UNIVERSITY OF ILLINOIS WILLARD AIRPORT CHAMPAIGN/URBANA, ILLINOIS

UNIVERSITY OF ILLINOIS WILLARD AIRPORT CHAMPAIGN/URBANA, ILLINOIS Application Under the Small Community Air Service Development Program Docket DOT-OST-2012-0069 Application for Federal Support for New Air Service via Revenue Guarantees, Advertising and Marketing, and Start-Up Cost Offsets Targeted towards Improved Eastbound Air Service Sponsor: University of Illinois Office of Capital Programs and Real Estate Services Champaign, Illinois Bruce K. Walden, Director Congressional Code: IL-15 Dun & Bradstreet Number: 04-154-4081 Tax Identification Number (EIN): 37-6000511 June 11, 2012

TABLE OF CONTENTS Section Page Number Introductory Letter of Support 3 Summary Information Appendix C 4 Introduction 7 The Central Illinois Air Service Market 8 Current and Historical Service 9 Overview of Passenger Leakage 12 Air Service Development Efforts 15 Air Service Needs and Deficiencies 16 Regional Fare Environment 17 Passenger Leakage Detail 18 Strategic Plan for New Air Service 20 Targeted Route: Champaign/Urbana Washington Dulles 21 Potential Eastbound Passenger Traffic 22 Implementation Timeline 26 Public/Private Partnership 27 Legal Sponsor 28 Conclusion 29 University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 2

INTRODUCTORY LETTER OF SUPPORT University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 3

SUMMARY INFORMATION APPENDIX C Small Community Air Service Development Program Docket DOT-OST-2012-0069 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: Federal Funds Requested: Carrier(s) Service Obtained: Destination(s) Served: B. Public/Private Partnership Public: 1. University of Illinois at Urbana-Champaign 2. City of Champaign 3. City of Urbana Private: 1. Champaign County Economic Development Corporation 2. Champaign County Alliance 3. University of Illinois Chancellor s Office Community Projects Fund University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 4

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) D. Existing Landing Aids at Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other: VOR, GPS, NDB, PAPI, VASI E. Project Cost 1. Federal amount requested: $ 600,000 2. State cash financial contribution: $ 0 Local cash financial contribution: 3a. Airport cash funds: $ 80,000 3b. Non-Airport cash funds: $ 0 3. Total local cash funds: $ 80,000 4. TOTAL CASH FUNDING: $ 680,000 In-Kind Contribution: a. Airport In-Kind contribution: $ 345,007 b. Other In-Kind contribution: $ Various 5. TOTAL IN-KIND CONTRIBUTION: $ 344,997 + Media Match 6. TOTAL PROJECT COST: $ 1,025,007 + In-Kind University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 5

F. In-Kind Contributions For funds in lines 7a (airport in-kind contribution) and 7b (other in-kind contribution), please describe the source(s) of fund(s) for each. Airport In-Kind: Landing Fee Waiver for 12 Months: $34,125 Jetbridge Fee Waiver for 12 Months: $19,344 Common Use Rent Waiver for 12 Months: $212,736 Dedicated Space Rental Waiver for 12 Months: $78,792 Total Airport In-Kind Contribution: $344,997 Community In-Kind: Matching funding for advertising and marketing of service. G. Is Application Subject to Review by State Under Executive Order 12372 Process? This application was made available to the state under the Executive Order 12372 Process for review on. Program is subject to E.O 12372, but has not been selected by the state for review. Program is not covered by E.O 12372. H. Is Applicant Delinquent on any Federal Debt? No University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 6

INTRODUCTION In the last month the University of Illinois Willard Airport completed a new passenger retention and leakage analysis, investing significant time and money in an effort to better understand its own market and how its local catchment area could best be served by the Airport. The analysis has uncovered some startling facts about air service in central Illinois. While it has long been assumed many Champaign/Urbana passengers flew out of Bloomington/Normal and Indianapolis because of low fares, it has been determined that almost half of airline passengers traveling to and from Champaign/Urbana really use Chicago area airports. Only 12% of passengers use Bloomington/Normal, contrary to popular regional beliefs. Perhaps most telling is the fact that just 16% of Champaign/Urbana passengers use their own airport just 16% of Champaign/Urbana passengers use their own airport the biggest reason high fares. Willard Airport. The biggest reason for the poor passenger retention: high fares. Champaign s Willard Airport has the highest average fare of all commercially served airports in Illinois and Indiana, at $294 each way. Champaign/Urbana s average fare is 78% above the regional average, meaning Willard Airport passengers pay a premium averaging $129 one way for the privilege of using the hometown airport. Fares have rapidly increased in the Champaign/Urbana market up 22% in the last three years as airlines have cut Willard Airport capacity. Since the summer of 2009 Willard has lost 44% of its daily departures and 34% of its daily departing seats. It s harder to find seats to and from Willard, especially at peak travel times, while it s also much more expensive to fly from Willard than from other airports in Illinois. Moreover, Willard Airport is served now by just one carrier American Eagle. The Airport, and the University, must address these air service deficiencies. The Airport is seeking a Small Community Air Service Development Grant in support of new eastbound hub access. The target of new service is the United hub at Washington Dulles, as Washington has available capacity for additional flights, and it ranks as Champaign/Urbana s sixth largest origin and destination passenger market, with an average of 51 local passengers per day each way. The Airport has developed a coalition of support and matching funding to make the project a reality. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 7

THE CHAMPAIGN/URBANA AIR SERVICE MARKET Current and Historical Air Service While the University of Illinois Willard Airport has seen its capacity cut by more than a third in the last three years, it still plays a vital role in connecting east central Illinois, and the State s flagship University, to the rest of the world. The Airport s primary catchment area covers many of the communities within an hour s drive (see map 1). The Airport is most likely to capture passengers who live within a half hour s drive, seen in the darkest shade of blue on MAP 1: University of Illinois Willard Airport Catchment Area Source: Sixel Consulting Group, 2010 US Census map 1. This area is home to 184,773 people as of the 2010 US Census. The Airport s extended catchment area reaches out to a 45-minute drive radius, which is home to 245,684 people, and a 60- minute drive radius, which is home to 390,541 people. Willard Airport does not typically pull passengers from outside the 60-minute drive radius, as there are other airports closer to those residents, including Chicago s airports, Bloomington/Normal, Peoria, Decatur, Springfield, and Indianapolis. Nonetheless, in the past when Willard Airport had unique service not offered from other central Illinois airports, it drew from a larger area. It is anticipated that this would be the case if Willard had the only East Coast non-stop service in the region. Champaign/Urbana is down to a single carrier. American Eagle is the only scheduled airline providing service, with six weekday non-stops to Chicago O Hare and one daily non-stop to Dallas/Ft. Worth (see figure 1 on next page). In July of 2010, Willard Airport also had two daily Delta Air Lines non-stops to Detroit, but that service was lost as Delta rationalized its regional network and ended service to many smaller communities throughout the Midwest. The University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 8

FIGURE 1: Service at the University of Illinois Willard Airport July 2010 vs. July 2012; Source: OAG Schedule Data, May 2012 Champaign/Urbana Detroit market had been continually served by Northwest for almost two decades, but it did not fit in with Delta s plans for the Detroit hub. The result of the loss of Delta service is available seat capacity which is down almost 16% from July of 2010 to July of 2012 (see figure 1). The Airport has met with American and communicated frequently with that airline about its capacity needs, resulting in American capacity that is up 14% since July of 2010 but not enough to overcome the loss of all service from Delta. Moreover, with American being the sole carrier in the market they have pricing power that has caused the average fare in the market to increase by almost 20% since Delta left. The summer of 2009 was the last high point for Willard Airport airline capacity. In July of 2009, Willard had an average of 9.5 departing flights per day and an average of 425 daily departing airline seats (see figure 2 on next page). Since that time, airlines serving the Airport have cut flights by an average of 4.2 departures per day, or 44%. Airlines have reduced their available departing seats to just 281 per day as of February 2012, a loss of 144 departing seats per day since summer of 2009, or 34% of total capacity. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 9

FIGURE 2: Flights, Seats and Passengers per Day Each Way, University of Illinois Willard Airport Source: US DOT T100; July 2009 February 2012 The Airport has worked to reverse the decline in available seats and the loss of flight frequency. It has met in person with almost a dozen airlines in the last three years. It has not had success in drawing additional capacity for two reasons: it did not have an adequate handle on its true market, including passengers that leak to other airports; and it does not have the financial support to offer large incentive packages on its own. While the airport in Bloomington/Normal has a property tax to help it keep costs artificially low, Willard Airport has only the support of users fees and a cash-strapped University. As a result of capacity cuts, Willard Airport has seen its passengers decline rapidly through the latter half of the last decade. While passengers have been in decline, fares have been rising rapidly to some of the highest levels in the Midwest, and in the country. Since 2005, the average one way fare from Willard Airport has gone up by $86 each way, or $172 roundtrip an increase of 41% (see figure 3 on next page). University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 10

FIGURE 3: O&D Passengers and Average Fares at the University of Illinois Willard Airport Source: US DOT Table OD1A; Calendar Year 2002 Calendar Year 2011 Rising fares have suppressed passengers, and forced passengers to use other airports. Since peaking in 2005, at an average of almost 347 passengers per day each way, Willard Airport passengers have dropped by 38% (see figure 3). In the last seven years, Willard Airport has lost an average of 131 passengers per day each way. In fact, passengers have continued to decline, year after year, for each of the last seven years. Willard Airport hasn t seen so few passengers in almost two decades. It s not that the Champaign/Urbana region isn t generating as many airline passengers as it used to. Quite the opposite is true. Willard Airport is retaining fewer passengers than it has in the last decade. The Airport s May 2012 leakage and retention study shows the Airport retains just 16.3% of the passengers generated in its immediate catchment area, or an average of 215 passengers per day each way (see figure 4 on next page). The entire Willard Airport catchment area generates an average of 1,318 passengers per day each way, with 83.7% using airports other than their local airport. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 11

It was expected that Champaign/Urbana s leaking passengers most often used Bloomington/Normal s airport or Indianapolis airport. The data shows, however, that the largest portion of Champaign/Urbana passengers drive two and a half hours to Chicago O Hare to access the national air transportation system. Altogether, 32% of Champaign/Urbana passengers, or an average of 422 passengers per day each way, use O Hare (see figure 4). Another 14% use Chicago Midway meaning 44% of all Champaign/Urbana travelers fly in and out of Chicago, FIGURE 4: CMI Catchment Area Passengers by O&D Airport; Source: Sixel Consulting Group CMI True Market Study, CY2011 despite it being farther away than other alternate airports in the region. The data also shows that almost as many Champaign/Urbana passengers drive three hours to St. Louis to catch their flights as those who drive an hour to Bloomington/Normal. While an average of 188 passengers per day each way generated in the Willard Airport catchment area fly out of Bloomington/Normal, almost 156 passengers per day each way drive to St. Louis (see figure 4). Just 59 passengers per day each way, on average, use Indianapolis, despite the fact it s an hour closer to Champaign/Urbana than St. Louis. The numbers are a genuine reflection of why people leak to other airports. Simply put, fares are lower in St. Louis than they are in Indianapolis, so people will drive the extra hour. The same goes for fares at Chicago Midway versus Bloomington/Normal. Champaign/Urbana travelers, in most cases, leak based on fare. The exception is Chicago O Hare, where Champaign/Urbana University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 12

FIGURE 5: Top 25 True O&D Passenger Markets in CMI Catchment Source: Sixel Consulting Group CMI True Market Study, CY2011 passengers actually pay more, on average, than they do at Willard Airport. Passengers appear to leak to O Hare for the wide breadth of non-stop flights, and the wide array of non-stop international destinations. The passenger leakage in the Willard Airport catchment area happens in all origin and destination markets. Willard retains less than 35% of passengers in each of its top 25 passenger markets (see figure 5). In 12 of Willard s top 25 true markets it retains less than 15% of passengers, with especially poor retention to leisure destinations such as Orlando, Las Vegas, Phoenix, and South Florida. To destinations on the East Coast, Willard Airport retains less than 20% of its local catchment area passengers, with more than 28,000 annual New York/Newark passengers flying from other airports and almost 26,000 Washington/Baltimore passengers leaking away from Willard. Even when leaking passengers from the Willard Airport catchment area are taken into account, the overall average fare in the catchment is $247 each way as of calendar year 2011 (see figure 6 on next page). That s $82 each way higher than the Illinois-Indiana average fare of $165 one way a premium of 50% over the region s average fare, even when Champaign/Urbana passengers fly from airports other than Willard. The catchment suffers from high average fares to virtually all destinations, outside of those served by low cost carriers in central Illinois such as Orlando. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 13

Fares from Champaign/ Urbana to east coast cities are among the highest per seat mile, with relatively short stage lengths. For example, the average fare from the Willard Airport catchment area, out of all airports passengers used, to Washington/Baltimore was $183 each way (see figure 6). The average one way fare to New York/Newark was $164 in 2011, while the average fare to Boston was $157 each way. FIGURE 6: Average True One Way Fares in Top CMI Catchment Markets Source: Sixel Consulting Group CMI True Market Study, CY2011 It would be comforting to assume that the air service decline at Willard Airport has bottomed out. It would certainly seem to be the case. But one could have made the same assumption at any point in the last several years, and yet capacity continued to be cut, fares continued to rise, and passengers continued to fall. Now is the time for the University of Illinois to take action to reverse the trend with the help of a Small Community Air Service Development Grant. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 14

AIR SERVICE DEVELOPMENT EFFORTS The University of Illinois Willard Airport has had an active 2011 and 2012 in air service development. Most recently, in the last six weeks, the Airport and its consultant completed a new True Market/Leakage-Retention Study to better identify its air service strengths and weaknesses. This Study will serve as the foundation for a new air service development strategy in the remainder of 2012 and 2013. While the study validated some thoughts about the market including the need for eastbound service to better connect the large number of international travelers with their destinations it also showed some surprising trends. It was not anticipated that Chicago O Hare would be the number one airport of use for Champaign/Urbana travelers. The number of passengers using other central Illinois airports was much lower than expected. Willard s strategy must be to compete on more efficient non-stops over price. FIGURE 7: Willard Airport True Market Study Source: Sixel Consulting Group; May 2012 The Airport also worked on an initiative in fall of 2011 to bring Vision Airlines non-stop Florida service to the market. The Airport invested more than $100,000 in the seasonal service to Punta Gorda, which performed well. The service ended as Vision reallocated the aircraft to cover for the shutdown of DirectAir. The University and the Airport are committed to better serving central Illinois. The Airport makes air service investments where they make sense and now has a targeted goal in securing eastbound non-stop service. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 15

AIR SERVICE NEEDS AND DEFICIENCIES IN CHAMPAIGN/URBANA Willard Airport is a microcosm of the challenges in regional market air service over the last several years. The Airport has seen its service cut to the point it has just one airline. It s the first time since deregulation in 1978 Willard Airport was served by only one carrier. With the loss of competing service, the Airport has had its available airline seats cut by 34% and its departures cut by 44%. While flights and seats have been cut, fares have rapidly increased up 22% in just the last three years. In 2011, Willard Airport has the highest average fare of all commercially served airports in Illinois, Indiana, and Wisconsin. The average one way fare at Willard was $294 one of the highest one way fares in the country for the period (see figure 8). Willard s fare was 78% higher than the regional average fare of $165 each way or an average of $129 more per one way trip. Willard s fare was also 21% higher than the fare of the next closest airport on the list the Evansville Regional Airport which was a Small Community Air Service Development Grant awardee in 2011. FIGURE 8: Average One Way Fares in IL, WI, and IN Source: US DOT OD1A; Calendar Year 2011 Among competing airports, Willard Airport has, by far, the highest average fares which aren t really competitive at all. Willard s average fare is 66% higher than the fare at Chicago O Hare its number one airport for passenger leakage. Willard s fare is 110% higher than the fare at Chicago Midway, which has low cost service provided, primarily, by Southwest Airlines. While the average one way fare at Bloomington/Normal is $155 each way, the fare at CMI is $294 a $139 one way premium to use Champaign/Urbana s airport (see figure 8). University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 16

FIGURE 9: Fare by Airport for CMI Catchment Passengers Source: Sixel Consulting Group CMI True Market Study; May 2012 The Airport s True Market Study was able to determine the average fare paid by travelers to and from the Champaign/Urbana catchment area. Including passengers that leak to other airports, the average fare paid to and from the local catchment area is $247 one way still higher than any average fare paid in the region (see figure 9). Passengers that fly out of Willard pay $294 each way on average, while passengers that fly out of Central Illinois Regional Airport in Bloomington pay $111 less one way or 38% less than the fare at Willard. The one anomaly in the Champaign/Urbana True Market fare data is the fact that local catchment area passengers actually pay more to fly out of Chicago O Hare than they pay to fly out of Willard. The average one way fare paid by Willard catchment area travelers who fly in and out of O Hare was $320 in 2011, which is $26 more each way than the Willard fare (see figure 9). This reflects the fact that those who leak to O Hare tend to be on longer stage length flights, with many flying internationally due to improved non-stop and one-stop flight options. This illustrates the need for better long haul and international connectivity at Willard, and the need for eastbound service that can connect to European destinations. The fare disparities, along with the lack of sufficiently competitive flight options, force the majority of Willard Airport catchment area passengers to use other airports. Willard Airport retains just 16% of its local catchment area passengers as of calendar year 2011. In its top 10 origin and destination passenger markets, Willard retains no more than 32% of passengers to any market, while in its top 20 markets it retains no more than 35% of passengers (see figure 10 on next page). Boston has the best retention of Willard s top markets, with almost 35%. The worst University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 17

retention of passengers is in the Champaign/Urbana Orlando market where less than 3% use their local airport. Airports in Chicago capture between 30% and 40% of Champaign/Urbana passengers to top markets, while Bloomington/Normal and St. Louis capture the rest. FIGURE 10: CMI Catchment Area True Airport Market Share in Top 20 Markets Source: Sixel Consulting Group CMI True Market Study; May 2012 Champaign/Urbana passengers are pushed to other airports, in part, due to the lack of available seats at Willard Airport. Champaign/Urbana ranks as one of the most underserved markets in the Midwest. As of calendar year 2011, Champaign/Urbana had just 0.48 available departing airline seats per capita of its Metropolitan Statistical Area (MSA) (see figure 11). That FIGURE 11: Available Seats per Capita in Illinois Markets Source: US DOT T100, 2010 US Census; CY2011 number was down from 0.57 seats per capita in 2010 a loss of 16% of seats per capita. With less than one half of one departing seat per resident per year, the Champaign/Urbana MSA had fewer available departing seats than both Peoria and Bloomington/Normal, along with University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 18

Moline/Quad Cities. The central Illinois average number of available departing airline seats per capita was 0.92 in 2011. Champaign/Urbana s available departing seats per capita was just 48% of that average. The same can be said about enplaned passengers per capita. Champaign/Urbana lags behind all but two other central Illinois cities as of calendar year 2011 (see figure 12). Willard Airport saw just 0.35 passengers per resident of the Champaign/Urbana MSA 79% fewer passengers per capita than the nearest airport Bloomington/Normal. The central Illinois average number of passengers per capita was 0.70 in 2011 exactly double the average in Champaign/Urbana s MSA. FIGURE 12: Passengers per Capita in Illinois Markets Source: US DOT T100, 2010 US Census; CY2011 These indicators illustrate how the University of Illinois Willard Airport is relatively underserved when compared to corollary cities in its own region. The lack of available seat capacity drives 84% of the market s passengers to other airports, where they find more extensive flight options, more carrier choice, and lower fares. The Airport is working diligently to reverse this trend this Grant application is just one the efforts the Airport is making to improve service. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 19

STRATEGIC PLAN FOR NEW AIR SERVICE In the mid-1990s Willard Airport had non-stop service to five hubs on four airline networks. By the mid-2000s the Airport had two airlines serving just three hubs. And as we head into the 2010 decade, the Airport is down to just one airline with service to two hubs. While westbound connectivity is decent, with service through Dallas/Ft. Worth on American, and Midwest connectivity is solid with service through Chicago O Hare on American, there is little to no eastbound connectivity. Moreover, the Champaign/Urbana market is saddled with some of the highest fares in the country and the highest average fare in the Midwest. Capacity cuts and high fares have forced many passengers to use other airports. Many have been priced out of flying from their hometown. An analysis of the data from the Airport s recently completed True Market Study shows the biggest gap in service is to the east and the best hub/airline combination for covering that service gap is the United hub at Washington Dulles Airport. MAP 2: One-Stop Connections over Washington Dulles on United Source: Sixel Consulting Group Hub Builder; May 2012 The service would provide Champaign/Urbana with its first ever nonstop flight to the Washington, DC area, along with one-stop connections to 69 cities, two-thirds of which require a backtrack connection with current CMI service (see map 2). University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 20

The Champaign/Urbana True Market currently produces 661 origin and destination passengers per day each way to destinations that naturally connect over the United Airlines/Star Alliance Washington Dulles hub, not counting any passengers that might use the service from the other central Illinois catchment areas. As of calendar year 2011, the CMI True Market Study showed that Champaign/Urbana generated 482,530 total origin and destination passengers that would flow over Washington Dulles on United. Of these passengers, just 17.5% use Willard Airport, with 82.5% flying from other airports representing 543 passengers per day each way who leak to other airports. FIGURE 13: O&D Passengers and Average Fares between the CMI Catchment and Washington-Baltimore Source: Sixel Consulting Group CMI True Market Study; CY2002 CY2011; Includes IAD, DCA, and BWI The Willard Airport catchment area has generated as many as 82 passengers per day each way to and from Washington-Baltimore. The market currently generates a total of 51 passengers per day each way to and from the DC area, but just 31% of those passengers use Willard Airport (see figure 13). Since 2004, total Washington-Baltimore passengers from the Champaign/Urbana catchment area have declined by 37%, or an average of 30 passengers per day each way. During the same period, the average one way fare between Champaign/Urbana and the DC area is up 48%, or an average of $68 each way, to an average of $210 one way or $420 roundtrip. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 21

Beyond local Washington-Baltimore traffic, the United hub at Dulles has potential to capture large portions of traffic in 69 of Champaign/Urbana s largest origin and destination passenger markets. The Washington Dulles hub is especially well positioned to help Willard Airport retain its own catchment area passengers particularly the ones that currently drive to Chicago area airports for service to the East Coast and international destinations. FIGURE 14: Top 20 O&D Passenger Markets over IAD on United Source: Sixel Consulting Group Hub Builder; CY2011 Altogether, to destinations served by United over Dulles, 82.5% of current passengers generated in the Champaign/ Urbana catchment area fly out of airports other than Willard Airport. The top potential market over Dulles on United is Orlando, on trips to which less than 3% of Willard catchment Airport area passengers currently use Willard. Champaign/ Urbana generates 85.5 passengers per day each way to the Orlando market alone, as of 2011 (see figure 14). On the East Coast, Dulles would best connect central Illinois to markets such as New York/Newark, to which the CMI catchment generates an average of 57 passengers per day each way; Boston, to which the CMI catchment generates an average of 28 passengers per day each way; and London, England, to which the CMI catchment generates an average of almost 13 passengers per day each way. In all of these markets current CMI passenger retention is less than 35% - meaning two thirds of passengers generated in Champaign/Urbana that are traveling to these markets fly from airports other than Willard. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 22

The true average fare in the Champaign/Urbana catchment area to destinations over the United hub at Washington Dulles is $219 one way as of 2011 (see figure 15). This true average includes all Willard Airport catchment area passengers to and from all the airports they use. It is not exclusive to Willard Airport, itself, but it is exclusive to the catchment. FIGURE 15: Average Fares at Top O&D Markets over IAD on United Source: Sixel Consulting Group Hub Builder; CY2011 The Champaign/Urbana Washington-Baltimore fare is $183 one way, as of 2011 (see figure 15). That works out to an average of 36 cents per mile, on a route of 506 nautical miles. The overall average fare per seat mile in the US hovers between 17 and 20 cents the CMI Washington-Baltimore fare runs at a roughly 80% premium over the national average in 2011. A third of Champaign/Urbana catchment area passengers that would flow to destinations over Washington Dulles on United currently drive to Chicago O Hare to access flights. Another 19% use Bloomington/Normal to the same destinations. Just 17.5% of passengers from the catchment use Willard Airport. The poor passenger retention is especially pronounced in markets such as Orlando, where just 2.6% of CMI catchment area passengers are retained; South Florida, where just 8.4% of CMI catchment area passengers are retained; Atlanta, where just 5.3% of CMI catchment area passengers are retained; and Richmond, where just 6.6% of CMI catchment area passengers are retained (see figure 16 on next page). University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 23

FIGURE 16: CMI Catchment Area True Airport Market Share in Top 20 Markets over IAD on United Source: Sixel Consulting Group CMI True Market Study; May 2012 The Airport proposes two daily flights on the Willard Airport Washington Dulles route in each direction. The route between Champaign/Urbana and Washington Dulles would cover 506 nautical miles in a flight time of one hour and 20 minutes, on average, assuming an average groundspeed of 400 knots on an Embraer ERJ145 aircraft seating 50 passengers in an alleconomy layout (see figure 17). FIGURE 17: Proposed Schedule, Champaign/Urbana Washington Dulles Origin Destination Departs Arrives Block Time Equipment CMI IAD 6:15am 9:00am 1:45 ERJ IAD CMI 11:45am 12:30pm 1:45 ERJ CMI IAD 1:00pm 3:45pm 1:45 ERJ IAD CMI 6:15pm 7:00pm 1:45 ERJ The proposed schedule is designed for ease of network integration into the Washington Dulles hub, ideal business connectivity to East Coast destinations for Champaign/Urbana business travelers allowing for same day business trips to many destinations in the mid-atlantic and the Northeast (see figure 17). An aircraft would overnight at Champaign/Urbana, departing early University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 24

enough to hit the first departing bank of the morning at Dulles on United. The schedule has a late morning return to Champaign/Urbana, which would turn around in time to hit the afternoon/evening international bank at Dulles. The last Dulles - Champaign/Urbana flight of the day would leave with connections from most inbound international markets. This schedule would achieve two goals: providing the best possible connectivity to East Coast destinations, and providing excellent connectivity to international destinations. The University of Illinois Willard Airport proposes to use a combination of locally raised funding in conjunction with federal Small Community Air Service Development Grant funding in support of the addition of a new eastbound hub. Eastbound service is essential in Champaign/Urbana, and in all of central Illinois, after Willard Airport lost Delta service to Detroit. The loss of these flights left the market with no easy eastbound access. It must also be noted, there is no East Coast service on any airline from any central Illinois airport. Willard Airport seeks a Small Community Air Service Development Grant, in the amount of $600,000, to help There is no east coast service on any airline from any central Illinois airport. mitigate United s initial monetary risk in serving the Champaign/Urbana Washington Dulles route. The University of Illinois Willard Airport proposes that a relatively small portion of the cost of starting the new service be supported up front with federal funds from the Small Community Air Service Development Program. Of the total project cost of $680,000, $50,000 will be used for marketing and advertising projects. The federal share of the project will be $600,000, all of which will be used for the airline revenue guarantee. The federal revenue guarantee share will be matched by $30,000 in local revenue guarantee money and $50,000 in local marketing money. Another $345,000 has been committed by the Airport and the University to reduce United s initial start-up cost by offering full terminal fee waivers and landing fee credits. Including in-kind, the total package of incentives available for new eastbound service will total almost $1.03 million. The Airport projects the new flights will be profitable within 12 months. The proposed implementation timeline for the project assumes the Department of Transportation will award Small Community Grant Funding in September 2012 (see figure 18). Once the award is announced, the University of Illinois Willard Airport will conduct airline meeting(s) to secure United Express service. Based on airline planning lead times and the need for advance bookings, we assume the service would not be able to begin until at least June of 2013. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 25

The first three milestones on the Airport's timeline are to execute the grant agreement with the Department of Transportation, meet with United and/or United Express carriers to negotiate for service, and sign the minimum revenue guarantee agreement with the appropriate airline partner (see figure 18). Once service is announced and schedules are published, the Airport would begin marketing the new route and working with the new carrier to monitor advance bookings. The Airport will continue its marketing program and continue to work with the new carrier to monitor the route once service begins. The Airport would submit grant status reports on a quarterly basis to the Department throughout the proposed two year term of the minimum revenue guarantee. FIGURE 18: Grant Implementation Timeline Source: University of Illinois Willard Airport Activity/Project Milestone Estimated Date SCASD Grant Award Announcement September 2012 Executive Grant Agreement with DOT October 2012 Meet With Prospective Airlines Oct/Nov 2012 Negotiate Minimum Revenue Guarantee (MRG) With Airline Jan - Mar 2013 Announce Service March 2013 Publish Schedule March 2013 Begin Marketing of New Route March 2013 Monitor Advance Bookings March - June 2013 Service Launch June 2013 MRG Available for Service June 2013 - October 2015 Monitor Route Performance June 2013 - October 2015 Submit Grant Status Reports to DOT Quarterly Q4 2012 - Q4 2015 Close Grant October 2015 While the estimated dates are targets, it is possible service could be secured and launched on a more aggressive timeline once Grant funding is awarded. It is also possible that new service could slip to 2014 should an airline require additional risk mitigation, beyond that included in this proposal, from the community. If, for some unforeseen reason, service is not commenced within one year after Grant award by United or a United Express carrier, the University of Illinois Willard Airport proposes to use federal grant money awarded under the Small Community Air Service Development Program for additional service on another airline to a market east of Champaign/Urbana. Other options include service to Washington National on US Airways Express, service to Philadelphia on US Airways Express, service to Charlotte on US Airways Express, service to Atlanta on Delta, service to Detroit on Delta, or service to Cleveland on United Express. Should none of these options become workable, the Airport will continue its discussions with all other carriers that can provide additional seats to a hub not currently served. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 26

PUBLIC/PRIVATE PARTNERSHIP The Airport has also developed an air service development partnership program, reaching out to businesses and community leaders. The Cities of Champaign and Urbana, the University of Illinois, and Willard Airport will all work together on this air service development project. Other local partners will be working with the Airport to promote and market the new service. The Airport will manage and coordinate the marketing program. Partners in the program are listed below, including their role in the effort to retain current air service and recruit additional air service. Champaign County Economic Development Corporation The Champaign County Economic Development Corporation is a public-private partnership dedicated to fostering a cooperative, county-wide approach to economic development. The organization coordinates with a number of other key organizations in the area to promote an environment in which business thrives. Champaign County Alliance The Champaign County Alliance is a service organization for the Champaign County Chamber of Commerce, the Champaign County Economic Development Corporation (EDC) and the Champaign County Convention and Visitors Bureau (CVB). The Alliance is made up of a board of directors with representation from the Chamber, the EDC and the CVB, plus the top investors (collectively) in the three organizations. These three top investors are the cities of Champaign and Urbana and the University of Illinois. University of Illinois at Urbana-Champaign The University of Illinois at Urbana Champaign is a public research university located in Urbana and Champaign. 2009 enrollment was 31,209 undergraduate and 10,701 graduate students. UIUC is the oldest, largest, and most prestigious campus in the University of Illinois system. The University of Illinois Urbana-Champaign is the second oldest public university in the state, second to Illinois State University. The university has 17 colleges and instructional units offering more than 150 programs of study. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 27

LEGAL SPONSOR As the owner and operator of Willard Airport, the University of Illinois at Urbana-Champaign is the legal sponsor responsible for administering the program. Champaign is a government entity. The University of Illinois at Urbana- University of Illinois Office of Capital Programs and Real Estate Services 807 South Wright Street, Suite 340, MC-309 Champaign, Illinois 61820 Bruce K. Walden, Director Phone: 217-244-8496 Fax: 217-244-8802 bwalden@uillinois.edu University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 28

CONCLUSIONS In the last 15 years, the University of Illinois Willard Airport has witnessed the departure of four airlines and the cancellation of service on seven routes. Today, the Airport has just one carrier offering service, despite a catchment that serves more than 390,000 people, and the State of Illinois flagship public university with an enrollment of more than 50,000 students. Current service at Willard Airport is not adequate for the catchment area, as proven by the Airport s new leakage study which shows almost 84% of catchment area passengers drive to other airports. It would be comforting to assume that the air service decline at Willard Airport has bottomed out. But one could have made the same assumption at any point in the last several years, and yet capacity continued to be cut, fares continued to rise, and passengers continued to fall. Now is the time for the University of Illinois to take action to reverse the trend with the help of a Small Community Air Service Development Current service at Willard Airport is not adequate for the catchment area, as proven by the Airport s new leakage study Grant. The University and the Airport seek great potential for the success of new air service to an eastbound hub. The Airport s True Market Study shows the best positioned hub for Champaign/Urbana travelers is the United operation at Washington Dulles. That hub has the potential to access an average of 661 passengers per day each way to and from the Willard Airport catchment area at an average fare of $219 each way. Of those 661 current passengers per day each way that would flow over Dulles on United 82.5% currently leak to airports other than Willard an average of 543 leaked passengers per day each way that could be recovered. With fuel costs rising to near all-time highs the Airport understands it will not be able to provide an incentive package for new service on its own. While it has developed a strong set of matching funds, it must have the support of the Small Community Air Service Development Program for the project described in this application to come to fruition. The Airport believes this federal investment in the Champaign/Urbana market will provide for better connectivity for east central Illinois travelers, lower fares throughout central Illinois, and increased access to markets for companies doing business in the region. University of Illinois Willard Airport Small Community Air Service Development Grant Proposal June 11, 2012 29