No One is Ever Satisfied: Meeting Today s Air Service Challenges

No One is Ever Satisfied: Meeting Today s Air Service Challenges

Key Discussion Points Factors Influencing Air Service Decisions Air Service Development & Incentives Community Engagement

Factors Influencing Service Decisions Market demand Yield per available seat mile Cost per available seat mile Fuel is a major driver Aircraft (and crew) availability size and type Route stage length Fit within airline business strategy Industry opportunities and challenges Airport costs

Air Service Development Considerations What metrics should you use to evaluate existing service? How is the current service performing? Is the airline working with the community to promote the route, is it priced competitively? Will the community support new service? Do you have accurate data that supports expansion? Do you have information about developments in your community that indicate a future or increased demand?

Air Service Development Strategies Having good network connectivity by legacy hub carriers with global alliances will generate better financial results for airports, airlines and the communities in the long-term. Identifying premium business travel is critical to the success of all markets. Airlines are focused on higher yields and average fares. Regular meetings with all vested parties to review air service performance is critical to ensure long-term success. Incentives, minimum revenue guarantees, or grants only work if the service will be profitable once these incentives expire or are depleted.

Air Service Incentive Programs The program must be legally defensible and comply with federal regulatory requirements. The program should identify specific opportunities. The program should have three distinct components: Financial incentives, such as a landing fee credit, to encourage flights A marketing incentive ( Incentive ) to promote additional flights to desired destinations A public relations outreach campaign to promote new service to the community.

Community Engagement Tell Your Airport s Story Explain how industry and economic trends impact your region and your airport. Provide information about how your airport compares to its peers. Educate the community on the economic impact of air service to garner increased support and commitment from business leaders and political allies. Share your success stories. Set realistic expectations!

Air Service Industry Overview Airlines Decrease Capacity System Wide to Increase Load Factor and Yield

Air Service Industry Overview Industry Losses Not Sustainable Long Term

Air Service Industry Overview Ten Major Carriers in 2000 Four Today Four Airlines Account for Approximately 90% of the Market

Route Map 2002 Service by 7 airlines 18 nonstop destinations 2007 Service by 8 airlines 21 nonstop destinations

Route Map - 2015 Service by 6 airlines 19 nonstop destinations

O&D Passengers Airline Passenger Share at Boise 2,700,000 2,400,000 2,100,000 1,800,000 1,500,000 1,200,000 900,000 600,000 300,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 Airline Market Share Year Quarter AS WN UA DL AA G4 Other 2013 Q1 25% 28% 20% 18% 8% 1% 1% Q2 25% 27% 20% 18% 7% 1% 1% Q3 26% 27% 20% 18% 7% 1% 1% Q4 26% 25% 20% 18% 7% 2% 1% 2014 Q1 27% 25% 20% 18% 7% 2% 1% Q2 28% 24% 20% 18% 7% 1% 1% Q3 28% 25% 20% 18% 7% 1% 1% Q4 28% 24% 20% 19% 7% 1% 1% Other G4 AA DL UA WN AS Alaska s passenger market share continues to grow. Strong Competitive Environment with No Single Dominant Carrier

Capacity/passengers Load factor % BOI Traffic / Capacity Trends 3,000,000 90 2,500,000 80 2,000,000 70 1,500,000 60 1,000,000 Capacity Passengers Load Factor 500,000 2010 2011 2012 2013 2014 Year Ended 50 40 YE December 2014 capacity was up 6%, while onboard passengers were up 4%, driving load factors down 1% point

Seats per Capita Seat Per Capita Comparisons 3.50 3.34 3.00 2.69 2.50 2.26 2.33 2.00 1.50 1.14 1.56 1.66 1.70 1.73 1.83 1.86 1.95 1.00 0.50 0.00 Boise exceeds all comparison markets except Spokane in seats per capita.

Seat Per Capita Comparisons 2012 Airline Seats per Resident in Metropolitan Statistical Areas with Populations of 550,000-750,000 City/MSA 2011 MSA Population 2012 Seats Seats per Resident 1 Fort Myers, FL 631,330 4,348,031 6.9 2 Boise, ID 627,664 1,661,018 2.6 3 Charleston, SC 682,121 1,679,559 2.5 4 Little Rock, AR 709,901 1,577,604 2.2 5 Des Moines, IA 580,255 1,263,669 2.2 6 Syracuse, NY 662,553 1,331,420 2.0 7 Colorado Springs, CO 660,319 1,110,411 1.7 8 Greensboro NC 730,966 1,215,618 1.7 9 Madison, WI 576,467 955,349 1.7 1 Harrisburg, PA 552,911 900,591 1.6 2 Akron, OH 701,456 1,139,634 1.6 3 Wichita, KS 625,526 967,455 1.5 4 Knoxville, TN 704,500 1,070,739 1.5 5 Sarasota, FL 709,355 767,362 1.1 6 Wilkes-Barre/Scranton, PA 563,223 347,176 0.6 7 Augusta, GA 561,858 326,745 0.6 8 Toledo, OH 650,266 94,110 0.1 9 Stockton, CA 696,214 70,855 0.1 10 Youngstown, OH 562,739 38,308 0.1

O&D Passengers O&D Passenger and Airfare Comparisons Average Fare 3,500,000 $280 3,000,000 $233 $237 $249 $221 $225 $227 $236 $218 $225 $200 $185 $215 $240 2,500,000 2,000,000 O&D Pax Average Fare $200 $160 1,500,000 $120 1,000,000 $80 500,000 $40 0 COS ICT MSN LIT DAY DSM GRR ELP TUL BOI GEG TUS $0 Only comparison market with lower average fares than Boise is Spokane.

$3.32 $3.35 $3.28 $3.34 3.49 3.87 $4.81 $4.52 $5.62 $6.64 Airline Cost per Enplaned Passenger Affects Credit Rating & Air Service Attraction $7 $6 $5 $4 $3 $2 $1 $-

Comparison of BOI to Peer Airports BOI A1 Rated Airports Small Hub Airports Airline cost per enplaned passenger 4.52 5.62 6.64 Operating revenue per enplaned passenger 16.63 17.77 24.06 Operating expense per enplaned passenger 11.86 12.56 16.78 Debt per enplaned passenger 22.30 44.20 63.19 % of airline revenue to total operating revenue 27% 35% 28% Primary carrier share of enplanements 34% 38% 35% Primary two carriers' share of enplanements 55% 55% 62%

BOI Forward Looking Schedule Year-over-Year Capacity growth will occur in every month (except March).

Share the Responsibility Three key things the business community can do to assist the airport in attracting new air service Utilize existing service Provide information regarding air travel needs Support the airport s grant application to US DOT

Thank You! Contact Information Rebecca Hupp rhupp@cityofboise.org Like Boise-Airport on FaceBook Follow iflyboise on twitter