383 $451 M em phis $227 $367 $698 M iam i $319 $418 $564 W est Palm Beach $377 $428 $584 Tam pa $332 $402 $451 Source: FareCom pare.com, April still strong and service existed to 12 destinations. However, since Delta s draw-down in service in 2005, fares at TLH have consistently been at least 25 percent higher than the national average and are a direct contributor to the increase in leakage. New nonstop services in key hub markets (i.e., hubs that are also top origin and destination markets) will have a much-needed downward effect on fares. Average One Way Domestic Fare - US and TLH $250 US Avg. TLH $200 $150 $100 $50 $- 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Source: BACK OD1a inet, excluding frequent flyers, not adjusted for stage length 9

12 4.0 Air Service Deficiencies Surprisingly, of all Tallahassee s top 10 out-of-state markets, the only one with service is Atlanta. Top 10 Non-Florida Markets Tallahassee Regional Airport Passengers Rank Market 1 Annual PDEW 1 Washington, DC 65, New York 54, Atlanta 36, Chicago 26, Philadelphia 23, Los Angeles 21, Dallas/Ft. Worth 17, Denver 16, Boston 16, Las Vegas 15, Source: BACK Od1a inet, YE 3Q06 1/ Data for all metro airports Served Nevertheless, Tallahassee has demonstrated it can support nonstop service to air carrier hubs that have a lower amount of O&D traffic than these top markets, including Charlotte, Houston Bush and Memphis. In fact, Memphis, with three daily flights per day is not even a top 50 O&D market for TLH. This makes the lack of service in the top markets all the more glaring. Tallahassee Regional Airport has further prioritized these markets in terms of their overall viability (including their ability to become self-sufficient) based on their role as hubs, specific importance to Tallahassee businesses and the input of air carriers. Washington has emerged as the single most important market. The local passenger volume is the most significant factor and is driven by not only the government and legal sectors, but the high-tech sector which has a significant presence in the Dulles Corridor. However, Washington Dulles is also an important air carrier hub that could provide convenient onward connections to all the major Northeast markets, Europe (including London Heathrow) and Asia. New York, similarly, is significant in terms of strong local business demand and Newark Liberty Airport s role as a hub for Continental. It is particularly strong as a 10

13 European and Asian gateway, but offers fewer domestic connecting opportunities (based on the frequency and flight times that Continental Express would have to offer). Newark is closer to a higher population than New York s other two main airports and is more accessible to Wall Street and the financial markets than the other two. Re-entry by Delta into the JFK market is therefore a less preferred option than Newark, although it is a viable alternative for New York service. Philadelphia has emerged as another significant hub with both strong domestic and international connecting opportunities through US Airways. Dallas/Ft. Worth provides an opportunity not only to enhance connection opportunities to the West, but to establish service by a oneworld alliance carrier, American Airlines; oneworld is the only major alliance not represented at TLH. Although Chicago and Denver are important United hub markets, United has indicated that it would prefer to explore the highest traffic market Washington before capitalizing on these other market opportunities. All of the carriers noted above have indicated that the respective markets are attractive opportunities and have the potential to become self-sufficient within a oneyear period. However, both United Express and American Eagle would be new entrants and would have to invest in facilities and personnel in addition to meeting their revenue goals. As for the other airlines, although they face less infrastructure cost, they are reluctant to add long-haul regional jet services in an era of high fuel prices without some assurance of profitability. Tallahassee Regional Airport benchmarks itself with a number of Airports in markets of similar size and economic composition. TLH is noticeably service deprived in comparison to these other facilities when viewed in terms of number of hubs served. Population Market MSA 1 Rank Total Hubs Served Jackson, MS 529, Montgomery, AL 361, Eugene, OR 337, Tallahassee, FL 336, South Bend, IN 318, Charleston, WV 305, Source: U.S. Census Bureau, July 2006 estimates ; BACK OAG inet, April 2007 Montgomery, another Southern state capital, appears to be in similar straits as Tallahassee. However, Montgomery lies much closer to a large alternate airport than does Tallahassee. Montgomery travelers only have to travel 90 miles to Birmingham 11

14 which boasts service by Southwest Airlines and nonstop service to eight additional legacy carrier hubs. Tallahassee travelers have to drive almost twice the distance to reach an airport with similar service offerings. For Tallahassee s economy to continue to thrive and diversify, frequent and reasonably priced air service must be convenient not three hours away. The fare discrepancy caused by the lack of service to key hubs is significant and helps explain why people whose ultimate origin or destination is actually Tallahassee are using alternate airports. High fares are one of the main signals to travelers (and to business decision-makers) that a community has service deficiencies. Fares in TLH Strategic Markets 3Q 2006 $250 $200 One-Way Fare $150 $100 $50 $- Dallas/Ft. Worth New York Philadelphia Washington JAX MCO TPA TLH Source: BACK Od1a inet, excluding frequent flyers The chart above represents the average fare paid. The differences can often be even more striking when actually shopping for a fare as the alternate airports often have lower fares closer in than does TLH. For example, according to FareCompare LP, the lowest 3-day advance purchase fare for travel from Tallahassee to Washington (Dulles or Reagan) was $408 but from Jacksonville to Washington, it is just $287. On a round-trip basis, a passenger would save $242 on air fare. Even after factoring in driving costs, the savings are significant enough to attract passengers. Although business travelers often will pay more, recent trends have shown that more business travelers now book their own travel and where savings are significant will choose lower fares even if it requires use of an alternate airport. Service to a new hub from TLH will not bring prices down to the level of a Jacksonville, but the increased capacity it provides will lower prices enough such that passengers will be less likely to use alternatives. 12

15 Traffic and Revenue Forecasts Tallahassee Regional Airport has developed forecasts for each of the markets and carriers (except Delta for JFK which is the second choice for New York service) and has presented these to the respective airlines. These forecasts follow. Market 1: Washington, DC Traffic and Revenue Forecast for United Express Tallahassee - Washington Dulles Twice Daily Round-Trip CRJ-200 Market Forecast Traffic Flight Share Flight Passengers Avg Net Fare Revenue LOCAL Washington Dulles 87, % 36,493 $ $ 6,300, CONNECTING - DOMESTIC Albany 5, % 399 $ $ 70, Allentown 2, % 354 $ $ 56, Altoona % 9 $ $ 2, Binghampton % 120 $ $ 26, Boston 17, % 634 $ $ 115, Buffalo 4, % 435 $ $ 70, Burlington 1, % 1,289 $ $ 270, Charlottesville 1, % 108 $ $ 18, Chicago O'hare 22, % 1,360 $ $ 253, Cleveland 3, % 407 $ $ 99, Detroit 9, % 747 $ $ 165, Harrisburg 3, % 366 $ $ 67, Hartford 6, % 777 $ $ 171, Manchester, NH 4, % 742 $ $ 139, New York Kennedy 12, % 1,217 $ $ 202, New York LaGuardia 24, % 1,119 $ $ 217, Newark 22, % 3,331 $ $ 611, Norfolk 4, % 339 $ $ 66, Philadelphia 24, % 1,177 $ $ 185, Pittsburgh 9, % 937 $ $ 160, Providence 5, % 763 $ $ 141, Richmond 3, % 195 $ $ 42, Rochester 3, % 399 $ $ 62, Seattle 6, % 466 $ $ 121, Shenandoah Valley % 9 $ $ 3, State College % 465 $ $ 104, Syracuse 2, % 276 $ $ 66, White Plains % 33 $ $ 7, SUBTOTAL DOMESTIC 18,477 $ $ 3,520, CONNECTING - INTERNATIONAL 3,563 $ $ 1,574, DOUBLE CONNECT AND INTERLINE 2,920 $ $ 1,482, TOTALS 61,453 $ $ 12,877,

16 Market 2: New York Traffic and Revenue Forecast for Contintental Express Tallahassee - New York/Newark Liberty Once Daily Round-Trip ERJ-145 Forecast Traffic Flight Share Flight Passengers Avg Net Fare Market Revenue LOCAL New York EWR 54, % 15,815 $ $ 3,128, CONNECTING - DOMESTIC Albany 4, % 55 $ $ 10, Boston 16, % 691 $ $ 131, Burlington 1, % 531 $ $ 121, Buffalo 4, % 354 $ $ 60, Cleveland 2, % 113 $ $ 29, Hartford 5, % 22 $ $ 5, Providence 4, % 202 $ $ 40, Portland 1, % 158 $ $ 39, SUBTOTAL DOMESTIC 2,126 $ $ 438, CONNECTING - INTERNATIONAL 2,063 $ $ 1,021, DOUBLE CONNECT AND INTERLINE 2,809 $ $ 1,205, TOTAL ON BOARD 22,813 $ $ 5,794,

17 Market 3: Philadelphia Traffic and Revenue Forecast for US Airways Express Tallahassee - Philadelphia Twice Daily Roundtrip CRJ-200 Market Forecast Traffic Flight Share Flight Passengers Avg Net Fare Revenue LOCAL Philadelphia 38, % 25,714 $ $ 4,238, CONNECTING - DOMESTIC Albany 4, % 452 $ $ 84, Allentown 2, % 436 $ $ 73, Baltimore 16, % 1,207 $ $ 216, Bangor % 123 $ $ 38, Binghamton % 91 $ $ 21, Boston 16, % 1,355 $ $ 258, Buffalo 4, % 484 $ $ 82, Burlington 1, % 348 $ $ 79, Cleveland 2, % 96 $ $ 25, Detroit 8, % 585 $ $ 142, Elmira % 330 $ $ 57, Erie % 77 $ $ 13, Harrisburg 3, % 92 $ $ 17, Hartford 5, % 355 $ $ 86, Ithaca % 359 $ $ 60, Long Island Macarthur % 262 $ $ 71, Manchester, NH 4, % 855 $ $ 169, New Haven % 175 $ $ 44, New York LaGuardia 22, % 1,227 $ $ 255, Newburgh % 271 $ $ 52, Pittsburgh 9, % 767 $ $ 139, Portland, ME 1, % 115 $ $ 28, Providence 5, % 897 $ $ 177, Rochester 3, % 513 $ $ 80, Salisbury % 162 $ $ 31, San Francisco 10, % 233 $ $ 60, Seattle 6, % 504 $ $ 151, State College % 446 $ $ 104, Syracuse 2, % 214 $ $ 56, Washington Dulles 15, % 2,070 $ $ 369, Washington Reagan 35, % 1,788 $ $ 319, White Plains % 61 $ $ 17, Wilkes-Barre/Scranton % 52 $ $ 11, Williamsport % 136 $ $ 25, SUBTOTAL DOMESTIC 17,137 $ $ 3,425, CONNECTING - INTERNATIONAL 3,321 $ $ 1,525, DOUBLE CONNECT AND INTERLINE 4,155 $ $ 1,380, TOTALS 50,327 $ $ 10,569,

18 Market4: Dallas/Ft. Worth Traffic and Revenue Forecast for American Eagle Tallahassee - Dallas/Ft. Worth Twice Daily Roundtrip ERJ-145 Market Forecast Traffic Flight Share Flight Passengers Avg Net Fare Revenue LOCAL Dallas/Ft. Worth 48, % 31,752 $ $ 7,021, CONNECTING - DOMESTIC Abilene % 92 $ $ 33, Albuquerque 3, % 2,007 $ $ 551, Amarillo % 269 $ $ 75, Austin 5, % 851 $ $ 215, Burbank % 368 $ $ 96, Champaign/Urbana % 110 $ $ 23, Chicago O'Hare 21, % 2,235 $ $ 438, College Station % 20 $ $ 5, Colorado Springs 2, % 907 $ $ 204, Corpus Christi % 372 $ $ 95, Denver 16, % 1,646 $ $ 341, El Paso 1, % 289 $ $ 84, Fayetteville % 72 $ $ 17, Fresno % 417 $ $ 155, Ft. Smith % 39 $ $ 9, Houston Bush 12, % 596 $ $ 139, Houston Hobby % 196 $ $ 43, Jackson % 342 $ $ 116, Kansas City 10, % 644 $ $ 108, Killeen % 76 $ $ 23, Laredo % 8 $ $ 2, Las Vegas 15, % 1,397 $ $ 316, Lawton % 8 $ $ 2, Little Rock 2, % 265 $ $ 60, Longview % 8 $ $ 2, Los Angeles 13, % 899 $ $ 238, Lubbock % 238 $ $ 68, Madison 1, % 185 $ $ 35, McAllen % 43 $ $ 11, Midland/Odessa % 76 $ $ 35, Minneapolis/St. Paul 8, % 252 $ $ 59, Oakland 1, % 103 $ $ 26, Oklahoma City 2, % 519 $ $ 125, Omaha 2, % 521 $ $ 136, Ontario 2, % 308 $ $ 74, Orange County 3, % 351 $ $ 93, Palm Springs % 286 $ $ 91, Phoenix 6, % 824 $ $ 241, Reno 1, % 334 $ $ 89, Sacramento 3, % 303 $ $ 79, Salt Lake City 7, % 566 $ $ 135, San Angelo % 56 $ $ 18, San Antonio 7, % 1,067 $ $ 223, San Diego 5, % 538 $ $ 150, San Francisco 10, % 553 $ $ 142, San Jose, CA 2, % 239 $ $ 61, Santa Barbara % 82 $ $ 34, Seattle 6, % 661 $ $ 198, Shreveport % 96 $ $ 19, Springfield % 211 $ $ 46, Texarkana % 43 $ $ 10, Tulsa 1, % 209 $ $ 52, Tuscon 1, % 162 $ $ 51, Tyler % 55 $ $ 11, Wichita 1, % 113 $ $ 24, Wichita Falls % 9 $ $ 2, SUBTOTAL DOMESTIC 23,138 $ $ 5,760, CONNECTING - INTERNATIONAL 1,494 $ $ 593, DOUBLE CONNECT AND INTERLINE 2,819 $ $ 623, TOTALS 59,204 $ $ 13,999,

19 5.0 Grant Administration Grant Request Summary Tallahassee Regional Airport respectfully requests a grant in the amount of $500,000 to help attract and support new nonstop service in one of four top hub markets (in order of priority):! Washington, DC (United Express to Dulles)! New York (Continental Express to Newark or Delta Express to JFK)! Philadelphia (US Airways Express)! Dallas/Ft. Worth (American Eagle) The program is supported locally by a public/private partnership comprising the Airport, the City of Tallahassee and the Greater Tallahassee Chamber of Commerce. The City will provide cash funds of $100,000. The Chamber will provide $40,000 in cash and $60,000 of in-kind support. The Airport will provide in-kind contributions of $600,000 for a total program amount of $1,300,000. Use of Funds The funds will be used as a risk offset, either by 1) offsetting operating costs such as ground handling or 2) compensating for unmet revenue goals and, in either case, for marketing, operational assistance and/or rebate or waiver of airport rates and charges. The use of the cash funds related to the program is summarized as follows: Component Grant Funds Community Funds Total Risk Offest $ 500,000 $ 140,000 $ 640,000 Share of Total 78.1% 21.9% 100.0% In addition to the above cash amounts, the Chamber of Commerce will offer in-kind marketing support of $60,000 and the Airport will provide $600,000 of in-kind support in the form of marketing, operational assistance and/or rebate or waiver of airport rates and charges. 17

20 Program Structure Tallahassee Regional Airport proposes to employ a structure similar to that used for similar prior SCASD grants. Immediately upon notification of a grant reward, the Airport will contact the carriers in terms of market priority to negotiate service commencement. That is, United Express will be contacted first as the Washington Dulles hub has been identified as the most important strategic market. If negotiations with United fail to establish service within a reasonable time frame, Continental Express will be contacted for Newark service, etc. Should a carrier wish to have its first year costs offset through this program, the specific expenses will be reviewed with the airline and submitted to the Department for approval. Any revenue risk abatement agreement would also be negotiated with the carrier and submitted to the Department for its approval and would at a minimum require the airline to provide the Airport with reports detailing monthly traffic, revenue and expenses for review. At the end of each six-month service period, a calculation will be made and the Airport will pay any revenue shortfall to the airline. Continuation After the Grant Period Tallahassee s grant request is for a one-year period effective with the start of air service in one of the target markets. TLH and the community will be highly supportive of these services and expect them to reach or surpass break-even before the end of the one-year period. Should this not occur, the Airport will offer the full $600,000 of its in-kind support for the second year of service. Program Responsibility The Tallahassee Regional Airport will administer the grant funds including those of the City and the Chamber of Commerce as well as the airport in-kind support; its partner, the Tallahassee Chamber of Commerce, will administer the in-kind marketing assistance. 18

21 APPENDIX I SUMMARY INFORMATION APPENDIX B OF ORDER

22 APPENDIX B Page 1 of 3 SMALL COMMUNITY AIR SERVICE DEVELOPMENT PRGRAM DOCKET OST SUMMARY INFORMATION All applicants must submit this information along with their proposal. In addition, applicants must also fill out form SF424 on (See Appendix C for the SF424 filing process) 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, expiration date of grant: B. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES) Public 1. _Tallahassee Regional Airport 2. City of Tallahassee Private 1. _Tallahassee Chamber of Commerce C. PROJECT PROPOSAL: (CHECK ALL THAT APPLY) X Marketing Upgrade Aircraft X New Route Personnel Increase Frequency Low Fare Service Travel Bank X Service Restoration X Subsidy

23 APPENDIX B Page 2 of 3 Surface Transportation X Regional Service Other (specify) X Revenue Guarantee Launch New Carrier X Start Up Cost Offset First Service Study X Secure Additional Carrier D. EXISTING LANDING AIDS AT LOCAL AIRPORT: X Full ILS Outer/Middle Marker Published Instrument Approach Localizer X Other (specify): PAPI, REIL, ALSF2, MALSR, CALS, Tower E. PROJECT COST: Federal amount requested: _$500,000 Total local cash financial contribution: _$140,000 Airport funds: Non-Airport funds: _$140,000 State cash financial contribution: Existing funds: New funds: Airport In-kind contribution: _$600,000 (amount & description) Marketing, operational assistance, and/or rebates or waivers Other In-Kind contribution: _$ 60,000 (amount & description) Tallahassee Chamber of Commerce marketing assistance Total cost of project: _$1,300,000 F. ENPLANEMENTS: , , , , , , ,104

24 APPENDIX B Page 3 of 3 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. X c. Program is not covered by E.O H. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF YES, PROVIDE EXPLANATION) X No Yes (explain)

25 APPENDIX II LETTERS OF SUPPORT

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28 April 19, 2007 The Honorable Mary Peters Secretary of Transportation United States Department of Transportation th Street, S.W. Washington, D.C Dear Secretary Peters: On behalf of the City of Tallahassee, I am writing this letter in support of the Small Community Air Service Grant for Tallahassee Regional Airport. Our objective is to establish new nonstop hub gateway service in markets that are also among our top unserved markets. I strongly support this application because the grant will enable the capital of the great state of Florida to more effectively access the world s air transportation markets and thus grow our economy. Currently, although the fourth largest state in the Union, Florida s capital has no nonstop service to any point north of Charlotte. The diversity of the economy, which beyond state government includes Florida State University and Florida A&M University as well as major research facilities and high tech enterprises, can only continue to thrive if afforded meaningful access to major markets. This grant will greatly help our community s efforts to establish air service in our top unserved markets, provide much needed competition, lower fares, and reverse the substantial decline in passenger traffic. I strongly urge you to give consideration to Tallahassee s goals and ask that you keep us informed of the application s progress. My staff is also at your disposal to answer any questions you may have. Thank you for your time and attention. Sincerely, John R. Marks III Mayor

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