July, 2014 Sheridan County Airport Proposal Under the Small Community Air Service Development Program Docket: DOT-OST-2014-0113 Sponsor: Sheridan County Airport Sheridan, WY Airport DUNS: 169645892 County DUNS: 033802372 Congressional District Code: WY-AL Tax ID: 836000124 Contact: John Stopka Airport Manager 908 W. Brundage Lane, Sheridan, WY 82801 (307) 674-4222
Table of Contents Summary Information 3 Proposal 8 Air Service Challenges/History 9 Economic Impact 15 Plan And Overview 16 Priority Selection Criteria 19 Secondary Selection Criteria 21 Previous Project Goals 23 Letters of Support 24 2
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Proposal Sheridan County, Wyoming is located midway between Yellowstone Park and the Black Hills at the foot of the majestic Big Horn Mountains. Home to nearly 30,000 residents, Sheridan County is a lively tourist area, with robust wildlife and a rich history. Sheridan s economy is diverse, with large employers in the natural resources, tourism and railroad industries, as well as Federal and State government. Continued growth of these industries requires reliable, stable, and affordable connections to the U.S. air service network. Sheridan is applying for a SCASD grant for these purposes. Sheridan faces a set of unique challenges retaining and attracting new air service. Changes in the airline environment have caused fares to increase; capacity and reliability to drop. Sheridan is located in a remote geographic area; a 6-hour plus drive from either a large hub airport or city with a substantial low-fare presence. Only one airline serves Sheridan currently. Sheridan seeks a Small Community Air Service Development Grant to fund a revenue guarantee for nonstop service to a large hub by a second airline, securing the community s link to the national air service network. Sheridan County Airport proposes funding a portion of this revenue guarantee with a $500,000 Small Community Air Service Development Grant. Federal funds will be combined with $1.3 million in cash funds from the State of Wyoming and $450,000 cash from local sources. An additional $50,000 in inkind contributions for landing fee waivers and marketing costs will also be provided. The total package of funds for this project will be $2,300,000. However, federal dollars will account for 22% of total funds for this revenue guarantee. Sheridan County and the State of Wyoming realize the importance of stable, competitive air service to the regional economy and are willing to fund nearly 80% of this revenue guarantee. 8
Air Service Challenges Seats Per Day Each Way Departures Per Day Sheridan County Airport currently has service to Denver on Great Lakes Airlines. Great Lakes currently three round-trips on 30-seat Embraer 120 aircraft. However, levels of service have fluctuated over the years. Sheridan-Denver: July, 2014 Airline Origin Dest Flt # Equip Seats Depart Arrive Freq ZK SHR DEN 3023 EM2 30 715 840 1234567 ZK SHR DEN 3045 EM2 30 1225 1350 1234567 ZK SHR DEN 3007 EM2 30 1551 1716 12345.7 ZK DEN SHR 3045 EM2 30 1040 1205 1234567 ZK DEN SHR 3007 EM2 30 1401 1526 12345.7 ZK DEN SHR 3007 EM2 30 1530 1655...6. ZK DEN SHR 3039 EM2 30 1855 2020 12345.. Capacity at Sheridan County Airport is well off peak levels. And the implementation of Part 117 at the airline currently serving the airport makes future capacity difficult to predict. 130 97.5 65 32.5 0 7 5.25 3.5 1.75 0 64 3.0 2004 2004 31 1.6 2005 2005 79 4.2 2006 2006 129 6.1 2007 2007 103 103 2008 2009 123 3.7 3.5 4.9 2008 2009 2010 2010 83 3.8 2011 2011 Flown 68 2012 82 2013 3.0 2.9 2012 2013 9 86 Jan 2014 Jan 2014 86 Feb 2014 Feb 2014 85 Mar 2014 Mar 2014 86 Apr 2014 Apr 2014 85 May 2014 May 2014 86 Jun 2014 Jun 2014 83 Jul 2014 Jul 2014 85 Aug 2014 Aug 2014 86 Sep 2014 Sep 2014 86 Oct 2014 Oct 2014 85 Nov 2014 Nov 2014 86 Dec 2014 2.9 2.9 2.8 2.9 2.8 2.9 2.8 2.8 2.9 2.9 2.8 2.9 Scheduled Seats Down: 36% from Peak Flights Down: 52% from Peak Dec 2014
Air Service Challenges More troubling than capacity, average fares at Sheridan County Airport have risen sharply over the past several years, and now are well above the U.S. average. $240 Annual Enplaned Passengers Vs. Fare - SHR 21,000 Average Fare $180 $120 $60 15,750 10,500 5,250 Annual Passengers 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 Passengers Fare Sheridan s airfares peaked in 2012. In 2013, Sheridan fares stood at $219 one-way. That s $43 or 25% more than the average for the Continental U.S.. Sheridan meets one of the most important priority selection criteria for a Small Community Air Service Development Grant. Sheridan s fares are consistently above average. $240 $207 $220 $201 $213 $211 $200 $212 $199 $229 $219 $180 $120 $155 $143 $137 $178 $178 $159 $144 $144 $132 $128 $132 $104 $154 $139 $153 $166 $172 $176 $60 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sheridan Continental US Average 10
Air Service Challenges In 2013, Sheridan s average U.S. Domestic fares were higher than 80% of 426 markets in the lower 48 states. % Rank Airport City 2013 Ave Fare 81% CMI Champaign, IL, US $222 81% ESC Escanaba, MI, US $222 81% TLH Tallahassee, FL, US $221 81% CMX Hancock, MI, US $221 81% CRW Charleston, WV, US $220 80% MLU Monroe, LA, US $220 80% MHK Manhattan, KS, US $220 80% SHR Sheridan, WY, US $219 80% PUB Pueblo, CO, US $219 79% HON Huron, SD, US $219 Average Continental US $176 While Sheridan County Airport s average fares dipped slightly in 2013, they re still consistently higher than the region s largest hub in Denver. Over the past several years, Sheridan s fares have been roughly 50% higher than Denver s fares. Sheridan s fares dropped between 2005 and 2007 due new service, new destinations and new competition at the airport. Sheridan Vs. Denver Fares $240 200% Average Fare $205 $170 $135 175% 150% 125% $100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 100% Sheridan Denver CYS as & of DEN 11
Air Service Challenges Recent passenger retention analysis demonstrates that Sheridan County Airport retains only 30% of airline traffic from its natural catchment area. However, in 2014, Sheridan County airport s passenger retention has steadily and materially worsened, dropping to levels not seen before. New airline service would stimulate competition, lower fares and attract traffic from the 70-80% of passengers who are driving to other airports for air travel. Airport Usage YTD 2014 Sheridan Catchment Passenger Retention Trends Sheridan County Airport 2010 2011 2012 2013 Jan-14 Feb-14 Mar-14 Apr-14 26% 24% 24% 31% 27% 17% 20% 18% 74% 76% 76% 69% 73% 83% 80% 82% 0% 25% 50% 75% 100% Gillette Denver 5% 17% Casper 13% Sheridan 23% Billings 42% New, competitive airline service would allow Sheridan County Airport to improve passenger retention from its currently very low levels and reduce the long drive a large percentage of residents are making to large hubs to access the U.S. air transportation network. 12
Air Service Challenges Sheridan s air service needs cannot adequately be met by driving to nearby airports. The two closest airports, Billings and Rapid City, have high average fares and limited nonstop flights to limited destinations. Drive times to large nearby hubs with lower fares and more service are inconveniently long, especially when inclement weather is a factor. Affordable, reliable, convenient access to a large hub is necessary for Sheridan to recapture the leaking to other airports. Drive from Sheridan to: Drive Ave. N/S Distance Time Fare Cities Denver 432 mi 6hr $150 190 760 N/S Flts. Day Salt Lake City 562 mi 9hr $184 96 320 Billings* 134 mi 2hr $202 12 28 Rapid City 258 mi 4hr $224 9 14 13 * Excludes Intra-Montana flights
Air Service Challenges Reliability of air service has been one of Sheridan s most pressing issues. Sheridan s existing air service has performed well below U.S. Averages, both in delays and cancellations. These two factors are an important part of Sheridan s ability to retain passengers from within its catchment area. If service is not reliable; if service is much worse than U.S. averages, Sheridan County Airport passengers will choose to drive to airports where the service is more reliable. Sheridan s flights, on average, have been 10-20 percentage points worse than the U.S. average for delays for the past 2 years. Sheridan s flights have been substantially more likely to be cancelled than other flights, on average. In 2014, 38% of Sheridan s flights were cancelled, while only 1.5% of U.S. flights were cancelled. This is an abnormal level of cancellations for a U.S. airline. There can be no doubt that reliability at Sheridan County Airport is negatively impacting passenger traffic. Improved reliability is another reason Sheridan seeks additional air service. % Flights Delayed % Flights Cancelled 38% 29% 19% 10% 0% 37.9% 21.8% 31.6% 21.7% 2013 2014 (YTD) 40% 30% 20% 10% 0% 8.9% 3.3% 38.0% 1.5% 2013 2014 (YTD) Sheridan U.S. Sheridan U.S. 14
Air Service Economic Impact The current level of air service in Sheridan is damaging the local economy. The decline in ridership over the past 7 years is costing the local economy at least $1.4 million annually. Sheridan seeks to bolster its economy by increasing traffic above and beyond 2007 levels with new, competitive air service, benefitting local business and residents. 2007 2011 2013 Passenger Segments 41,314 27,637 28,510 % Visitors to Sheridan 55% 55% 55% Visiting Passengers* 11,361 7,600 7,840 Average Length of Stay* 4.8 4.8 4.8 Average Daily Spend $82 $82 $82 Incremental Dollars From Airport $4,471,827 $2,991,429 $3,085,922 Change since 2007 ($1,480,398) ($1,385,905) A more recent 2013 study of economic impacts of commercial airports and airline services in Wyoming estimated the total off-airport and on-airport impact of Sheridan County Airport to be $23,418,570. * From 2010 Wyoming Department of Transportation Aeronautics economic impact study 15
Plan and Overview Sheridan County Airport plans to use state, local and SCASD funds to solicit a second carrier to serve the airport. Sheridan requests a $500,000 Small Community Air Service Development Grant to fund a $2.3 million dollar total revenue guarantee. Program Goals: Increasing local utilization of Sheridan County Airport. Sheridan s passenger retention is declining drastically in 2014. Only 15-25% of area passengers are estimated to currently use SHR. New, competitive airline service to a large hub with increased frequency and capacity will increase passenger retention. Increasing reliability of airline service. The reliability of air service at Sheridan County Airport is much worse than U.S. averages. A new carrier would increase reliability and thereby increase passenger usage of the airport. Reducing airfares paid at Sheridan County Airport. Sheridan s fares are well above the national average. New airline service should cause some price competition in Sheridan This has happened in the past. Better access to the U.S. Air Transportation Network. Additional airline service will provide better, more reliable connectivity than currently exists at Sheridan. Plan Specifics/Allocation of Funds: Revenue Guarantee: The revenue guarantee will be used to incentivize new airline service at Sheridan County Airport. The funds will be used to offset the new airline s losses for up to three years after commencing service. Exact terms will be negotiated once grant money is awarded. Federal funds will constitute only 22% of the total revenue guarantee. 78% of the funds will come from state and local sources. $500,000 Small Community Air Service Development Grant. $450,000 Local matching funds from 2 Wyoming counties & local businesses. $1,300,000 State of Wyoming - Air Service Enhancement Program. $50,000 In-kind contributions. 16
Plan and Overview Marketing/Advertising: Sheridan County Airport proposes $25,000 in reduced marketing costs for the new service. Facilities Use Abatements/Startup Costs Offsets: Sheridan County Airport proposes $25,000 in waiver of landing fees for the new airline. Other Costs: The airport will not use SCASD funds for administration, or monitoring and reporting of results under the grant. Additional expenses incurred will be paid out of the airport s general operating funds. Oversight: The governing body of Sheridan County Airport, the Sheridan County Board of County Commissioners, will be responsible for all fiscal issues and D.O.T. reporting requirements. As a government entity, D.O.T. should be assured that proper financial oversight for implementation rests in the hands of the Commissioners. The Board of Commissioners understands that it is responsible for program expenditures and will submit invoices to D.O.T. for reimbursement based on the grant request. 17
Plan and Overview Timeline: Assuming the Department of Transportation awards Small Community Air Service Development grants in late 2014, Sheridan County Airport will move as aggressively as possible to implement air service under the terms of the grant. Sheridan County Airport is already in talks with various airlines for additional service to the airport. Should Sheridan County Airport receive SCASD funds, it will solidify negotiations with those airlines and develop timelines and dates to begin new service. Legal Sponsor: Sheridan County Airport is the legal sponsor of this proposal. The Airport will administer the programs outlined. The Sheridan County Airport is a government entity. 18
Priority Selection Criteria Air fares are higher than the national average for all communities. Sheridan s air fares are higher than average. In 2013, Sheridan s air fares were : 25% higher than the U.S. average. 43% higher than the nearest hub airport in Denver. The community or consortium will provide a portion of the cost of the activity from local sources other than airport revenues. Sheridan plans to fund this revenue guarantee as follows: $500,000 Small Community Air Service Development Grant $450,000 Local matching funds $1,300,000 State of Wyoming - Air Service Enhancement Program. $50,000 In-kind contributions $2,300,000 Total Federal Funding: State/Local Funding: 22% of revenue guarantee. 78% of revenue guarantee. 19
Priority Selection Criteria The community will establish a public-private partnership Sheridan County has established a public-private partnership. Sheridan County Airport s Task Force consisting of Sheridan and Johnson County stakeholders began meeting in May of 2012. The task force renamed themselves as the Critical Air Service Team (CAST) in October of 2012. The organization became a 501(c)3 in January of 2013. CAST has adopted by-laws and current officers are Bruce Garber, Chairman, Jay Stender, Vice President, and Angela Jarvis, Secretary. CAST is a multiple stakeholder group of citizens and government that are working to assure commercial service is in Sheridan, reliable, and cost effective. Members include, Representative from the Sheridan County Commission, City of Sheridan, Forward Sheridan, Sheridan Chamber of Commerce, Johnson County Chamber of Commerce, Sheridan Travel and Tourism, representatives from local Travel Agencies, oil and gas industry, financial institutes, and real estate agencies. The assistance will provide material benefits to a broad segment of the traveling public, including businesses, educational institutions and other enterprises, whose access to the national air transportation system is limited. As only 15-25% of Sheridan County Airport s catchment area airline traffic currently chooses to fly locally, additional service that attracts a larger percentage of traffic will naturally benefit a broad segment of the traveling public. 20
Priority Selection Criteria The assistance will be used in a timely manner As Sheridan County Airport s passenger retention issues worsen, Sheridan has begun to make contingency plans to reverse this process. Sheridan is prepared to act immediately to solicit an airline for new service to the airport. Secondary Selection Criteria Innovation Wyoming s Air Service Enhancement Program (ASEP) is unlike any air service development program in the United States. The State of Wyoming combines state funds with local funds to attract and retain air service within the state of Wyoming. The program was originally funded at $6M per biennium. The primary goals of ASEP are to: Work with existing airlines to improve operational reliability Work to make airfares affordable. Increase passenger retention of Wyoming airports. Ensure airlines are financially stable to operate in Wyoming. Achieve financial stability in existing Essential Air Service markets. The program funds a number of routes within the state. Sheridan seeks to combine Federal funds with those from this unique program to augment Sheridan County Airport s air service. 21
Secondary Selection Criteria Participation Efforts to attract new airline service to Sheridan have always enjoyed broad community support. The State of Wyoming s and Sheridan area s willingness to fund 80% of the proposed minimum revenue guarantee demonstrates that commitment. Location Sheridan s geography is unique. Wyoming is the least populated state in the United States. Sheridan is located in a remote portion of Wyoming, with long drives to hub airports that can provide acceptable access to the U.S. air transportation network. Sheridan County Airport is not proximate to an existing or prior grant recipient, and, therefore, award of a SCASD grant would have no negative impact on Sheridan s proposal or another active SCASD recipient. Other Factors The proposal directly addresses Sheridan s stated problems: New competitive airline service will: Reduce fares Increase enplanements Positively benefit the Sheridan and Wyoming economies. Sheridan s air service is decreasing, and the airport seeks to reverse this trend. Sheridan has access to Wyoming s Air Service Enhancement Program to continue financial support for this project (if necessary)after SCASD funds have expired. The proposed Federal funding is only 20% of the total revenue guarantee. 22
Previous Project Goals Sheridan County Airport s 2014 Small Community Air Service Development Grant application differs substantially from the 2005 SCASD grant awarded to the State of Wyoming. The 2005 Wyoming grant was used to correct misperceptions about Wyoming s air service through an advertising/marketing campaign. The 2005 grant was also used to increase passenger retention across all Wyoming airports. Although that grant was successful for the state, the 2014 grant application is geared mainly to attracting and funding new airline service at a specific airport with specific air service issues, rather than marketing existing air service. 23
Letters of Support 24