San Luis Obispo County Regional Airport, California

Project Abstract The San Luis Obispo County Regional Airport had a record year in 2007, both in terms of passenger traffic and in terms of airline revenue. More than 320,000 passengers traveled in and out of the Airport, on the four incumbent airlines that serve five western hubs. Traffic and revenues continue to grow, as demand grows, with the population of the San Luis Obispo extended catchment area up almost 10% since 2000 to just under a million total residents. Even with passenger traffic up 21% in the last six years at San Luis Obispo, the Airport s fares are at their highest level in a decade. The average one-way fare at the Airport, $214 in 2007, was 35% higher than the national average. The fare disparity is even more pronounced in markets within the State of California, with San Francisco, Los Angeles, San Diego, and Sacramento ranking as the four most expensive markets in which to fly from San Luis Obispo. Despite relatively high average fares and inconvenient connecting flights San Diego and Sacramento continue to rank as some of the fastest growing passenger markets from San Luis Obispo. The San Luis Obispo market has a high demand for intrastate California air travel, even though the passenger numbers on both routes are suppressed by those high fares and poorly timed connecting flights. The Airport proposes the reinstatement of service between San Luis Obispo, San Diego, and Sacramento. This service hasn t been operated since 1998. The Airport believes there is sufficient demand for service to be successful. However, due to the high fuel cost environment, most airlines aren t looking to expand. The Airport believes this Small Community Air Service Development Grant will mitigate a new carrier s risk in both markets, helping to ensure the success of each new service. The Airport has already pledged $25,000 to this project. It requests a Small Community Air Service Development Grant in the amount of $425,000 for start-up cost offsets, advertising and marketing support, and revenue guarantees in support of new service. The Airport proposes to spend $50,000 on advertising projects, while reserving $375,000 for revenue guarantees. San Luis Obispo County Regional Airport Small Community Air Service Development Grant Application June 2008

Docket: DOT-OST-2008-0100 Before the Office of the Secretary of Transportation U.S. Department of Transportation San Luis Obispo County Regional Airport, California Proposal Under the Small Community Air Service Development Program An Integrated Program of New Service Development via; Start-up Cost Offsets, Advertising/Marketing and Revenue Guarantees In Support of SkyWest Service to/from San Diego and Sacramento Sponsor: San Luis Obispo County Regional Airport San Luis Obispo, California Klaasje Nairne Airports Manager Dun & Bradstreet Number: 965095599 June 6, 2008

Table of Contents Description Page number Table of Contents 2 Introductory Letter 3 Summary Information 4 Introduction 7 Primary Objectives of Proposal 8 Executive Summary 9 Detailed Explanation of Proposal 17 Expected Results 21 Letters of Support 27 Current Air Service 33 Air Service Deficiencies 37 Extenuating Factors Affecting Air Service 41 Availability of Alternate Airports 43 Use of Local / Federal Funds 44 Public / Private Partnerships 45 Air Service Advisory Groups 47 Local Air Service Development Efforts 47 In-kind Services from the Community 47 Performance Measures 48 Financial Controls 48 Return on Investment 48 DOT Exit Strategy 49 Alternate Plan 49 Airport Information 50 Community Profile 53 Comparison to Other Communities in Region 63 Conclusions 64 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 2

Introductory Letter San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 3

Summary Information Small Community Air Service Development Program Docket DOT-OST-2008-0100 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, expiration date of grant: Community Name San Luis Obispo, California Address1 903-5 Airport Drive City, State, Zip-code San Luis Obispo, California 93401 Point of Contact: Klaasje Nairne, Airports Manager Phone: (805) 781-5205 Fax: (805) 781-5985 Email: knairne@co.slo.ca.us County: San Luis Obispo Dun & Bradstreet #: 965095599 Designated Legal Sponsor: Name Klaasje Nairne Title Airports Manager San Luis Obispo County Regional Airport Address 903-5 Airport Drive City, State, Zip-code San Luis Obispo, California 93401 Phone: (805) 781-5205 Fax: (805) 781-5985 Email: knairne@co.slo.ca.us San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 4

B. Public/Private Partnership Public: 1. San Luis Obispo County Regional Airport 2. San Luis Obispo Council of Governments (SLOCOG) Private: 1. City of San Luis Obispo Chamber of Commerce 2. The Economic Vitality Corporation (EVC) C. Project Proposal Marketing Upgrade Aircraft New Route Personnel Increased Frequency Low Fare Service Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Other (specify) Revenue Guarantee Start Up Cost Offset Study Launch New Carrier First Competitive Service Secure Additional Carrier D. Existing Landing Aids at Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other: Glide Slope / Outer Marker / VOR San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 5

E. Project Cost Federal amount requested: $ 425,000 Total local financial contribution: $ 25,000 Airport funds: $ 25,000 Non-Airport funds: $ 0 State financial contribution: $ 0 Existing funds: $ 0 New funds: $ 0 Airport In-kind contribution: $ 0 (Amount & description) Other In-Kind Contribution: $ 0 (Amount & description) Total cost of project: $ 450,000 F. Enplanements at Airport 2002: 132,510 2003: 130,100 2004: 140,960 2005: 158,360 2006: 156,190 2007: 160,120 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 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 6

Introduction The San Luis Obispo County Regional Airport had a record year in 2007, both in terms of passenger traffic and in terms of airline revenue. More than 320,000 passengers traveled in and out of the Airport, on the four incumbent airlines that serve five western hubs. Traffic and revenues continue to grow, as demand grows, with the population of the San Luis Obispo extended catchment area up almost 10% since 2000 to just under a million total residents. Even with passenger traffic up 21% in the last six years at San Luis Obispo, the Airport s fares are at their highest level in a decade. The average one-way fare at the Airport, $214 in 2007, was 35% higher than the national average. The fare disparity is even more pronounced in markets within the State of California, with San Francisco, Los Angeles, San Diego, and Sacramento ranking as the four most expensive markets in which to fly from San Luis Obispo. Despite relatively high average fares and inconvenient connecting flights San Diego and Sacramento continue to rank as some of the fastest growing passenger markets from San Luis Obispo. The San Luis Obispo market has a high demand for intrastate California air travel, even though the passenger numbers on both routes are suppressed by those high fares and poorly timed connecting flights. The Airport proposes the reinstatement of service between San Luis Obispo, San Diego, and Sacramento. This service hasn t been operated since 1998. The Airport believes there is sufficient demand for service to be successful. However, due to the high fuel cost environment, most airlines aren t looking to expand. The Airport believes this Small Community Air Service Development Grant will mitigate a new carrier s risk in both markets, helping to ensure the success of each new service. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 7

Primary Objectives of Proposal Objectives for Program: Increase connectivity between California intrastate markets Create better opportunities for business connections between the San Luis Obispo region and the State s capitol in Sacramento Open new markets between San Luis Obispo and the southernmost part of California Increase awareness about local air service Means to Achieve Objectives: Recruit a carrier to open two new routes from the San Luis Obispo County Regional Airport o Non-stop to Sacramento o Non-stop to San Diego Course of Action to Support Means: Recruit SkyWest for new non-stop flights to Sacramento and San Diego Provide start-up cost offsets Make available revenue guarantee in first 12-months of new service on each route Initiate marketing and advertising campaign to publicize new air service San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 8

Executive Summary San Luis Obispo County Regional Airport is located on California s central coast, halfway between San Francisco and Los Angeles. The nearest alternate airport with jet and/or low-fare service is located in Burbank, a 3½-hour drive to the south. San Luis Obispo County Regional Airport serves as the primary airport for the 247,000 residents of the county including the communities of San Luis Obispo, Paso Robles, Atascadero, Morro Bay, Grover Beach, Arroyo Grande and Pismo Beach (see Table 1). The Airport also serves as an alternate airport for the Santa Maria area. With record enplanements of 160,120 in 2007, San Luis Obispo County Regional Airport is classified as a non-hub airport. Table 1: Location of San Luis Obispo County, in relation to other Southern California airports The San Luis Obispo County Regional Airport is well positioned to draw passengers from a larger area of the California coast, between the major cities of Los Angeles and San Francisco. The Airport is, in fact, the primary gateway for a number of major business and tourist centers, including Paso Robles, Morro Bay, Santa Maria, and Atascadero (see Table 2). San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 9

Table 2: San Luis Obispo County Regional Airport Immediate Catchment Area (60 Mile Radius) The Airport s immediate catchment area includes all the communities within 60 miles, or an hour s drive, of the Airport (see Table 2). San Luis Obispo County Regional Airport is the preferred gateway for all of those living within this region. As of 2005 US Census estimates 533,200 people lived in the Airport s immediate catchment area. The area grew by 7.8% from 2000 to 2005, or 38,500 residents. The Airport s extended catchment area goes out roughly 100 miles, not including the Santa Barbara, Oxnard, or Bakersfield metropolitan statistical areas (see Table 3). For residents within this radius, San Luis Obispo is, at least, equally convenient to other airports in the region. The right brand of service at San Luis Obispo will draw significant passenger numbers from this larger catchment area. The San Luis Obispo County Regional Airport s extended catchment area is home to 999,000 people as of 2005 US Census Bureau estimates (see Table 3). The area grew by 9.4% between 2000 and 2005 adding 85,400 residents during that time. This catchment area is the sixth largest in the entire State of California. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 10

Table 3: San Luis Obispo County Regional Airport Extended Catchment Area (100 Mile Radius) Despite the relative size of the San Luis Obispo catchment area, the Airport has much less service than other markets boasting a million residents within 100 miles. As of June 2008, the San Luis Obispo County Regional Airport has service to five hub airports in the west, on regional affiliates of four major airlines. From San Luis Obispo, American serves Los Angeles, Delta serves Salt Lake City, United serves Los Angeles and San Francisco, and US Airways serves Las Vegas and Phoenix (see Table 4). While this service offers San Luis Obispo area travelers access to four major airline networks, and one-stop connections to more than 150 destinations in the US and overseas, the region lacks adequate service within its own region. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 11

Table 4: Current Service at San Luis Obispo County Regional Airport, June 2008 The primary impediment to continued air service growth is the lack of available seats and competitive service to markets located within California. While American Eagle and United Express all provide service to Los Angeles, and United Express provides service to San Francisco, San Luis Obispo lacks non-stop flights to the State s capitol in Sacramento, and to another major intrastate destination: San Diego. There simply aren t seats available, primarily for business travelers, who need to frequently travel within the State of California. The lack of competitive service also tends to inflate ticket prices, and contributes to the 42% leakage rate the airport experiences, with a number of travelers driving the three-hours to Los Angeles-area airports, to catch competitive flights within California. Despite a record number of passengers, and the most flights ever in and out of the Airport, San Luis Obispo recorded its highest ever airfares in 2007 at $214 each way (see Table 5). Airfares went up by 4% year over year, while the average one way San Luis Obispo fare is up 34% since 2002 or $54 each way. Moreover, San Luis Obispo s average airfare is $55 or 35% higher each way than the national average of $159. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 12

Table 5: Despite record high airfares in the San Luis Obispo market, the Airport recorded its highest ever passenger numbers, with more than 320,200 total travelers in and out of the Airport in 2007, or 439 passengers per day each way (see Table 5). Total San Luis Obispo passengers were up 3% in the last year, and up 21% since 2002. The passenger growth has occurred in the face of average fares that rank as the second highest in the State of California, with only Monterey having higher average airfares than San Luis Obispo in 2007 (see Table 6). San Luis Obispo fares were only marginally higher than the average fare found just down the Pacific coast at Santa Barbara, but one way fares in San Luis Obispo were 16% higher than one way fares at Los Angeles International, and a stunning 77% higher than the average fare at San Luis Obispo s main competing airport Burbank. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 13

Table 6: With some of California s highest average one way fares, airlines have been able to dramatically increase their San Luis Obispo County Regional Airport revenues. Airlines earned a record $62.5 million in total revenue in San Luis Obispo in 2007 which equals $85,605 in revenue per day each way (see Table 7). Table 7: San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 14

San Luis Obispo revenue was up by $2.5 million from 2006 to 2007 or $3,490 in revenue per day each way an increase of 4.2% (see Table 7). In the last six years, San Luis Obispo revenue has grown much faster than the national average. Since 2002, the Airport s airline revenues are up $23.6 million or 61% which equals an additional $32,380 in revenue per day each way. The increase in airline revenue significantly outpaced passenger growth in 2007. Ten of San Luis Obispo s top 20 origin and destination markets are west of the Rockies, illustrating just how important connection to the rest of the west are in the market. On routes with non-stop service, such as Phoenix, the San Luis Obispo County Regional Airport boards significantly higher numbers of passengers. To and from Phoenix the Airport s top origin and destination passenger market almost 23,300 passengers flew the route in 2007, 32 passengers per day each way (see Table 8). Table 8: Despite the lack of non-stop service, and the inconvenience of a connection at Los Angeles, San Diego still ranks as San Luis Obispo s 19 th largest origin and destination passenger market (see Table 8). In 2007, 4,280 flew the route between San Luis Obispo and San Diego, or 6 passengers per day each way, even though current air service on the route often takes as long as driving. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 15

Sacramento ranked just outside the top 20 San Luis Obispo passenger markets, at number 22, with 3,740 origin and destination passengers in 2007. With no non-stop service between San Luis Obispo and Sacramento, passenger numbers of the route are suppressed, due to the fact travel on the route requires a connection at San Francisco. Many San Luis Obispo travelers simply fly to San Francisco, on the non-stop flight, then drive to Sacramento. Even without the benefit of non-stop service, the San Luis Obispo San Diego route produces almost $1 million in annual origin and destination revenue, or $1,271 in revenue per day each way, as of 2007 (see Table 9). San Diego ranks as San Luis Obispo s 20 th largest revenue market. Table 9: Sacramento ranks as San Luis Obispo s 36 th largest origin and destination revenue market, with $503,800 in annual revenue in 2007, or $690 in revenue per day each way. Revenue in the San Luis Obispo Sacramento market is suppressed due to the lack of non-stop service, and the inconvenience of current connecting service in the market. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 16

Detailed Explanation of Proposal San Luis Obispo has become better connected with the national air transportation system in the last few years. The Airport s aggressive recruitment of new airlines and routes has led to the initiation of service on Delta, and addition flights from US Airways. But the region still lacks connections to major cities in its own State. The entire central coast region is the missing link in air service from both Sacramento and San Diego (see Table 10). Table 10: Current California Intrastate Air Service from San Diego and Sacramento In order to correct this air service deficiency, the San Luis Obispo County Regional Airport seeks a Small Community Air Service Development Grant, in the amount of $425,000, to help recruit SkyWest Airlines to serve both the San Luis Obispo Sacramento route and the San Luis Obispo San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 17

San Diego route (see Table 11). The Airport proposes three daily flights on each route, in each direction (see Tables 12 and 13) on weekdays, with two daily flights on the weekends. Table 11: Current and Proposed Air Service at San Luis Obispo Table 12: Proposed Schedule San Luis Obispo Sacramento Origin Destination Departs Arrives Block Time Equipment SMF SBP 6:45am 8:00am 1:15 EMB120* SBP SMF 7:45am 9:00am 1:15 EMB120* SMF SBP 2:35pm 3:50pm 1:15 EMB120 SBP SMF 12:45pm 2:00pm 1:15 EMB120 SMF SBP 7:05pm 8:20pm 1:15 EMB120** SBP SMF 8:10pm 9:25pm 1:15 EMB120** * Flight operates Monday Saturday ** Flight operates Monday Friday, Sunday San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 18

Table 13: Proposed Schedule San Luis Obispo San Diego Origin Destination Departs Arrives Block Time Equipment SAN SBP 6:00am 7:15am 1:15 EMB120* SBP SAN 8:30am 9:45am 1:15 EMB120* SAN SBP 11:00am 12:15pm 1:15 EMB120 SBP SAN 4:20pm 5:35pm 1:15 EMB120 SAN SBP 6:20pm 7:35pm 1:15 EMB120** SBP SAN 8:50pm 10:05pm 1:15 EMB120** * Flight operates Monday Saturday ** Flight operates Monday Friday, Sunday The proposed schedules do not take into account upper level winds or weather. The resulting flight time would be 55 minutes (see Tables 12 and 13). Ten minutes has been added to each end of the flight to allow for taxi time, resulting in the subsequent block time of 1:15 on each route. The San Luis Obispo County Regional 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 grant request of $425,000, only $50,000 will be used for marketing and advertising projects, with none of the grant award going to immediate start-up costs. The federal share of the project will be $425,000, $400,000 of that money being used as part of a revenue guarantee. The San Luis Obispo County Regional Airport projects that the bulk of the grant money be available to provide insurance in case SkyWest needs help during the first year of operations. With demand for intrastate service in the San Luis Obispo market, the Airport projects the new flights will be profitable within one year. The objective of the proposal is two-fold. First, the San Luis Obispo County Regional Airport seeks to bring competitive intrastate air service to California s central coast for the first time since 1998. This in turn would moderate airfares, stimulate demand and quell the leakage the airport experiences today. Second, through the successful introduction of targeted service to Sacramento and San Diego, the San Luis Obispo County Regional International Airport hopes to encourage other carriers, both low-cost and full-service carriers, to enter the San Luis Obispo market and provide service San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 19

to additional intrastate and west coast destinations. Community support for the Airport is evident in the peak passenger numbers the Airport is currently experiencing. The San Luis Obispo County Regional Airport is targeting this program to meet and exceed those peak numbers through increased capacity, lowered average fares and increased service by new carriers to additional non-stop intrastate markets. If, for some unforeseen reason, service is not commenced in a timely manner by SkyWest, on the Sacramento and/or San Diego route, the San Luis Obispo County Regional Airport proposes to use federal grant money awarded under the Small Community Air Service Development Program to another carrier interested in beginning service to these essential intrastate markets. At this point, a likely secondary candidate would be Horizon Air, which continues to expand its presence in southern California markets. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 20

Expected Results: San Luis Obispo Sacramento Historically, the San Luis Obispo region has supported non-stop service to California capital in Sacramento. Until 1998 Westair flew the route non-stop with 19-seat Jetstream turboprops, and in its last full year in the market, it boarded 26 passengers per day each way (see Table 14). The number of passengers using the non-stop service in 1997 marked a 1.3% increase from 1996. For the purposes of this projection, it is assumed, had non-stop service continued on the San Luis Obispo Sacramento route, passengers would have grown by roughly 1.3% a year since 1997, to more than 22,000 in 2007. Table 14: Origin and Destination Passengers from Central Coast Airports to Sacramento, 1993 2004 Projections on the route assume twice-daily service in each direction between San Luis Obispo and Sacramento, operated by a 30-seat Embraer EMB-120 turboprop aircraft. It is projected there will be 43,800 seats available per year at an operating cost per flight of roughly $1,020 (see Table 15). The difficulty in developing accurate cost projections in the current air service environment is the volatile changes in the price of fuel. With such market instability it should be noted that the projections contained in this application could change drastically should the price of fuel increase significantly. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 21

Table 15: Item Statistical Category Full Year August Sept. Operating Statistics 1 Flights Per Day 4.0 4.0 4.0 2 Available Seats Per Departure 30.0 30 30 3 Days Operating 365 31 30 4 San Luis Obispo - SMF Flight Segments 1,460 124 120 5 San Luis Obispo - SMF Seats Available 43,800 3,720 3,600 6 San Luis Obispo - SMF Mileage 244 7 San Luis Obispo - SMF Total ASM's 10,687,200 907,680 878,400 8 Total DOC per ASM 13.90 9 Total DOC $1,485,521 $126,168 $122,098 10 Total DOC Per Flight $1,024 Based on the above assumptions, the San Luis Obispo Sacramento route should generate 22,039 origin and destination passengers, while boarding 25,000 total passengers when connections beyond Sacramento are taken into account (see Table 16). Table 16: Item Statistical Category Full Year August Sept. Operating Projections 11 Seasonality of Demand San Luis Obispo 100.0% 8.2% 7.8% 12 Total San Luis Obispo - SMF Onboard Passenger Demand 25,000 2,050 1,950 13 San Luis Obispo - SMF Local Passengers 22,039 1,807 1,719 14 San Luis Obispo - SMF Local Passenger Share of Onboard 88.2% 15 San Luis Obispo - SMF Unrestricted Load Factor 57.1% 57.1% 57.1% 16 San Luis Obispo - SMF Restricted Load Factor 57.1% 57.1% 57.1% 17 Total San Luis Obispo - SMF Onboard Restricted Passenger Demand 25,000 2,050 1,950 18 Total San Luis Obispo - SMF Revenue $2,750,000 $225,500 $214,500 19 Total Revenue per Flight $1,884 $1,884 $1,884 20 Total San Luis Obispo - SMF RASM 25.73 25.73 25.73 21 Total Local San Luis Obispo - SMF Revenue Mileage Prorate $2,425,500 22 Beyond Revenue $324,500 23 Total San Luis Obispo - SMF RPM's 6,100,000 24 San Luis Obispo - SMF Total Average Fare $110.00 25 Average Passenger Miles 4,178 26 Projected Average Yield per RPM 39.76 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 22

The San Luis Obispo Sacramento route is projected to gross $1,884 per flight, or $2,750,000 annually, even with conservative passenger projections, assuming an average one-way fare of $110 (see Table 16). The route is projected to make a profit of $860 per flight, or $1.2 million total annually, assuming costs don t rise. The profit potential on this route is especially strong as most passengers who use the new flights will be origin and destination, and not connecting to other cities at Sacramento, thus diluting segment revenues. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 23

Expected Results: San Luis Obispo San Diego Residents of California s Central Coast also have a strong history of support for non-stop service to San Diego. When Westair offered non-stop 19-seat turboprop service between San Luis Obispo and San Diego, all Central Coast airports boarded almost 40,000 origin and destination passengers in 1997 (see Table 17). However, as soon as Westair pulled its service, the number of passengers on the route dropped dramatically. Table 17: Origin and Destination Passengers from Central Coast Airports to San Diego, 1993 2004 Between 1993 and 1997, the number of passengers traveling between the Central Coast and San Diego grew by 65% (see Table 17). Had non-stop service between San Luis Obispo and San Diego continued, it is assumed growth on the route wouldn t have been that robust, but it is projected total passengers would have grown by roughly 50% every five years. By 2008, it is projected a total of 91,800 passengers would fly directly between Central Coast airports and San Diego. It is assumed San Luis Obispo would capture just a small portion of those origin and destination passengers with new non-stop flights less than 25%, or 19,500 passengers a year (see Table 18). San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 24

These projections assume twice-daily service in each direction between San Luis Obispo and San Diego, operated by a 30-seat Embraer EMB-120 turboprop aircraft. It is projected there will be 43,800 seats available per year at an operating cost per flight of roughly $1,097 (see Table 18). Table 18: Item Statistical Category Full Year August Sept. Operating Statistics 1 Flights Per Day 4.0 4.0 4.0 2 Available Seats Per Departure 30.0 30 30 3 Days Operating 365 31 30 4 San Luis Obispo - SAN Flight Segments 1,460 124 120 5 San Luis Obispo - SAN Seats Available 43,800 3,720 3,600 6 San Luis Obispo - SAN Mileage 263 7 San Luis Obispo - SAN Total ASM's 11,519,400 978,360 946,800 8 Total DOC per ASM 13.90 9 Total DOC $1,601,197 $135,992 $131,605 10 Total DOC Per Flight $1,097 Based on the above assumptions, the San Luis Obispo San Diego route should generate 19,500 origin and destination passengers, while boarding 27,540 total passengers (see Table 19). Table 19: Item Statistical Category Full Year August Sept. Operating Projections 11 Seasonality of Demand San Luis Obispo 100.0% 8.0% 7.9% 12 Total San Luis Obispo - SAN Onboard Passenger Demand 27,540 2,203 2,176 13 San Luis Obispo - SAN Local Passengers 19,500 1,560 1,541 14 San Luis Obispo - SAN Local Passenger Share of Onboard 70.8% 15 San Luis Obispo - SAN Unrestricted Load Factor 62.9% 62.9% 62.9% 16 San Luis Obispo - SAN Restricted Load Factor 62.9% 62.9% 62.9% 17 Total San Luis Obispo - SAN Onboard Restricted Passenger Demand 27,540 1,560 1,541 18 Total San Luis Obispo - SAN Revenue $2,754,000 $220,320 $217,566 19 Total Revenue per Flight $1,886 $1,886 $1,886 20 Total San Luis Obispo - SAN RASM 23.91 23.91 23.91 21 Total Local San Luis Obispo - SAN Revenue Mileage Prorate $1,949,832 22 Beyond Revenue $804,168 23 Total San Luis Obispo - SAN RPM's 7,243,020 24 San Luis Obispo - SAN Total Average Fare $100.00 25 Average Passenger Miles 4,961 26 Projected Average Yield per RPM 26.92 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 25

The San Luis Obispo San Diego route is projected to gross $1,886 per flight, or $2,754,000 annually, even with conservative passenger projections, assuming an average one-way fare of $100 (see Table 19). The route is projected to make a profit of $789 per flight, or $1.15 million total annually, assuming costs don t rise. The profit potential on this route is especially strong as most passengers who use the new flights will be origin and destination, and not connecting to other cities at San Diego, thus diluting segment revenues. It should be noted that there is extreme difficulty in developing accurate cost projections in the current air service environment due to volatile changes in the price of fuel. With such market instability it should be noted that the projections contained in this application could change drastically should the price of fuel increase significantly. A Small Community Air Service Development Grant in support of new San Luis Obispo service will help to mitigate the risk of entering the market on these two new routes, with fuel prices increasing so quickly. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 26

Letter of Support San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 27

San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 28

San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 29

San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 30

San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 31

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Current Air Service in San Luis Obispo The San Luis Obispo County Regional Airport has service on the regional affiliates of four network carriers, to five current destinations. American Eagle offers service to Los Angeles, Delta Connection has service to Salt Lake City, United Express has service to Los Angeles and San Francisco, while US Airways Express has service to Phoenix and Las Vegas. Despite San Luis Obispo s non-stop service to a number of hubs in the western US, the region lacks intrastate service within California. Historically, Sacramento and San Diego have been two of San Luis Obispo s most popular origin and destination markets, but without non-stop service, demand in both markets has been suppressed. Air Carrier Market Share in San Luis Obispo In 2007, United Airlines had the largest share of San Luis Obispo catchment area travelers, with 37% of the market. United carried 119,560 passengers in and out of San Luis Obispo in 2007, or 164 passengers per day each way (see Table 18). US Airways was San Luis Obispo s second most popular airline, with almost 28% of the market. US Airways carried 88,640 total San Luis Obispo travelers in 2007, or 121 passengers per day each way. Table 18: San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 33

American and Delta had smaller shares of San Luis Obispo catchment area passengers in 2007. American pulled 17% of the market, while Delta pulled 14% (see Table 18). American s service to and from Los Angeles boarded 60,920 total passengers, or 76 passengers per day each way, in 2007, while Delta s service to and from Salt Lake City boarded 44,690 total passengers, or 61 passengers per day each way. The breakdown of airline revenue generated in the San Luis Obispo market in 2007 mirrors the passenger breakdown, indicating each airline is earning a share of revenue equal to the number of passengers it carries. United was the largest revenue airline in San Luis Obispo in 2007, with $22.6 million in total origin and destination revenue, or almost $31,000 in revenue per day each way a share of roughly 36% of the market (see Table 19). US Airways was the second largest San Luis Obispo revenue airline, with almost $17.7 million in total 2007 revenue, or $24,200 in revenue per day each way 28% of the market. Table 19: American and Delta, again, were much smaller players in the San Luis Obispo market in 2007, with a combined 30.5% of the San Luis Obispo revenue. American earned $10.5 million in total revenue in San Luis Obispo in 2007, or $14,400 in revenue per day each way, while Delta earned $8.6 million in revenue, or $11,700 in revenue per day each way in 2007. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 34

Current Passenger Traffic in the San Luis Obispo Market The San Luis Obispo County Regional Airport has seen steady if not explosive passenger growth over the last six years. The Airport boasts a passenger traffic record in 2007, with 320,240 total passengers traveling through the Airport, or 439 passengers per day each way (see Table 20). This new passenger record marked an increase in total passenger traffic of 3% in the last year, and 21% since 2002. Table 20: The 2007 record passenger level beat the previous record, set in 2005, by 3,520 total passengers, or 5 passengers per day each way (see Table 20). The 2007 passenger total marked a 1% increase over the Airport s previous record year. While passenger traffic has been steadily increasing in San Luis Obispo, airline revenue has been rising much more dramatically. 2007 marked a record revenue year at the San Luis Obispo County Regional Airport, with airlines earning $62.5 million in total revenue, or $85,600 in revenue per day each way (see Table 21). San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 35

Table 21: 2007 airline revenues at San Luis Obispo were up 4% over 2006 revenue, and even more impressively 61% since 2002 (see Table 21). Airlines earned $23.6 million more in total revenue in 2007 than in 2002, an increase of $32,400 in revenue per day each way. San Luis Obispo is a solid passenger market that will likely continue to see modest origin and destination passenger growth in 2008, and beyond, while, at the same time, producing revenue growth that outpaces passenger growth. In fact, airlines in the San Luis Obispo market have seen their yields grow by 22% in the last six years. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 36

Air Service Deficiencies in San Luis Obispo While the San Luis Obispo County Regional Airport has current service on four airlines, to five cities around the west, the San Luis Obispo market lacks the kind of competition that would bring fares closer to national averages. In 2007, San Luis Obispo had some of the highest average fares in California, and the Airport s $214 average one-way fare was 35% above the national average of $159 each way. Higher than average fares are especially pronounced on San Luis Obispo s intrastate routes, within California. In fact, San Luis Obispo s four most expensive markets, in terms of the cost of flying per seat mile (average fare divided by the itinerary mileage of the route), are all in California. While San Francisco and Los Angeles are the two most expensive routes to and from San Luis Obispo per seat mile, San Diego ranks third and Sacramento ranks fourth (see Table 22). The cost of flying from San Luis Obispo to San Diego is 478% higher than the average seat mile cost in the San Luis Obispo market, while the cost of flying from San Luis Obispo to Sacramento is 155% higher than the average seat mile cost in 2007. Table 22: San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 37

The high fare environment between San Luis Obispo and both San Diego and Sacramento is one of the factors that suppresses demand on the routes. Non-stop service between San Luis Obispo and both San Diego and Sacramento would help to bring down the average fares on both routes, as an airline serving the routes could still be profitable with fares at roughly 70% of their current levels. Since non-stop service between the central California coast and Sacramento was pulled in 1998, those traveling between San Luis Obispo and the State s capital have been forced, either, to connect at Los Angeles or San Francisco to reach Sacramento, or to make an arduous drive. The driving distance between San Luis Obispo and Sacramento is 299 miles (see Table 23). Further, there is no direct freeway between the two cities, so one must take a two lane road to access the freeway. The drive time on this route is 4:44, which causes many of those, who would otherwise take the trip, to stay home. Table 23: Moreover, the distance between Santa Barbara and Sacramento is 420 driving miles, with a similar two-lane jog to access the freeway to the State s capital (see Table 23). The drive time San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 38

on this route is 6:23. Again, many defer trips between the cities due to the difficulty in travel. The San Luis Obispo County Regional Airport believes that many who live in the Santa Barbara area would make the much shorter drive to San Luis Obispo (1:52 drive time) to access flights to Sacramento, rather than drive to the State s capital or make connections at Los Angeles or San Francisco. The drive from San Luis Obispo to San Diego is equally as difficult as the drive to Sacramento. San Luis Obispo is 325 driving miles from San Diego a drive time of 5:11 (see Table 24). Current air service between the two cities is slightly faster, but travelers are required to stop and change planes in Los Angeles. The quickest possible current flight time on the route is 2:29, on two American Eagle flights, connecting at Los Angeles International. While these flights cut the travel time in half, the lowest available fare on the routing as of April 2008 is $279 round trip. The lack of a more convenient and affordable connection between San Luis Obispo and San Diego suppresses the current travel demand between the two cities. Table 24: San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 39

The Airport believes those who live in the Santa Maria area could also benefit from the non-stop connection between San Luis Obispo and San Diego. Santa Maria lies just 33 miles from the San Luis Obispo County Regional Airport a drive time of roughly a half-hour (see Table 24). A nonstop flight from San Luis Obispo to San Diego would shave more than three hours off the current drive time from Santa Maria to San Diego, even when the drive between Santa Maria and San Luis Obispo is taken into account. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 40

Extenuating Factors Affecting Air Service The San Luis Obispo County Regional Airport only retains about half of the passengers who live in its catchment area. The Airport s most recent passenger leakage/retention study showed that about 59% of those who live in the catchment area fly from the San Luis Obispo County Regional Airport (see Table 25). More than 18% of the region s travelers make the drive to Los Angeles to access the national transportation system. Smaller portions of San Luis Obispo area travelers fly from other airports in the immediate region, including Santa Barbara and Santa Maria, despite the fact that neither of those airports offer significantly more flights or significant better fares. Table 25: In order to fly non-stop to Sacramento or San Diego, San Luis Obispo area travelers must drive to one of the Los Angeles area airports either Burbank or Los Angeles International for those who live to the north of the LA Basin. These travelers are a significant portion of the passenger leakage to Los Angeles. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 41

The Airport handles roughly 300,000 annual passengers, but projections from the most recent San Luis Obispo Ticket Left Study show more than 245,000 more annual passengers fly from other airports in the region (see Table 26). 100,000 of those leaked passengers fly from the Los Angeles International Airport, while another 125,000 fly from other airports in the region, including Burbank, Santa Barbara, and Ontario. Table 26: Due to the passenger leakage the San Luis Obispo market experiences, the relative size of market is underestimated by the DOT s passenger numbers for the Airport. When the number of San Luis Obispo passengers flying locally is combined with the travelers who choose to fly from other airports in the larger region, a better picture of the true market strength is derived. The most recent passenger leakage/retention study shows San Luis Obispo s true market is closer to 550,000 annual passengers not the 300,000 passengers who fly from the San Luis Obispo County Regional Airport (see Table 26). This market is sufficiently large enough to support non-stop San Diego and Sacramento service. It is believe that service on those routes will also help curb some of the passenger leakage the Airport currently experiences. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 42

Availability of Alternate Airports The nearest airport with competitive service to San Luis Obispo County Regional Airport is in Santa Barbara. Santa Barbara is a 2-hour drive to the south of the city of San Luis Obispo, and up to a 3-hour drive from locations to the north part of the county such as Paso Robles and Atascadero. The nearest low-fare service is found at Burbank and Los Angeles, about a 4-hour drive from San Luis Obispo. While Santa Maria also has service, it is provided by turboprops to markets served at San Luis Obispo and is therefore not an alternative for San Luis Obispo County residents. There is no current service from any airport in the San Luis Obispo extended catchment area to either Sacramento or San Diego. Table 27: Location of San Luis Obispo County, in relation to other Southern California airports San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 43

Use of Local / Federal Funds Marketing and Advertising San Luis Obispo County Regional Airport proposes to spend $50,000 in funds on marketing and advertising promotions in support of new service introductions. The goal is to increase ridership and usage of new San Diego and Sacramento service through targeted regional campaigns. Revenue Guarantee San Luis Obispo County Regional Airport proposes to make available at least $400,000 in funds for a revenue guarantee to SkyWest, to cover start-up losses that may occur during the first twelve months of service, on both the Sacramento and San Diego routes. Subject to negotiation, payments will be made to SkyWest quarterly when income derived from passengers and cargo is less than agreed expenses on the route. Revenue generated that exceeds expenses will be carried forward and tapped before any grant funds are used. Startup Cost Offsets San Luis Obispo County Regional Airport proposes to spend only existing airport funds to pay for start-up costs in support of new service introductions. SkyWest already serves the San Luis Obispo market, and has no need for the Airport to provide essential terminal space or equipment to handle the new service. Additional Costs As part of this program, San Luis Obispo County Regional Airport understands that additional expenses will be incurred, such as monitoring the results of the program and reporting those results back to the US DOT. In addition, San Luis Obispo County Regional Airport expects to incur some expenses in the recruitment of SkyWest to fly the Sacramento and San Diego routes. The Airport will pay for these additional expenses out of other airport sources and will not incorporate these fees and charges into this proposal. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 44

Public / Private Partnerships The San Luis Obispo Council of Governments (SLOCOG) and the San Luis Obispo County Regional Airport are providing the local matching cash for the grant application. The other local partners will be working with the San Luis Obispo County Regional Airport to promote and market the new service. The Airport will manage and coordinate the marketing program. Additionally, contacts will be made through the other partners to all San Luis Obispo organizations and those with an interest in supporting local air service. SLOCOG The San Luis Obispo Council of Governments The San Luis Obispo Council of Governments (SLOCOG) was formed in 1968 as an area planning council, through a Joint Powers Agreement (JPA) among the incorporated cities and the County of San Luis Obispo. In 1968, the Area Council was designated by the U.S. Department of Housing and Urban Development to provide area-wide planning for housing, sewer and water. The SLOCOG was subsequently designated as the Regional Transportation Planning Agency (RTPA) for San Luis Obispo County. As a result of the finding by the U.S. Census Bureau that the City of San Luis Obispo and the adjacent unincorporated area have a population of over 50,000, thus forming an official urbanized area, as of July 1, 1992 the SLOCOG was designated as the Metropolitan Planning Organization (MPO). SLOCOG addresses issues of mutual concern for the San Luis Obispo Region, in addition to satisfying federal and state planning/program mandates. The agency serves as a forum for planning/discussion of area wide issues, preparing regional plans and programs, serving as a regional agency for federal and state programs, and addressing other area-wide issues as mutually desired. SLOCOG is also responsible for the development of an efficient and effective multi-modal transportation system for mobility and maximizing state and federal funding. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 45

The Economic Vitality Corporation (EVC) EVC is the primary economic development agency for San Luis Obispo County and each of its cities including San Luis Obispo, Paso Robles, Atascadero, Morro Bay, Grover Beach, Arroyo Grande and Pismo Beach. Covering a wide geographic region on the beautiful California Central Coast, the EVC assists local and relocating companies with a variety of business resources and services including business attraction and creation; business retention and expansion; site location, commercial property acquisition, and building permits; international trade and import and export issues through a private in-house consultant and the BuyUSA trade program; business financial assistance and loans; a unique trailing spouse job network; and special economic gardening practices. San Luis Obispo Chamber of Commerce The San Luis Obispo Chamber of Commerce is the oldest and largest voluntary organization in San Luis Obispo County. As a totally independent non-profit corporation (not affiliated with government or any other agency) it is uniquely able to serve the needs of its 1,350 members. For 100 years the Chamber has been dedicated to just one goal: the economic health of the San Luis Obispo area and the prosperity of our members. Our philosophy is simple: more business is good for existing business and an attractive and viable city will attract more business activity. The Chamber also believes additional economic activity will benefit every business person and resident in the region. The Chamber s work toward implementing this philosophy has been successful because of a powerful combination of active, motivated volunteer business leaders supported by a highly regarded professional staff. Together, the volunteer leaders and the professional staff do what no service club, government agency nor individual business could do: enhance and promote San Luis Obispo as a place to do business and enjoy life. Moreover, the Chamber believes enhanced air service is essential to the interconnectivity of businesses, and is an essential part of any community s plan for economic growth. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 46

Air Service Advisory Groups San Luis Obispo County Regional Airport works closely with the San Luis Obispo Council of Governments, the Economic Vitality Corporation, the San Luis Obispo Visitor and Convention Bureau and the San Luis Obispo Chamber of Commerce to support and promote local air service and local service clubs. Local Air Service Development Efforts For the last ten years, San Luis Obispo County Regional Airport has been working to retain, expand, and attract new airline service at the Airport. The Airport s recent history includes the recruitment of America West Express (now US Airways Express) service to/from Phoenix and then Las Vegas. In 2004, San Luis Obispo began recruiting Delta Air Lines to provide competitive east-bound service to Salt Lake City. The Airport conducted a leakage analysis in early 2005 and visited with Delta Air Lines at Jumpstart in Calgary in June of 2005. Negotiations with Delta culminated in 2006, after San Luis Obispo was awarded a Small Community Air Service Development Grant. With that Grant offsetting start-up costs, providing a revenue guarantee, and providing marketing assistance, SkyWest agreed to add service on the San Luis Obispo Salt Lake City route, beginning in 2007, with twice-daily regional jet flights. These flights have been fully selfsustaining in their second six months of service, as projected in the grant application. In-kind Services from the Community The following organizations will help promote the new service through their various membership groups. There is no estimated value to these services. San Luis Obispo County Board of Supervisors Economic Vitality Corporation San Luis Obispo Chamber of Commerce Various service organizations (Elks, Lions, etc.) San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 47

Performance Measures The success of new service to both Sacramento and San Diego will be based on two measurable variables: the number of enplanements on the routes and the average airfares charged in the effected city pairs. The first measurement will include a monthly comparison once the program begins to past enplanements numbers. The second measurement will be derived from US DOT OD1A reports. Financial Controls As the sponsor, San Luis Obispo County Regional Airport will be the responsible party for all fiscal matters and DOT reporting requirements. As a public entity the DOT can be assured that proper financial controls are in place to guarantee that the DOT s grant will be used in accordance with any subsequent agreement. San Luis Obispo County Regional Airport understands that the grant is a reimbursable grant, meaning the Airport is responsible for program expenditures and will submit invoices to the DOT for reimbursement, based on a percentage of the total grant request. Return on Investment San Luis Obispo County Regional Airport has developed a cost effective and achievable strategy to increase enplanements at the airport. The proposal uses proven methods of achieving air service improvements, allowing the DOT to be comfortable with choosing this proposal. The increased competition and access to increased competition with airfares by adding service to Sacramento and San Diego is a major goal of the Small Community Air Service Development Program. Approximately $50,000 of the $450,000 in cash is committed to being spent. The remaining $400,000 in cash available for the revenue guarantee portion of the grant may never be expensed. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 48

DOT Exit Strategy The Airport has developed this proposal as a one-time grant. The advertising and marketing program will commence a few months before service starts and last for at least twelve months. The revenue guarantee program will also be in place for twelve months, with two additional twelve-month periods available for negotiation. It is projected that the service on both routes will be financially self-sustaining within the second twelve months of service. Alternate Plan In the unforeseen circumstance that SkyWest does not begin service before the end of summer 2009 on the new routes, San Luis Obispo County Regional Airport will seek another airline that can offer intrastate service to Sacramento and San Diego from San Luis Obispo. At this time, the most likely candidate to operate the routes is Horizon Air, an airline that has shown continual interest in serving the San Luis Obispo market. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 49

San Luis Obispo County Regional Airport Background The San Luis Obispo County Regional Airport began operations in 1939. Its physical plant was designed and paid for by the US War Department, as the facility was heavily used to support Pacific operations in World War II. The Airport has two runways, one of which was recently extended to 6,100 feet long, to handle larger commercial jet aircraft. The Airport s crosswind runway is 2,500 feet long. The Airport is relatively busy, for an airfield of its size, with more than 250 operations a day. Almost 500 aircraft are based on the field. A little more than 83% of the San Luis Obispo Regional Airport s traffic is general aviation. The Airport s Master Plan calls for a brand new passenger terminal, encompassing more than 66,000 square feet, to help deal with the huge increase in passenger numbers over the past ten years. The terminal will also offer increased aircraft ramp areas, allowing the Airport to handle larger aircraft. Table 28: San Luis Obispo County Regional Airport Aerial Photo San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 50

Table 29: San Luis Obispo County Regional Airport Diagram, April 2008 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 51

Table 30: San Luis Obispo County Regional Master Plan, June 2007 San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 52

San Luis Obispo Community Information For 80 centuries, San Luis Obispo County was the heart of the Chumash Indian country. But by 1769, the Europeans had arrived under the command of Gaspar de Portola of Spain. With Portola came the Franciscan friars to begin founding the California missions and by 1772, Mission San Luis Obispo de Tolosa was established. Following the independence of Mexico and the secularization of the missions, the central coast entered the period of the rancheros from which many names of towns and places are derived. General Fremont claimed San Luis Obispo for the United States in 1846. Four years later, California was admitted to the United States, and San Luis Obispo became one of the original counties. Today, more than 238,974 residents enjoy San Luis Obispo s central coast location. Agriculture, state institutions, tourism and recreation make up the principal economic background. With the ocean and mountains, the Spanish and historical flavor, the friendly climate and the relative freedom from urban hassles, San Luis Obispo County is widely considered one of the best hometowns in the United States. The City of San Luis Obispo San Luis Obispo is the hub of San Luis Obispo County and serves as the County Seat. It is home to historic Mission San Luis Obispo de Tolosa, the world-famous Thursday Night Farmers' Market and America's first motor hotel, The Motel Inn. Tree-lined streets, a charming shopping district, distinctive San Luis Obispo hotels, and historic buildings comprise the delightful downtown area with its array of stores, outdoor cafes, coffee houses, and galleries. Every Thursday evening, an open-air Farmers' Market fills four blocks of the downtown. Buy justpicked produce and sample a variety of barbecued specialties from local restaurants or stroll the many arts and crafts booths while local bands perform. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 53

If Downtown is the heart of San Luis Obispo, then Mission Plaza is its soul. The beautifully landscaped plaza is the background for many events and festivals throughout the year. San Luis Creek meanders through the Plaza where you'll find the Art in Public Places project on display. Parishioners still gather daily for services at the Mission San Luis Obispo de Tolosa, the fifth in a chain of Franciscan stations in California. Visit the original padres' residence, now a museum where you'll find Indian artifacts, glassware, papers, and pictures from days gone by. Tourism in the San Luis Obispo Region San Luis Obispo is in the heart of southern California s wine country, with hundreds of wineries within short drive from San Luis Obispo County Regional Airport. Tens of thousands of people travel to the region each year for wine tasting trips. The area is also known for its Pacific Ocean beaches, and its coast range mountains. San Luis Obispo has truly become a vacation destination in the last 10-to-20-years. Wine Country: Atascadero, California Picturesque Atascadero Lake is often the gathering point of community events, such as the popular Tuesday Evenings in the Park barbecue and free band concert series held throughout the summer. Surrounded by oak trees and rolling hills, the lake offers fishing, paddleboats, picnic areas and a beautiful pavilion. Steps away from the lake discover more than 150 animals at the Charles Paddock Zoo, a perfect spot for family fun. While in the region venture through the miles of hiking trails located throughout the Los Padres National Forest or explore award winning wineries that abound in the surrounding areas. Hundreds of miles of back roads make an ideal setting for cycling enthusiasts while the avid golfer can play a round on courses set among lush oak groves and undulating hillsides. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 54

Wine Country: Paso Robles, California The city of Paso Robles is an eclectic mix of past and present with a commitment to preserving its small town charm. A vibrant downtown area is filled with boutiques, antique stores and eateries all surrounding the beautiful city park. Local events like the Paso Robles Wine Festival embellish the already active area with a vast array of cultural offerings including wine, music and harvest festivals. The dominant feature of Paso Robles wine country is the flourishing wine industry of more than 65 AVA Paso Robles CA wineries and 250 vineyards. Paso Robles wine country tours and wine-tasting tours are extremely popular activities. Most Paso Robles wineries operate tasting rooms which feature critically acclaimed, award-winning wines of the highest quality. The Paso Robles Wine Festival and other events during the year offer first hand experience of Paso Robles CA wines, a rising star of California wine country. Paso Robles is the gateway to nearby Lake Nacimiento - a water sports enthusiast's dream, which is a quick 20-minute drive west of the city. The lake offers campgrounds, outstanding cliff side lodges, and its wilderness qualities make for a distinctive vacation site. If golf is your game, you'll be glad to know the Paso Robles area has three championship courses, each set in exquisite tranquil settings, offering affordable rates and tee time availability. Beaches: Grover Beach, California The entrance to the Oceano Dunes State Vehicular Recreation Area, where adventures galore take place, is located just off Highway 1 at Grover Beach, California. All-terrain off road vehicles can be rented to go four-wheel driving on the seemingly endless dunes or just experience driving directly on the Pacific Ocean coastline for miles. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 55

Grover Beach activities and festivals attract the entire family, while several community parks are also available for fun, picnics and barbeques. A popular annual event is the Stone Soup Ethnic Music Faire held at the Ramona Garden Park. The event features the Dune Run, food and craft booths filled with homemade items and ethnic foods, and the sounds of Latin, African, Australian, Scottish, jazz and country-western music. Dancing in the streets is encouraged. Diverse recreational opportunities are offered in and around Grover Beach. Activities like dune hiking, fishing, clamming, golfing, horseback riding, wine tasting and off-road vehicle riding are just some of the activities awaiting your arrival. Beaches: Morro Bay, California The sentinel of Morro Bay is Morro Rock, a volcanic peak over 21 million years old. This 576-foothigh dome-shaped formation now serves as a preserve for the spectacular peregrine falcons that nest on top, sometimes swooping over your Morro Bay hotels heading out to hunt. As a bird sanctuary, the city of Morro Bay and the Morro Bay National Estuary provide a nourishing habitat to more than 250 species. This abundance is celebrated every year on the Winter Bird Festival weekend. Morro Bay is unique in having one of California's largest and most productive commercial fishing fleets, which provides area restaurants and fish markets with the freshest of seafood. Harbor side Morro Bay offers visitors a large variety of unique shops plus Morro Bay hotels, motels, bed and breakfasts, and restaurants - most with magnificent views of the Pacific Ocean and the Morro Bay estuary. Beaches: Pismo Beach, California Pismo Beach is known as the "Clam Capital of the World" and preserves the spirit of early California with its 23 miles of unspoiled sandy beaches including Pismo Beach State Park, dramatic rugged coastline, and the 1,200 foot Pismo Beach pier lined with fishing enthusiasts. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 56

Ride horseback along the surf-line, explore pebbled coves and tide pools beneath steep rocky bluffs, or experience the beauty of the Pacific Ocean by kayak. The white, sandy, uncrowded coastline offers a perfect landscape for kite flying, shell gathering and sand castle building, all close by your Pismo Beach hotel, motel or beach vacation rental. Pismo Beach hotels offer excellent access to your next beach vacation. Attractions: Hearst Castle Hearst Castle is located near San Simeon, in the Santa Lucia Mountains of San Luis Obispo County. This magnificent estate of 165 rooms and 127 acres of gardens, terraces, pools and walkways commands a stunning view of the Pacific Ocean and the hills and valleys of the Santa Lucias. Over nearly three decades, William Randolph Hearst's ranch evolved into Hearst Castle, one of the most magnificent private estates in America, the setting for legendary parties during the Golden Age of Hollywood. A tour of Hearst Castle today makes it easy to imagine the social lives of prominent people in pre-war America, a view we normally can only see in the movies. Today, Hearst Castle is a State Historical Monument and one of the most popular visitor destinations in California. It rests on a beautiful mountain above San Simeon, California, which is the nearest town to The Enchanted Hill. It was through San Simeon that the materials to build Hearst Castle were transported almost 1,600 feet up the mountain to the site of the estate. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 57

San Luis Obispo Economic Overview The Industry Standard named San Luis Obispo the best new place to get away from it all, saying it s never been so easy to run a business from paradise. Major fiber-optic companies have chosen San Luis Obispo County as a natural landing site for links with Trans-Pacific cables. In fact, there are over 300 high-tech companies already located in the County, with many others involved in manufacturing, agriculture, and business services. With regional cities located along the state s fiber-optic data network, San Luis Obispo County is a natural fit for businesses and start-ups looking to relocate or grow their business. The San Luis Obispo area also benefits from its prime location along the Pacific Ocean as a major tourist destination. The region s moderate climate, incredible scenery, picturesque landscape, and wide, sandy beaches bring tens of thousands of tourists to San Luis Obispo each year. Moreover, the area s rapidly expanding wine industry, currently consisting of more than 130 individual wineries, is becoming a destination unto itself. San Luis Obispo has a diverse job-base, with major employers in dozens of distinct and different industries. Many area jobs are high paying, with the average median family income in San Luis Obispo Metropolitan Statistic Area (MSA) above $50,000 a year. Economic Impact of the San Luis Obispo County Wine Industry Beyond high-tech, health care, and tourism, the growing factor driving the San Luis Obispo County economy is the world-renowned wine industry. A recently completed study, commission by the San Luis Obispo Economic Vitality Corporation and the Paso Robles Wine Country Alliance in 2007 showed the wine industry in the region has a $1.8 billion dollar annual economic impact greater than any other industry in the area. The industry directly supports 8,114 jobs mostly in small vineyards and wineries. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 58

The study found that more than 1.2 million people travel to San Luis Obispo each year to visit the vineyards and wineries in the area. These visitors stayed at local hotels, ate at local restaurants, and shopped at local stores, adding more than $113 million in tourism spending to the region. Moreover, exported San Luis Obispo County wine sold around the world, with an annual retail value of $657 million not including the residual marketing impact. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 59

Top Employers in the San Luis Obispo MSA County of San Luis Obispo 3239 California Polytechnic State University 2575 Atascadero State Hospital 2066 Pacific Gas and Electric 1750 California Men s Company 1700 Cal Poly Corporation 1349 Compass Health 1200 Tenet Health Care 1170 Lucia Mar Unified School District 1013 Paso Robles Public Schools 918 King Ventures 900 Catholic Healthcare West 893 San Luis Coastal Unified School District 805 Cuesta College 712 Von s 674 Supervalu 668 Atascadero Unified School District 660 City of San Luis Obispo 557 Mid-State Bank and Trust 459 Martin Resorts 368 Joslyn Sunbank/Danaher Corporation 270 Source: San Luis Obispo Economic Vitality Corporation, 2008 Select Company Profiles King Ventures Headquartered in San Luis Obispo, King Ventures specializes in hotel and restaurant development, construction, and managements. King owns and operates some of the most well-known hotels on the California coast. Among King s properties are the Apple Farm Inn, the Inn at Oyster Point, Sycamore Mineral Springs, The Cliffs Resort, The Pismo Beach House, and the Inn at Morro Bay. Martin Resorts Also based in San Luis Obispo, Martin Resorts operates a number of resorts and restaurants along the central California coast. Among Martin s hotels are the Paso Robles Inn, the Avila Lighthouse Suites, the Pismo Lighthouse Suites, the Shore Cliff Lodge, and the Shelter Cove Lodge. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 60

Joslyn Sunbank/Danaher Corporation A part of the Washington, DC-based Danaher Corporation, the Joslyn Sunbank Company is based in nearby Paso Robles, and has major operations in Tijuana, Mexico. Sunbank builds parts for major military and commercial applications in aviation, automotive, and construction applications. As a part of Danaher, Sunbank is a multi-national company, with offices and plants all over the world. California Department of Transportation The California Department of Transportation, also known as Caltrans, is responsible for more than 45,000 miles of highway and freeway, inter-city rail lines, 400 public-use airports, and dozens of public-use heliports throughout the State. Caltrans District 5, which covers the central coast of California, is based in San Luis Obispo, with more than 420 employees stationed at the regional base. These jobs have close connections to Caltrans headquarters in the capital city of Sacramento, and often require air travel for business. Cal Poly Corporation The Cal Poly Corporation (formerly known as the Cal Poly Foundation) provides dozens of programs and facilities for California Polytechnic State University, including the bookstore, campus dining, and a number of sponsored programs. The organization s mission is to provide high quality services that assist the University in achieving its educational mission. The Corporation is non-profit, and employs more than 1,300 workers on campus. Mid-State Bank and Trust With $2.3 billion in assets, and more than 100,000 customers along the central and southern coasts of California, Mid-State Bank and Trust is San Luis Obispo s largest hometown financial institution. Mid-State current employs 860 people statewide, including 475 in San Luis Obispo itself. Mid-State has 41 office locations throughout California. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 61

Compass Health Compass operates a number of care centers throughout the region surrounding San Luis Obispo. It provides care to seniors, families, and others who need an assisted living environment. Compass has 550 employees in the area, working in facilities in Arroyo Grande, Atascadero, Morro Bay, San Luis Obispo, and Templeton. Higher Education California Polytechnic State University Cal Poly is a nationally ranked, four-year, comprehensive public university located in San Luis Obispo California. The emphasis of the University is a "learn by doing" educational experience for its more than 18,000+ students. Many students seek admission to Cal Poly not only because of its excellent academic reputation, but also because the 6,000-acre main campus is nestled in the foothills of San Luis Obispo, just minutes from California's Central Coast beaches. At 9,678 acres, Cal Poly is the second-largest land-holding university in California (second only to UC Berkeley), and one of the largest land-holding universities in the nation. Cal Poly, however, uses all of its land for educational and public purposes. Cal Poly San Luis Obispo has been rated the best public large undergraduate university in the west by U.S. News & World Report for 11 consecutive years (1992-2004). Cuesta College The community college for a district of including more than 230,000 people, Cuesta College is a two-year institution offering associates degrees in hundreds of fields of study. Cuesta has a current full-time student enrollment of 11,150, while the college employs more than 700 full-time staff members. Cuesta s annual budget exceeds $56 million. San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 62

Comparison of San Luis Obispo to Regional Communities Table 31: San Luis Obispo County Regional Airport Small Community Air Service Development Grant June 2008 63