APPLICATION UNDER SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOT-OST SUMMARY INFORMATION

Transcription

1 APPLICATION UNDER SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOT-OST SUMMARY INFORMATION A. PROVIDE THE LEGAL SPONSOR AND ITS DUN AND BRADSTREET (D&B) DATA UNIVERSAL NUMBERING SYSTEM (DUNS) NUMBER, INCLUDING +4, EMPLOYEE IDENTIFICATION NUMBER (EIN) OR TAX ID. Legal Sponsor Name: Mohave County Airport Authority, Inc. Name of Signatory Party for Legal Sponsor: Jeremy Keating, CM, CAE, Airport Director DUNS Number: EIN/Tax ID: B. LIST THE NAME OF THE COMMUNITY OR CONSORTIUM OF COMMUNITIES APPLYING: 1. Mohave County Airport Authority, Inc., Bullhead City, Arizona C. PROVIDE THE FULL AIRPORT NAME AND 3-LETTER IATA AIRPORT CODE FOR THE APPLICANT(S) AIRPORT(S) (ONLY PROVIDE CODES FOR THE AIRPORT(S) THAT ARE ACTUALLY SEEKING SERVICE). 1. Laughlin/Bullhead International Airport, IFP THE AIRPORT SEEKING SERVICE IS NOT LARGER THAN A SMALL HUB AIRPORT: UNDER FAA HUB CLASSIFICATIONS EFFECTIVE ON THE DATE OF SERVICE OF THE ATTACHED ORDER AS OF CALENDAR YEAR 1997 DOES THE AIRPORT SEEKING SERVICE HOLD AN AIRPORT OPERATING CERTIFICATE ISSUED BY THE FEDERAL AVIATION ADMINISTRATION UNDER 14 CFR PART 139? (IF NO, PLEASE EXPLAIN WHETHER THE AIRPORT INTENDS TO APPLY FOR A CERTIFICATE OR WHETHER AN APPLICATION UNDER PART 139 IS PENDING.) Yes No (explain) Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

2 D. SHOW THE DRIVING DISTANCE FROM THE APPLICANT COMMUNITY TO THE NEAREST: 1. Large hub airport: Las Vegas McCarran Int l (LAS), 95 miles 2. Medium hub airport: Ontario Int l (ONT), 246 miles 3. Small hub airport: Long Beach Airport (LGB), 296 miles 4. Airport with jet service: Las Vegas McCarran Int l (LAS), 95 miles E. LIST THE 2-DIGIT CONGRESSIONAL DISTRICT CODE APPLICABLE TO THE SPONSORING ORGANIZATION, AND IF A CONSORTIUM, TO EACH PARTICIPATING COMMUNITY. 1. AZ-04 F. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) Not a Consortium Interstate Consortium Intrastate Consortium Community currently receives subsidized Essential Air Service, or receives assistance under the Alternate Essential Air Service Pilot Program Community (or Consortium member) previously received a Small Community Air Service Development Program Grant If previous recipient: Provide year of grant(s): 2008; and, the text of the grant agreement section(s) setting forth the scope of the grant project: Address air service deficiencies to the western United States by establishing new scheduled service from Laughlin/Bullhead City International Airport using a major carrier s code. Focus on nonstop service to Los Angeles or other destinations that can offer connections for business and leisure travelers to destinations in the West and Northwest. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

3 G. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES) PUBLIC PRIVATE 1. Mohave County Airport Authority, Inc. 1. Bullhead Regional Economic Development 2. Bullhead City, Arizona 2. Bullhead Area Chamber of Commerce 3. Town of Laughlin, Nevada 3. Laughlin Resorts 4. Needles Chamber of Commerce 4. Laughlin Tourism Commission (LTC) 5. Kingman Airport Authority 5. Kingman and Mohave Manufacturing Assn. 6. Arizona Office of Tourism 6. Rubin Broadcasting 7. Las Vegas Convention and Visitors Auth. 7. Signature Aviation 8. Mohave County Economic Development 8. Valley View Medical Center 9. Clark County, Nevada 9. Baron Services 10. Lake Havasu City 10. LJ Bardswich Mine Consultant, Inc. 12. Colorado River School District 11. Mountain View Homes 12. Park West Partners 13. Western Arizona Regional Medical Center 14. Bullhead City Insurance Center 15. Eugene Newman, CPA 16. National Bank of Arizona 17. AVIS/Budget Group 18. Automobile Consulting Services, LLC 19. Farm Bureau Financial Services 20. Johnson & Bull, CPAs 21. Mohave Electric Cooperative 22. Village Construction 23. Clear Channel Airports 24. Murphy Broadcasting 25. News West Publishing 26. Chelsea Street Productions 27. Suddenlink Communications 28. Lamar Advertising 29. Bullhead Laughlin Realty 30. Frontier Communications 31. Colorado River Women s Council 32. Kiwanis Club of the Colorado River Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

4 H. PROJECT PROPOSAL: 1a. GRANT GOALS: (CHECK ALL THAT APPLY) Launch New Carrier Secure Additional Service Upgrade Aircraft First Service New Route Service Restoration Regional Service Surface Transportation Professional Services Other (explain) 1b. GRANT GOALS: (SYNOPSIS) Concisely describe the scope of the proposed grant project. Laughlin-Bullhead International Airport seeks Grant funding for a project to recruit nonstop service to Denver, connecting to markets in the Midwest and East. The Airport is working to secure service on a carrier that can provide connectivity through a major airline s code. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

5 2. FINANCIAL TOOLS TO BE USED: (CHECK ALL THAT APPLY) Marketing (including Advertising): promotion of the air service to the public Start-up Cost Offset: offsetting expenses to assist an air service provider in setting up a new station and starting new service (for example, ticket counter reconfiguration) Revenue Guarantee: an agreement with an air service provider setting forth a minimum guaranteed profit margin, a portion of which is eligible for reimbursement by the community Recruitment of U.S. Air Carrier: air service development activities to recruit new air service, including expenses for airport marketers to meet with air service providers to make the case for new air service Fee Waivers: waiver of airport fees, such as landing fees, to encourage new air service; counted as in-kind contributions only Ground Handling Fee: reimbursement of expenses for passenger, cabin, and ramp (below wing) services provided by third party ground handlers Travel Bank: travel pledges, or deposited monetary funds, from participating parties for the purchase of air travel on a U.S. air carrier, with defined procedures for the subsequent use of the pledges or the deposited funds; counted as in-kind contributions only Other (explain below) I. EXISTING LANDING AIDS AT LOCAL AIRPORT: Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) GPS Approach Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

6 J. PROJECT COST: DO NOT ENTER TEXT IN SHADED AREA REMINDER: LOCAL CASH CONTRIBUTIONS MAY NOT BE PROVIDED BY AN AIR CARRIER (SEE TYPES OF CONTRIBUTIONS FOR REFERENCE). LINE DESCRIPTION SUB TOTAL TOTAL AMOUNT 1 Federal amount requested $750,000 2 State cash financial contribution $0 Local cash financial contribution 3a Airport cash funds $220,000 3b Non-airport cash funds $530,000 3 Total local cash funds (3a + 3b) $750,000 4 TOTAL CASH FUNDING (1+2+3) $1,500,000 In-Kind contribution 5a Airport In-Kind contribution** $54,750 5b Other In-Kind contribution** $608,500 5 TOTAL IN-KIND CONTRIBUTION (5a + 5b) $663,250 6 TOTAL PROJECT COST (4+5) $2,163,250 K. IN-KIND CONTRIBUTIONS For funds in lines 5a (Airport In-Kind contribution) and 5b (Other In-Kind contribution), please describe the source(s) of fund(s) and the value ($) of each. See the funding plan on page 17 for details on contributions; included landing fee waivers, marketing support and in-kind from local and nationwide businesses. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

7 L. IS THIS APPLICATION SUBJECT TO REVIEW BY AN AFFECTED STATE UNDER EXECUTIVE ORDER PROCESS? a. This application was made available to the State under the Executive Order Process for review on (date). b. Program is subject to E.O , but has not been selected by the State for review. c. Program is not covered by E.O M. IS THE LEAD APPLICANT OR ANY CO-APPLICANTS DELINQUENT ON ANY FEDERAL DEBT? (IF YES, PROVIDE EXPLANATION) No Yes (explain) Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

8 TABLE OF CONTENTS Section Page Number Legal Sponsor 8 Introduction 9 The Laughlin/Bullhead City Air Service Market 10 Catchment Area Demographics 10 Visitor Trends 11 Current Charter Service 12 Air Service Needs and Deficiencies 15 Loss of Regional Airline Capacity 15 Changes in Regional Fares 16 Passenger Retention and Leakage 17 Air Service Development Plan: Laughlin/Bullhead City Denver 20 Local Denver Passenger Trend 20 Connections over Denver 22 Funding Plan 24 Public/Private Partners 26 Conclusion 27 LEGAL SPONSOR The Mohave County Airport Authority, which operates Laughlin/Bullhead International Airport, is the legal sponsor responsible for administering the proposed air service development program. The Authority is a governmental agency. Mohave County Airport Authority, Inc. Laughlin/Bullhead International Airport 2550 Laughlin View Drive, Suite 117 Bullhead City, Arizona Jeremy Keating, CM, CAE, Airport Director (928) jkeating@laughlinbullheadintlairport.com Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

9 INTRODUCTION Scheduled airline service is critical to the long-term economic health of Laughlin, Bullhead City, Kingman, Lake Havasu, and the rest of the two-state region. Each year more than three million visitors come to Laughlin-Bullhead City to visit the local resorts, the casinos, to raft the Colorado River, and to hike the mountains of the Mohave Desert. Since 2005, resort charters have brought more than a million passengers through Laughlin/Bullhead International Airport. This application seeks funding for scheduled air service between Laughlin-Bullhead City and Denver on United. The service is estimated to generate $17.5 million in annual economic impact, bringing more than 18,000 new visitors to the area in the first year of service. A broad coalition of supporters stands behind this Grant application. In previous years Laughlin/Bullhead International Airport had the support of its local communities. In this application, the Airport has additional support from communities as far away as Kingman, and the Kingman Airport, itself, which recently lost its Essential Air Service (EAS). This is a true effort to regionalize air service into a community that can best support it. This Grant application does not represent the beginning of the air service development process for Laughlin/Bullhead International Airport or its community This investment will result in a projected 181 new jobs and a brighter future for a large and growing region. partners. This is just the latest, necessary step in developing sustainable service. The Airport was awarded a previous Grant in 2008, and was unable to finalize an agreement for air service. On three separate occasions, the Airport was in contract negotiations for service when factors outside its control caused the prospective airline to cancel mutually agreed upon contracts. The community wants this service and is ready to support it. Partners in this application come from all sectors of the regional economy. Together, they have pledged $750,000 in cash matching funds, along with more than $660,000 in in-kind donations. Including in-kind, local funding for this project represents 66% of the total project cost. The Department of Transportation portion of funding is just 34% of the total project cost. This investment will result in a projected 181 new jobs and a brighter future for a large and growing region. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

10 THE LAUGHLIN/BULLHEAD CITY AIR SERVICE MARKET Air Service and Community Profile The airport code for Laughlin-Bullhead International Airport is unintentionally appropriate: IFP. The Airport and its partners have decided that IFP stands for International Fun Place. And that moniker is catching on. Each year, more than three million people come from all over the country to stay at the region s resorts, to play in Laughlin s casinos, to enjoy the magnificent Colorado River, and to hike through the mountains of the Mohave Desert. In addition to being a destination for millions, Laughlin and Bullhead City are split by the MAP 1: Laughlin/Bullhead City Catchment Area Source: Sixel Consulting Group, May 2016 Colorado River, but essentially make up one larger metro area. But Laughlin/Bullhead International Airport serves a much larger area than the local metro an area covering parts of three states: Arizona, California and Nevada. With the end of scheduled air service at Kingman, that city s major organizations now consider Laughlin/Bullhead International Airport their local airport and support this Grant application. The immediate Laughlin-Bullhead City catchment area (seen in red in map 1) covers a population of 130,285 as of the latest US Census estimates, including Laughlin, Bullhead City, Needles, and Kingman. The greater catchment area (seen in blue in map 1) is home to 302,785 people, and includes Lake Havasu City, Searchlight, and Vidal. For decades, Laughlin and Bullhead City had been drive markets, catering to visitors who mostly came from Southern California, or who split their vacation time between Las Vegas and Laughlin-Bullhead City. That has changed dramatically in the last ten years, with the advent of charter air programs operated by the community s resorts. Now the most valuable visitors for the local economy arrive by air. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

11 FIGURE 1: Visitors Who Visit Las Vegas on Same Trip Source: Las Vegas Visitors Authority; Updated April 2016 Since 2009, the share of visitors to Laughlin and Bullhead City that visited Las Vegas on the same trip has dropped by eight points (see figure 1). In 2009, 21% of Laughlin and Bullhead City visitors also visited Las Vegas on the same trip almost a quarter of total visits. Today just 13% of Laughlin and Bullhead City visitors also visit Vegas. This illustrates how Laughlin and Bullhead City have become a destination in their own right one that visitors seek out individually and not as a package with Las Vegas. At the same time, almost all visitors who come to Laughlin and Bullhead City don t buy packages through the resorts that include both airfare and hotel. In 2014, 87% of Laughlin and Bullhead City visitors bought their airfare to visit the region separately from their hotel, rental car, and other activities (see figure 2). This indicates that most visitors are flying to Las Vegas, renting a car, and then spending their vacation in Laughlin and Bullhead City. Most visitors are not able to use the local charter programs offered by Laughlin and Bullhead City resorts. These are visitors that FIGURE 3: Laughlin Monthly Visitors and Hotel Occupancy Rate Source: Las Vegas Convention and Visitors Authority; Updated April 2016 FIGURE 2: Visitors Who Bought Airfare Separately Source: Las Vegas Visitors Authority; Updated April 2016 would use locallyprovided air service at Laughlin/Bullhead International Airport. In the past, the tourism traffic to the region was highly seasonal, with visitors choosing to travel during the cooler fall, winter, and spring months. But in 2014, the most Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

12 recent data available, the community saw a secondary spike in overnight visitors, with more traveling to Laughlin-Bullhead City in July than in any month besides the traditionally strong March (see figure 3 on previous page). Still, even in the busiest months for overnight visitors, hotel occupancy in Laughlin remains below 72% - with the average occupancy in the low 60s. FIGURE 4: Major Area Resorts and Available Rooms Source: Laughlin Tourism Commission (LTC) Laughlin s resorts and casinos offer close to 11,000 rooms per night (see figure 4) and employ more than 10,000 people in the region. These resorts are the critical backbone for the local economy and they are the major drivers of air traffic in the region. Laughlin-Bullhead City generally relies on Las Vegas for access to the national air transportation system. McCarran is a two hour and eight minute drive away, over a mountain pass, and through the Mohave Desert. Phoenix, the other main alternate, is more than three hours away by car. MAP 2: Riverside Resort Charter Routes Source: OAG Schedules, Calendar Year 2015 Because of Laughlin/ Bullhead City s relative isolation, resorts have been forced to bring tourists to their properties through their own charter airline programs. Both the Riverside Resort and Caesar s Entertainment, which operates Harrah s Laughlin, operate year round charter programs. The Riverside contracts with Sun Country Airlines for Boeing 737 charter flights throughout North America (see map 2). The Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

13 Riverside sees 250,000 unique visitors per year to its 1,405 room resort on the Colorado River. It employs 2,000 people and has a $50 million annual payroll. Its charter program is the key to the resort s vitality. The 2015 charter program included flights from Allentown and Baltimore in the east to Seattle and Bellingham in the Northwest. The Riverside puts particular emphasis on the intermountain west and the upper Midwest, flying more flights to these destinations than any other parts of the country. MAP 3: Harrah s Laughlin Charter Routes Source: OAG Schedules, Calendar Year 2015 Harrah s contracts with both Sun Country for 737 aircraft and ViaAir for charters operated by Embraer ERJ145 aircraft (see map 3). In 2015, its charters operated to more than 80 destinations, focusing on areas of strength in the upper Midwest, the South, and the Pacific Northwest. Harrah s has 1,616 rooms in three towers, employing more than 2,000 people. It welcomes almost 300,000 individual, unique visitors per year. It credits the charter program with ensuring it runs at higher than average occupancy. In attempting to boost occupancy rates into the 80s, regional resorts have significantly increased their support for this Grant application. As drive traffic from Southern California continues to decline, air passengers have grown more critical to the regional tourism economy. Moreover, it is now more difficult to travel by air to Laughlin-Bullhead City than it was just a decade ago. Despite the breadth of charter service at Laughlin-Bullhead International Airport, it has seen a decline in passengers over the last three years. Part of the reason for the decline is Harrah s move to non-scheduled charters with Via Air ERJ145s. Those flights operate from the Fixed Base Operator (FBO) and are no longer counted in the federal Department of Transportation s DB1A passenger database. Another reason for the passenger decline is a reduced number of flights as resorts streamline their charter operations. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

14 FIGURE 5: O&D Passengers at Laughlin/Bullhead International Airport Source: US DOT Table DB1A; YE3Q06 YE3Q15 In the year ended third quarter 2015, the most recent data available, Laughlin-Bullhead International Airport saw just 49,000 passengers the lowest passenger count in a decade (see figure 5). Passengers at IFP declined from almost 118,000, or an average of 162 passengers per day each way (PDEW) in 2013 to an average of just 67 PDEW in The passenger decline continues to spur the Airport to be aggressive in air service development efforts, conducting both airline headquarters and conference meetings multiple times in the last 12 months. The streamlined charter program has resulted in full planes for the resorts and for the Airport. In 2014, charters in and out of Laughlin-Bullhead International Airport filled just 62.8% of available seats (see figure 6). In 2015, with streamlined capacity, Laughlin-Bullhead City charters saw an average load factor of 81.4%, an improvement of 18.6 points, or 30%. While overall passengers using the Airport have declined, planes are flying with higher load factors. FIGURE 6: Average Load Factor at Laughlin/Bullhead International Airport Source: US DOT T100, December 2013 December 2015 It is critical to note that the resorts charters are not a replacement for scheduled air service. While they provide a lifeline to the community, bringing in huge economic impact and helping to employ thousands, their seats are not sold to residents of the Laughlin-Bullhead City community. They are only sold to out-of-market visitors. While Laughlin-Bullhead City is well connected to specific communities to bring in visitors, it has no local access to the national air transportation system. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

15 AIR SERVICE NEEDS AND DEFICIENCIES IN LAUGHLIN-BULLHEAD CITY This is not the first Small Community Air Service Development Grant (SCASDG) application for Laughlin/Bullhead Airport. International This application, however, comes at a time when air service needs are reaching a critical point for both the Airport and the local economy. The resort charter operation at Laughlin/Bullhead International Airport is at its lowest point of capacity in more than a decade. At the same time, capacity at Las Vegas, Laughlin- Bullhead City s main alternate air service access point, has been significantly reduced. Moreover, nearby Kingman, Arizona was removed from the Essential Air Service (EAS) program two years ago, leaving northern Arizona with no scheduled air service. FIGURE 7: Daily Arriving Seats, Laughlin/Bullhead International Airport Source: US DOT T100; March 2014 December 2015 Since spring of 2014, the charter capacity at Laughlin/Bullhead International Airport has dropped by 58%. In March of 2014, resort charters at IFP offered an average of 566 arriving seats per day (see figure 7). In December of 2015 those charters offered an average of just 236 arriving seats per day a loss of an average of 330 arriving seats per day. The general decline in capacity has continued for several years, but it is more pronounced today. FIGURE 8: Daily Arriving Seats, Las Vegas Source: US DOT T100; October 2007 December 2015 Due to the limited nature of the charter program with flights to specific communities on an irregular basis, most of those who travel to and from Laughlin-Bullhead City by air are forced to Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

16 use Las Vegas McCarran International Airport. But since 2007, airline capacity at Las Vegas has continued to decline. In fact, since fall of 2007, McCarran Airport has lost an average of 12,992 daily departing scheduled airline seats, or 20% of its total seat capacity (see figure 8 on previous page). That s the equivalent loss of 81 flights on a While the capacity loss hurts Las Vegas, it also hurts all of Las Vegas surrounding communities, making it significantly more difficult to find a seat at the right price for a trip to Laughlin-Bullhead City. New local service at Laughlin/Bullhead International Airport will only replace a small portion of the region s lost capacity. Laughlin, Bullhead City, Kingman, Lake Havasu, and other communities in the region are all isolated from the national air transportation system. After all, Las Vegas is not an easy-to-reach alternative airport for anyone in the Laughlin/Bullhead International Airport s catchment area. Each route requires a long drive through desert, and each route crosses a mountain pass. The routes have winding roads that can be dangerous especially at night and in poor weather. In fact, according to the State Department of Transportation, Highway 163 departing Laughlin has the highest accident rate in Nevada. Once travelers make the drive, they are faced with fares that are among the fastest-rising in the country. According to the Department of Transportation s data, the long-held impression that Las Vegas is a low-fare market appears to no longer be true. In just the last six years, the average Las Vegas fare has shot up by almost a quarter as capacity was cut by a fifth (see figure 9). FIGURE 9: Average One Way Fare at Las Vegas Source: US DOT Table DB1A; YE3Q09 YE3Q15 As of the year ended third quarter 2015, the latest data available, the average one way Las Vegas fare was $181 (see figure 9). This fare was up 22% from the year ended third quarter 2009 average of $149. The net effect of the fare increase is that it is much more expensive for residents of Laughlin-Bullhead City to travel from their community and it is also much more expensive for inbound tourists to use Las Vegas to access Laughlin-Bullhead City. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

17 As part of the Airport s air service development process, it commissioned a True Market Study, measuring passenger retention and leakage through a collection of tickets, coded by zip code, and collected by the Airline Reporting Corporation (ARC). The Study found that charters provided by Laughlin resorts are able to retain 7.4% of inbound passenger demand a surprising number considering the charters are irregular in virtually all markets (see map 4). Still, 92.6% of total Laughlin-Bullhead City air service demand is handled by McCarran Airport in Las Vegas. MAP 4: Passenger Retention in IFP Catchment Source: Sixel Consulting Group, YE3Q11 When looking at the True Market numbers in detail, the Laughlin-Bullhead City market generates more than 1.6 million origin and destination passengers per year, or an average of 2,207 passengers per day each way (PDEW) (see figure 10). An average of 164 PDEW use charters at Laughlin/Bullhead International Airport while the other 2,043 PDEW use airlines serving McCarran Airport. FIGURE 10: Passenger Retention in Laughlin-Bullhead City Catchment Source: Sixel Consulting Group, YE3Q11 Rank Airport Passengers PDEW Share 1 Laughlin/Bullhead International Airport 119, % 2 McCarran International Airport 1,491,559 2, % Total Bullhead City/Laughlin Area Passengers 1,610,899 2, % FIGURE 11: Point of Origin for Laughlin Catchment Passengers Source: Sixel Consulting Group, YE3Q11 Point Of Origin Passengers PDEW Share Laughlin/Bullhead (Outbound) 141, % Inbound to the Market 1,466,476 2, % Totals 1,607,978 2, % The vast majority of passengers traveling to and from the Laughlin- Bullhead City catchment area are inbound to the market. The Airport s True Market Study found that 91% of passengers were inbound to Laughlin/Bullhead City (see figure 11). Just 9% of passengers were originating their trips in the Laughlin/Bullhead City catchment area. Of the 1.6 million annual passengers traveling to and from Laughlin-Bullhead City an average of 2,010 passengers per day each way (PDEW) are inbound to the market (see figure 11). The Laughlin/Bullhead City area generates an average of 194 PDEW traveling out of the market. This number represents the local demand for air service. It is clear that any airline service at Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

18 Laughlin/Bullhead International Airport will cater to a majority of passengers traveling to the area, rather than a majority based in Laughlin-Bullhead City, itself. Each of Laughlin-Bullhead City s top 25 origin and destination passenger markets generates at least 25 passengers per day each way (PDEW) (see figure 12). Laughlin/Bullhead International Airport retains poorly in virtually all markets, with only periodic charters available. The exception is Minneapolis/St. Paul, where the Airport retains almost a third of all passengers due to a weekly charter program on Sun Country Airlines. FIGURE 12: Top 25 O&D True Passenger Markets in the Laughlin/Bullhead City Catchment Area Source: Sixel Consulting Group, YE3Q11 Laughlin/Bullhead International Airport also has some level of retention in select markets where charters have operated. These include the San Francisco Bay Area; Portland, Oregon; Milwaukee; Bellingham, Washington; Denver; Seattle/Tacoma; Dallas/Ft. Worth; Houston; Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

19 Omaha; Oklahoma City; Sacramento; Salt Lake City; Spokane, Washington; San Antonio; and Des Moines (see figure 12 on previous page). The Airport, obviously, has zero retention in markets where charters were not operated during the study period. It is important to note that Laughlin-Bullhead City s top markets are all over the country. In the top ten, there are five markets in the Midwest, three in the Pacific Northwest, one in California, and one in Colorado (see figure 12 on previous page). Laughlin/Bullhead City has become a destination for people from all over the United States. Now that fares are higher in the region and access more difficult, there is increased confidence that air service will be successful. It is important that any new air service at Laughlin/Bullhead International Airport be able to connect people from all over the country to the destination. Laughlin-Bullhead City s stature as a vacation destination is growing not only in the West, where most visitors have traditionally come from, but also in the Midwest. Five of Laughlin-Bullhead City s top ten markets are in the Midwest, where people are currently flying into Las Vegas and renting cars to drive to their preferred resorts in Laughlin- Bullhead City. The tourism assets in the region recognize this shift and the importance of leveraging visitor spending from destinations farther away. This is one reason so many tourism organizations, resorts, and attractions have made financial pledges in support of this application. Laughlin/Bullhead International Airport was close to landing service under its previous Small Community Air Service Development (SCASD) Grant on no fewer than three occasions, despite the fact that the Airport s previous Grant was awarded just as the US economy entered the Great Recession of Changes in the industry, including regional aircraft retirements and pilot rule changes, caused those opportunities to disappear just before contracts were finalized. Airlines have found demand for service in the market, but the timing for the launch of scheduled air service was not ideal. Now that fares are higher in the region and access more difficult, there is increased confidence that air service will be successful. This Grant is the missing component in the Airport s ability to recruit a carrier to provide targeted hub service. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

20 AIR SERVICE DEVELOPMENT PLAN: LAUGHLIN/BULLHEAD DENVER This Grant proposal differs in scope from Laughlin/Bullhead International Airport s previous Grant award in that the main focus route is between Laughlin/Bullhead City and Denver. The Denver hub would best allow the region to access tourists from the intermountain West and the upper Midwest. These tourists can sustain service, making it affordable for those living in Laughlin- Bullhead City to use their local Airport instead of driving to Las Vegas. Laughlin-Bullhead City ranks as the third largest origin and destination passenger market in the country without non-stop service to Denver. When the Laughlin- Bullhead City True Market Study is meshed with Department of Transportation data for the year ended third quarter 2015, it shows only Richmond and San Juan generate more local Denver passengers without non-stop service than Laughlin-Bullhead City (see figure 13). Laughlin-Bullhead City generates an average of 73.3 passengers per day each way (PDEW) to and from Denver. The Laughlin-Bullhead City Denver local market also has an exceptionally high fare, averaging $263 each way (see figure 13). Denver is just 549 miles from Laughlin- Bullhead City by air and takes less than two hours to fly. Laughlin-Bullhead City generates an average yield of 47.9-cents per mile to and from Denver. That is more than double the Denver average of 22-cents. FIGURE 13: Denver s Top 30 O&D Markets without Non-Stop Service Source: US DOT Table DB1A; YE3Q15 Market Passengers Fare PDEW Coupons Richmond, VA 61,022 $ San Juan, PR 57,977 $ Laughlin-Bullhead City, AZ 55,528 $ Norfolk, VA 52,762 $ Rochester, NY 48,286 $ Lihue, HI 42,395 $ Syracuse, NY 42,196 $ Paris, France 34,286 $ Portland, ME 32,421 $ Burlington, VT 31,491 $ Savannah, GA 29,991 $ Montreal, Canada 27,104 $ Amsterdam, Netherlands 24,705 $ Punta Cana, Dominican Republic 24,053 $ Montego Bay, Jamaica 22,433 $ Rome, Italy 22,405 $ Lima, Peru 19,031 $ Beijing, China 19,024 $ Seoul, Republic of Korea 18,910 $ Wilmington, NC 18,078 $ Charlotte Amalie, VI 18,047 $ Dublin, Ireland 17,808 $ Columbia, SC 17,413 $ Nassau, Bahamas 17,280 $ Jackson/Vicksburg, MS 17,110 $ Corpus Christi, TX 16,138 $ Munich, Germany 15,998 $ Sao Paulo, Brazil 15,758 $ Charlottesville, VA 15,516 $ Fairbanks, AK 15,511 $ New service between Laughlin-Bullhead City and Denver would only be replacing a portion of the capacity that airlines have cut between Las Vegas and Denver. In May of 2007, airlines offered an average of 3,651 daily departing seats from Las Vegas to Denver (see figure 14). By December of 2015 the number of seats offered on the route each day dropped to just 2,793. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

21 The Las Vegas Denver route has lost an average of 858 daily departing seats since the 2007 peak, or 24% of all capacity. FIGURE 14: Daily Departing Seats and Departing Flights, Las Vegas Denver Source: US DOT T100; May 2007 December 2015 At the same time, airlines have made large cuts to the number of frequencies between Las Vegas and Denver. During the May 2007 peak airlines schedule an average of 24.4 flights per day in each direction in the market (see figure 14). By December of 2015 that number had dropped to just The Las Vegas Denver market has lost 27% of its flights, or an average of 6.6 flights per day in each direction. These cuts have made local Denver access more difficult from Laughlin-Bullhead City. FIGURE 15: Daily Departing Seats, Laughlin/Bullhead City Denver Source: US DOT T100; April 2014 December 2015 Laughlin s resorts have also culled Denver charter capacity. Denver typically saw at least two to three charter rotations per month through the better part of the last decade. But in three of the last nine months, Laughlin resorts scheduled no charters to and from Denver (see figure 15). In months where charters do operate, the average capacity between Laughlin-Bullhead City and Denver has dropped from around 750 seats per month to just 370 seats per month. The Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

22 market has lost more than half of its charter capacity in just the last year. This will make it much easier for a carrier operating Laughlin-Bullhead City Denver to pick up passengers who have been forced to use Las Vegas instead of local charters. The large local market size, and the large number of high ranking connect markets available through a Denver hub have made potential Denver Laughlin-Bullhead City service attractive to several airlines. But Laughlin/ Bullhead International Airport has had its best and most productive discussions in the last eight months with United Airlines. The Airport has met with United planners twice in the last year, including a headquarters meeting in Chicago last November. MAP 5: Connectivity on United Airlines, IFP-DEN Source: Sixel Consulting Group Hub Builder Software The United hub at Denver is ideal for connecting Laughlin-Bullhead City to many of its current top 25 markets, including Chicago, Minneapolis/St. Paul, Milwaukee, Dallas/Ft. Worth, Kansas City, Detroit, Houston, Omaha, and Denver, itself (see map 5). In fact, The United hub at Denver would connect Laughlin-Bullhead City to 86 one-stop destinations, representing 1,299 passengers per day each way (PDEW) at an average fare of $155 each way, according to the Airport s True Market Study. While the original goal for the Airport had been a daily, or almost daily, service to Denver with a regional jet, discussions with United changed the strategy. United planners were candid in their thought that service operating three times per week would likely provide Laughlin-Bullhead City Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

23 with better pricing, and better options for connections. This application takes into account the Airline s direct feedback. FIGURE 16: Top 20 O&D Markets over DEN on United Source: Sixel Consulting Group IFP True Market Study Currently, just 7% of passengers traveling to or from the Laughlin-Bullhead City catchment area, that could flow over Denver on United, use the charters in and out of Laughlin/Bullhead International Airport. The other 93% are flying into or out of Las Vegas and driving the rest of the way. In eight of the Laughlin-Bullhead City catchment s top 20 markets that could flow over Denver on United and the Star Alliance, Laughlin/Bullhead International Airport s passenger retention is zero (see figure 16). The highest retention is found in Minneapolis/St. Paul, which is the only market with regular charters. Altogether, Laughlin/Bullhead International Airport loses an average of 1,208 passengers per day each way (PDEW) that could flow over Denver on United to Las Vegas. The sheer number of passengers that are going out of their way, through Las Vegas, to get to Laughlin-Bullhead City gives the Airport confidence that United service can be successful. The service would need to capture less than 3% of current passengers to fill 100% of its available seats. FIGURE 17: One Way Fare in Markets over DEN Source: Sixel Consulting Group IFP Study The average one way fare over the United hub at Denver, to all destinations, is $155, according to the Airport s True Market Study (see figure 17). This is significantly higher than the average that would be anticipated on United, which gives further confidence that passengers can be won over to the new service. On longer routes to the East Coast, fares are significantly higher than the overall average. The one way New York/Newark fare, for example, is $220. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

24 Using this data, the Airport commissioned an economic impact study to determine the value of the new projected service to the community. New visitors using United service are forecast to generate 48,399 new visitor overnights, with the vast majority spending those nights in Laughlin (see figure 18). New inbound travelers are forecast to spend $8.2 million in hotel and gaming revenue, $1.9 million in food and drink revenue, and $939,000 in shopping revenue, with a total new visitor spend of $12 million. This generates a total economic impact to the region of almost $17.5 million. There is a clear economic benefit to scheduled air service at Laughlin-Bullhead International Airport. community s financial support will be returned in long-term economic impact and growth, as the market is opened to more cities throughout the rest of North America. FIGURE 19: Funding Source Overview Source: Laughlin/Bullhead Int l Airport Funding Source Funding Amount SCASD Grant $750,000 Bullhead City $250,000 Local Businesses $178,650 Civic Organizations $86,100 Local Residents $13,400 Non-Local Visitors $1,850 Airport $220,000 Total Funding Amount $1,500,000 The United Airlines would have significant financial risk in launching the route. To help United overcome this barrier to market entry, Laughlin/Bullhead International Airport has developed a community coalition in support of this air service development plan. This coalition has committed hard dollars to match a Grant award (see figure 19). This proposal is matched by $750,000 in cash from various community partners. Additionally, outside of direct cash, community partners have pledged $608,500 in various inkind services, including direct marketing and other advertising. Detail on funding partners can be found in the Public/Private Partners section of this application. FIGURE 18: Economic Impact of IFP Denver Service Source: Sixel Consulting Group, IFP Economic Impact Study The Airport anticipates a total cash project cost of $1,500,000, with 85%, or $1,280,000, being used as a revenue guarantee for the carrier launching service (see figure 20). Of the additional $220,000 in cash funding, $200,000 will be used for marketing of new air service, while $20,000 will be used to cover the cost of meeting with the targeted carriers and negotiating the final revenue guarantee agreement. FIGURE 20: Funding Use Source: Laughlin/Bullhead Int l Airport Project Component Funding Amount Revenue Guarantee $1,280,000 Marketing/Advertising $220,000 Recruitment/Negotiation $20,000 Fee Waivers In Kind Total Project Cost $1,500,000 Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

25 FIGURE 21: Project Timeline Source: Laughlin/Bullhead International Airport Activity/Project Milestone Assuming the Department of Transportation Laughlin/ awards Bullhead International Airport a SCASD Grant by July of 2016, the Airport believes it is far enough along in discussions with United to have service in place by the fall of 2017 (see figure 21). As Laughlin-Bullhead City s peak season is from October through May, service would be timed to begin on this timeline. Estimated Date SCASD Grant Award Announcement July 2016 Executive Grant Agreement with DOT August 2016 Meet with Airlines to Recruit Route Fall 2016 Targeted Announcement Date for Service Spring 2017 Targeted Start Date for Service September 2017 Submit Grant Status Reports to DOT Quarterly Q Q Close Grant July 2019 Laughlin/ Bullhead International Airport would avoid a service launch in the summer, as the heat in the market keeps many visitors away. Should United change its mind regarding serving the Laughlin/Bullhead City market, or should something out of the Airport s control change its strategy, the Airport is prepared to use the Grant on other air service development projects leading to scheduled flights. The Airport has met with more than a dozen airlines in the last year. Among the alternate projects the Airport would consider would be an alternate carrier to Denver, service to Phoenix on American, service to Salt Lake City on Delta, or service to another hub that can provide broad connectivity to both visitors and those living in Laughlin-Bullhead City. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

26 PUBLIC-PRIVATE PARTNERSHIP More than 75 local organizations, businesses, and private citizens have pledged funding for this Small Community Air Service Development Grant (SCASDG) project. partners comes from all sectors of the local economy, and represents the Airport s broad outreach in preparation for this application (see figure 22). This group of partners also represents the main potential users of new, local air service, providing confidence that service will meet with immediate success. This diverse group of FIGURE 22: Public-Private Partners Source: Laughlin/Bullhead International Airport Together, this group of motivated members of the community, including large businesses, cities, tourism agencies, chambers of commerce, and individuals, has developed $750,000 in matching cash and more than $660,000 in-kind donations. Each of members of the Airport s publicprivate partnership is committed to ensuring new air service in Laughlin-Bullhead City is immediately successful. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

27 CONCLUSION The Laughlin-Bullhead City community, including the larger region encompassing Kingman and Lake Havasu, is serious about developing local air service. In the past year, motivated members of the community, including large businesses, cities, tourism agencies, chambers of commerce, and individuals, have developed $750,000 in matching cash and more than $660,000 in-kind donations to support this Small Community Air Service Development (SCASD) Grant application. This outpouring of support underscores the importance of scheduled airline service to the future of the regional economy. To that end, Laughlin/Bullhead International Airport commissioned a study to project the economic impact of its targeted new air service on the region. The study shows that service between Laughlin-Bullhead City and Denver would generate 181 total jobs, almost $4.5 million in new personal income, and a total economic impact of almost $17.5 million in the first year of service. In light of the economic significance of new airline service, Laughlin/Bullhead International Airport seeks a new Small Community Air Service Development (SCASD) Grant to This application includes the largest community match the Airport has ever been able to develop. support its effort to develop Denver service. While the Airport was unable to finalize a contract for air service with its 2008 Grant award, twice the Airport was in talks with Frontier when factors outside both the Airport s and the Airline s planners control caused talks to stall before service launch. Airlines continue to express interest in serving Laughlin/Bullhead International Airport. In the past six months, the Airport has met with planners from its main target, United, at its headquarters in Chicago to discuss Denver service. Planners had positive reactions to the service plan, and expressed the need for risk mitigation before service could be launched. There is clearly demand for scheduled air service in the Laughlin-Bullhead City market. This application includes the largest community match the Airport has ever been able to develop, indicating the strong desire for air service, and the likelihood of success once service begins. Proposal of Laughlin/Bullhead International Airport Bullhead City, Arizona May

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40 July 10, 2015 Brooke Chapman U.S. Department of Transportation 1200 New Jersey Avenue, SE W Washington, DC Dear Director Chapman, It is my pleasure to write this letter of support for the application of the Laughlin/Bullhead International Airport to the Small Community Air Service Development Program for a SCASDP Grant. Economic Development, I am keenly aware of the importan business and tourism industries. The communities of Laughlin, Bullhead City, Fort Mohave, Mohave Valley, and Needles would benefit greatly from scheduled air service. If approved, the potential combination of grant funding, accompanied by a solid match from the local community, would enhance the opportunity for these communities to secure an air service provider through a meaningful expansion of their efforts to attract new service. Thank you for providing me with this opportunity to express my support for the Laughlin/Bullhead International Airport application to the SCASDP. If I may be of further assistance in providing you with additional comment or information please do not hesitate to contact me at With best regards, Mark A. Hutchison Lieutenant Governor State of Nevada 101 N. Carson Street, Suite 2 Carson City, NV Phone: Fax: E. Washington Avenue, Suite 5500 Las Vegas, NV Fax

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