LOS ALAMOS COUNTY 1000 Central Avenue, Suite Los Alamos, NM Phone (505) Fax (505) Website:

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1 LOS ALAMOS COUNTY 1000 Central Avenue, Suite Los Alamos, NM Phone (505) Fax (505) Website: COUNTY COUNCIL Council Chair Geoff Rodgers Council Vice-Chair Kristin Henderson Councilors Frances M. Berting Steven Girrens David lzraelevitz Rick Reiss Pete Sheehey COUNTY ADMINISTRATOR Harry Burgess July 14, 2014 Mr. Kevin Schlemmer Chief, Essential Air Service & Domestic Analysis Division U.S. Department of Transportation Office of Aviation Analysis EAS & Domestic Analysis Division 1200 New Jersey Ave., SE Washington, DC Dear Mr. Schlemmer, Thank you for the opportunity to present Los Alamos County's request to the Secretary of Transportation to receive federal support for commercial air service under Statute 41736, "Air transportation to Non-eligible Places." Los Alamos is at a critical and fragile stage of its economic development, and commercial air service providing efficient access to the Albuquerque Sunport is an essential component of our business development infrastructure. Los Alamos County initiated an agreement with a commercial air service provider approximately 15 months ago and has been seeking funds for its continuance since that time. It is our intention to utilize the funding requested herein to continue to grow this service and reap the rewards of its positive economic impact on the community and the Los Alamos National Laboratory until the service is self-supporting. Background Los Alamos County first received federal funding for commercial air service from the Atomic Energy Commission (AEC) in 1948, nearly a decade before the enactment of the Federal Aviation Act in Over the decades that followed, Los Alamos National Laboratory (LANL) and the AEC (later, the U.S. Department of Energy or DOE) continued to pay for commercial air service in Los Alamos, negating the need for the community to receive EAS designation. For a time in the late 1980s, Los Alamos experienced over 35,000 passengers each year, making it the second busiest airline hub in New Mexico after Albuquerque. Los Alamos never became an EAS community because the federal

2 government was already paying for the service at the time that EAS was offered, and continued to do so until Following the cancellation of air service in 1996, Los Alamos County did not have commercial air service to offer to its citizens, lab-related business travelers, nor tourists. In 2013, Los Alamos County received a federal Small Community Air Service Development Program (SCASDP) grant valued at $272,000 to restart daily airline service. This funding has been matched to date by in County funds ($565,000) and in contributions from the Lab ($15,000). The County contracted with Pacific Wings (dba New Mexico Airlines) to fly three daily flights to and from Albuquerque in a nine-seat Cessna Caravan at an all-inclusive cost of $49 per flight, reducing what was once a two hour driving, parking, and shuttle voyage through congested urban traffic and, at times, inclement weather to a 20 minute door-to-door flight with direct gate access to the only airport in New Mexico designated by U.S. Department of Transportation (DOT) as a "Mediumsized" Air Hub. In May 2014, flight times and frequencies were adjusted in response to user trends and passenger feedback. Today, Los Alamos commercial air service complies with all federal requirements to fund small airport essential air service. Traffic Generation and Marketing Ridership is growing at a steady pace, and the opportunity for passenger growth remains strong. The Los Alamos Airport (LAM) recorded a total of 6,324 passengers between April of 2013 and May of 2014, averaging 486 passengers per month or six people per flight (Attachment A). Only 20% of riders to date have self-identified as traveling on national laboratory business. In 2010, LANL enplaned 21,844 passengers at the Albuquerque Sunport and received another 20,000 official visitors from around the world. Since new service began in April of 2013, ridership has grown over 200% and is fast approaching 700 passenger boardings per month. In 2013, the County contracted with an outside vendor to manage advertising and marketing. In early 2014, the County brought the campaign in-house, initiating a web marketing campaign targeting DOE and national laboratory traveler markets around the country. Concurrently, two strategically timed evening flights were added to create more efficient and economical operations that better meet the needs of business commuters while improving passenger counts-flights that are regularly sold out one week in advance. Two flights were also added to the weekend schedule to accommodate the recreational travel market. Combined, these measures have more than doubled internet traffic to the flylosalamos.com website and increased total traffic to the Los Alamos Airport by 45 percent year over year. An overwhelming majority of passengers that have participated in the two surveys conducted by the County consistently rate New Mexico Airlines high in customer satisfaction. All trends and patterns demonstrate the ridership and untapped demand that will sustain a strong market going forward for commercial air service between Los Alamos and Albuquerque.

3 Revenue Generation In the first 13 months of service, passenger revenue has more than doubled from $10, 153 to $23,655 per month, and the gap funding to sustain the system has shrunk from $141 per passenger to a current (May 2014) rate of $54 per passenger. Over the first 12 months the average gap funding required was $38,561 per month, or $462,732 per year (Attachment B). Although these are positive figures, we anticipate a continuing need to subsidize these flights at some level for the foreseeable future. Cost to the United States Government Los Alamos County is proposing a very cost-effective investment in commercial air service that will greatly benefit the federal government and the community of Los Alamos at a critical economic time. Annual required gap funding, given current trends, is expected to stay below $450,000, moving to below $350,000 in three years or less. Los Alamos County is proposing a cap on the annual federal subsidy at 50% of the gap funding for commercial air service of $250,000. Los Alamos County proposes to leverage these funds with its own monies in order to sustain over $2 million in annual economic activity that these flights will generate in the community. While it is estimated that the funding gap for service may be completely bridged by the end of the decade, there are no guarantees, as noted in the poor ridership numbers for October 2013 when the threatened federal government shutdown and accompanying uncertainty reduced ridership by 15% for a short period. According to the LANL Travel Office, the federal government spends $9 million annually on LANL-related air travel, with only about $60,000 spent so far on Los Alamos-Albuquerque service. Each LANL passenger using Los Alamos air service versus driving to Albuquerque saves the government approximately $25 in travel reimbursements and $52 in hourly productivity per segment, for a total of $77 per passenger segment in direct savings to the federal government over driving, plus personal safety benefits as outlined by laboratory director Charles McMillan in an April 21, 2014 employee memo (Attachment B). The total federal government savings that could be realized if 50% of the LANL air service passengers utilized New Mexico Airlines is $770,000 per year--far greater than the gap funding required for such service even before additional ridership reduced the gap funding requirement. County gap funding requirements per passenger ($54-104) also compare favorably with funding required in most peer communities that are currently covered by Essential Air Service. Therefore, it is logical to conclude that commercial air service gap funding for Los Alamos under Statute is an efficient use of federal funds, and that the proposed subsidy cap ensures that this service remains affordable to the federal government. In addition, service subsidy will help to improve needed access to one of the federal government's most important laboratory and security facilities--lanl. Also important to note are the environmental and economic impacts of commercial air service. According to New Mexico Airlines, the carbon footprint of one flight segment

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