NORTHEAST FLORIDA REGIONAL AIRPORT St. Augustine, Florida

NORTHEAST FLORIDA REGIONAL AIRPORT St. Augustine, Florida Proposal Under the Small Community Air Service Development Program Docket DOT-OST-2011-0119 Funding to Support the Marketing of New Air Service at Northeast Florida Regional Sponsor: The Northeast Florida Regional Airport Edward R. Wuellner, AAE, Executive Director Congressional Code: FL-07 Dun & Bradstreet Number: 14-664-2389 Tax Identification Number (EIN) 59-1163738 August 2, 2011

Section TABLE OF CONTENTS Page Number Introductory Letter of Support 3 Summary Information Appendix C 4 Introduction 6 The Northeast Florida Regional Air Service Market 8 Location, Catchment and Air Service Airports 8 Northeast Florida Historic Air Service 8 Northeast Florida Domestic Average Fares 11 Northeast Florida Carrier Market Share 12 The First Air Service at Northeast Florida Regional Airport 13 Alternative Airports 14 Northeast Florida Air Service Development Efforts 15 Air Service Needs and Deficiencies 17 Northeast Florida Airfares in comparison to other Florida leisure destinations 17 Northeast Florida Historic Average fares 18 Alternative Airports and traffic leakage 20 The Traffic and Economic impact that less-than-daily carrier service can have 21 Strategic Plan for New Air Service 24 A state of the art airport terminal facility 24 Complete and low cost ground handling 25 Local support via a Public Private Partnership 26 Aggressive recruitment of new air service 26 A plan for new air service using grant funding 26 Grant application goals and objectives 27 Grant application Target Audience 27 Implementation timeline 29 Funding plan 30 Performance measurements and financial controls 30 Routes self-sufficiency 31 Examples of market pairs that grand funding would support 32 Legal Sponsor 32 Summary 34 Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 2

INTRODUCTORY LETTER OF SUPPORT July 27, 2011 Ms. Aloha Ley Associate Director Office of Aviation Analysis U.S. Department of Transportation 8 th Floor, Room W86-310 1200 New Jersey Avenue SE, Washington D.C. 20590 Dear Ms. Ley, Reference: Docket DOT-OST-2011-0119 The Northeast Florida Regional Airport has submitted to the Department an application for a 2011 Small Community Air Service Development (SCASD) Grant. The Airport s application is for marketing funding to support new air service at the Northeast Florida Regional Airport. Allegiant Air is considering service at this Airport. We believe the Airport may have potential to be a destination airport in the growing Allegiant Air system. Availability of marketing and promotional funding is critical to the success of new Allegiant Air service. Award of a 2011 SCASD Grant to the Northeast Florida Regional Airport will give the airport additional marketing funds to support new air service and will aid Allegiant Air in its continuing analysis of the potential for the Airport to join the Allegiant system. We urge the Department to give the Northeast Florida Regional Airport application all possible favorable consideration. Please feel free to contact me with any questions, comments, or concerns. Best regards, E. Keith Hansen Manager, Airport Planning Allegiant Air Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 3

SUMMARY INFORMATION APPENDIX C Small Community Air Service Development Program Docket DOT-OST-2011-0119 A. Applicant Information Not a Consortium Community now receives EAS subsidy Interstate Consortium Intrastate Consortium Community previously received a Small Community Grant If previous recipient, date of Grant: Expiration date of Grant: B. Public/Private Partnership Public: 1. Northeast Florida Regional Airport, St. Augustine 2. City of St. Augustine 3. St. Johns County Tourism Development Council Private: 1. Galaxy Aviation 2. Professional Golfers Association (PGA) 3. Ponte Vedra & Beaches Visitors and Convention Bureau 4. St. Johns County Economic Development Council C. Project Proposal Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start-Up Cost Offset First Service Study Secure Additional Service Other (Specify) Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 4

D. Existing Landing Aids at Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other: E. Project Cost 1. Federal amount requested: $ 125,000 2. State cash financial contribution: $ 0 Local cash financial contribution: 3a. Airport cash funds: $ 25,000 3b. Non-Airport cash funds: $ 10,000 3. Total local cash funds: $ 35,000 4. TOTAL CASH FUNDING: $ 160,000 In-Kind Contribution: a. Airport In-Kind contribution: $ 0 b. Other In-Kind contribution: $ 0 5. TOTAL IN-KIND CONTRIBUTION: $ 0 6. TOTAL PROJECT COST: $ 0 F. In-Kind Contributions For funds in lines 4a (airport in-kind contribution) and 4b (other in-kind contribution), please describe the source(s) of fund(s) for each. G. Is Application Subject to Review by State Under Executive Order 12372 Process? This application was made available to the State on. Program is subject to review, but has not been selected by the State. Program is not covered. H. Is Applicant Delinquent on any Federal Debt? No Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 5

INTRODUCTION Northeast Florida stretches from the Georgia border along the Atlantic Coast south to nearly Daytona Beach and some 40 miles inland at any point. The six county area has a population of over 1.4 million and contains well known metro areas such as Jacksonville and St. Augustine. The area s tourism attractions and venues are perhaps less known than those of some other Florida areas but are, nevertheless, popular and annual local tourism visit days are measured in the millions. Currently the region has established air service at Jacksonville International, on the far north side of Jacksonville, and at Daytona Beach, some 15 miles south of the region s southern boundary. The bulk of the region s population and almost its entire tourism related infrastructure is located south of downtown Jacksonville and north of Palm Coast with a center of gravity at St. Augustine. If the airline industry were to come today, for the first time, to Northeast Florida, the first air service would certainly be at Northeast Florida Regional Airport, perfectly located to serve the entire region from one low-cost facility. The Northeast Florida Regional Airport is a unique aviation facility. It is convenient to the major highways of the area and features a well designed and ultra low-cost airline terminal facility. On the field are extensive aviation related industrial facilities that contribute significant rental income to the airport and thus lower the facility-related cost burdens of scheduled air service. The Airport briefly had scheduled air service in 2007 and 2008. SkyBus Airlines, a low cost start-up carrier, began Airbus A-319 flights from Columbus, Ohio, and then added Portsmouth, New Hampshire, and Greenville/Spartanburg, South Carolina. During nine months of service Northeast Florida Regional was a traffic and revenue star in the fledgling SkyBus route system. Over 54,000 enplanements and 108,000 O&D passengers used the Airport during the nine months that SkyBus provided service. But while Northeast Florida Regional was a success for SkyBus, the balance of the route system was not and the carrier ended all operations in late March of 2008. Thus the Airport and its surrounding communities know that air service at Northeast Florida Regional can generate significant traffic and economic benefit. For that reason the Airport and Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 6

its supporters have continued to work to recruit various airlines to consider the enormous potential of this market. The Airport, in cooperation with one of its Fixed Based Operators, has developed a complete and low cost ground handling service package, including above and below wing and fuel-intoplane service. This ground handling service package is available to any qualified airline and the attractive rate structure is long term. The Airport has in place today the infrastructure to handle several hundred thousand annual passengers with airport related costs well below those at Jacksonville or Daytona Beach. For the year 2010 the average domestic air fare at Jacksonville and Daytona Beach was $146, measurably higher than the average fare at West Palm Beach, Sarasota, Tampa, Fort Myers, Fort Lauderdale and Orlando. Northeast Florida competes with those other cities for tourism visitors and tourism dollars. Measurable disparities in the cost of airline travel have a direct effect on the ability of Northeast Florida If the Airline Industry were to first area businesses that depend on tourism to compete for visitors. come today to Northeast Florida, the first air service would certainly As is detailed in this document, the Northeast Florida Regional be at Northeast Florida Regional, Airport has worked hard since 2007 to recruit air service. Several perfectly located to serve the airlines have expressed interest and one low fare carrier has entire region from one low cost written a letter of support for this grant application. The airlines facility. have consistently said, We love the facility and cost structure, how do we market this new airport as a destination to prospective Florida tourists? The Airport and its partners need marketing dollars to aid prospective low fare airlines in effectively marketing the Northeast Florida Regional Airport as a gateway to the magnificent vacation infrastructure around it to Florida visitors. This Grant application requests $125,000 in Department funding matched by $10,000 in local non-airport funds and $25,000 in local Airport funds. The total of $160,000 will give the Airport the final tool it needs to successfully recruit new low fare air service to Northeast Florida Regional. The new service will lower the cost of air travel to Northeast Florida, improve tourist access to the region and thus confer a significant local economic benefit. This modest Grant funding request is entirely consistent with the purpose of the Grant Program and Department funds will enable new low fare service that will have a significant positive local economic impact. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 7

THE NORTHEAST FLORIDA REGIONAL AIRPORT AIR SERVICE MARKET Location, Catchment Population and Air Service Airports Northeast Florida is defined as a region by the area from the Georgia state line along the Atlantic Ocean and extending some forty miles inland and running south to the northern fringe of the Daytona Beach area. The region encompasses the six Florida counties of Nassau, Duval, Clay, St. Johns, Putnam and Flagler and those six counties (the map s gray shaded area) have an estimated population of 1,439,421. The map illustrates that air service in this area is concentrated at the Jacksonville airport, north of Jacksonville, and in the Orlando metro area, well south of the region. The gap between the Jacksonville Airport, north of that metro area, and the Orlando International Airport is significant, with an estimated drive time of 2:51 minutes and a distance of 170 road miles. Inside this gap only limited network carrier service exists at the Daytona Beach Airport. At Sanford there is limited less-than-daily service. The Northeast Florida Regional Airport at St. Augustine, with its low airport costs and convenience to Highway One and Interstate I-95, sits nearly at the center of local population distribution and the region s primary tourism venues and infrastructure. Northeast Florida Current and Historic Air Service The Jacksonville International Airport is the dominant air service airport in Northeast Florida. Jacksonville is served by six airlines and has nonstop air service on 28 routes. Just south of the Northeast Florida region, at Daytona Beach, two network carriers offer service to two connecting hubs. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 8

Jacksonville averages about 90 daily airline departures. Some 20% of seat capacity is provided by network carrier regional jets, compared to only about 4% regional jet operations at Fort Lauderdale, Fort Myers, Orlando and Tampa. The average seats per flight in 2010 was 109. Daytona Beach air service is limited to Delta service to Atlanta and US Airways service to Charlotte. Delta and US Airways combine to offer an average of eight departures per day at Daytona Beach. Average per flight seat capacity at Daytona Beach was 93 in 2010, implying a mix of regional jet and mainline equipment use. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 9

Northeast Florida (Jacksonville and Daytona Beach) regional domestic traffic has declined 15% from the 2007 peak while capacity is down 16% and the average fare is up 6%. Combined Jacksonville & Daytona Beach Traffic, Capacity and Average Fare Seats per Day Each Way Domestic PDEW Domestic Avg Fare 14,000 12,000 10,859 11,356 11,925 12,062 12,938 $145 12,240 $145 10,875 10,811 $150 $145 $140 10,000 8,000 6,000 $125 6,834 7,428 $124 8,158 $126 $139 8,222 $137 8,803 8,266 $133 7,560 7,501 $135 $130 $125 $120 4,000 $115 2,000 $110 $105 0 2003 2004 2005 2006 2007 2008 2009 2010 $100 Measuring over a longer period of time; the region has slightly less capacity in 2010 (10,811 SDEW) than it did in 2003 (10,859 SDEW). Measured over that seven year period regional domestic traffic is up 10% from 6,834 PDEW to 7,501 PDEW and the average domestic fare is up 16% from $125 to $145. Northeast Florida air service is stagnant. The merger of Delta and Northwest, the merger of United and Continental and, finally, the merger of Southwest and AirTran has cost Northeast Florida three airline brands and reduced pricing competition by that number of carriers. The merger of Southwest and AirTran, in particular, reduces the region s roster of low fare carriers to only Southwest and jetblue. While the rest of Florida certainly is experiencing the same merger-related impact, the significance is that Northeast Florida does not have service from any of the various less-thandaily (LTD) carriers, such as Allegiant, Vision, Direct Air or Sun Country. These carriers focus on bringing tourists to Florida and have brought significant capacity to Orlando Sanford, the Tampa Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 10

Bay area via St. Pete, southeast Florida via Punta Gorda and Fort Lauderdale in the past five years. With Vision Airline s new focus city at Fort Walton Beach and continued expansion by all these carriers, it is estimated that in total they will generate 4,000,000 seats in and out of Florida in 2011. Vision s new service at Fort Walton Beach means that Northeast Florida is the only region of the state that does not have air service by at least one less-than-daily carrier. Northeast Florida s 30 Largest Domestic Markets: Year 2010 ATL BWI PHL JFK FLL LGA DFW BOS ORD EWR DCA LAS BNA LAX ORF DEN DTW MSP PIT SFO SEA MDW PHX IND CLT SAN BDL IAH STL CMH 99,170 83,500 78,710 75,120 74,460 72,990 69,850 68,080 67,320 67,150 66,310 63,520 63,420 61,080 143,620 117,330 117,150 110,000 107,570 102,140 256,270 245,730 225,810 190,020 173,060 172,940 163,200 158,670 152,270 150,090 114.4 107.8 102.9 102.0 100.0 95.7 93.3 92.2 92.0 90.8 87.0 86.9 83.7 160.7 160.5 150.7 147.4 139.9 135.8 237.1 236.9 223.6 217.4 208.6 205.6 196.7 260.3 Annual O&D PDEW 309.3 351.1 336.6 0 50,000 100,000 150,000 200,000 250,000 The top thirty domestic market chart reflects the nature of Jacksonville air service. Jacksonville generates 92% of Northeast Florida s current domestic O&D traffic and has 93% of the region s seat capacity (2010). Thus, Jacksonville traffic demand and service patterns will dictate the composition of the current top O&D traffic list. Nineteen of the top 30 O&D markets above have nonstop service from Jacksonville. However, only nine of the top markets have nonstop service from one of the low cost carriers at Jacksonville. Northeast Florida Domestic Average Fares The average domestic one way net fare paid by Northeast Florida passengers in 2010 was $146. For the top thirty domestic markets the average fare was $138 in the same period. This is due to the low cost carriers that provide Northeast Florida service concentrating their service and traffic Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 11

capture in larger city pairs, leaving the bulk of the remaining traffic in smaller city-pairs to network carriers and their typically higher fares. Average Fares in Northeast Florida s 30 Largest O&D Markets: Year 2010 ATL BWI PHL JFK FLL LGA DFW BOS ORD EWR DCA LAS BNA LAX ORF DEN DTW MSP PIT SFO SEA MDW PHX IND CLT SAN BDL IAH STL CMH $116 $109 $124 $122 $104 $133 $150 $124 $158 $158 $174 $158 $119 $172 $114 $144 $142 $163 $116 $177 $177 $118 $152 $116 $177 $182 $133 $180 $146 $114 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Northeast Florida Carrier Market Share Southwest Airlines and Delta Air Lines are the dominant carriers in terms of market share in Northeast Florida. Low cost carriers Southwest/AirTran and jetblue make up only 32% of total domestic market share, with network carriers capturing the balance of the traffic in 2010. Northeast Florida Carrier Share 2010 United Continental, 10% jetblue, 5% American, 8% US Airways, 18% Delta, 32% Southwest/Air Tran, 27% Delta Southwest/AirTran US Airways United/Continental American jetblue Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 12

The First Air Service at Northeast Florida Regional Airport Skybus Airlines began operations from its Columbus, Ohio base in May of 2007. In July of that year the carrier became the first to operate at Northeast Florida Regional Airport. Skybus Monthly Data Summary: UST July 2007 thorough March 2008 Month Number of Daily Flights Total Landings On Off Total Seats Load Factor Jul-07 0.5 14 1,308 1,534 2,842 3,864 73.6% Aug-07 1 31 3,360 3,245 6,605 8,556 77.2% Sep-07 1 30 3,318 3,429 6,747 8,640 78.1% Oct-07 1 30 3,385 3,384 6,769 8,640 78.3% Nov-07 1 30 3,540 3,613 7,153 8,640 82.8% Dec-07 2.5 59 6,340 6,655 12,995 16,992 76.5% Jan-08 3.5 106 9,821 10,395 20,216 30,528 66.2% Feb-08 4 114 10,136 10,381 20,517 32,832 62.5% Mar-08 4 123 12,932 13,339 26,271 35,424 74.2% 537 54,140 55,975 110,115 154,116 71.4% By March of 2008 Skybus was operating four daily departures at Northeast Florida Regional. Northeast Florida service was a tremendous success for Skybus, with an average load factor over the nine months of operation of 74%. Unfortunately, Skybus was ill prepared for the difficult fuel cost and traffic demand environment of 2008 and the carrier shutdown April 5, 2008. Skybus provided service from Northeast Florida Regional to three northern cities: Columbus, Greensboro and Portsmouth. The tremendous traffic volumes the service generated, given an unknown airline, are proof that Northeast Florida Regional will support air service. Columbus Portsmouth Greensboro St. Augustine Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 13

For the third quarter of 2007, the first quarter of SkyBus operations at Northeast Florida Regional Airport, the carrier reported to the DOT 16,210 O&D passengers at $62.30. For the fourth quarter of 2007, the carrier reported 26,917 O&D at $72.93. This DOT traffic data for both quarters matches the enplanement and deplanement data on the previous page. The carrier failed to file DOT traffic reports for first quarter of 2008. Alternative Airports Without SkyBus service visitors to the Northeast Florida region and local residents relay primarily on the Jacksonville, Florida airport, located 14 miles north of downtown Jacksonville and 52 miles north of Northeast Florida Regional or on Daytona Beach, which is 57 miles south of Northeast Florida Regional. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 14

NORTHEAST FLORIDA REGIONAL AIRPORT AIR SERVICE DEVELOPMENT INTRODUCTION Local Air Service Development Efforts The Northeast Florida Regional Airport at St. Augustine has only been active in air service development since 2007, after the tremendous potential of the airport was illustrated by the SkyBus service of 2007 2008. 2007 SkyBus begins service at Northeast Florida Regional in July. Airport assists carrier with ground handling support and works on additional routes that start in 2008. 2008 Developed Presentations and Marketing Material for Pittsburgh ACI Jumpstart Meetings and met with Gulfstream, Spirit, Alaska/Horizon, Southwest and Vision. Follow-up Material Development and Contacts with Jumpstart Meeting participants and had Air Service Development Consultant Meetings with United Airlines and Southwest. On-site Meeting with Allegiant Airlines. 2009 Developed Presentations and Marketing Material for ACI Jumpstart Meetings in Montreal. Met with Republic, Southwest, Spirit, Gulfstream and Pinnacle Airlines at ACI Jumpstart. Air Service Development Consultant Meetings with United Airlines, AirTran and Southwest. Follow-up Material Development and Contacts with Jumpstart Meeting participants. 2010 Developed Presentation and Marketing Materials for Allegiant Airlines. Met with Allegiant Airlines at their corporate headquarters in Las Vegas, NV. Air Service Development Consultant Meetings with United Airlines and Southwest. Developed Presentation and Marketing Materials for Network USA Meetings. Met with AirTran, Spirit, Gulfstream, Southwest and Republic Airlines at Network USA, In Ft. Lauderdale, FL. Follow-up Material Development and Contacts with Network USA participants. Developed Email Marketing Materials for pre-conference contact to all Jumpstart participant airlines. Developed Presentations and Marketing Material for ACI Jumpstart Meetings in San Diego, CA. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 15

Met with Frontier, Southwest, AirTran, and Vision Airlines at ACI Jumpstart. Gold Sponsorship and Display and Booth at ACI Jumpstart Event. Follow-up Material Development and Contacts with Jumpstart Meeting participants. Conference Call with GPT about NE Florida service potential with Vision or ExpressJet. Conference Call with Locair. Developed Presentation Materials for Sky King Airlines. On-site Meeting with Allegiant. 2011 Ongoing conversations with both Allegiant and Direct Air as those carriers continue to evaluate the Northeast Florida Regional Airport and market area. Attendance at the Network Conference in Austin, Texas, in March of 2011. Formal meetings at Network with six carriers: AirTran, Allegiant, Branson Express, Southwest, Vision and ViVaAeroBus. Post Network Conference follow-ups, as appropriate, with each of the six carriers with whom formal meetings took place. DEVELOPMENT EFFORTS AIR SERVICE NEEDS AND DEFICIENCIES IN IDAHO FALLS MPLEMENTATION TIMELINE Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 16

AIR SERVICE NEEDS AND DEFICIENCIES Tourism is a major industry in the Northeast Florida region. The St. Augustine area alone hosts 3.4 million annual overnight visitors per year. Annual regional tourism spending of an estimated $634 million creates and supports over 11,000 local jobs. The coastal area of Northeast Florida (called the First Coast) has more tourism attractions than any other Florida coastal area: Historic sites including Old St. Augustine, the oldest European settlement in North America (1565). Numerous sites that mark the progress of Old St. Augustine from the earliest settlement period to the American Civil Rights movement in the 1960s. The area is home to three PGA golf tour events, the World Golf Hall of Fame, the World Golf Village and fourteen public golf courses. Over 90 marinas and over 10,000 locally based motor and sail boats. Miles of uncrowded beaches and world renowned deep sea or fresh water fishing. To host all these visitors, the St. Augustine area alone has 10,550 total accommodations at 171 facilities. The entire Northeast Florida region has an estimated 177,000 rental units at 2,452 facilities. There is great diversity in the local lodging infrastructure from internationally known resorts such as Ponte Vedra or the Marriott at Sawgrass down to camping and trailer sites. In April of 2011 the average visitor stay in the region was 5.39 days, the ADR was $99.57 and the local occupancy rate was 60.2%. This vast local tourism industry competes for tourism visitors and tourism dollars with other warm weather beach locations and venues in Florida, on the North American continent, and in the Caribbean. But the region competes with a distinct and significant disadvantage; a lack of leisure oriented air service and resulting high average fares that drive some tourism visitors to other destinations. Northeast Florida Airfares in Comparison to other Florida Leisure Destinations The Northeast Florida region has measurably higher domestic airfares than almost all other leisure destination airports in Florida. The region is also the only in Florida (now that Vision Airlines has its focus city in Fort Walton Beach) without the benefit of nonstop less-than-daily air service. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 17

Average Fare 250 Florida Airports Average Fare: 2010 200 150 100 $206 $196 $185 $183 $170 $162 $161 $151 $146 $145 $139 $137 $135 $132 $128 $126 50 $76 $70 $47 0 VPS TLH EYW GNV PNS MIA ECP MLB JAX DAB PBI SRQ TPA RSW FLL MCO SFB PIE PGD Of the eight Florida airports with a higher domestic average fare than in Northeast Florida, only Key West (EYW) and Melbourne (MLB) are primarily leisure destination airports. Of the airports that have a lower average fare than Northeast Florida, many are primarily leisure destinations. Northeast Florida Historic Average Fares Northeast Florida (Jacksonville/Daytona Beach) has had a higher domestic average fare each year 2003 through 2010 in comparison to Orlando, Tampa, Fort Lauderdale and Fort Myers. NE Florida and Major Florida Markets: Average Fare Comparison NE FL FLL MCO RSW TPA $150 $145 $145 $145 $140 $139 $137 $138 $135 $130 $125 $120 $115 $110 $130 $128 $126 $129 $125 $124 $124 $125 $121 $121 $124 $123 $123 $123 $117 $114 $115 $112 $112 $111 $111 $109 $111 $108 $133 $132 $129 $127 $128 $123 $120 $117 $135 $132 $126 $105 $100 2003 2004 2005 2006 2007 2008 2009 2010 Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 18

In recent years northeast Florida has been well above its peer group, as much as $15 and 12% higher than Orlando and Tampa. These average fares paid discrepancies occur despite the presence of low-cost airlines at Jacksonville, including Southwest, AirTran and jetblue. The impact of these much higher average fares on the ability of northeast Florida tourism venues and lodging facilities to compete with other regions of Florida is obvious. Especially in these austere economic times, vacationers count dollars and consumer consciousness about airfare dollars is always high. This average fare discrepancy is even more glaring given that the two northeast Florida airports are closer, being on the north end of Florida, to most of Florida s top domestic markets, especially those in the New England and the northeast U.S. Therefore, from a yield standpoint, northeast Florida travelers are paying between 20% and 30% more per mile than Orlando or Tampa travelers. NE Florida and Major Florida Markets: Yield Comparison NE FL FLL MCO RSW TPA 15 14 13.8 13.6 14.3 14.1 13 13.1 12 11 10 12.5 10.4 10.2 10.1 9.9 9.8 12.3 10.0 12.6 10.2 10.1 9.9 11.4 11.4 11.0 11.0 11.1 10.8 10.6 10.4 12.1 11.7 11.7 11.0 11.3 10.8 10.6 10.2 12.2 11.4 11.1 10.7 9 9.3 9.0 9.3 8 2003 2004 2005 2006 2007 2008 2009 2010 Clearly the yield impact is not just from the higher average fares paid at northeast Florida airports but also reflects simple geography in that northeast Florida is closer to most of the nation s key Florida travel generators than the other major Florida markets. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 19

DOMESTIC TRIP DISTANCE: MAJOR FLORIDA MARKETS FOR 2003-2010 Average Trip Distance Market 2003 2004 2005 2006 2007 2008 2009 2010 Northeast Florida 1,003 1,004 1,002 1,006 1,008 1,011 1,023 1,018 Orlando 1,131 1,126 1,112 1,110 1,102 1,105 1,112 1,107 Tampa 1,087 1,098 1,091 1,091 1,084 1,088 1,097 1,092 Fort Lauderdale 1,207 1,205 1,187 1,193 1,184 1,164 1,174 1,181 Fort Myers 1,205 1,202 1,189 1,185 1,179 1,177 1,176 1,172 The average domestic trip distance chart shows that northeast Florida average passenger trips are between 10% and 20% shorter than those at other a major Florida airports. Alternative Airports & Traffic Leakage Northeast Florida Regional Airport is perfectly positioned, both geographically and from an infrastructure cost standpoint, to draw new low-cost air service to the northeast Florida region. This new service will help mitigate the significantly higher average fares that northeast Florida passengers are paying in comparison to average fares at other major Florida airports. The significant average fare differential between northeast Florida airports and nearby Orlando (106 road miles and 1:44 drive time) certainly would suggest that some travelers, both local residents and inbound tourists, use the Orland airport in lieu of Jacksonville or Daytona Beach. NE FLORIDA vs. MCO: TOP TWENTY MARKETS AVERAGE FARE: 2010 NE Florida Orlando Difference Market Avg Fare Avg Fare Dollars Percent Atlanta $117 $121 ($4) -3.3% Baltimore $109 $103 $6 5.8% Philadelphia $124 $110 $14 12.7% New York JFK $123 $114 $9 7.9% Fort Lauderdale $104 $69 $35 50.7% New York LGA $133 $116 $17 14.7% Dallas $150 $135 $15 11.1% Boston $124 $127 ($3) -2.4% Chicago ORD $158 $131 $27 20.6% Newark $158 $126 $32 25.4% Washington D.C. DCA $174 $114 $60 52.6% Las Vegas $158 $172 ($14) -8.1% Nashville $119 $134 ($15) -11.2% Los Angeles $172 $203 ($31) -15.3% Norfolk $114 $110 $4 3.6% Denver $144 $149 ($5) -3.4% Detroit $142 $100 $42 42.0% Minneapolis $163 $130 $33 25.4% Pittsburgh $116 $107 $9 8.4% San Francisco $177 $208 ($31) -14.9% Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 20

Average Fare In thirteen of northeast Florida s top twenty markets the Orlando average fare paid is lower, in nine of the fifteen markets the percentage lower is double digits. Given the close proximity of Orlando and the low cost of rental cars in Florida, these average fare differentials certainly suggest significant leakage of northeast Florida traffic to Orlando. The Traffic and Economic Impact That Less-Than-Daily Carrier Air Service Can Have In the past eight years Allegiant Air has pioneered the concept of Less-than-Daily (LTD) air service from small and medium sized cities to leisure destinations, first at Las Vegas and now at four Florida destination airports plus Phoenix, Los Angeles, Oakland and Myrtle Beach. Several airlines are mimicking the Allegiant Air concept, including Direct Air, Vision and Sun Country. Even traditional Low-Cost-Carriers such as AirTran and Frontier have some LTD routes to complement their traditional daily service route structures. LTD air service has one core focus: bring tourists from small and medium sized cities to leisure destinations, at low fares and with aggressive sale of ancillary services such as rental cars, hotel rooms and leisure activities. LTD carriers have had a significant impact on the Florida leisure air travel market, bringing dramatically lower fare offerings from many northern cities to the Orlando, Tampa Bay, Fort Myers and Fort Lauderdale areas. Although data is not yet available, it would appear that the new Vision Airlines focus city in Fort Walton Beach will bring the same result to the Florida Panhandle. Domestic Average Fare by Year: Orlando International vs. Sanford 2003-2010 MCO SFB $130 $120 $123 $123 $129 $126 $110 $115 $111 $112 $117 $100 $90 $89 $89 $91 $92 $80 $79 $80 $76 $70 $65 $60 $50 2003 2004 2005 2006 2007 2008 2009 2010 Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 21

Average Fare At Orlando, the 2010 average domestic fare paid at MCO was 66% higher than that paid at Sanford, where several LTD carriers operate. In 2010 SFB carriers captured about 3% of total Orlando domestic traffic. LTD carriers offer nonstop service to 37 cities from Sanford. In the Tampa Bay region the average fare differential is even greater with the 2010 average domestic fare paid at TPA was 93% higher than that paid at St. Petersburg, where LTD carriers operate. St. Petersburg carriers captured about 5% of total PIE/TPA domestic traffic and offer nonstop service to 29 cities. Domestic Average Fare by Year: Tampa International vs. St. Petersburg 2003-2010 TPA PIE $140 $132 $135 $130 $124 $123 $124 $120 $110 $114 $109 $111 $100 $101 $95 $90 $88 $88 $85 $85 $80 $70 $60 2003 2004 2005 2006 2007 2008 2009 2010 $65 $70 In Southwest Florida the Punta Gorda Airport has just, in the past two years, gained LTD carrier service. In both 2009 and 2010 the LTD carriers at Punta Gorda captured about 1% of total Southwest Florida domestic traffic at average fares about 200% lower than at Fort Myers International airport. The Airport has mostly seasonal winter service to six cities. Clearly LTD carriers have a huge impact on air service in Florida markets that draw inbound leisure traffic. Small and medium sized markets in the northern, mid-atlantic and Midwest regions of the country gain significantly lower average fares and nonstop service to Florida. The economic impact of new less-than-daily air service is significant. A twice weekly service with a 150 seat aircraft will generate 208 segments and 31,200 seats per year. At an 85% load factor 26,520 O&D passengers are carried. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 22

THE ECONOMIC IMPACT OF NEW AIR SERVICE One Less-Than-Daily Route Flown Twice a Week Annually Element Metric Remarks or Source Annual Segments 208 52 x 4 Aircraft Seats 150 Annual Seats 31,200 Load Factor 85% Typical for LTD service O&D Passengers 26,520 Round trip passengers 13,260 Percent Inbound Origin 67% Allegiant at Orlando Inbound Visitors 8,884 New Visitor percentage 50% New Visitors 4,442 Average Visitor Stay (days) 5.4 St. Johns County TDC New Visitor Stay (days) 23,987 Average Spend per Visitor Day $110 St. Johns County TDC Total New Visitor Spend $2,638,607 TERNATE PLAN Even with modest assumptions about the percent of inbound origin passengers and using Northeast Florida averages for length of stay and daily spend, one single route flown twice a week brings over 4,400 new visitors to Northeast Florida, over 20,000 visitor days and over $2.6 million in local visitor spending. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 23

STRATEGIC PLAN FOR NEW AIR SERVICE The Northeast Florida Regional Airport believes that the successful recruitment of LTD air service, in the model of Punta Gorda, Sanford or St. Petersburg, will have a huge positive economic impact on tourism dependent businesses in Northeast Florida. The Airport s guiding strategic principals are; Develop a state-of-art airport facility that can offer ultra low costs for airlines, give passengers a pleasant transit experience and that is convenient to all of Northeast Florida. Build a partnership with on-field Ground Handling and Fueling companies and develop a complete and low cost ground handling package, including above and below wing service and low cost fueling service, for use by prospective LTD carriers. Bring together the local tourism industry, via their associations, and reach agreement that potential new LTD air service carriers will be able to reach commercial terms on the sub-sale of Northeast Florida hotel/motel rooms, rental cars and other leisure activities via the carrier s ancillary service offerings. Recruit LTD carriers aggressively, listen to their needs and concerns and respond as possible. Build a significant marketing and advertising fund for use in partnership with LTD carriers to support their market entry and address their number one concern, how to market new LTD air service to Northeast Florida, which has not traditionally had such service. All of the above principals are in place except for the development of a significant marketing and advertising fund for use in partnership with LTD carriers to address their concern about adequate marketing of new Northeast Florida LTD air service. The Airport seeks to put that last principal in place via this Grant application for marketing funding. A State-of-the-Art Airport Terminal Facility Allegiant Air is considered the most efficient LTD carrier in the United States. When Allegiant officials first toured the Northeast Florida Regional Airport terminal facility they stated that this Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 24

was exactly how they would design a facility. This is high praise for an outstanding airport terminal facility. The terminal building is designed for ease of use by both the customer and the airline. The above photo shows the terminal during SkyBus operations in 2007. The building is capable of handing two aircraft at once and several hundred thousand annual O&D passengers. Complete and Low Cost Ground Handling Service The Airport receives significant rental revenue from various aviation related industries on the property. The Airport also will generate parking and rental car fees related to airline passenger through-put. Thus the Airport is able to offer LTD carriers a long term waiver on all airport fees including landing fees, terminal or gate fees, bag claim or common use fees and fuel storage charges. The Airport has teamed with one of its Fixed Base Operators to offer a long term $350 per turn cost for any LTD carrier using typical mainline aircraft such as a 737, MD80 or Airbus A319. This cost includes above and below wing service and in-to-plane fueling charges. For a typical LTD carrier with an 80% load factor on a 150 seat aircraft this is means a total Cost Per Enplaned (CPE) of less than $3. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 25

Local Support via a Public Private Partnership The Airport s government and private sector partners in air service development include; The City of St. Augustine The oldest city in North America is an active supporter of the Northeast Florida Regional Airport. St Johns County Tourism Development Council The Mission Statement of the TDC is to enhance, advertise and promote St. Johns County as a desirable travel destination, encouraging overnight stays and day visits, attracting visitors especially during non-peak periods and encouraging visitor expenditures across all segments of the County s tourism and travel industry. Professional Golfers Association The PGA hosts three tour events annually in the St. Augustine area and is a strong advocate for local air service. The World Golf Hall of Fame is located at the World Golf Village in St. Augustine. It is supported by all the world s leading golf organizations. St. Augustine Ponte Vedra & Beaches Visitors & Convention Bureau (VCB) - The mission of the VCB is to brand and market the destination globally as a premier leisure, convention and business destination; to communicate the area's assets and inherent benefits to consumers, meeting planners, travel trade, media, local community and constituents; and to facilitate the opportunity for partners to promote their individual businesses within that framework. Galaxy Aviation Galaxy is a full service Fixed Based Operator with six locations nationwide. St. Johns County Economic Development Council The Council has 304 members and its mission is to bring new business into the community and to help existing business and industry to prosper. Aggressive Recruitment of New Air Service The earlier section on history of recruiting efforts detailed the many years and many contacts the Airport has made to recruit new air service. Representatives from two LTD carriers have visited the airport and region and one carrier has written a letter of support for this Grant application. A Plan for New Air Service Using Grant Funding Award of Grant funding for marketing and advertising will mean the Airport has all the pieces in place for the recruitment of successful new air service. Key steps in the successful implementation of new LTD air service using Grant funding include: A clear set of goals and objectives Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 26

A defined target audience for grant supported services A detailed implementation timeline A funding plan Performance measurements and Grant related financial controls Self-sufficiency contingency plans Designation of a legal sponsor to oversee the Grant Grant Application Goals and Objectives This Grant document has illustrated that Northeast Florida air service is priced significantly higher than in the Orlando area, the Tampa Bay area, the Fort Myers area and at Fort Lauderdale. Furthermore, the primary tourism areas of Northeast Florida are some distance from the Jacksonville or Daytona Beach Airports. Less-than-daily (LTD) airlines such as Allegiant, Direct Air, Vision and Sun Country are demonstrating on a daily basis the ability to profitably transport tourists to Florida, at Orlando Sanford, St. Petersburg and Punta Gorda. The Northeast Florida Regional Airport, and its local public and private partners, believe that the Airport is the next LTD focus city in Florida. Our goal is simply to recruit and support LTD service from northern tier, mid-atlantic and Midwest cities to the Airport, bringing significant numbers of new tourists and their dollars to the economy of Northeast Florida. We have all the pieces in place to do this, including an ultra low cost airport facility and ground handling program. We need grant funding to address the remaining concern of prospective LTD carriers, that being how to market this new Florida destination airport in small and medium sized cities in competition with the more traditional and already known leisure magnets like Orlando or Fort Myers. Grant Application Target Audience The primary target audience for the Grant funded marketing and promotional efforts will be consumers interested in visiting Florida that reside in the city and region near the airport that will receive nonstop flights to Northeast Florida Regional Airport. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 27

As was explained earlier in this document, one of the hesitations of airlines that the Airport has spoken to is related to consumer perception of gateway airports in Florida and that places like Orlando or Tampa are likely well known in that regard and Northeast Florida Regional at St. Augustine is most likely not known at all. Thus a focused program to promote the new air service in the northern tier or central U.S. city and region that will receive the new Northeast Florida Regional air service is a priority. The Airport will have many allies in this effort, including; The Airline, which has a vested interest in the success of the new service and also will want all marketing and promotional efforts to conform to its brand and advertising protocols. The Tourist Development Council of St. Johns County, which is strongly motivated to nurture low fare air service at Northeast Florida Region, as a successful low fare service at this Airport is a huge boon to county tourism. The resort and lodging entities and the tourism venues of the St. Augustine area, all of which have suffered a loss of business activity due to the recession and are hungry for methods to expand visitor events. While exact marketing and advertising plans cannot be determined until the carrier and route are known, the Airport envisions that a typical new air service to a northern or central U.S. city will use some or all of the following marketing and promotional methods in the origin city; 1) Radio promotions and ticket/hotel package giveaways. 2) Billboards, advertising the destination as much as the airline. 3) Emails and postal mailings to consumers that are identified as previous visitors from zip code and address retention programs at northeast Florida lodgings and leisure venues. 4) Careful coordination with the existing northeast Florida promotional efforts of the TDC, turning those efforts to focus on the region where the new air service is to originate. TDC efforts cross a wide spectrum of media venues including newspaper, internet and radio. Depending on the route and carrier business model the Airport will also market and promote the new air service in the northeast Florida region. To clarify this, if Allegiant is the carrier and the route is twice weekly to Allentown, PA, the Airport is unlikely to commit measureable promotional Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 28

resources to the local northeast Florida market. If, on the other hand, the carrier is Frontier with year round three or four times weekly service to Milwaukee or Kansas City with an extension to Denver, then the Airport may commit measureable promotional resources to the local market, given that Frontier does not serve Jacksonville, operates a network type route system, and is committing significantly more frequency to the market than an Allegiant might. Implementation Timeline Small Community Air Service Development Grant proposals are due to the Department on August 2, 2011. The Department has indicated a tentative timeline for proposal evaluation and grant awards that will announce grant designees in early fourth quarter of 2011. Based on that tentative award timeline the Airport has developed the following timeline for implementing the use of Grant funding in support of new LTD air service at the Northeast Florida Regional Airport. The timeline is tentative and will be driven by the date of Grant Award. The Airport believes that Grant Award will be the final piece of the puzzle and that new LTD service at Northeast Florida Regional Airport will be agreed upon and announced within months of Grant award announcement. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 29

Funding Plan The Airport requests in this Grant document $125,000 in Grant funding for the purpose of supporting the marketing and promotion of new air service at the Northeast Florida Regional Airport. The Grant funding of $125,000 would be supported by $10,000 is local non-airport funding and $25,000 in local Airport cash funding for a total Grant funding of $160,000. Northeast Florida Regional Airport 2011 SCASD Project Cost Detail Line Description Sub Total Total Amount Description 1 Federal amount requested $125,000 2 State cash financial contribution $0 Local cash financial contribution $0 3a Airport cash funds $25,000 $0 Airport marketing funds 3b Non-airport cash funds $10,000 Ponte Vedra & Beaches VCB 3 Total local cash funds (3a + 3b): $35,000 4 TOTAL CASH FUNDING (1 + 2 + 3): $160,000 In-Kind contribution 5a Airport in-kind contribution** $0 5b Other in-kind contribution** $0 5 TOTAL IN-KIND CONTRIBUTION (5a + 5b): $0 6 TOTAL PROJECT COST (4 + 5): $160,000 While we cannot know the exact expenditure rate for Grant funding, we believe that Grant supported marketing efforts will be distributed throughout the year 2012 and 2013, as appropriate for optimum support of new air service. Thus the Airport requests that its Grant have at least a two year term. Performance Measurements and Financial Controls; Monitoring Grant Progress All stakeholders in the Grant implementation, the Airport, its partners, the Airline, the TDC and local lodging and leisure venue entities, will be regularly apprised of the performance of the new air service, in terms of load factor, average fare, revenue, and profitability. To the maximum extent possible, the stakeholders will reference actual market share performance and traffic mix metrics to determine if marketing and promotional efforts are successful. This will include mapping zip codes for origin of traffic and comparison of that mapping to expenditures of Grant marketing and promotional funds. This will be done even if the route is performing well, since it may be performing well despite badly aimed marketing and promotional efforts, and could be doing even better with resource allocation adjustments. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 30

Key milestones along the path of Grant success include: Having a clear understanding from the LTD carrier regarding its cost of operations and breakeven or profit making traffic and revenue targets. Monitoring of carrier advance booking and actual performance reports, not just for load factor volume, but also for average fare and ancillary revenue. Continuous monitoring of carrier operational performance. Less-than-daily air service demands near 100% flight completion performance, for the simple fact that the next flight is not in a few hours but in a few days. Any reliability or on-time performance issues will be addressed with the carrier as soon as they emerge. The Airport and its Executive Director will oversee performance measurement and ensure that Grant funds and local match fund spending is carefully tracked and wisely executed. Route Self-Sufficiency Marketing and promotion alone cannot make a new air service successful, nor be its downfall. However, the Airport and all Grant stakeholders recognize that marketing and promotion are one essential element of a successful new air service. The Airport has a comprehensive airport facility and ground handling package that complements the marketing and promotional efforts this Grant will support. These two key elements, combined with a passionate local commitment to make low fare air service happen at Northeast Florida Regional and a commitment to closely monitor new route performance, suggest that new low fare air service at Northeast Florida Regional will be successful or that midcourse adjustments in strategy and tactics, undertaken as needed, will result in eventual success. The Airport and its local partners understand the need for success and will commit additional marketing and promotional resources, as needed, to ensure that success. While the shutdown of SkyBus in 2008 was not in any way the fault or responsibility of the Airport, that sudden end of a popular air service is still well remembered. The Airport and its local air service development partners have no intention of allowing a repeat of the SkyBus shutdown in late March of 2008. Northeast Florida Regional Airport Small Community Air Service Development Grant Proposal August 2, 2011 31