Chicopee, Massachusetts. Proposal under the Small Community Air Service Development Program. Docket DOT-OST

Transcription

1 CEF Westover Metropolitan Airport -- Chicopee, Massachusetts Proposal under the Small Community Air Service Development Program Docket DOT-OST Dun & Bradstreet DUNS Number: Tax Identification Number: Two-Digit Congressional District Code: 02

2 TABLE OF CONTENTS INTRODUCTORY LETTER... 3 EXECUTIVE SUMMARY... 4 AIR SERVICE OVERVIEW... 6 Catchment Area and Alternate Airports... 6 Westover Currently Has No Scheduled Air Service... 7 Air Service Development Efforts... 8 AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES... 9 Hartford Capacity, Domestic Traffic and Domestic Fare Trends... 9 Hartford-Florida Traffic and Fare Trends Southwest's Hartford-Florida Traffic and Fare Trends STRATEGIC PLAN Proposed Use of SCASD Funding Objective Grant Amendments/Alternate Strategies PROJECT IMPLEMENTATION, MONITORING AND FUNDING Public / Private Partnerships Sources and Allocations of Project Funding Project Timeline Continuation of Project Activities Beyond the Grant Timeline PROJECT MONITORING AND FINANCIAL CONTROL Project Monitoring Legal Sponsor Financial Controls APPENDIX A: REQUIRED SUMMARY INFORMATION A. Applicant Information B. Public/Private Partnerships C. Project Proposal D. Existing Landing Aids at Local Airport E. Project Cost F. In-Kind Contributions** G. Is this application subject to review by state under Executive Order Process? H. Is this applicant delinquent on any federal debt?

3 INTRODUCTORY LETTER 3

4 EXECUTIVE SUMMARY Westover Metropolitan Airport is requesting a Small Community Air Service Development (SCASD) Grant in the amount of $200,000. SCASD funding would be supplemented with community funding totaling $50,000 in cash to market and advertise daily or less-than-daily (LTD) service to one or more leisure destinations from Westover. In addition, the Airport would provide incentives, in the form of fee waivers, valued at up to $374,000 over two years. Several airlines, such as Allegiant, Direct Air and Vision, provide service exclusively to leisure destinations at what are often secondary airports near larger airports in Florida. For the airlines flying to these secondary airports, the airports are often lower-cost alternatives to the primary airport serving a leisure destination and are more attractive than the larger airport for low-cost service because airport costs are lower. Airlines specializing in this particular kind of air service have expressed interest in serving the Westover/Chicopee area, and each carrier has indicated a need for Westover Metropolitan Airport to bear some of the risk of potential service by marketing and advertising any service the airline would begin to a leisure destination. Eight leisure destinations and four airlines have been identified for potential service from Westover Metropolitan Airport. Seven of the destinations are in Florida West Palm Beach, Ft. Lauderdale, Punta Gorda, St. Petersburg, Lakeland, Sanford/Orlando and Destin/Ft. Walton Beach. Myrtle Beach, in South Carolina, has also been identified as a potential market for service, and Direct Air's new service to San Juan from several mainland markets makes San Juan a target for service from Westover. Westover is targeting four airlines as candidates for service to these destinations: Allegiant, Direct Air, Spirit and Vision. These carriers (Direct Air is actually an indirect air carrier providing public charter air flights) currently 4

5 provide service to one or more of the targeted destinations from other smaller airports on the East Coast and the Midwest. 5

6 AIR SERVICE OVERVIEW Catchment Area and Alternate Airports Westover Metropolitan Airport is located in the heavily populated Northeast Corridor and is located within reasonably short drives of large population centers. 643,000 residents live within a 30 minute drive, 1.7 million live within a 60-minute drive and 4.2 million live within a 90-minute drive of the airport. Most of the Hartford metropolitan area is located within the 60-minute drive time and, many of the western suburbs of Boston are within a 90-minute drive of the airport. Bradley International Airport in Hartford (BDL) is located approximately 26 miles from Westover, the airport in Worcester (ORH) is located approximately 60 miles from Westover, and Boston Logan International Airport (BOS) is located approximately 100 miles from Westover. Exhibit 1: 30, 60 and 90-Minute Drive Times from Westover Metropolitan Airport 6

7 Enplaned Passengers Westover Metropolitan Airport Westover Currently Has No Scheduled Air Service Westover Metropolitan Airport has no commercial airline service today. Westover's last airline service was operated by Skybus Airlines between July 2007 and April 2008 with one daily roundtrip to Columbus, Ohio. Service to Greensboro, North Carolina was added in January narrowbody Airbus A319 aircraft. Both markets were operated with The service ended when SkyBus discontinued operations and shut-down. Over the eight months Skybus reported data for its operations at Westover, more than 24,000 passengers were enplaned on Skybus flights, a strong indication Westover can generate significant traffic when low-cost airline service is available. Exhibit 2: Skybus Enplaned Passengers at Westover Metropolitan Airport July 2007 through February 2008 (DOT T-100 Data) Skybus operated at Westover through April 2008, but reported data only through February ,000 4,500 4,000 3,500 3,000 2,500 2,000 4,475 1,500 1, ,551 2,847 3,067 3,155 3,174 2,693 3,

8 Air Service Development Efforts Westover Metropolitan Airport met with Direct Air, SkyKing and Vision Airlines in October 2010 in Myrtle Beach to discuss service to destinations in Florida. All three airlines indicated the need for the Airport to share some of the risk by providing funds to market and advertise any new air service, and all three airlines indicated the amount would need to be approximately $100,000 per route. 8

9 Seats and Passengers per Day Each Way Average One-Way Fare Westover Metropolitan Airport AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES Hartford Capacity, Domestic Traffic and Domestic Fare Trends Westover Metropolitan Airport has no commercial airline service, and Bradley International Airport, near Hartford, is the closest airport to Westover with commercial airline service. Most residents and travelers within a 30 minute drive of Westover Metropolitan Airport use Bradley when they travel; however, fares at Bradley have risen over the last ten years as airline capacity at Bradley has trended down. Over the last ten years, Bradley's capacity peaked in 2005 at just over 14,000 seats per day each way. Since 2005, capacity has declined 34.4%, and the average domestic fare has increased 31.4% or $41 each way to $172. Exhibit 7: Bradley International Airport Seats per Day Each Way, Domestic Passengers per Day Each Way (PDEW) and Average Domestic One-Way Fare (DB1B and DOT T-100 data) Seats per Day Each Way Domestic PDEW Average One-Way Domestic Fare 16,000 $200 14,196 14,000 12,000 13,456 12,666 12,075 13,206 12,644 11,549 $173 $172 $175 10,000 8,000 8,881 8,318 8,021 8,583 9,386 8,823 $153 $163 8,209 10,748 7,591 9,104 9,312 $156 6,759 6,808 $150 6,000 $144 $136 $144 $137 4,000 $131 $125 2, This Section Continued on Next Page $100-9

10 Passengers per Day Each Way Average One-Way Fare Westover Metropolitan Airport Hartford-Florida Traffic and Fare Trends Because Westover Metropolitan Airport is requesting SCASD funding to assist airlines in advertising and marketing service to one or more leisure destinations, primary destinations in Florida, it is important to understand the trend in fares between Bradley International Airport and markets in Florida. Despite low-cost carriers such as Southwest and JetBlue operating nonstop service from Bradley to destinations in Florida including Orlando, Tampa and Ft. Lauderdale, the average Bradley-Florida one-way fare stood at $142 in The average fare in 2010, was just $2 lower than the ten-year peak of $144 in Over the last ten years, the average Bradley- Florida fare increased 43.1% or $43 each way from $99 in 2001 to $142 in Nonstop service from Westover to one or more destinations in Florida would likely generate a lower average fare than the average fare at Bradley. As the average Bradley-Florida fare increased since 2005, traffic has fallen. Traffic from Bradley to destinations in Florida peaked in 2005 at 2,548 PDEW, but fell 36.3% to 1,624 PDEW in Exhibit 8: Southwest Airlines Hartford-Florida Passengers per Day Each Way (PDEW) and Average One-Way Fare (DB1B data) BDL-Florida PDEW Average One-Way BDL-Florida Fare 3,000 $175 2,548 2,500 2,000 2,309 2,185 2,086 2,338 2,209 1,912 $144 $135 $142 $150 1,500 $123 $136 1,763 1,603 1,624 $125 $110 1,000 $99 $98 $105 $100 $ $75 10

11 Passengers per Day Each Way Average One-Way Fare Westover Metropolitan Airport Southwest's Hartford-Florida Traffic and Fare Trends Analysis of Southwest's Hartford-Florida traffic and fares indicates even Southwest's average Florida fare has increased substantially over the last ten years. In fact, Southwest's average Hartford-Florida fare increased at a greater rate than the average fare for all industry traffic in Hartford-Florida markets. Southwest's average fare was $138 in 2010 and increased to this level from $93 in 2001, a 48% increase or an increase of $45 in each direction.. Exhibit 8: Southwest Airlines Hartford-Florida Passengers per Day Each Way (PDEW) and Average One-Way Fare (DB1B data) Southwest BDL-Florida PDEW Southwest Average One-Way BDL-Florida Fare 700 $ $138 $ $132 $127 $ $106 $108 $ $93 $87 $95 $91 $ $75 11

12 STRATEGIC PLAN Proposed Use of SCASD Funding Westover Metropolitan Airport is requesting SCASD funding of $250,000 to market and advertise service to one or more leisure destinations on a low-cost carrier such as Allegiant, Direct Air, Spirit or Vision. SCASD funding will be supplemented with $50,000 of cash provided by partners in the community. The Airport would like the option to pay the proposed grant amount directly to the airline over a period of two years at a rate of up to $100,000 per route per year. In addition to the cash, in-kind support from the Airport, in the form of fee waivers, is valued at $187,000 over a period of two years. Objective As discussed, the primary objective of Westover's proposal is to secure air service to at least one leisure destination on one or more airlines. A combination of nine destinations on four airlines has been identified as potential targets for the type of service Westover is seeking, and the airline/destination combinations are: Allegiant Myrtle Beach, Punta Gorda, St. Petersburg, Sanford/Orlando Direct Air Lakeland, Myrtle Beach, Punta Gorda, San Juan, West Palm Beach Spirit Ft. Lauderdale, Myrtle Beach Vision Ft. Walton Beach Grant Amendments/Alternate Strategies Funds to market, advertise and promote air service from Westover to a leisure destination is the objective of the requested Small Community Air Service Development grant. If the Department awards Westover Metropolitan Airport the grant funding requested, but the Airport is not successful in securing service to one of the targeted leisure destinations, the Airport would request an amendment to the grant from the Department to reallocate funding for another type of air service development project. This would include a minimum revenue guarantee (MRG) for service to a leisure or other type of destination if the interested carrier is not interested in utilizing the grant funding to market, advertise or promote service. 12

13 PROJECT IMPLEMENTATION, MONITORING AND FUNDING Public / Private Partnerships Westover Metropolitan Development Corporation owns and operates Westover Metropolitan Airport and is the project sponsor. Westover Metropolitan Development Corporation is a public entity. The Westover Metropolitan Development Corporation and the Economic Development Council of Western Massachusetts (EDC) have partnered in the proposal for Small Community Air Service Development funding. Westover Metropolitan Development Corporation Westover Metropolitan Development Corporation was created in 1974 by the Commonwealth of Massachusetts as a non-profit 501(c)(4) corporation for economic development of portions of the former Westover Air Force Base. Westover Metropolitan Development Corporation operates the airport under a joint use agreement with the Department of Defense. Economic Development Council of Western Massachusetts The Economic Development Council of Western Massachusetts (EDC) is a private, non-profit corporation that provides resources and information to businesses operating in or entering the region by aiding in expansion, relocation and networking. The mission of the EDC is to deliver the services and business resources that enable companies to do business in Western Massachusetts grow the region's economy through the creation of quality jobs and enhanced public and private investment. EDC accomplishes its goals through its own efforts and the coordinated efforts of eight affiliated partner organizations: the Affiliated Chambers of Commerce, Greater Springfield Convention and Visitors Bureau, Regional Technology Corporation, Westfield Business Improvement District, Northampton Business Improvement District, Springfield Business Improvement District, Westmass Area Development Corporation and the Westover Metropolitan Airport. 13

14 Sources and Allocations of Project Funding The total cost of the project is $624,000 to include the amounts of the requested grant, community-provided cash and the value of in-kind airport incentives. The requested amount of the grant is $200,000, and community cash funding is $50,000. The Airport will be able to waive landing fees, aircraft parking/apron fees, terminal use fees and fuel flowage fees. The total value of the in-kind incentives offered by the Airport is $187,000 per year based for two years on an assumption of four flights per week operated with a 150-seat aircraft ( , MD-80 or A320) over a 12 month period. The value of the Airport's in-kind incentives over two years is $374,000. Exhibit 22: Sources and Types of Proposed Project Funding Funding Source Grant Cash In-Kind Total Department of Transportation $200,000 $200,000 Community $50,000 $50,000 Airport $374,000 $374,000 Total $200,000 $50,000 $374,000 $624,000 Project Timeline Westover Metropolitan Airport intends to continue its discussions with airlines within a few weeks of learning the proposed funding is awarded. Business cases will be presented to the four airlines identified as targets for the proposed service: Allegiant, Direct Air, Spirit and Vision. Since airline planning cycles are dependent on factors to include aircraft availability and require time for bookings to build, we anticipate the earliest possible date service could begin to be March or April 2012 and could extend beyond these dates. A timeline has been developed based on SCASD award announcements made in September 2011 with service beginning in April Exhibit 23: Proposed Project Timeline (Assumes SCASD Awards Are Announced in September 2011) Activity/Project Milestone Estimated Dates SCASD Grant Award Announcement September 2011 Execute Grant Agreement with DOT September-October 2011 Negotiate Minimum Revenue Guarantee with Airline October-November 2011 Announce Service January 2012 Publish Schedule January 2012 Market Route (Pre-Launch) January-March 2012 Monitor Advance Bookings January-March 2012 Adjust Marketing Plan Based on Advance Bookings January-March 2012 Begin Service Early April 2012 Market Route (Post-Launch) April 2012 and Beyond Operate Service with MRG April March 2014 Monitor Route Performance April March 2014 and Beyond Submit Grant Status Reports to DOT Quarterly 2Q Q

15 Continuation of Project Activities Beyond the Grant Timeline The project sponsors are confident the proposed service will be successful, and additional service will be added once the initial service operates for a period of time. This optimism is based on the experience of Skybus service at Westover, and the amount of traffic carried from the region to leisure destinations and increasingly higher fare trends among the airlines providing service from other airports in the region, such as Hartford. A true low-cost alternative to the fare levels at Hartford in particular, will drive traffic to the proposed service at Westover. Given the fragile state of the economy, the volatility of fuel costs and other factors beyond the control of the airline industry, the success of the proposed service cannot be assured. The Airport will work closely with the airline or airlines operating the proposed service throughout the grant period, and beyond the two-year grant period, to monitor both the amount of traffic and the average fares are sufficient to sustain the service. In the event the service is not meeting the carrier's expectations, both the Westover Metropolitan Airport and the Economic Development Council of Western Massachusetts are prepared to work with the carrier to address the carrier's concerns. Both project sponsors may be able to provide additional incentives and may be able to provide additional advertising and marketing, depending on the carrier's needs. PROJECT MONITORING AND FINANCIAL CONTROL Project Monitoring The primary goal of Westover's proposal is to secure low-cost airline service to one or more leisure destinations by providing marketing and advertising for an airline or airlines that agree to operate the targeted service. The success metric for the proposed grant funding is simple: securing and sustaining service to one or more destinations in Florida, Myrtle Beach or San Juan beyond expiration of the grant period. 15

16 Legal Sponsor The Westover Metropolitan Development Corporation is the legal sponsor responsible for administering the proposed program, and the Westover Metropolitan Development Corporation is a government entity. Westover Metropolitan Development Corporation Westover Metropolitan Airport Michael W. Bolton Director of Civil Aviation 255 Padgette St. Chicopee, MA (office) Financial Controls As the sponsor, the Westover Metropolitan Development Corporation and its governing body, the Westover Metropolitan Development Corporation Board, will be the responsible parties for all fiscal matters and the Department's reporting requirements. The Metropolitan Development Corporation Board is established as a nonprofit 501(c)(3) corporation and is a public governing body. As a public entity, the Department can be assured that proper financial controls are in place to guarantee that the Department s Grant will be used in accordance with any subsequent agreement. The Westover Metropolitan Development Corporation Board understands that the Grant is a reimbursable grant, meaning the Board is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request. 16

17 APPENDIX A: REQUIRED SUMMARY INFORMATION A. Applicant Information Not a Consortium Interstate Consortium Intrastate Consortium Community now receives EAS subsidy Community (or Consortium member) previously received a Small Community Grant If previous recipient: Date of Grant: Expiration Date of Grant: B. Public/Private Partnerships Public Westover Metropolitan Development Corporation Private Economic Development Council of Western Massachusetts C. Project Proposal Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start-up Cost Offset First Service Study Secure Additional Service Other (explain below) Westover Metropolitan Airport is requesting SCASD funding to support marketing and advertising low-cost commercial airline service to one or more leisure destinations. 17

18 D. Existing Landing Aids at Local Airport Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) E. Project Cost Line Description Sub Total Total Amount 1 Federal amount requested $200,000 2 State cash financial contribution $0 Local cash financial contribution 3a Airport cash funds 3b Non-airport cash funds $50,000 3 Total local cash funds (3a + 3b): $50,000 4 TOTAL CASH FUNDING ( ): $250,000 In-Kind contribution 5a Airport in-kind contribution** $374,000 5b Other in-kind contribution** 5 TOTAL IN-KIND CONTRIBUTION (5a + 5b): $374,000 6 TOTAL PROJECT COST (4 + 5): $624,000 F. In-Kind Contributions** For funds in lines 5a (Airport In-Kind contribution) and 5b (Other In-Kind contribution), please describe the source(s) of fund(s) for each. (5a) Westover Metropolitan Airport will waive landing, aircraft parking, apron, fuel flowage, terminal use and office space fees for a period of one year from the date the new service begins. These fees are estimated to be approximately $187,000 per year based on an assumption of four weekly flights operated with a narrowbody aircraft such as a Boeing 737 or MD-80 with 135 to 150 seats uploading 2,000 gallons of fuel per departure. This incentive would be offered for two years, and bring the total value of the incentive to $374,000. G. Is this application subject to review by state under Executive Order Process? a. This application was made available to the State under the Executive Order Process for review on (date): b. Program is subject to E.O , but has not been selected by the State for review. c. Program is not covered by E.O

19 H. Is this applicant delinquent on any federal debt? No Yes (explain) 19

20 RICHARD E. NEAL SECOND DISTRICT, MASSACHUSETTS A r LARGE WHIP COMMITTEE ON WAYS AND MEANS RANKING MEMBER, SUBCOMMITTEE ON SE LECT REVENUE MEASURES DEMOCRATIC LEADER, FR IENDS OF IRELAND CAUCUS The Honorable Ray LaHood Secretary of Transportation US Department of Transportation 400 7~1 Street SW Washington, DC De., S<C"~Od, R0tJ, Otnngrells of t4e mutfell ~tates ~OUll of ~pr 5 ntatiuell masqingtolt, IDQt August 2, 20 II I'm writing in support of the a((;iication for grant funds under the Small Conununity Air Service Development Program submitted by the Westover Metropolitan Airport, Chicopee, Massachusetts. Westover lost daily airline service to Columbus, Ohio and Greensboro, North Carolina in 2008 due to the cosi of crude oil at $1401bbl. The service was very successful with substantial passenger load factors in the first nine months of operations. The passengers flew for business, pleasure and college aged young adults attended a variety of institutes of higher education located in the Knowledge Corridor.. The airline locally employed approximately 45 in a variety of capacities including ticket counter, baggage handling, security, and fueling along with airport operations. One easy solution for overcrowded conunercial airports is the use of underutilized airports hke Westover. Not only is the overcrowding eliminated but fees are less expensive fees, encouraging airlines to open new routes and markets to the public. As Westover is a joint-use facility, with the Air Force playing a major role in our nation's security, the military operations is known as a first class leader in both its facilities and personnel. This year the Air Force received $60 million dollars for airfield improvements, Similarly, our civilian component seeks to provide a first class operation to the public by providing airline service that further enhances Westover. Westover is a gateway to Springfield, Central & Western Massachusetts, Northern Connecticut and the Pioneer Valley, Airline service boosted the local economy with increased revenues from rental cars, hotel stays, restaurants, retail sales and tourist attractions, The return of airline service is an important function to our conununity and local citizens in our region, Please give Westover Metropolitan Airport's proposal consideration in your selection process, Sincerely, Richard E, Neal Member of Congress 2208 RAYBURN H OUSE OFF~E BUILDING 300 STATE STREET 2 CONGRESS STREET WASHINGTON, DC SUITE 200 POST OFFICE BUILDING (202) SPRINGFIELD, MA MILFORD, MA (413) (508) PR INTED ON RECYCLED PAPER