Application Under the Small Community Air Service Development Program, Docket DOT- OST-2012-0069 by the Metropolitan Airport Authority of Peoria for the General Wayne A. Downing- Peoria International Airport DOCKET DOT-OST-2012-0069 Duns 049139736 Illinois 18th Congressional District Prepared June, 2012
TABLE OF CONTENTS Section 1 Executive Summary Page 3 Section 2 PIA Background Page 4 Section 3 Immediate Air Service Issues Page 11 Section 4 Proposed SCASD Program For PIA Page 14 Section 5 Summary Information Sheet Appendix A PIA SCASDP Application Page 2
EXECUTIVE SUMMARY Peoria and its Central Illinois service area have been adversely affected by changes in the airline industry over the past few years. Analysis of origin and destination data for the Central Illinois and Peoria market areas reveals significant leakage to other airports from the Peoria market area. As the largest city in Central Illinois, Peoria is a critical and vital air transportation link for Central Illinois. More than 1.6 million people live within the service area of the General Wayne A. Downing Peoria International Airport. The service area of the Airport encompasses a radius of 75 miles. Peoria's core MSA population is over 379,000 within 25 miles of the General Wayne A. Downing Peoria International Airport. The Metropolitan Airport Authority of Peoria (MAAP), in cooperation with the Peoria Area and Pekin, IL Chambers of Commerce, are beginning efforts to extensively market the General Wayne A. Downing Peoria International Airport with two goals in mind: first to maintain the service levels currently enjoyed in the community, and second, to identify gaps in air service that need to be filled to fully serve the economic development and transportation needs of the service area. In order to meet these goals, MAAP and the two Chambers have embarked on a project to work with area businesses to more closely identify their existing travel patterns and future needs. A detailed air service study is needed to carry this effort beyond the memberships of the two Chambers and beyond the two communities directly involved. MAAP is requesting $350,000 to carry out this study, which will be matched by $100,000 of MAAP funds as well as an as-yet to be determined in-kind match of staff time of MAAP and the two chambers. PIA SCASDP Application Page 3
GENERAL WAYNE A. DOWNING PEORIA INTERNATIONAL AIRPORT BACKGROUND The General Wayne A. Downing Peoria International Airport is a Non-Hub Airport which carried 513,573 total passengers in 2011 (258,425 enplaned passengers and 255,148 deplaned passengers). The Peoria MSA is home to the world headquarters of Caterpillar, Maui Jim Sunglasses, RLI Insurance and many other important economic interests. Peoria s economy is diversifying and includes gains in the medical, retail, finance, and other industries. MAAP embarked on a process to improve the airline terminal infrastructure in 2005. This process resulted in the construction of a new terminal building which opened in April, 2011. The old terminal is being partially demolished and converted into a temporary stand-alone Air Traffic Control Tower while we pursue funding for a new replacement tower. In addition, the Airport Authority is working aggressively on retaining and improving air service for the community. PIA Current Schedule Average Airline Destinations Frequencies Aircraft Seats Allegiant Las Vegas, NV 4 per week MD 80 150/166 Allegiant Tampa St. Petersburg, FL 3 per week MD 80 150/166 Allegiant Phoenix Mesa, AZ 2 per week MD 80 150/166 Allegiant Punta Gorda Ft. Myers, FL 2 per week MD 80 150/166 American Chicago ORD, IL 4 daily Embraer RJ series 50/44 American Dallas Ft. Worth, TX 3 daily Embraer RJ series 50/44 Delta Atlanta, GA 3 daily CRJ 200 50 Delta Detroit DTW, MI 4 daily CRJ 200 50 Delta Minneapolis St. Paul, MN 1 daily CRJ 200 50 United Chicago ORD, IL 4 daily CRJ 200 50 United Denver, CO 2 daily CRJ 200 50 For more than 75 years, Caterpillar Inc. has been building the world's infrastructure and, in partnership with its worldwide dealer network, is driving positive and sustainable change on every continent. Caterpillar is a technology leader and the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. A majority of all Caterpillar sales are generated from international business. Caterpillar experienced a pull-back due to the recession at the end of 2008, which impacted travel until late in 2009. Cat s travel returned to normal levels in 2010, and has increased again in 2011 and 2012. PIA SCASDP Application Page 4
600,000 500,000 400,000 300,000 200,000 100,000 0 PIA Total Passengers 600,000 PIA Total Passengers 500,000 400,000 300,000 200,000 100,000 0 200020012002200320042005200620072008200920102011 Despite Peoria's strong industrial and commerce base, Peoria has struggled for years to compete with neighboring regions to provide convenient and affordable access to the national air transportation system. In order for Peoria, its economy, trade, commerce and tourism to compete globally, it is essential that the General Wayne A. Downing Peoria International Airport offer air service that competes in terms of access, price, and reliability with other available alternatives within its region. Peoria's limited access to the national transportation system (specifically to the West, Northeast, and the nation s capital) impacts all communities in its service area. PIA SCASDP Application Page 5
PIA Service Area The impact is a negative economic development impact and a higher cost of securing air travel due to a high degree of canceled and delayed flights via one of the Airport's key hubs at Chicago O'Hare. The General Wayne A. Downing Peoria International Airport is the most convenient gateway for businesses and travelers traveling to and from the Central Illinois region. This limited access weighs heavily in the proliferation of the current negative impact Peoria's air service has on economic development. It is the goal of the Metropolitan Airport Authority of Peoria to utilize the Small Community Air Service Grant program in conjunction with its community partners to secure additional air service. PIA SCASDP Application Page 6
PIA Current Route Map The proposal seeks to improve air service to and from the Peoria and Central Illinois region by funding a market analysis study to determine what the roadblocks are to obtaining new service. In addition, this study will identify the hubs and flights that would stand the best chance of supporting service over the long term, and which would not harm the existing service currently enjoyed by the community. One key item in this study is to quantify the leakage from the Peoria market and identify to which airports this leakage is occurring. Leaked passengers pose the greatest potential for sustaining new service. PIA SCASDP Application Page 7
CURRENT CHALLENGES TO ACCESSING THE NATIONAL AIR TRANSPORTATION SYSTEM Most of Peoria's service is to the immediate North and South and accesses relatively congested hubs. GREATER PEORIA SERVICE AREA POPULATION Communities within Peoria's Service Area MSA Population Peoria 377,000 Champaign -Urbana 217,320 Springfield 204,468 Bloomington-Normal 156,879 Decatur 111,175 Galesburg 72,737 Pontiac 39,208 Canton 37,658 Lincoln 30,717 PEORIA'S CURRENT AIR SERVICE PIA retains the greatest share of passengers located in and immediately surrounding the city of Peoria (referred to as Primary Catchment). These passengers are considered the core traffic for PIA. This is an important area as it makes up 79% of the total catchment's booking activity. In 2008, leakage from PIA was estimated to be 51.5% to competing airports (21% to Chicago Airports), mainly to ORD. Currently, PIA generates about 678 passengers daily each way. A total of 623 (91.9%) of these are domestic passengers, and 55 (8.1%) are international, a significantly larger proportion than other small-hub or non-hub airports in the state. The number that is not known is the proportion of boardings from the Peoria region that are taking place at other airports, including those nearby as well as directly to major hubs. Legacy carriers such as AA, DL, and UA are likely to consider continuing to reduce system capacity. This could affect PIA. As recently as 2008, PIA enjoyed service from five airline brands. Due to airline mergers, PIA's current service consists of four carriers providing flights to nine destinations (two carriers serve ORD), with no one carrier dominating the market. At the same time, existing PIA carriers are operating under severe financial distress and have been reducing capacity system-wide. About 83% of PIA's capacity is provided by Regional Jet (RJ) aircraft (50 seats or smaller). PIA SCASDP Application Page 8
PIA's year to date load factor is 76%. From 2003 to 2005, PIA's enplanements grew by 39%, due mainly to the introduction of G4's low fare service to LAS. In addition to its primary service area, the Airport draws passengers from as far as 100 miles away (population of this geographic range is 2.5 million) From the summer of 2005 monthly available seats grew until a peak of 38,336 in December of 2007. Monthly seats were reduced by the airlines in September of 2008, and they fluctuated up and down, averaging 28,281 until February of 2012. With the returned vigor of the Peoria area economy, monthly available seats has increased to 35,610. This is 25% above the 2008-2012 average, but still about 7.1% below the number of seats available in December of 2007. Even with the reduced seats available, Peoria has experienced the second best March ever attained in March 2012, and the second best April ever attained in 2012 (best April in 33 years. Peoria's current service pattern is heavily weighted to the North and South. Of the 9 nonstop destinations, none are to the Northeastern United States. This deficiency is forcing travelers to add additional drive time; it also increases their safety risk factors and increases their cost of accessing the national air transportation system from having to use airports outside their service area (mainly Chicago O'Hare and Midway Airports). PIA DAILY DEPARTING SEATS Total capacity at PIA has decreased2to/o since peaking in 1999, atwhich time TW provided over 500 seats per day to STL and Access Air provided over 420 seats per day from the market. CURRENT MARKET COMMENTARY Under the existing dynamics, PIA is disadvantaged PIA continues to be in more of a "defensive" position PIA has done well in comparison with neighboring airports in maintaining seat availability. PIA has also maintained its LCC, while neighboring airports have lost theirs due to corporate acquisitions. Existing PIA carriers are operating under severe financial distress (with one in the midst of bankruptcy proceedings. The current financial climate for the airlines increases the risk of Peoria losing seats or possibly even entire hub cities. Congestion and flight delays at ORD continue to plague Peoria, which makes flying from PIA appear unreliable. Access to alternative hubs is imperative to maintain our reliability factor as compared to drivable hubs. Service to these hubs could harm existing service. Planning is critical to target PIA SCASDP Application Page 9
the appropriate new service that would be additive, not duplicative. Exception: Allegiant Airlines service to LAS, PIE, and AZA continues to perform very well and is among Allegiant's best routes. This service has performed well enough for G4 to add service from Peoria to PGD. PIA SCASDP Application Page 10
IMMEDIATE AIR SERVICE ISSUES FOR SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM PIA exists to serve the business and leisure travelers of Central Illinois. An increasingly diversified economy demands as much point-to-point and hub and spoke service as can be profitable. Caterpillar has expanded plants in Texas, has acquired a company and facilities in Milwaukee, and has an increasingly international focus on its operations and profits. Many business travelers are forced into double-connecting flights or driving significant distances to conduct their business. Access to European and Latin American hubs has become much more important in recent years. Price competition still exists after the departure of Air Tran from regional markets. Several carriers are following in the wake of LCC departures to pick up market segments abandoned through corporate mergers and acquisitions. Allegiant Airlines is expected to grow sharply over the next few years -including new Florida, Caribbean and/or Mexico service. The removal of large jets and the overall reduction in capacity in the Peoria market, coupled with the air traffic delays at Chicago O'Hare has caused significant changes in travel patterns for Peoria and Central Illinois travelers. Capacity in the region's airports has declined since 2001. These emerging trends in the Central Illinois region suggest increased downward pressure on the ability for businesses to conveniently and competitively access key markets throughout the United States. AIR SERVICE DEVELOPMENT STRATEGIC PLAN The Metropolitan Airport Authority of Peoria has had an air service development plan in place for the past six years. The plan works to identify community air service deficiencies and needs. It works to provide all airlines the support required to ensure short and long term success in Peoria and Central Illinois. Our current air service plan provides an effective amount of marketing support and airport operational cost abatements for the first year of new service. This plan also provides incentives for existing airlines to grow their service portfolio at PIA. Our strategic plan for meeting our community's needs through the Small Community Air Service Development Program involves a community outreach effort between the Metropolitan Airport Authority of Peoria, the local business community, and local Chambers of Commerce. In developing this strategic plan, the Airport Authority's management staff, in PIA SCASDP Application Page 11
conjunction with its community partners, routinely conducts a series of meetings with key shareholders in the Peoria business community to solicit input and travel data to identify gaps in air service availability. The deficiency in this process is a lack of data for who is flying from somewhere else. Available Resources: The experiences, knowledge and airline network of the Director of Airports and Air Service Development Manager The resources of the local area governments, chambers and businesses. The support and commitment of Airport Authority Board members. Resources of the Federal Government (i.e. SCASD Program designed to help smaller communities to enhance their air service). DESCRIPTION OF PEORIA'S AIR SERVICE DEVELOPMENT EFFORTS Recent Air Service Successes: 2012 April, Allegiant announces new service from PIA to Punta Gorda/Fort Myers, FL to begin June 28. 2012 April, Delta resumes direct service to Atlanta, which ended in July 2009 due to the merger with Northwest (load factors were in the high 70% range). 2011 MAAP initiates feasibility study for constructing a US Customs Federal Inspection Service facility. 2011 April, new terminal opens and goes into full operation. 2008 Construction begins on new passenger airline terminal. 2007 -Secured new non-stop service to Detroit via Northwest Airlines and new nonstop service to Denver via United. 2006 -Secured additional service from American Eagle to DFW & additional service and increase in aircraft type from United to ORD, both efforts increased the available seat capacity for residents and businesses in Peoria and Central, Illinois. 2006 -Secured an additional daily non-stop flight to LAS from Allegiant Airlines. 2006 -Secured new low-fare non-stop service to PIE (a new destination for PIA) from Allegiant Airlines. This service regained access to Central Florida for the residents and businesses of Peoria and Central Illinois. 2004 -Allegiant Airlines initiates non-stop low-fare jet service to Las Vegas with 5 weekly departures. Daily passengers grew from 10 passengers per day in the 4'n quarter of 2003 (PDEW) to 101 passengers per day (PDEW) in the 2no quarter of 2005. The fare in this market decreased 31%. 2004 -American initiates non-stop service to Dallas-Fort Worth, doubling the PIA SCASDP Application Page 12
local PIA-DFW passenger demand. 2001 -Delta Air Lines initiates non-stop service to Atlanta. Local passenger demand increased 145%. PLAN FOR CONTINUED SUCCESS Communications with local corporations, travel agents, and business leaders have indicated the need for additional hub connections. Additional connections to the south, northeast, and the nation s capital have been suggested as desirable. A market analysis is needed to determine the feasibility of these requests, as well to forecast as the effect these actions would have on existing levels of service. PIA SCASDP Application Page 13
PROPOSED SCASD PROGRAM FOR PIA FINANCIAL SUPPORT The goal of the Metropolítan Airport Authority of Peoria and its public/private partners is to secure air service from one of the potential airlines (existing or new) that will provide regional jet service flights to a new destination hub. This project is proposed to be an analysis of market data, trends, and other methods to determine which targets would be best approached, and what additional travel new hub service would generate. The Airport Authority is requesting $350,000 in funding from the SCASD program and will provide $100,000 in matching funds to carry out this program. PROPOSED FUNDING REQUEST The Airport Authority's Marketing and Development Department, under the direction of the Airport Authority's Director of Airports will have responsibility for development and management of this program. The Airport Authority and its public/private partners request a $350,000 grant under the terms of The Small Community Air Service Development Program to attempt to secure competitive air service to a new hub destination within the United States. The $350,000 of requested federal money is being matched by a contribution of $100,000 or 28% of the federal funds requested. We are asking the Department to help Peoria and our business travel partners identify and quantify our next marketing and air service development efforts and begin the process of consolidating the gains we have made in the last two years. TOTAL PROGRAM FUNDING BREAKDOWN Public Private Federal Contribution Contribution Contribution Consultant fees $300,000 Data Costs 50,000 Marketing Costs 100,000 TOTAL PROGRAM FUNDING $450,000 PIA SCASDP Application Page 14
APPENDIX A Summary Information Sheet PIA SCASDP Application Page 15
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM DOCKET DOT-OST-2012-0069 SUMMARY INFORMATION All applicants must submit this information with their proposal, along with a completed form SF424 on www.grants.gov. A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY) Not a Consortium Interstate Consortium Intrastate Consortium Community now receives EAS subsidy Community (or Consortium member) previously received a Small Community Grant If previous recipient: Date of grant: Federal Funds Requested: Carrier(s) Service Obtained: Destination(s) Served: Expiration date of grant: B. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES) PUBLIC PRIVATE 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. C. PROJECT PROPOSAL: (CHECK ALL THAT APPLY) 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 (explain below)
D. EXISTING LANDING AIDS AT LOCAL AIRPORT: Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) E. PROJECT COST: DO NOT ENTER TEXT IN SHADED AREA LINE DESCRIPTION SUB TOTAL TOTAL AMOUNT 1 Federal amount requested 2 State cash financial contribution Local cash financial contribution 3a Airport cash funds 3b Non-airport cash funds 3 Total local cash funds (3a + 3b) 4 TOTAL CASH FUNDING (1+2+3) In-Kind contribution 5a Airport In-Kind contribution** 5b Other In-Kind contribution** 5 TOTAL IN-KIND CONTRIBUTION (5a + 5b) 6 TOTAL PROJECT COST (4+5) F. IN-KIND CONTRIBUTIONS** For funds in lines 5a (Airport In-Kind contribution) and 5b (Other In-Kind contribution), please describe the source(s) of fund(s) for each.
F. IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UNDER EXECUTIVE ORDER 12372 PROCESS? a. This application was made available to the state under the Executive Order 12372 Process for review on (date). b. Program is subject to E.O. 12372, but has not been selected by the state for review. c. Program is not covered by E.O. 12372. G. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF YES, PROVIDE EXPLANATION) No Yes (explain)