Proposal of Bismarck Airport • July 2013 APPLICATION UNDER
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET DOT

- OST

- 2013

- 0120

SUMMARY INFORMATION

All applicants must submit this Summary Information schedule, as the application coversheet, a completed standard form SF424 and the full application proposal on www.grants.gov

. For your preparation convenience, this Summary Information schedule is located at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/SCASDP

A. P ROVIDE THE LEGAL SPO NSOR AND ITS DUN AND BRADSTREET (D&B) DATA UNIVERSAL NUMBE RING S YSTEM (DUNS)

NUMBER , INCLUDING +4, EMPLOYEE IDENTIFICAT ION NUMBER (EIN) OR TAX ID

. Legal Sponsor Name: Bismarck Municipal Airport
DUNS Number: 080245640 EIN/Tax ID: 6002036

B. L IST THE N AME OF THE COMMUNITY OR CONSORTIUM OF COM MUNITIES APPLYING : 1

. B I SMARCK , N ORTH D AKOTA 2.____________________________________________________ 3.____________________________________________________ 4.____________________________________________________

C. P ROVIDE THE FULL AIRP ORT NAME AND 3

- L ETTER IATA A IRPORT C ODE FOR THE APPLICAN T ( S ) AIRPORT ( S ) (O NLY

PROVIDE CODES FOR TH E AIRPORT ( S ) THAT ARE ACTUALLY SE EKING SERVICE ).
1. Bismarck Airport BIS 2.
3. 4.Proposal of Bismarck Airport • July 2013

D. L IST THE 2

- DIGIT CONGRESSIONAL DISTRICT CODE APPLIC ABLE TO THE SPONSORI NG ORGANIZATION , AND IF A

CONSORTIUM , TO EACH PARTICIPATIN G COMMUNITY

. 1. ND

- 01 2.
3. 4.

E. A PPLICANT I NFORMATION : (C HECK A LL T HAT A PPLY )
Not a Consortium Interstate Consortium Intrastate Consortium Community now receives subsidized Essential Air Service Community (or Consortium member) previously received a Small Community Air Service Development Program Grant
If previous recipient: Year of grant(s): 200 2

F. P UBLIC /P RIVATE P ARTNERSHIPS : (L IST O RGANIZATION NAMES ) OTHERS LISTED ON PAG E 19
PUBLIC PRIVATE
1. The Cities of Bismarck and Mandan 1. MDU Resources
2. Bismarck Mandan Chamber of Commerce 2. Basin Electric Power Cooperative
3. Bismarck Mandan Development Association 3. BOBCAT/Ingersoll

- Rand
4. Bismarck Mandan CVB 4. North Dakota Petroleum Council
5. 5. Sanford Health Systems

G. P ROJECT P ROPOSAL : ( CHECK ALL THAT APPLY ) Marketing Upgrade Aircraft New Route
Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start

- up Cost Offset First Service Study Secure Additional Service Other (explain below)

H. E XISTING L ANDING A IDS AT L OCAL A IRPORT : Full ILS Outer/Middle Marker Published Instrument Approach
Localizer Other (specify) 

### xProposal of Bismarck Airport • July 2013

I. P ROJECT C OST : D O NOT ENTER TEXT IN SHADED AREA
L INE D ESCRIPTION S UB T OTAL T OTAL A MOUNT
1 Federal amount requested $5 0 0,000
2 State cash financial contribution $0
Local cash financial contribution
3a Airport cash funds $ 10 0 ,000
3b Non

- airport cash funds $5 0 0,000
3 Total local cash funds ( 3a + 3b ) $ 6 0 0,000
4 TOTAL CASH FUNDING ( 1+2+3 )
In

- Kind contribution
5a Airport In

- Kind contribution** $ 400,000 estimated
5b Other In

- Kind contribution** $0
5 TOTAL IN

- KIND CONTRIBUTION ( 5a + 5b ) $ 400,000 estimated

6 TOTAL PROJECT COST ( 4+5 ) $ 1, 5 00 ,000

J

. 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) and the value ($) of each. 5a Airport in

- kind contribution estimated at $400,000 in airport fee and rentals, based on a carrier service pattern of 2 x DFW (CRJ7) and 1 x ORD (ERJ145 or CRJ). This contribution varies if a measurably different service pattern or equipment gauge is off ered.Proposal of Bismarck Airport • July 2013

K. I S T HIS A PPLICATION S UBJECT T O R EVIEW B Y S TATE U NDER E XECUTIVE O RDER 12372 P ROCESS ?

a. This application was made available to the state under the Executive Order 12372 Process for review on (date) _____________.
b. Program is subject to E.O. 12372, but has not been selected by the state for review.

c. Program is not covered by E.O. 12372.

L. I S T HE A PPLICANT D ELINQUENT O N A NY F EDERAL D EBT ? (I F “Y ES ”, P ROVIDE E XPLANATION )
No Yes (explain)

_____________________________________________________________________________________________

_______________________________________________________________Proposal of Bismarck Airport • July 2013 

## 1

TABLE OF CONTENTS AND LEGAL SPONSOR

Legal Sponsor 1
Introduction 2
Bismarck’s Location, Population and Economy 3

- 5
Current Air Service and Traffic 6

- 9
Bismarck’s Air Service Deficiencies and Needs 1 0

- 1 3 Air Service Development Efforts and Air Service Marketing 1 4
Bismarck ’s Strategic Plan for new Air Service 1 5

- 1 8
Bismarck ’s Public Private Partnership and Previous Grant Award 19 Summary 20

The legal sponsor of this Grant Application is the Bismarck Airport . M r. Greg B. Haug, Airport Manager , has successfully administered numerous Federal grants for the Airport

. Greg B. Haug Airport Manager
, Bismarck Airport
, 2200 Terminal Boulevard
, Bismarck, ND 58502 Phone: 701 355 1808 Fax: 701 221 6886 Email: ghaug@nd.gov

This document is 2 4 pages in length, consisting of four pages of Summary Information (cover)
and 20 pages of application information. 

### Section Page NumberProposal of Bismarck Airport • July 2013 

## 2

INTRODUCTION

Bismarck is the capital of North Dakota , currently the strongest economy in the nation. The past few years of unprecedented economic growth (led by energy mining) have challenged every part of North Dakota’s transportation infrastructure, including air service. Energy mining activity is
focused in western North Dakota and, by its nature, demands good air transportation options.

Bismarck is centrally located in the state and has the only airport in the energy mining region
with in

- place infrastructure to accommodate air service growth. The cities of Bismarck and Mandan, working closely with numerous public and private community pa rtners, have worked
hard to improve local air service to meet the ever

- growing transportation needs of the region.

While we have made progress, we remain short of a primary goal, the successful recruitment of a third network carrier to provide critically needed new service options. We need a third network carrier because, even as our traffic h as grown dramatically in recent years, the air service capacity of our incumbent network carriers (Delta & United) has actually declined. Since 2008
, our network enplanements are up 2 0 .5% while our network capacity is DOWN 1. 8 %. Furthermore,
since 2008
, our network domestic average fare is up 9% from already high levels to nearly $300 one way. We also need a third network carrier because our hub option s are currently limited to Denver and Minneapolis.

We have worked closely with American for two years r egarding service at Bismarck. The carrier is just completing bankruptcy reorganization and has embarked on the US Airways merger. We
believe that the re organized and merged carrier will be well positioned in 2014 to expand service from its major hubs, including Dallas (DFW) and Chicago (ORD). We believe that Bismarck can be a profitable new market for American. The obvious challenge for a new
network carr ier at Bismarck , where Delta and United have dominated for decades , is establishing brand identity and p reference . The Bismarck parties, via this Grant application, wish to develop a minimum revenue guarantee ( MRG ) program to support initial American service at
Bismarck while carrier brand identity gets established. Our Grant proposal calls for $500,000 in DOT funding, matched by $500,000 in local, non

- airport funding, to create an MRG and marketing fund to support the initial phase of American service at Bismarck. This will introduce new network carrier competition at Bismarck and, by extension, in all of western North Dakota and have a mitigating influence on regional airfares, which are among the highest in the na tion. “Since 200 8, our network enplanements are up 20.5% while our network capacity is DOWN 1.8%Proposal of Bismarck Airport • July 2013 

## 3

BISMARCK’S LOCATION, POPULATION AND ECONOMY

Location

– Bismarck is located in west central North Dakota at the junction of I

- 94 and State Highway 83, the primary east/west and north/south highways in the state

. About 80% of the population of the entire state lives within three hours drive of the Bismarck airport. Energy mining activity in the Bakken Formation is in the area north of I

- 94 and west of Highway 83. Most of the mining area is within a three hour driv e of the Bismarck Airport.

Isolation

– At the risk of feeding stereotypes, Bismarck and its catchment area are a long way from anywhere. The closest major population centers, and major airline hubs, are Minneapolis (430 road miles) and Denver (700 road miles). This isolation from the more popul ated areas of the nation makes the quality of Bismarck air transportation a critical consideration. Bismarck, and North Dakota’s, strong economic growth is actually being hampered by its isolation a nd limited or poor choices in air transportation, for both business and leisure travel. Recruitment of a skilled workforce, across all economic sectors and skill sets, is made even harder by arduous and high cost travel options. Business air travel options are limited and airfare costs are high.Proposal of Bismarck Airport • July 2013 

## 4

Population

– The strongest

- in

- the

- nation economy of the Bismarck catchment area has meant strong population growth, despite the isolation and travel option limitations. The Bismarck MSA population has shown 18% growth since 2002. The nearby micropolitan areas of Dickinson, Minot and Williston have shown strong population growth, but only since 2008, suggesting their growth
is simply due to energy mining. The combined group shown has seen 14.4% growth since 2008.

Economy

– The Bismarck economy is the e nvy of the nation. Unemployment is at 3% and there are more jobs than workers in most occupation al fields

.

While the rural areas around Bismarck are focused on energy mining and or agriculture, the Bismarck/Mandan metro area economy is very diverse. Key s ectors, in addition to energy mining and agriculture, include the state and federal government, health care institutions (that support the residents of the entire state), education (four colleges or technical schools) and a significant private sector with a list of major employers that includes Aetna ( Insurance )
, BOBCAT (manufacturing), MDU (Energy mining), the Burlington
Northern Railroad
, and National Information Systems (business billing systems)

.

65,361 64,928 64,982 64,298 63,817 63,566 63,504 64,412 69,540 72,067 75,000

23,012 22,917 22,886 22,888 22,835 23,189 23,315 23,674 24,982 25,981 27,000 96,084 96,846 97,734 99,371 101,186 103,023 104,629 106,286 108,779 110,879 113,000

19,416 19,256 19,144 19,136 19,272 19,565 19,797 20,451 22,398 24,374 26,600

0 20,000 40,000 60,000 80,000 100,000 120,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Population Minot MSA Dickinson MSA Bismarck MSA Williston MSAProposal of Bismarck Airport • July 2013 

## 5

Energy Mining

– Bismarck is the largest city in the Bakke n region. It’s economic and social
services infrastructure supports mining operations for hundreds of miles to the west and north. The growth in North Dakota oil and gas production in recent years is truly stunning. North Dakota is now the second largest o il producing state in the Union, behind only Texas. In the six

- year period
2007 to 2012
, oil production is up 443%, gas production up 265% and producing well count is up 70%. North Dakota now has more active drilling rigs than any state except Texas.

The tremendous growth in energy mining in the Bismarck region requires tremendous growth in all sectors of the economy; social and health services, police and fire, schools, housing, residential and consumer services and in the availability of common every day retail and
commercial businesses.

Bismarck, on a regional level, and North Dakota , on a statewide level, are both committed to a rapid but carefully planned expansion of the social and economic infrastructures needed to meet the needs of a rapidly gro wing population and economy. North Dakota energy production, including not just oil and gas but also coal and wind power, is making a huge contribution to our country’s goal of energy independence. In order for that production to grow in an orderly fashion transportation infrastructure must grow with it. That is not just pipelines, rail lines and highways, but also air service. Air service must grow with the population and level of economic activity. At this time Bismarck ’s network air service capacity is a ctually down from four
years ago.Proposal of Bismarck Airport • July 2013 

## 6

CURRENT AIR SERVICE AND TRAFFIC

Current Bismarck Air Service

– Bismarck currently has service from two network carriers and two
less

- than

- daily (LTD) carriers. Delta provides service to its Minneapolis hub while United offers service to its Denver hub. Allegiant Air offers LTD service to Las Vegas and Phoenix/Mesa whi le Frontier offers five or six day per week service (depending on the season of the year) to Denver.

In August of 2013, Delta’s Minneapolis service will
consist of a mixture of 50

- seat CRJs and 76 seat E175s. United’s Denver service will be entirely 50

- sea t aircraft . Allegiant service is provided with 166

- seat MD80s and Frontier service with 138

- seat A319s.

The network group taken as a whole offers 146 weekly flights in and out with 8,340 seats. The LTD group offers 20 weekly segments with 2,984 seats. Carrier frequency and capacity offerings do vary seasonally, for example Delta makes modest frequency and gauge adjustments by season and Frontier will go from 12 Denver segments per week to 10 in September.

Traffic History

– Despite very high fares on a ll routes save Las Vegas and Phoenix (and Denver starting in 2012) , Bismarck traffic has grown dramatically in recent years. 2012 traffic was up 20% from 2011, which had set an all

- time record. Total 2012 traffic is up 34.5% compared to 2008,Proposal of Bismarck Airport • July 2013 

## 7

while network traffic is up 22.1% and LTD traffic is up 99% (Allegiant was just beginning Phoenix/Mesa service in late 2008 and Frontier did not enter the market until 2012)

.

Network Carrier Capacity, Traffic and Average Fare

– Despite the fastest growing economy in
the nation
, Bismarck network capacity is trending downward :

- 13% since 2004 and

- 2% since
2008. Also since 2008 domestic traffic is up 29% despite the average domestic fare climbing from $240 to $285 (19%)

. Bismarck’s $285 network carrier average fare is one of the highest in the
nation.Proposal of Bismarck Airport • July 2013 

## 8

Top Domestic Markets

– Bismarck’s top twenty domestic market list (excluding Las Vegas and Phoenix/Mesa) is headed by Denver and Minneapolis, the two network hubs with nonstop service. The Bismarck region’s energy minin g links are clearly shown with Dallas and Houston ranking as the third and sixth largest markets. Bismarck ha d Chicago service until June of 2012. Bismarck’s Top Twenty Domestic Markets (Excluding Allegiant markets LAS and AZA): Year 2012

Top Domestic Market Average Fares

– Average one way fares below $200 are almost nonexistent in Bismarck, excluding Allegiant markets. Texas and Chicago airfares are highlighted.Proposal of Bismarck Airport • July 2013 

## 9

Bismarck Domestic Traffic by Region

– Bismarck domestic traffic is relative ly evenly distributed nationwide with the exception of the Far West region. The Far West region generates an outsized percent of total
domestic traffic due to high volume/low fare Allegiant Air service to Las Vegas and Phoenix/Mesa.

Current Market Share

– In 2012 Delta carried 51% of total Bismarck enplanements, United 25%, Allegiant 18% and Frontier 6%. C arrier market share s in 2013 are tracking similarly to 2012.

International Traffic

– Bismarck international traffic has grown 243% since 2004, despite modest levels of nonstop international service available at Denver (United) and Minneapolis (Delta)

. Bismarck International Traffic: 2004

- 2012

Alternative Airports

– Central and Western North Dakota is a long way from anyplace. Drive
times and distances to alternative airports are long.Proposal of Bismarck Airport • July 2013 

## 10

BISMARCK AIR S ER VICE DEFICIENCIES AND NEEDS

Air Service Deficiencies

– The Bismarck MSA and the state of North Dakota have experienced rapid economic growth in the past few years. State GDP grew 13.7% between 2011 and 2012 (the highest growth of any state) while the Bismarck MSA saw GDP growth of 25% between 2008
and 2012. In the state
, per

- capita income has doubled since 2000 while
, in the Bismarck MSA
, it is up 19% since 2008. North Dakota has the lowest unemployment rate in the country while the Bismarck MSA has the lowest MSA unemployment rate in North Dakota.

However network carrier air service in the state and in Bismarck is essentially a duopoly. With the exception of modest
American Airlines service at Fargo,
network service in the entire state is provided by either Delta Air Lines or United
Airlines. Delta and United offered 93.4% of total network carrier seats and 94.2% of total network flights in the state in June of 2013. American ’s entire participation in the state market is at Fargo.

Capacity

– T he duopoly of network carrier service in North Dakota is clearly illustrated at Bismarck

. While Bismarck and North Dakota, especially central and western North Dakota, have

seen stunning economic and population growth in the past five years
, Bismarck has lost its Delta service to Salt Lake City and United service to Chicago. Furthermore, network capacity at Bismarck is DOWN 1.8% in the period, despite 20.5% network traffic growth.

Average Fare

– Regarding average domestic fare, for all airports in the lower 48 Bismarck had
the 61 st highest average fare in 2012 at $242.85. If EAS and single carrier airports are excluded
Bismarck has the 22 nd highest domestic fare in the lower 48. If Bismarck’s LTD service from Allegiant and Frontier is excluded (most of the airports above Bismarck on the list do not haveProposal of Bismarck Airport • July 2013 

## 11

LTD service) Bismarck has a network domestic average fare of $285 and that ranks it 3 rd highest
in the nation behind
, ironically, Williston and Minot, North Dakota, both of which are in the
Bismarck catchment area.

Airports in red only have one network air carrier or are EAS. Airports marked in blue have less

than

- daily service, such as Allegiant and / or Frontier. This tends to dilute the network average fare, as it does at Bismarck. Bismarck ranks 61 st overall but 3 rd if single carrier and EAS markets are
excluded and LTD dilution s are considered

. Carrier counts are network count s only.Proposal of Bismarck Airport • July 2013 

## 12

Air Service Needs

– Bismarck’s overall goa l is to introduce additional network carrier competition.
Two new hub routes appear viable for new network carrier service

.

Dallas/Ft. Worth Service

– The fastest growing segment of travel demand in the Bismarck market is the South Central region of the nation, Texas, Oklahoma and Louisiana. These three states are
home to most of the nation’s energy mining companies and where m ost of the nation’s skilled work force in mining occupations lives.

Twelve of the top twenty mining companies active in the Bakken region are based in the se three states. Supporting those companies are hundreds of smaller and specialty south central regio n companies that perform hundreds of specialized tasks involved in oil and gas mining. As a result of the influx of these many companies and their skilled work f orces into western North Dakota, traffic between Bismarck and
these three states , both busines s related and visit friends/relatives (go back home) traffic has grown dramatically. Traffic has doubled since 2009 ; the average fare has risen from $275 to $341 (24%).

Traffic and Average Fare 2004

- 2012: Bismarck and Texas, Oklahoma and LouisianaProposal of Bismarck Airport • July 2013 

## 13

Based on th is powerful business and VFR/leisure community of interest
, nonstop service from Bismarck to Dallas (DFW) would address a glaring service need, not just for Bismarck but for all of
central and western North Dakota.

Chicago

– Until mid

- 2012 Uni ted Airlines offered a single daily Bismarck Chicago regional jet flight . In mid

- 2012 the carrier refocused its Bismarck service on its Omni

- directional hub in Denver, moving from a 3 x DEN and 1 x ORD service pattern to a 4 x DEN pattern. The loss of the United Airlines flight to ORD service left Bismarck without nonstop service to its fifth largest domestic market (excluding LAS and AZA).

Bismarck is now the largest market in
the twelve

- state Midwest/Great Lakes region (ND, SD, NE, KS, MN, IA, MO, WI, M I, IN, KY, IL) without nonstop service to a Chicago airport.

Th e loss of United Airlines service to the powerful ORD hub also leaves Bismarck, and all of western North Dakota, without any nonstop service
east bound except for Delta flights to Minneapolis. This results in a n almost complete dominance of market
share in eastbound markets by Delta Air Lines.

In the last six months of 2011, with United nonstop service to ORD, Delta
had a n 80.2% share of traffic to twenty top eastbound Bismarck markets. In the last six months of 2012, with no nonstop service to ORD, Delta has moved to an 89.1% share of total traffic among the group of destinations.

Bismarck clearly needs additional network air service and both Dallas/Ft. Worth and Chicago are top destinations. Furthermore, service to one or both of these powerful hub airports would generate significant and beneficial online connections.Proposal of Bismarck Airport • July 2013 

## 14

AIR SERVICE MARKETING AND AIR SREVICE DEVELOPMENT EFF ORTS SERVICE MARKETING AND AIR SREVICE DEVELOPMENT EFFORTS Air Service Development Efforts

– The Bismarck Airport has aggressively marketed its air service for many years. The Airport has hired an Advertising Agency and works closely with city and regio nal partners to promote Bismarck air service.

Air Service Development Efforts

– The Bismarck Airport retains a professional air service development consulting firm on a full

- time basis. The Airport is very active in attending meetings
with its incumbent carriers as well as prospective new entrant carriers each year.Proposal of Bismarck Airport • July 2013 

## 15

BISMARCK ’ S STRATEGIC PLAN FOR NEW AIR SERVICE

The Bismarck Airport, supported by its many public and private air service development partners,
intends to recruit new network airline service to Bismarck. As demonstrated on the previous
page s , there is a clear and pressing need for new network service at Bismarck, with nonstop Texas service (Dallas) and / or Chicago service top priorities. We feel that Grant funding, a s outlined herein, will mean new Grant supported network service at Bismarck in 2014.

Proposed New Route

– Our top priority is nonstop service to a Texas hub. Excluding Las Vegas and Phoenix/Mesa (Allegiant), Dallas /Ft. Worth (DFW and DAL) is our third la rgest O&D market and largest without nonstop service. The American Airlines hub at DFW is one of the largest in the
world. T he American network gains from Bismarck efficient access to all of central and western North Dakota, including the B akken form ation and the energy mining activities where Texas

based companies and their skilled workers are extremely active.

Our second
, or alternative
, goal is to regain nonstop service to Chicago. Chicago is our fifth largest O&D market (excluding LAS and AZA) and Bismarck is the largest Chicago O&D market in the 12 states around Chicago without nonstop service to Chicago. Chicago service would also help redress the almost monopolistic market share pattern between Bismarck and markets in the eastern United States by introducing online connecting service that can compete with Delta’s Minneapolis services. American Airlines has large hubs at Dallas and Chicago and strong brand identity in the regions around both of those hubs and it is the logical recruitment target for these proposed new services.

Funding Plan

– Th is application propose s to use a combination of $5 0 0,000 of local, non

- airport funding distributed through the sponsor and $ 50 0,000 of Grant funding and $!00,000 in airport marketing funding to create a $ 1, 1 00, 000 total cash fund dedicated to risk abatement and marketing of
, new American Airlines service to Dallas, or potentially Dallas and Chicago. The Bismarck Airport will contribute a two

- year waiver of airport
fees

. The value of the fee waive rs depends on the frequency and gauge of the new service

. The total value of the Airport’s marketing funds and fee waivers is estimated at $900,000 over two
years, if service is service of 2 x DFW and 1 x ORD.Proposal of Bismarck Airport • July 2013 

## 16

New Service Marketing Plan

– On page 15 is an outline of the ongoing marketing and promotional efforts of the Bismarck airport, working with its advertising agency (Results Unlimited)
and community partners. In support of new network air service
, the Airport and its partners will provide a long

- term, multimedia, marketing and promotional campaign. Key components of this campaign will be :

 TV and radio purchases for western North Dakota coverage  Targeted email blasts  Newspaper advertising  Social media and online media ads  Advertising contests with the winner receiving travel vouchers for the new service  Promotional efforts at community sporting or social events  A series of kick

- off events for the new service, employing multiple media outlets  All marketing subject to ongoing review based on bookings and carrier feedback  All marketing done in close coordination with the new carrier The Bismarck Airport along with its ad agency and community partners provided support similar to that listed above in 2012 for the very successful launch of Frontier Airl ines service to Denver.

Grant Implementation Timeline

– Bismarck understands the Department will seek to award 2013 Grant funding and contract for Grant funding with airports during the third quarter of 2013. Based on that as a beginning point, the
chart at right shows the time line of key
milestone s for Grant implementation. This is based on reaching prompt agreement with
American Airlines on an MRG contract and the carrier being able to implement service late in Q1 of 2014. American is in the midst of e merging from C h. 11 reorganization and is in the process of a merger with US Airways. Therefore contract agreement and service implementation may slip to later in 2014. In consideration of this possibility
, the Bismarck parties ask for a three

- year Grant
d uration, covering Q4 of 2013 until Q3 of 2016

. We fully expect to
end Grant related service support and close out before then.

For ecast of Results for New Dallas/Ft. Worth Service

– Bismarck envisions that new DFW service would consist of two round trip s per day operated with CRJ

- 700 aircraft with 65 seats. The serviceProposal of Bismarck Airport • July 2013 

## 17

would generate 1,400 annual segments on 3,570.0 block hours of operation and put 91,000 new
annual seats in the Bismarck market.

The Dallas service would provide Bismarck its first nonstop service to Dallas, its largest domestic market without nonstop service. O nline connections would also be created to at least 82 domestic and 36 international cities.

The forecast assumes calendar year 2014 as the first year of American service. Year 2012 local, connect and international connect traffic is grown organically by 5% to assumed baseline 2014 numbers. A new service stimulation is then applied for twice daily dual class American service to DFW. The forecast suggests American would captu re 7 4,075 annual O&D and $21. 46 million in passenger revenue. Segment revenue, after connect prorate , would be $13. 23 million.

The 7 4
, 075 onboard O&D against the projected 91,000 annual seats would result in a n 81.4 % segment load factor the first year. S ervice is projected to at least mitigate the rate of increase on Bismarck’s high average fares with the 2014 average fares for each traffic type driven
back down to 2012 levels after American market entry.

American is expanding its
fleet of medium

- sized regional jets and taking on new regional carrier partners to fly them. Thus carrier segment costs for this route in 2014 are uncertain. Based on an estimated block hour cost of $3,800 per hour in 2014, this 978 mile route would see a very modest operating loss the first year of $ 333,279

.Proposal of Bismarck Airport • July 2013 

## 18

Forecast of Results for Chicago Service

– Bismarck’s third largest O&D market without nonstop service is Chicago ORD/MDW. Bismarck is the largest market in the 12

- state area around Chicago without Chicago service. Chicago service is envisioned to initially be one daily round trip with a 50

- seat regional jet. The single trip would generate 35,800 annual seats and, depending on flight timing, connect to up to 89 domestic and 18 international destinations.

As with t he Dallas forecast, baseline 2012 traffic is grown to 2014 levels and then stimulated for the beginning of new network carrier service. Single round trip service is assumed to have much more modest traffic capture than a two round trip pattern.

The 27,591 annual onboard O&D against the projected 36,100 seats would result in a 76.4% segment load factor the first year. Service is projected to at least mitigate the rate of increase in Bismarck’s high average fares with the 2014 average fares for each traffic type driven back down to 2012 levels after American entry.

American Eagle 50

- seat regional jet per block
hour costs are in the range of $3,100

- $3,300.
This route would be one of the longer range ERJ operations for American. Costs per hour are projecte d at $3,100 and annual segment costs at $4.7 million. First year segment revenue is forecast at $4.58 million, resulting in a very modest operational loss of $116,894 the first year of operation.Proposal of Bismarck Airport • July 2013 

## 19

BISMARCK’S PUBLIC PRIVATE PARTNERSHIP AND PREVIOUS GRANT

Public Private Partnership

– The
communities of Bismarck and Mandan work closely on economic development and other social/commercial issues. Bismarck’s public private partnership to support new Grant supported air service reflects that close cooperation
, i s broad based
and covers all sectors of the local
economy. Every local government body is a member as well has the most major employers.

The Partnership includes the two largest health care institutions and all three local colleges.

Bismarck’s Previous SCASD Grant Award

– In 2002, the first year of the Small Community Air Service Development Grant Program, the Bismarck Airport was awarded a Grant for $1,557,500 in funding, matched by a local share of $512,500. The purpose of the 2002 Grant was to assess the feasibility of inaugurating new regional air service, recruit a regional airline to provide the regional air service, and market the regional air service. A total of $1,511,250 in DOT funding was expended on this Grant.

The proposal was groun dbreaking in that it envisioned an on

- call point

- to

- point airways system using single engine aircraft providing service in rural areas where drive distances are great. The concept was tried and did not gain the traction necessary to continue as a going con cern. Much was learned about the marketing, pricing, promotional and operational tactics needed to make such a concept work at some future time and place.

The 2002 Grant gets an “A” for creativity and for acquired learning by the Department and
North Dakota on possible strategies or tactics for addressing rural air service needs. The Grant’s scope and purpose have almost nothing in common with the current 201 3 Grant application.Proposal of Bismarck Airport • July 2013 

## 20

SUMMARY

North Dakota’s economy is the strongest in the nation, driven primarily by the energy mining and agriculture sectors in the central and western part of the state (Bismarck’s catchment area). Bismarck is a transportation hub for the region and the Bismarck Airport is the only one in the region w ith in

- place infrastructure to handle n ew air service to meet the region’s air travel needs.

The isolation of the Bismarck region makes air service of critical importance in supporting the ongoing economic growth. Bismarck and its catchment area is a long way from major metro areas and large scale low fare airline operations (MSP is 430 drive miles, DEN is 700 drive miles).

Yet despite strong network traffic growth and some of the highest network carrier average fares in the nation, Bismarck network capacity is down in 2013 from 2008 levels. Currently
, Bismarck
service is limited to Delta (MSP) and United (DEN) service, consisting mostly of regional jets.

Bismarck be lieves it is essential to recruit and support new network carrier air service. The rapidly growing local energy mining sector has meant a huge increase in air travel demand between
Bismarck and the south central U.S., particularly Texas, Oklahoma and Louis iana. The Bismarck region has a crying need for new nonstop service to Texas
, and the Dallas/Ft. Worth hub of American Airlines is the most logical destination for that new service. Dallas/Ft. Worth is Bismarck’s largest market without nonstop service and the American hub would open up critically needed new online connections throughout the southern U.S. Bismarck has also lost its only nonstop service to Chicago, service that had provided some competitive balance against Delta’s eastbound services to Minnea polis. American service to Chicago also is a clear opportunity for expanding the Bismarck region air service in an efficient and effective manner.

American’s entry into the Bismarck market, despite promising traffic and revenue metrics, does have challeng es. Delta and United have dominated network air service in the region for decades. Both DFW and ORD are long stage length routes, meaning high segment operating costs. In this Grant proposal Bismarck proposes a $500,000 DOT funding level, matched dollar fo r dollar with local non

- airport cash and complemented by significant Airport marketing funding and startup phase fee waivers. The total cash funding of $1,100,000 will mitigate startup phase
financial risks for American. The need for additional network air service at Bismarck is clear. This Grant application outlines a clear path to gaining that critically needed new air service. Bismarck urges the Department to give this application favorable consideration.