Telluride Airport s application meets the program priorities as established by the Secretary of Transportation (Order ):

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1 August 25, 2010 Subject: Proposal under the Small Community Air Service Development Program Docket OST Telluride Regional Airport Authority, San Miguel County, Colorado Duns Number Town of Telluride/Town of Mountain Village/San Miguel County Telluride Montrose Regional Air Organization/Marketing Telluride Inc. Dear Ms. Ley: Accompanying this letter is the Telluride Regional Airport s Small Community Air Service Development Program grant application. Our application has a well thought-out plan, proactive community involvement and a realistic timetable. The plan proposes a comprehensive strategic plan to add additional air carrier service and increase frequency of service and available seats to meet demand at the Telluride Regional Airport. This proposal will address the fact that Telluride lacks consistent competitive airline service of more than one carrier serving the Telluride Airport for most of the calendar year; which contributes to airfares much higher than those experienced by the majority of airports serving the national transportation system. Additionally the Telluride flight schedule lacks a flight which will connect to eastbound air service from a hub airport that can arrive before about 10pm on the east coast. This impacts enplanements to the Telluride Airport and adds to leakage to other regional airports quite a drive away from Telluride Telluride Airport s application meets the program priorities as established by the Secretary of Transportation (Order ): A. The Plan proposed will meet the community goals of improving air service access and create competition to help pressure lower fares. Additionally it will help diminish local and destination traveler s needs to drive to alternate airports when trying to travel to or from the Telluride region that are a long distance away in order to find competitive airfares or convenient flight schedules. B. The Telluride community will fund 33% ($200,000) of the total proposed air service program in the form of cash and in-kind services 25% ($100,000) of the total plan cash requirement is from non-airport or grant fund sources. C. The community will be working with an experienced public organization focused for years on air service development (Telluride Montrose Regional Air Organization a 501c6 Non-Profit 1 P age

2 formed in 2004) as a part of a diverse public-private partnership committed to completing the proposal submitted herein. D. This proposal includes a thorough market analysis. E. The proposed service would provide material benefits to a wide segment of the remote Telluride Community including to the tourism industry, local businesses competing on a global basis, local resident travelers and other enterprises whose access to the national transportation system is limited by the Telluride Regional Airports present air service condition. We appreciate the US Department of Transportation s understanding of the importance of commercial air service in smaller and more remote communities like Telluride and look forward to your review of our Small Community Air Service Development Program Grant Application. Sincerely, Rich Nuttal Airport Manager, Telluride Regional Airport 2 P age

3 Table of Contents Proposal Highlights Limited Service with High Fares Pg. 6 Challenged to attract Aircraft Equipment Eligible to Fly to Telluride Pg. 7 Airport improvements expand Aircraft Eligibility by Fall 2011 Pg. 7 Uneven Passenger Demand Pg. 7 Well Considered Plan with a realistic Timeline Pg. 8 Active Community Involvement and Financial Support Pg. 9 Material benefits to overall population Pg. 9 Air Service Environment Telluride Airport s Catchment Area Pg. 9 Catchment area proximity to other Airports (Leakage) Pg. 10 Home to Telluride Ski Resort/Close to National Parks Pg. 10 Important to Tourism Reliant Economy Pg. 10 Air Service Existing and Historical Existing Air Service Pg. 11 Historical Air Service Pg. 13 Past Air Service Development Efforts Pg. 15 Air Service Deficiencies and Needs Only One Year-round Carrier Pg. 16 High Airfares Pg. 16 Circuitous Routings Pg. 16 Underserved Markets Pg. 17 Strategic Plan Air Service Project Goals Pg. 17 Proposed Air Service Pg. 17 Airline Participation Pg. 18 Market Analysis Pg. 19 Alternate Plan Pg. 21 Strategic Plan Implementation and Funding Public/Private Partnership Pg. 21 Incentive and Support Plan Pg. 21 Strategic Plan Funding Pg. 24 Project continuation and sustainability Pg. 25 Schedule and Monitoring Milestones Pg. 25 Monitoring Pg. 25 Appendix A. Airline and Community Support Pg P age

4 Summary Information A. Applicant Information: (Check all that apply) X_ Not a Consortium Interstate Consortium Intrastate Consortium Community Now Receives EAS Subsidy X_ Community (or Consortium member) previously received a Small Community Grant If previous recipient, expiration date of grant: Received 2002/Expiration 2004 B. Public/Private Partnerships: (List organization names) Public: Private: 1. Town of Telluride 1. Telluride Montrose Regional Air Organization 2. Town of Mountain Village 2. Telluride Ski Resort 3. Telluride Regional Airport Authority 3. Telluride Alpine Lodging - Telluride 4. Marketing Telluride Inc. 4. Franz Klammer Telluride 5. San Miguel County 5. Mountain Lodge Mountain Village C. Project Proposal: (Check All That Apply) 4 P age X_ Marketing Upgrade Aircraft X_ New Route Personnel X_ Increase Frequency X_ Low Fare Service Travel Bank Service Restoration Subsidy Surface Transportation X_ Regional Service X_ Revenue Guarantee Launch New Carrier X_ Start-up Cost Offset First Service Study X_ Secure Additional Carrier Other D. Existing Landing Aids at Local Airport: Full ILS Outer/Middle Marker Published Instrument Approach X_ Localizer Other E. Project Costs: 1. Federal Amount Requested: $400, Total Local Cash Financial Contribution: $100, Local Cash Financial Contribution: 3a. Airport Cash Funds: $0 3b. Non-Airport Cash Funds: $100,000 3c. Total Local Cash funds (3a. +3b.): $100, TOTAL CASH FUNDING ( c.): $500, Local funds contributed from already- existing programs or projects included in line 3c. amount: $100,000* 6. Local funds contributed from new commitments or new resources included in line 3c. amount: $0*

5 7. Airport In-Kind contribution: $0 8. Other In-Kind Contribution: $100,000 Local Tourism/Hotels Marketing Support 9. TOTAL IN-KIND CONTRIBUTION ( ): $100, TOTAL COST OF PROJECT ( ): $600,000 F. Enplanements: , , , , , , , , ,537 G. IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UNDER EXECUTIVE ORDER PROCESS? a. This application was made available to the State under Executive Order Process for review on (date). b. Program is subject to E.O but has not been selected for 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) *TMRAO Funds are derived about 65% from a 2% lodging and restaurant tax in the towns of Mountain Village and Telluride and 35% from annual individual contributions. In essence TMRAO has a permanent funding mechanism in place to provide the local funding support for its air service development efforts and this grant request, although new funds come in every year via the voluntary individual contributions. +Telluride was closed from April 7, 2009 November 3, 2009 for runway construction work. It is a one runway airport which impacted normal enplanements in the 2009 calendar year. 5 P age

6 Proposal Highlights: Telluride Regional Airport in conjunction with the Telluride/Montrose Regional Air Organization (TMRAO) is applying for the Small Community Air Service Development Program grant for $400,000. The community match will be $200,000 in cash and in-kind contribution. This money will be used to increase airline service and airline service competition to the Telluride Regional Airport. The Project goals are to: - 1 st Objective: Obtain a new 2 nd Summer Air Service and carrier via a different hub airport than is presently serving Telluride. This service will provide feed into the national transportation system, on one of the limited aircraft types that qualifies to fly commercially into the Telluride Regional Airport. - Reduce the high airfares into the Telluride Regional Airport in summer via creating more competition in the marketplace. - 2 nd Objective: Improve air flight schedules to meet demand for a morning flight to a connecting hub heading east that would allow passengers to arrive back on the east coast at a more reasonable hour (5p-6p) than the present post 10pm arrival time via these connections. This would also reduce the need for air travelers to drive long distances to access air service at competitive airfares. The Strategic Plan to accomplish the project goals is to do the following: + Objective One: Add summer service from Telluride on a 2 nd carrier via a hub airport (USAirways is the number-1 priority) during the summer and expand the period Telluride has service with two carriers to about 7 months. (Note: Market and carrier options are limited due to the limited number of airport that can operate commercially into Telluride) + Objective Two: Add a Telluride to Denver flight that departs earlier in the day on a carrier that flies to a connecting hub that can get passengers back in a more reasonable time of day (5p-7p). Denver would be the first priority for hub with Great Lakes/United the first priority carrier option, other United Codeshare/United 2 nd priority and other carrier/hub final priority of service that can meet earlier east coast arrival goal. Limited Air Service that has been declining with High Airfares Presently, Telluride is limited to 2X daily service to Denver on Great Lakes airlines year-round and 2X daily service to Phoenix on US Airways in winter (Mid-December to End of March). Additionally, flight schedules tend to occur during the middle of the day when airlines tend to have more aircraft available, making it difficult for local business flyers to efficiently complete business trips. Business and leisure flyers heading to the East Coast often see post 10pm arrivals based on present flight schedule available connecting times (And sometimes have to overnight for some markets). Due to the limits on Telluride 6 P age

7 airline service due to operational conditions (9070 foot plus high runway elevation/7111 foot long runway) and the limits on flight schedules, approximately 60% of Telluride Catchment area travelers fly out of other airports. This often means driving long distances over rural mountain roads to get to alternate airports to gain access to flight times that work and competitive fares to/from the region. Alternate airports that draw significant travelers from Telluride include: Montrose (1 Hour/20 Minutes), Grand Junction (2 Hours/30 Minutes) and even Denver (6 Hours/30 Minutes). The combination of one carrier service for 75% of the year which limits competition, limited flight schedules and circuitous routings often with multiple air carriers, causes the high percentage of leakage and high airfares from the Telluride Regional Airport. Challenged to attract aircraft equipment eligible to Fly to Telluride The Telluride Regional Airport (TEX) has unique air service needs. Telluride is the highest commercial airport in the United States (Elevation ) that has a part 139 operating certificate. The airport category is B-3 which presently limits the commercial air service to a few very specific turbo-prop aircraft that typically can only fly to/from a short range. This limits the hub airports and airlines that can be sought to provide air service to Telluride. Telluride has dropped from a high of almost 28,000 enplanements over 10 Years ago to around 13,999 in 2008 due to the aircraft limitations which in turn have limited schedules, competition and raised airfares. Presently the forecast is for Telluride to just barely achieve 10,000 enplanements in The limitation on aircraft types that can fly to Telluride also limits commercial air service retention particularly as aircraft are retired and airlines are trending towards a reduction of regional oriented service due to high fuel costs that make it more difficult to profitably operate. Airport improvements expand access to qualified aircraft by Fall 2011 The Telluride Regional Airport is presently in the process of an airport runway improvement project. Phase I of the projected was completed in 2008, Phase II was started the spring of 2009 and completed in October This required a runway closure during this period (Telluride is a one runway airport). The last phase of this project has recently begun and is scheduled for completion in November This last phase will require much shorter runway closure periods. When this project is completed Telluride s classification will change from a B-3 airport to a D-3 airport. Upon approval of C & D approaches this will open up Telluride to new aircraft that can operate here on a commercial basis including the Q-400. Commercial airline service will, however, remain limited to mostly regional service within a maximum mile distance from Telluride at best. Uneven passenger travel demand Another challenge to commercial air service to Telluride is that Telluride is a heavy leisure travel destination with an uneven passenger demand when looking at this demand throughout the year. 7 P age

8 Telluride sees the greatest amount of travelers during the winter and to a lesser extent the summer due to skiing in the winter and other outdoor recreational opportunities in the summer. Spring and fall see a drop-off on traffic demand which adds to the challenge of getting new air service and retaining present air service. The Telluride Montrose Regional Air Organization (TMRAO), a partner in this grant request with the Telluride Regional Airport Authority, has been successful in the past years via air guarantee programs in attracting and retaining air service. TMRAO (A multi-community member 501c6 Non-profit) would provide the local air guarantee match to the federal grant to help acquire new air service to create more competition at the Telluride Regional Airport, improve flight times on current air service particularly for east bound travelers or extend present service with USAirways by adding summer airline service in addition to the winter service presently operating successfully on a revenue guarantee. Well considered plan with a realistic timeline Our strategic plan to meet our goals is designed to obtain an early morning outbound flight via a hub airport with many connections into the national transportation system and a second carrier for summer service to provide competition and help lower airfares. The primary targeted service, in order to add an early morning flight summer and winter seasons, is with Great Lakes Aviation/United from Telluride to Denver. Our alternate plans would be to obtain an early morning flight with another United operated or code-share flight from Telluride to Denver or any eastbound carrier that could provide a connectable flight from Telluride that could get business and leisure travelers to major mid-west and east coast cities at reasonable times on the same date of departure. The primary targeted service in order to add a second summer service carrier is with US Airways from Telluride to Phoenix. Our alternate plan is to attract a 2 nd summer service on another carrier (Not Great Lakes/United) that can provide many connections via a hub airport. These targets take into consideration the limited aircraft type options and thus the limited air carrier and market options. Key components of the strategic plan include the following: Revenue guarantee and marketing plan to offset new service start-up and to give time and focus to capture present traveler leakage and mature market for visiting destination guests. An in-depth market analysis including historical data indicates a profitable and sustainable effort after initial two to three year ramp-up period. Grant funds will be used in a timely manner The local community is committed to seeing this project succeed on service it has been working to obtain over the past few years and is a financial stakeholder. Active community involvement and financial stakeholder The Telluride Montrose Regional Air Organization (TMRAO) is the main community funding partner and focuses on stimulating the regional economy by increasing air service to meet the growing demand for travelers to and from the region and the region s airports in Telluride and Montrose. TMRAO has utilized air service guarantee programs and marketing support to meet these goals. 8 P age

9 Contributing members of TMRAO include: All Hotels and Restaurants in the Town of Telluride (About 50) All Hotels and Restaurants in the Town of Mountain Village (About 50) Telluride Ski Resort More than 70 additional voluntary air service program contributing businesses City of Montrose Town of Telluride Town of Mountain Village Telluride Ski and Golf and the local convention and visitor s bureau (Marketing Telluride Inc & Montrose Visitors Bureau) are major supporters of the air service by their marketing of the local air service. These agencies/businesses are supported in marketing the local flights by many lodging and other businesses in the region. Seeing that air service at the Telluride Regional Airport stimulates economic activity in the area of over $140 Million Dollars* the local community is very much behind sustaining and growing air service to help facilitate a healthy local economy. Adding service that can help diversify the local economy which is predominately tourism based is another focus of the community support. *Based on a 2008 economic impact study by the Colorado Department of Transportation Aeronautics Division conducted by Wilbur Smith Associates. Material benefits to overall population The addition of an early morning flight to a hub city will benefit the overall traveling public; including local businesses competing in the national and global marketplace, independent entrepreneurs and consultants and visitors who need to travel back east and get back at a reasonable time on the same day for business and/or personal business. A second carrier service in the summer will be a benefit for visitors and locals alike in that the increase in air service competition will help drive down excessively high airfares at the Telluride Airport. Both improved access and lower airfares will benefit a diverse remote local population of about 35,000 who presently often have to travel long distances over rural mountain roads when they drive to alternate airports that can provide better access and fares. Additionally, due to the high local economic activity driven by air service, increasing air service to Telluride and it s usage by visitors to this tourism destination also provides a critical economic benefit. Air Service Environment Telluride Airport Catchment area The Telluride catchment area includes all of San Miguel County as well as West Montrose County, West Ouray County and Dolores County. Surrounding area catchment populations include: San Miguel County (7684), Montrose County (40,263), Ouray County (4510) and Dolores County (1937). An additional 45,000 travelers and other communities also benefit economically from the Telluride air service when considering the flow of economic benefits through-out the region. The City of Montrose, for example fills the role of a service center for Telluride and San Miguel, Ouray, Montrose and Dolores Counties all provide employees who work in Telluride (About 80% of the workforce per the US Census Commuter Shed Report). 9 P age

10 Catchment area proximity to other airports Based on a 2008 airport survey and 2009 local residents survey, passenger leakage is estimated at 60 percent of the Telluride Catchment area. Being located in a rural mountain community does not provide an easy drive for residents and visitors alike and the leakage occurs due to the much higher than average airfares and choice of airlines and schedule convenience at Telluride vs. other airports. Of the diverted passengers, it is estimated that 40% use the Montrose Regional Airport (1Hr 20Min away), 30% use the Grand Junction Airport (2Hr 30Min Away) and 25% use the Denver International Airport (6Hr 30Min Away). An additional 5% use multiple other airports that are from 1Hr 30Min to over 8Hr away. The top three reasons for local residents using other airports include: 1) Airfare (59%), 2) Airline Schedule (20%) and 3) Direct Flight Availability (11%) When local flyers were asked to use the Telluride Airport more often, (92%) said they would if prices were lower, (26%) said they would if Flight times were more convenient. When the question was asked what desired changes the local residents would like to see at the Telluride Airport (80%) answered lower airfares, (58%) answered more non-stop destinations and (38%) answered better flight schedules and more choice of airlines. In the winter, (93%) of the users of the Telluride Airport are visitors or part-time second homeowners. In Summer (91%) of the users of the Telluride Airport are visitors or part-time second homeowners. (59%) of these travelers in the winter cited convenience as the main reason for selecting Telluride when flying to the region in the winter and this goes up to 74% in the summer. Price/Value is the least cited reason followed closely by availability/selection of flights. The results of the various surveys of local flyers and guest flyers clearly indicates that lower airfares and more choice in convenient flight schedules and air carriers would lead to increased usage of the Telluride Regional Airport. Home to Telluride Ski Resort and Many National Parks and Wild Life Areas Telluride is home to the world class Telluride Ski Area and a short driving distance from many national parks and wildlife areas including: Mesa Verde National Park and Black Canyon of the Gunnison National Park. Telluride itself is located in a beautiful box canyon and attracts many visitors year-round with its outdoor treasures including hiking and mountain biking trails and gold metal waters for fisherman. Air Service Important to Tourism Reliant Economy Tourism plays a key role in the economy of the Telluride Region. It is estimated that 65% of the employment in Telluride is driven by Tourism. Additionally, many full-time and part-time local residents work for national companies or have self-employed businesses that require travel to their client base great distances away from Telluride. For these established business sectors improved air service that is more accessible and convenient and offers more options for more periods of the year is critical. It is also felt that improving air service access from this remote rural mountain region is critical to diversifying the 10 P age

11 local economy. Without major highway access, Telluride, due to its geographic isolation is very dependent on the local airport for both visitor and local resident transportation needs. Many assume Denver (6 Hr 30Min from Telluride) is the closest major Metropolitan area to Telluride when in fact Albuquerque (6 Hr from Telluride) is. When Tourism makes up 65% of your economy and the drives are long and on non-super highway roads, air service remains critically important. Air Service Existing and Historical Existing Air Service Non-Stop Marketing Weekly Weekly Connecting Season Destination Carrier Aircraft Departures Seats Destinations Spring/Fall Denver Great Lakes B Summer Denver Great Lakes B Winter Denver Great Lakes B Winter Phoenix US Airways Dash As you can see, airline service is completely offered by small turboprop aircraft at this time. This is due to limitations on aircraft that can qualify to fly into the Telluride Regional Airport. With the completion of the Telluride Regional Airport Runway project (Projected in the late fall of 2010) the classification of the airport is expected to change to a D-3 status. This will open up the aircraft types we can pursue air service to Telluride to include the Q-400 Turboprop aircraft which has a seating capacity of (74). Additionally, other aircraft types may become more economically viable as the changes will improve operating characteristics that will reduce limits (Mainly Weight Restrictions) on the present aircraft operating thus making this service a little easier to gain and/or sustain. Air Service Development Presently Restricted Due to the limits of commercial aircraft qualified to fly to Telluride; and because these aircraft have a small flight distance range, Telluride is very limited as to the operators, markets and aircraft it can try to attain to improve its air access into the national transportation system. Due to these limitations, airline revenue guarantees are critical to the efforts to acquire the new airline service and to place Telluride in a more competitive position for air service with the operating carriers. Essentially, Telluride is limited to at most about a mile range and 3-4 aircraft types that can operate commercially into Telluride from this range. Only 3 connecting hub airports meet this set of criteria (Denver/Phoenix and Salt Lake City) and only 2 of these (Denver/Phoenix) have a hubbing carrier with the aircraft type that can fly into Telluride in the summer. Presently, only one market and carrier (Denver/Great Lakes-United) has service in the summer. Lack of Diversity of Air Service and High Fares At one time, the Telluride Regional Airport had operations with three different air carriers and was producing nearly 28,000 yearly enplanements (1994). While these flights were full and profitable, changes by airlines in their route networks and the retirement of aircraft like the Dash 7 have 11 P age

12 contributed to the decline in qualified aircraft that can operate to Telluride. With this reduction in air service and thus competition between multiple carriers, this has contributed to Telluride s much higher than average airfares and enplanements dropping to about 13,000 yearly about two years ago and perilously close to being under 10,000 enplanements the last year or two. Fared Avg Fared Avg Fared Avg Fared Avg Airport Fare 2009 Fare 2008 Yield 2009 Yield 2008 Telluride $ $ Cents Cents Total NW Region Airports $ $ Cents Cents Telluride vs. NW Region % % % % The table above shows a Mead/Hunt study of the Northwest Region that Telluride is a part of. Telluride has airfares that are more than 67% higher than the average airfares in the region and yields that are more than 96% higher almost double those of other regional airports. Even when compared against those airports of a similar enplanement size Telluride airfares are high (See Chart Below): **Year Ended - March 31 Pax Pax Fared Avg Fared Avg Fare 2009 Fare 2008 Riverton WY $ $ Friday Harbout WA $45.54 $39.38 Cheyanne WY $ $ Port Angeles WA $46.50 $46.50 Telluride CO $ $ Seattle Lake Union WA $52.74 $52.46 Salem OR $ $ It should be noted that of the 74 Markets with commercial air service in the Northwest Region only Butte, Montana had higher average airfares than did Telluride in 2009 in the Northwest Region. USAirways Great Lakes USAirways Great Lakes Total Increase Summer Carriers Mkt Share Mkt Share Avg. Fare Avg. Fare Avg. Fare 08 vs. 04 vs. Winter Summer 2008 Great Lakes 0% 100% n/a $ $ % 30.83% Summer 2004 Great Lakes/USAir 24.43% 75.57% $ $ $ % Winter 2008/2009 Great Lakes/USAir 50.37% 49.63% $ $ $ % Winter 2004/2005 Great Lakes/USAir 39.87% 60.13% $ $ $ The above table tracks the 2008 and 2004 summer and winter season s market share and average fare. In the winter in both 2004 and 2008 there were (2) different airlines serving (2) different non-stop hub markets that connected with many cities in the national transportation network. Despite cost and other increases that drove up average airfares there was only a $10.64 (3.46% Increase) in the average airfare during the winter season when there was some competition. In the summer, however, when there was 12 P age

13 a shift from (2) different air carriers in 2004 to one in 2008 the average fare in 2008 saw an increase of $67.49 (19.34% Increase). **Year Ended - March 31 Pax Pax Fared Avg Fared Avg Neighboring Airports Fare 2008 Fare 2007 Grand Junction $ $ Montrose $ $ Telluride $ $ Durango $ $ Cortez $ $ The chart to the left shows how Telluride compares in average fare to neighboring airports. Telluride is as much as 50% higher in airfare (Cortez). With the above noted airports in the chart being within 1hr 30min to 2hr 30min drive these airports become very viable alternatives to Telluride (Particularly Spring through Fall when the weather doesn t impede driving on the rural roads as much) because of their lower airfares. It should be noted that the two regional airports that saw increases in the number of airlines operating and available seats from 2007 to 2008 (Grand Junction/Durango), also saw average airfares decrease the most and passenger enplanements increase the most. Historical Air Service Air service over the past fifteen years has declined to an enplanement level of less than half of what it was in This trend has continued over the last five years with acceleration over the last three years with Great Lakes Aviations reductions to their peak winter/summer schedule of flights from Denver (They have reduced service to Telluride A Non-EAS City in order to take on additional EAS Routes & Subsidies). Year Enplanements % Change % % % % % % % % % 13 P age

14 Note: In the winter of 2004 Telluride added service with USAirways (2X Daily Via a revenue guarantee program and an SCASD award)that helped with the uptick of enplanements between 2003 and Unfortunately, after the summer of 2005 USAirways pulled non-guaranteed non-winter summer service out which in conjunction with Great Lakes Aviation reduction in peak season service from 5-6 flights to 2 flights daily has accelerated the downward enplanment performance of the last couple of years. Extenuating Factors that have affected air service There are three primary factors that have impacted air service levels at the Telluride Regional Airport: 1) Retirement of the Dash 7 aircraft and other limitiations on the availability of aircraft that are qualified to fly to the Telluride Regional Airport has reduced available seats into Telluride and thus reduced yearly enplanements. 2) Reduction in the number of airlines flying to Telluride has reduced competition to Telluride and thus airfares have risen to a level that is well above the nations average airfare and is the second highest in the Northwest Region of the country further depressing demand. 3) The last, and recently most significant reason is the acquisition of additional B1900 aircraft and EAS Subsidy contracts by Great Lakes Aviation. Due to an aggressiveness on acquiring these contracts that exceeds the number of aircraft their fleet can serve, Great Lakes has downsized the service to Telluride (What has been non-subsidized airline service) in order to gain aircraft they can use to meet their EAS subsidy contractual agreements. (Great Lakes does not presently and has never received a subsidy or guarantee from the Telluride Community for air service They have very recently indicated that an airline guarantee would increase Telluride s chances of regaining some of the lost service to Telluride but only when their aircraft is better matching their service market needs). Telluride has an air service development organization (Telluride Montrose Regional Air Organization) that has been actively pursuing additional air service to Telluride. This effort has been handicapped by the factors above in acquiring new air service and in retaining air service at the Telluride airport. What accounts for the qualified aircraft challenge for the most part is the fact that at 9070 Elevation and just a 7111 foot runway Telluride is the highest commercially served airport in the country limiting aircraft qualified to operate to Telluride. Market changes by Great Lakes Aviation does provide hope for better access to equipment that can operate into the Telluride airport. It should be noted that there have been some recent changes in some primary Telluride airlines situations: (Great Lakes/USAirways). They have commercial aircraft that can get into Telluride (And in a market that is within range of Telluride and is a Hub Market that can feed into the national transportation system). Aircraft availability may improve in the future based on present conditions at these airlines thus the focus of the strategy of this proposal. Additionally, possibly by Summer/Fall 2011 other air service possibilities may open up with the expansion of aircraft types that can serve 14 Page

15 Telluride increasing to include the Q-400 Aircraft. This is due to the present Telluride Airport Runway Improvement project and the subsequent look at TEX C & D approaches. Telluride air service development efforts The Telluride Montrose Regional Air Organization has attempted to increase service to the Telluride Regional Airport since 2004 with mixed results. Year Initiative Guarantee Offered Result 2004 Add USAirways Winter Service Yes Service Obtained/Still Operating (SCASD Grant Assisted Service Start-up Low to no guarantees have been pd most yrs.) 2006 Add USAirways Summer Service Yes Cost Prohibitive/Lack of Planes 2007 Add USAirways Summer Service Yes No Aircraft Available 2007 Add Delta Summer Salt Lake City Yes No Aircraft Available 2007 Add AM Great Lakes Denver No No Aircraft Available 2008 Add USAirways Summer Service Yes No Aircraft Available 2008 Add AM Great Lakes Denver in Winter Yes No Aircraft Available 2008 Add Delta Summer Salt Lake City Yes No Aircraft Available 2009 No Effort for Summer/Airport Shutdown n/a n/a 2009 Add AM Great Lakes Denver in Winter Yes Under consideration but ultimately no aircraft available 2010 Add AM Great Lakes Denver in Summer Yes Didn t get aircraft back in time from EAS Market Pull-Down 2010 Add USAirways Summer Service Yes No Aircraft Available 2010 Add AM Great Lakes Denver in Winter Yes In Process/Pending (Would make 3 rd Flight Daily) 2011 Add USAirways 2 nd Summer Carrier Yes In Process/Pending Since 2004 in almost all instances where air service efforts were not successful, the cause was that there were no aircraft available. In one instance where we were not successful the cost for the service was made exhorbitant by the airline for the revenue guarantee causing a decline by TMRAO of the service. (It was felt the carrier didn t really want to serve based on costs that were 60% higher then what would be considered fair at that time for the market service). The key thing to note with past air service efforts is that 1) On the successful service which is still operating, (Winter USAirways Phoenix Telluride) an SCASD grant was instrumental in helping with the start up costs and priming the pump of the market and this service still operates today, 5 years later. 2) The other item of note is that if a) aircraft is available, b) a strong guarantee is offered, c) the airline extends a fair guarantee cost and d) there is a public/private partnership, then Telluride has not only been successful in obtaining the service but in sustaining and continuiing the service for years afterwards. Today in 2010, Telluride is finding that potential airlines for service appear to have more 15 P age

16 aircraft available (Or Anticipate having more available) which makes this a good year to attempt to expand air service. WHY This Proposal is different then the Telluride SCASD Grant Award in 2002 The 2002 grant award had Three Goals: 1) Expanding service with Existing Carriers to increase enplanements 2) New airline service to/from Albuquerque that would connect with Southwest Airlines 3) Fly Telluride Marketing Program to generate more local and destination awareness of present service and any new service TEX could obtain.focused on comprehensive Telluride air service. It should be noted that the 2002 grant request was very generally worded so in our opinion actual execution should be considered when looking at the differences. The 2002 grant had the below results: 1) Telluride was able to obtain a 2 nd winter service 2X Daily with America West/Now USAirways and existing carrier by the start of winter This service is still operating to this day and has for most of the last few years operated at little to no guarantee. Restaurant and lodging tax collections which are driven by these visiting guests go to TMRAO for funding its air service development program. NOTE: While this expansion of existing service occurred in 2006 Telluride saw the loss of Spring/Summer/Fall non-guaranteed USAirways service and despite efforts since has been unable to regain service during any of these seasons to date. Also Great Lakes (A non-guaranteed service) has dropped from 5 Daily flights to 2 Daily over this period. 2) Unable to obtain new Albuquerque service as the cost was too high via a guarantee arrangement and with new security requirements requiring passengers to go back through security to check their bags on the connecting carrier in ABQ (WN has no interline agreements) and then go through security a second time on their trip this experience was prohibitive to having this service be successful 3) Fly Telluride Marketing Program was a success as based on equipment load factors and flight revenues were good in subsequent high-seasons. The general awareness of overall Telluride air service goal saw good results. This 2010 Grant Request Goals: (Goals more focused) 1) Reduce airfares via increased airline competition (Winter only season with 2 Carriers serving Telluride) via adding a 2 nd summer carrier. 2) Add additional seats and provide more customer convenience via a 3 rd Great Lakes/United Flight (or via another carrier/aircraft type if Great Lakes continues to not have the equipment) with an early morning Telluride to Denver departure. 3) Support above specific efforts with marketing support to insure sustainability of these service additions/enhancements 16 P age

17 This 2010 request is different in that: 1) The 1 st goal specifically is to add a new 2 nd summer carrier (2002 had a general goal to increase existing service and in its actual RESULT was an increase in WINTER service adding a 2 nd carrier-america West/USAirways) 2) The 2 nd goal specifically is to add a 3 rd flight with an early morning Telluride departure on Great Lakes or to add a new carrier with an early morning Telluride Departure to increase seat capacity access and with a flight schedule that meets demand ( nd goal was to add Albuquerque service to connect with Southwest in Albuquerque-a more direct route from Texas additionally this goal is customer request driven) 3) The Marketing component is to specifically support the incremental service obtained in goals one and two above vs. all the Telluride Airports service as a whole (2002). NOTE: Without the addition of service on America West in the Winter to Phoenix (Via the 2002 SCASD Grant) the reduction of TEX enplanements since 2002 would have been more severe and to the level where Telluride would have been consistently hovering at or below the 10,000 enplanement level since 2007 when Great Lakes starting taking aircraft from Telluride to operate new EAS markets it had gotten committed to. In 2002 neither the Spring-Fall USAirways service nor the year-long Great Lakes service was on a revenue guarantee into Telluride. In winter 2004 we added guaranteed USAirways service via the 2002 grant that is very solid and sustainable via local funding mechanisms. USAirways Spring Fall service wasn t guaranteed and was dropped in 2006 due to a reduction of Dash 8 Aircraft in USAirways fleet. (No other aircraft USAirways has can presently operate into TEX). Great Lakes (Not Guaranteed) has dropped to 2 Daily flights from 5 Daily flights due to new EAS commitments flights it has acquired the last couple of years. By 2010 the Telluride situation has changed in regards to what is an Existing service. USAirways summer service in 2011, if obtained would be basically a NEW service offering a 2 nd summer carrier since it hasn t operated since 2006 and because it would require a revenue guarantee to obtain this service. An early morning departure, since one hasn t operated since 2005 (Regardless of whether it operated on Great Lakes or another Carrier) would also be a new service as it regards meeting passenger demand requests and adding additional seats. If it works out to be Great Lakes/United, which is the primary target for the service, it will require a revenue guarantee to offset EAS subsidies Great Lakes receives from other markets to gain this service based on Great Lakes present fleet and EAS community commitments. The net result of both air service additions would be an increase in seats, competition and a lowering of airfares to travelers to Telluride which should get the Telluride airport to an enplanement level that is consistently above 13,000 yearly well above the 10,000 enplanement goal of the airport. NOTE2: Based on an estimated 4676 additional enplanements, 90% visitors/2 nd homeowner use and an average trip spend of $2500 the flight goals would drive just shy of $10 Million Dollars additional direct economic activity for the region yearly! Note3: Limitations on aircraft and markets that can operate to Telluride also limit approaches to improving enplanements and the high airfares into the Telluride airport. We feel that within 17 Page

18 this limited scope of solutions to these problems our proposed strategy is different than in 2002 and can be effective in improving Telluride air service. Air Service Deficiencies and Needs Only One Year-Round Carrier Telluride is served by only one year-round carrier (Great Lakes Aviation) and has only one season where it has two carriers (Winter). This creates a situation with lack of schedule and airline choices and high airfares. Airfares are lower in the winter when there are two carriers serving the Telluride Airport. High Airfares Telluride Airfares are over 67% higher than the average for all of the Northwest Regional Airports. This is caused by small aircraft serving the market and only one air carrier serving the market for most of the year which allows a monopoly on service in many markets and drives up the airfares. Average Airfares to Select Markets 2008 Destination Telluride Montrose Grand Junction Durango New York $ $ $ $ Boston $ $ $ $ Tampa $ $ $ $ Chicago $ $ $ $ Dallas $ $ $ $ Houston $ $ $ $ Los Angeles $ $ $ $ San Francisco $ $ $ $ Circuitous routings For local travelers and visitors needing to travel back east, often the earliest departure is around 1pm and due to the time change the passenger doesn t arrive until 10pm or later. If you are heading to a major east coast city, with only one airlines route system to work with (Great Lakes/United), to many markets you are looking at multiple connecting and changes of planes on multiple airlines to get to your final destination. If you are an international traveler you are almost assured of an overnight stay which adds to your overall trip cost. Being able to conduct business on the same day and then fly back is basically impossible even for regional business trips to Denver based on the limited number of flights and narrow mid-day scheduling of present service. Underserved Markets For most of the year travelers are limited to a maximum of 140 different markets they can access with one change of planes air service via the Great Lakes/United service. An additional 30 markets open up in winter with the US Airways winter service addition and the number of markets with more than one 18 P age

19 airline serving from Telluride goes from 0 in Spring-Fall to 70 in the winter and is one of the reasons airfares are the least expensive in the winter versus other times of the year. Strategic Plan Air Service Project Goals The Strategic Plan proposed by the Telluride Airport and the Telluride Montrose Regional Air Organization will achieve the community s air service improvement goals and help to alleviate the lack of a morning flight tailored to eastbound business and leisure travelers as well as help lower airfares from the Telluride Airport. The Strategic Plan will meet the goals of the community and the Telluride Regional Airport: Second air carrier in summer that provides connections through a hub airport Air service that provides better scheduling more direct routings and more connecting opportunities Reducing average airfares for more of the calendar year (Summer as well as winter) Reduce the need for travelers to drive long distances to access air service and competitive fares Provide a morning flight and increase available seats to better accommodate demand at the Telluride airport and passenger desire for flights that can provide more convenient connections to Denver, the mid-west and the east coast. Proposed Air Service US Airways from Phoenix Second Summer Air Carrier Service To improve air service at the Telluride Regional Airport and accomplish the goals of this SCASD grant application, a second airline service in summer that connects to a hub airport in the national transportation system is needed to better meet traveler needs. US Airways service via Phoenix presently operates successfully in winter and has aircraft that has operational abilities to operate into the Telluride Regional Airport. Adding US Airways service in the summer where we can build upon a market of customers that are already familiar with the winter air service on US Airways from Phoenix can help alleviate the deficiency of only one air carrier and one non-stop market in summer and thus help bring more competition and lower airfares. US Airways Phoenix service will help alleviate address the following air service goals: 1) US Airways Phoenix service adds a 2nd summer flight with national hub market connections increasing overall markets that are connected to by 2 carriers. 2) Adds more competition in summer to help reduce airfares 3) Helps reduce the need for air travelers to drive long distances to access air service and competitive airfares 19 P age

20 4) Will provide additional markets served and more direct routings and more convenient connections that will also positively help to reduce average airfares. Great Lakes/United Early Morning Flight More Convenient East Bound connections/increase available seats from Telluride Great Lakes Aviation service via a flight schedule with a departure from Telluride before 9am will meet the following goals: 1) Helps reduce the need for air travelers to drive long distances to access air service and competitive fares. 2) Will provide service with more direct routings and more convenient connections 3) Will provide air service that allows travelers more convenient flight connections heading eastbound 4) Will provide air service that allows business travelers to fly to Denver conduct business and return in the same day. 5) Will help raise available seats from Telluride towards a more historic level and thus help increase overall enplanements from the Telluride Airport. Note: Airlines consider aircraft arriving in the evening returning early the following morning a premium service due to many communities desiring this flight schedule. This creates more opportunity costs with an airline to attain this service. Additionally there are more crew and other costs with an overnight scenario as well. To get the early morning outbound flight that Telluride desires a revenue guarantee is likely to be required. Airline Participation The Telluride Montrose Regional Air Organization (TMRAO) has been in discussions with US Airways about summer Phoenix service since Aircraft availability has been a major impediment until recently. While the aircraft situation and airline direction at US Airways is fluid they are presently giving more consideration to our service request based on strategic changes at the airline, potential aircraft availability and our proposed revenue guarantee program. TMRAO has also been discussing with Great Lakes Aviation for the addition of a morning flight (Before 9a-10a departure time) since Recently in 2008 TMRAO has offered a revenue guarantee arrangement in order to obtain this service but Great Lakes Aviation still had aircraft availability issues. Great Lakes aircraft availability is anticipated to improve within the next year as they reduce some of their EAS market flying. They now have more consideration to a RON operation or of a morning flight to Telluride. On-going discussions with US Airways and Great Lakes indicate that the marketing commitment and 20 P age

21 guarantee program proposed herein is required to support the services outlined above. There is still somewhat limited aircraft availability and other significant barriers to entry exist. Through the SCASD Grant and TMRAO s community program to support air service development many of the barriers can be mitigated and Telluride can share the risk with the air carrier via revenue guarantees. Market Analysis US Airways Summer Phoenix Service A financial analysis and pro forma route forecast have been developed for US Airways Phoenix summer service to provide justification for the east/west connecting service. A one roundtrip summer schedule is analyzed using a Dash 8 aircraft. The pro forma analysis for the service is summarized below. The analysis included the following operating and marketing assumptions: US Airways operating cost for one roundtrip daily for the Dash 8 aircraft is $3800 per one-way flight for the 388 mile stage-length between Telluride and Phoenix. US Airways will capture a share of the passengers that are presently driving to a competing airport (e.g. Montrose/Grand Junction/Durango) to travel to Phoenix and beyond destinations US Airways winter service in averaged over 68% load factor making a first year 55% load factor a conservative estimate. Gross OW Fare averaged $ st Quarter of 2009 a period when airfares were depressed making the $160 Average OW Yield a conservative forecasted amount. Year 1 Year 2 US Airways Phoenix Market Analysis US Airways Phoenix Market Analysis Mature Mature Statistical Category Market Statistical Category Market Operational Days 90 Operational Days 90 Operations 180 Operations 180 Cost Per Operation $3,800 Cost Per Operation $3,850 Available Seats Per Departure 37 Available Seats Per Departure 37 Segments per day 2 Segments per day 2 Onboard Passengers 3663 Onboard Passengers 3996 Load Factor 55% Load Factor 60% Average Yield $160 Average Yield $160 US Airways Segment Cost $684,000 US Airways Segment Cost $693,000 US Airways System Revenue $586,080 US Airways System Revenue $639,360 Revenue Guarantee Owed $97,920 Revenue Guarantee Owed $53,640 As the market service matures in year 2 the cost of the guarantee goes down as marketing increases the awareness of the service and load factors rise. It is estimated that development of the market brings the service to a breakeven or better by year four or five. Additionally, TMRAO receives funds for air service 21 P age

22 development via a 2% tax in Telluride and Mountain Village on Lodging and Restaurants. By year 3 or 4 it is estimated that the increase in passengers will generate about $52,000 additional in taxes per year, going to the air service development program due to the US Airways Summer service which should more than offset ongoing payouts to US Airways after year two. (See Chart Below) USAirways Year 1 Year 2 Year 3 Year 4 Year 5 Projected Shortfall $97,920 $53,640 $32,328 $9,360 ($11,952) Additional Passengers Tax Impact $43,956 $49,018 $51,750 $53,709 $55,690 Detailed Market Analysis Great Lakes Year-round Denver Morning Service A financial analysis and pro forma route forecast have been developed for Great Lakes Denver service to provide justification for the AM flight. A one roundtrip schedule is analyzed using a Beechcraft 1900 aircraft. The pro forma analysis for the service is summarized below. The analysis included the following operating and marketing assumptions: Great Lakes operating cost for one roundtrip daily for the B1900 aircraft is $1400 per one-way flight for the 218 mile stage-length between Telluride and Denver. Great Lakes will capture a share of the passengers that are driving to a competing airport (e.g. Montrose/Grand Junction/Durango) to travel to Denver and beyond destinations Great Lakes averaged over 54% load factor in 2008 when they operated 2.7 flights a day and 53.1% in 2007 when they averaged 3.15 flights per day. A 41% load factor is a very conservative estimate for year one based on these statistics. Connecting markets with a significant improvement in connecting opportunities based on a RON and/or pre 9am flight departure were stimulated 120 percent on a per flight basis. Year 1 Year 2 Great Lakes Denver Market Analysis Great Lakes Denver Market Analysis Mature Mature Statistical Category Market Statistical Category Market Operational Days 365 Operational Days 365 Operations 730 Operations 730 Cost Per Operation $1,400 Cost Per Operation $1,450 Available Seats Per Departure 19 Available Seats Per Departure 19 Segments per day 2 Segments per day 2 Onboard Passengers 5687 Onboard Passengers 5964 Load Factor 41% Load Factor 43% Average Yield $165 Average Yield $165 Great Lakes Segment Cost $1,022,000 Great Lakes Segment Cost $1,058,500 Great Lakes System Revenue $938,306 Great Lakes System Revenue $984, P age

23 Revenue Guarantee Owed $83,695 Revenue Guarantee Owed $74,424 Great Lakes Year 1 Year 2 Year 3 Year 4 Year 5 Projected Shortfall $83,695 $51,538 $28,653 ($3,504) ($49,275) Additional Passengers Tax Impact $53,261 $58,527 $61,193 $63,918 $66,692 As the market service matures in year 2 the cost of the guarantee goes down as marketing increases the awareness of the service and load factors rise. It is estimated that development of the market brings the service close to a breakeven or better by year three. Additionally, TMRAO receives funds for air service development via a 2% tax in Telluride and Mountain Village on Lodging and Restaurants. By year 2 it is estimated that the increase in passengers will generate about $58,000 additional in taxes per year due to the AM Great Lakes Denver service which should more than offset projected ongoing payouts to Great Lakes after year two. Alternate Plan Telluride, has had preliminary discussions with US Airways and Great Lakes Aviation about both the new air service objectives (2 nd Carrier Summer/Earlier AM flight Summer/Winter), which is encouraging. However, the airline industry is extremely dynamic and ever changing. If these airlines cannot initiate service in the summer from Phoenix (US Airways) and service in the early morning (Great Lakes) Telluride would look for another carrier new 2 nd summer service that provides significant national connections via a hub airport into the national transportation system and would offer competition to Great Lakes/United. Additionally Telluride would look for an early am flight with any hubbing carrier (1 st with another United Denver code-share option and then with another hubbing carrier) that can provide more convenient connections and the ability to fly in one day eastward where the travelers can arrive in the same day and/or at a reasonable hour on the east coast. Strategic Plan Implementation and Funding Public/Private Partnership The Telluride Regional Airport is the acting sponsor of this application. The Telluride Montrose Regional Air Organization (TMRAO) is committed to completing the strategic plan outlined herein and will provide all of the local cash funds in support of the application and most of the in-kind support. TMRAO s membership is made up of the Governments of Town of Telluride, Town of Mountain Village, City of Montrose and key regional businesses like: Telluride Ski Resort, The Peaks Resort, Cappella Hotel and over 75 additional supporting businesses in this public/private economic development organization. Telluride Airport as sponsor, will execute all federal grant offers, process all associated reimbursement requests and oversee grant administration. The Telluride Airport, TMRAO, Telluride Ski Resort and 23 P age

24 Marketing Telluride Inc., and the Telluride Airport will administer the marketing campaign. TMRAO will solicit and coordinate the revenue guarantee program including paying the local match and assist the Telluride Airport in monitoring the strategic plan and performance tracking. Incentive and Support Plan The proposed air service plan will require an air carrier to undertake risk during the first year of service. This risk reduces as the program matures but the start-up risk over the first couple of years must be addressed. A couple of elements are proposed in our plan to mitigate the risk: a revenue guarantee and a marketing campaign. The widespread participation in our community partnership via The Telluride Montrose Regional Air Organization (TMRAO) helps to further support the plan. Revenue Guarantee The Strategic Plan proposes to use a revenue guarantee to limit the risk of the targeted air carriers and provide an incentive to attain the targeted air service during this volatile time for the airlines. The pro forma projections for the associated service demonstrate a movement to a reduced/eliminated and/or self-sustainable shortfall within about 3 years. (ie within 3 years the short fall is projected to fall below the tax generation monies that the service will produce for TMRAO funding) Within about 5 years the service is projected to reach self-sustainability where there is no short fall. Both the proposed AM Denver flight and the summer Phoenix flight; show an approximately $180,000 combined shortfall in year one and about a $105,000 combined shortfall in year 2. By year three the shortfall is projected to be about $60k combined which is below the projected additional local air service generated tax collections. The net short fall over the three year ramp-up of the service is projected to be approximately $400,000. To mitigate airline risk for both services the strategic plan proposes a revenue guarantee amount of $400,000 total ($300,000 from SCASD grant cash funds and $100,000 from local cash funds The excess is for any potential underestimation of guarantee payments with Telluride proposing an 75%/25% split on federal/local guarantee payments). Marketing Plan It is critical to jumpstart new air service initiatives by creating service awareness in the community and in the cases of Destination Tourism markets like Telluride to destination guests in order to change travel habits and recapture locals and visitors who have been utilizing competing airports. Air carriers predominantly market on a national level with a brand focus and don t have funds or marketing programs for small markets within their systems. This leaves the local community to step-up with a marketing program in order to support its local service. Marketing Goals Increase local awareness of improved air service for east bound business and leisure travelers as well as new summer service via a new 2 nd carrier to a hub connecting airport. Increase destination guest awareness of additional service to the Telluride Airport. The effectiveness of the campaign will be measured by changes to the enplanement levels with the goal to increase Great Lakes enplanements by about 2350 passengers over the first year, US Airways enplanements by about 1850 passengers and 24 P age

25 total enplanements by about 4200 passengers to a total Telluride Airport enplanement level over 15,000 yearly enplanements. Further measurement of the marketing goals for the Great Lakes AM Denver flight and the US Airways summer Phoenix flight will include goals of obtaining a 41% load factor for the Great Lakes flight and a 55% load factor for the US Airways flight in the first year. Second year load factor targets are a 44% load Factor on the Great Lakes Denver AM flight in year two and a 60% year two load factor on the US Airways flight. Incremental load factor increases are targeted for years 3 5. Marketing Plan The Telluride specific marketing plan in support of the proposed new service that would include SCASD funds requested would take place over months (Ideally two years plus a 2-4 month lead time before the introduction of the new service). As with the guarantee element of the strategy, the initial effort is considered a start-up effort. Upon the completion of the start-up period, local community marketing efforts will continue in support of the SCASD obtained air service in perpetuity via various local marketing organizations. A committee made up of the Telluride Airport, Marketing Telluride, Inc (The local visitors bureau), The Telluride Montrose Regional Air Organization and Telluride Ski Resort have devised the proposed plan that will spend the cash dedicated to this Marketing plan; including utilizing SCASD funds for marketing and the Telluride Airport and TMRAO cash dedicated to the marketing plan. In addition, this same committee will coordinate the cash driven marketing plan with local in-kind efforts (Approximately $100,000 in value) to maximize the effectiveness of the new air service awareness program. While ad plans over this period of time need to be somewhat fluid to get the most exposure and program awareness for the dollars spent (And taking advantage of advertising buy deals and opportunities that may come up), the present plan anticipates spending 25% of the cash funds locally and 75% in a handful of key Destination Markets and/or targeted national media. In the Telluride region the local newspapers are the predominant media so most of the local expenditures would go to print. This split between local and destination efforts mirrors the historical usage of the flights from the Telluride Airport. Division of Marketing Budget Advertising Type Budget Local Destination Print 70% 40% Internet n/a 20% Radio 20% 10% In-Flight n/a 20% Direct Mail 10% n/a Other n/a 10% Print Media is the predominant local source in 25 P age