### APPLICATION UNDER SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET DOT

- OST -2014-0133

SUMMARY INFORMATION 1



### 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/SCA SDP

A. P ROVIDE THE LEGAL SPO NSOR AND ITS DUN AND BRADSTREET 

### (D&B) DATA UNIVERSAL

NUMBERING SYSTEM 

### (DUNS) NUMBER 

### , INCLUDING 

### +4, EMPLOYEE IDENTIFICAT ION NUMBER


### (EIN) OR TAX ID



### . Legal Sponsor Name:
Name of Signatory Party for Legal Sponsor:

DUNS Number:

EIN/Tax ID:

B. L IST THE 

### N AME OF THE COMMUNITY OR CONSORTIUM OF COM MUNITIES APPLYING 

### :
1.____________________________________________________

2.____________________________________________________

3.____________________________________________________

4.____________________________________________________

C. P ROVIDE THE FULL AIRP ORT NAME AND 

### 3-L ETTER 

### IATA A IRPORT 

### C ODE FOR THE

APPLICANT 

### ( S 

### ) AIRPORT 

### ( S 

### ) (O NLY PROVIDE CODES FOR THE AIRPORT 

### ( S 

### ) THAT ARE ACTUALLY

SEEKING SERVICE 

### ).

1. 2

. 3

. 4

.

1 Note that the Summary Information does not count against the 20

- page limit of the SCASDP application.

### D OES THE AIRPORT SEEKING SERVICE HOLD AN AIRPORT OPERATING CERTIFICATE ISSUED BY

THE 

### F EDERAL 

### A VIATION 

### A DMINISTRATION UNDER 

### 14 CFR P ART 

### 139? (I F 

### “N O 

### ”, P LEASE

EXPLAIN WHETHER THE AIRPORT INTENDS TO APPLY FOR A CERTIFICATE OR WHETHER AN

APPLICATION UNDER 

### P ART 

### 139 IS PENDING 

### .)

Yes No (explain)

______________________________________________________________________________

______________________________________________________________________________ D. L IST THE 

### 2- DIGIT CONGRESSIONAL DISTRICT CODE APPLIC ABLE TO THE SPONSORI NG

ORGANIZATION 

### , AND IF A CONSORTIUM 

### , TO EACH PARTICIPATING COMMUNITY



### . 1. 2

. 3

. 4

.

E. A PPLICANT 

### I NFORMATION 

### : (C HECK 

### A LL 

### T HAT 

### A PPLY 

### )

Not a Consortium Interstate Consortium Intrastate Consortium

Community currently receives subsidized Essential Air Service

Community (or Consortium member) previously received a Small Community Air Service Development Program Grant

If previous recipient: Provide year of grant(s) :_______________________________; and, the text of the grant agreement section(s) setting forth the scope of the grant project :

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

F. P UBLIC 

### /P RIVATE 

### P ARTNERSHIPS 

### : (L IST 

### O RGANIZATION NAMES 

### )

PUBLIC PRIVATE

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

### G. P ROJECT 

### P ROPOSAL 

### :

1. G RANT 

### G OALS 

### : ( CHECK ALL THAT APPLY 

### )

Launch New Carrier Secure Additional Service Upgrade Aircraft

First Service New Route Service Restoration
Regional Service Surface Transportation Professional Services 2



### Other (explain below)

2. F INANCIAL 

### T OOLS 

### T O 

### B E 

### U SED 

### : ( CHECK ALL THAT APPLY 

### )

Marketing (including Advertising): promotion of the air service to the public

Start

- up Cost Offset : offsetting expenses to assist an air service provider in setting up a
new station and starting new service (for example, ticket counter reconfiguration)

R evenue Guarantee : an agreement with an air service provider setting forth a minimum
guaranteed profit margin, a portion of which is eligible for reimbursement by the
community

Recruitment of Air Carrier: air service development activities to recruit new air service,
including expenses for airport marketers to meet with air service providers to make the

case for new air service

Fee Waivers : waiver of airport fees, such as landing fees, to encourage new ai r service;
counted as in-kind contributions only
Ground Handling Fee : reimbursement of expenses for passenger, cabin, and ramp (below
wing) services provided by third party ground handlers

Travel Bank: travel pledges, or deposited monetary funds, from pa rticipating parties for
the purchas e of air travel on an air carrier , with defined procedures for the subsequent use
of the pledges or the deposited funds; counted as in-kind contributions only

2 “Professional Services” involve a community contracting with a firm to produce a product such as a marketing plan, study, air carrier proposal, etc.

### 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)

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

2 State cash financial contribution
Local cash financial contribution

3a Airport cash funds

3b Non

- airport cash funds

3 Total local cash funds ( 3a + 3b )

4 TOTAL CASH FUNDING ( 1+2+3 )

In

- K ind contribution

5 a Airport In

- Kind contribution **

5b Other In

- Kind contribution **

5 TOTAL IN

- KIND CONTRIBUTION
( 5a + 5b )

6 TOTAL PROJECT COST ( 4+ 5 )

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.

### K. I S 

### T HIS 

### A PPLICATION 

### S UBJECT 

### T O 

### R EVIEW 

### B Y AN 

### A FFECTED 

### S T ATE 

### 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 S tate for review.

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

L. I S 

### T HE 

### L EAD 

### A PPLICANT OR 

### A NY 

### C O 

### -A PPLICANTS 

### D ELINQUENT 

### O N 

### A NY 

### F EDERAL 

### D EBT 

### ?
(I F 

### “Y ES 

### ”, P ROVIDE 

### E XPLANATION 

### )

No Yes (explain)

______________________________________________________________________________

______________________________________________________________________________ APPLICATION CHECKLIST

I NCLUDED ? I TEM

For Immediate Action
Determine Eligibility

New Grants.gov users must r egister with www.grants.gov

. Existing Grants.gov users must verify ex isting www.grants.gov account has not expired and the Authorized Organization R epresenta tive (AOR) is current

. For Submission by 5:00 PM EDT on July 31, 2014
Communities with active SCASDP grants: notify DOT/X50 of intent to terminate existing grant in order to be eligible for selection in FY2014
Complete Application for Federal Domestic Assistance (SF424) via www.grants.gov

S ummary Information schedule complete and used as cover sheet (see Appendix B )

A pplication of up to 20 one - sided pages (excluding any letters 

### from the community or an air carrier showing support for the application ) , to include:

• A description of the community’ s air service needs or deficiencies

.

• A strategic plan for meeting those needs under the Small Community Program

.

• A detailed description of the funding necessary for implementation of the community's project.

• An explanation of how the proposed project differs from any previous projects for which the community received SCASDP funds (if applicable).

• Designation of a legal sponsor responsible for adminis tering the program

.

• A motion for confidential treatment (if applicable)

– see Appendix D below.

### 1

2014 SCASDP Grant Application | Rapid City Regional Airport 

# Table of Contents

Introduction

................................ ................................ ................................ ........................ 2
Regional Background

................................ ................................ ................................ ...... 3

Location & Is olation

................................ ................................ ................................ ................................ .......................... 3

Economy

................................ ................................ ................................ ................................ ................................ ............ 4


### Current Air Service

................................ ................................ ................................ ............ 5

Destinations & Capacit y

................................ ................................ ................................ ................................ ................... 5

Air Fares

................................ ................................ ................................ ................................ ................................ .............. 6


### Air Service Deficiencies & Needs

................................ ................................ ................... 9

Historical Ai r Service Development Efforts

................................ ................................ .. 11

BHASP

- Public Private Partnership

................................ ................................ ................................ ................................ . 11

Previous Grant Award

................................ ................................ ................................ ................................ ..................... 12 

### Strategic Plan for Improved Air Service

................................ ................................ ....... 13

Details of Proposed Service

................................ ................................ ................................ ................................ ............ 13

Goal & Objectives

................................ ................................ ................................ ................................ .......................... 14

Methods & Funding

................................ ................................ ................................ ................................ ......................... 14

Timeline

................................ ................................ ................................ ................................ ................................ ............ 16 

### Summary

................................ ................................ ................................ ........................... 16

References

................................ ................................ ................................ ....................... 17



# Legal Sponsor

The legal sponsor of this grant application is the City of Rapid City

. Mr. Peter Girtz

, Interim Airport Executive Director , will be the signatory party for this grant application.

Mr. Peter Girtz Interim Airport Executive Director City of Rapid City 4550 Terminal Road, Suite 102 Rapid City, SD 57703 605

- 394

- 4195 Community Name: Rapid City, South Dakota Legal Sponsor : City of Rapid City

DUNS : 05

- 722

- 2119 Congressional District Code: SD

- 0 1

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2014 SCASDP Grant Application | Rapid City Regional Airport 

# Introduction

Rapid City is the second largest city in South Dakota , and the main trade c enter for the Black Hills region. As the gateway to the beautiful Black Hills and Mt. Rushmore National Memorial, Rapid City has one of the nation’s strongest economies, boasting an unemployment rate of only 4.1 %. 1 W ith especially strong tourism, educatio nal,
medical, financi al, and energy services sectors, the Black Hills region is posed for economic growth.

Because of its isolated location, economic development in the Black Hills strongly depends on commercial air service to the Rapid City Regional Airpo rt (RAP) , the only airport with jet service for over 250 road miles. However

, while enplanements have
increased by over 16 % since 2003

, network airline capacity has decreased by approximately 15% over the same period. This results in increasingly high fa res for

local travelers

– the average fare has increased 35% since 2003, and airline yields at Rapid City Regional Airport are much h igher than comparable markets. Consequently, economic growth in the Black Hills is being directly impeded by the
lack of a dequate air service options.

The Rapid City Regional Airport proposes an expansion of a recently

- introduced seasonal, Saturday

- only Atlanta service to a daily, year

- round , non

- stop flight. The airport, along with the public

- private Black Hills Air Service Partnership (BHASP) , would
build public awareness for this improved air service through a $500,000 strategic marketing initiative

. This improved air service would increase capacity at RAP by approximat ely 7%, mitigating the rate at which the airport’s av erage fare increases, all in an economically self

- sustaining way (after initial marketing support ). Delta Air Lines has indicated their support for expanded RAP

- ATL service

. To fund this marketing initiative, t his grant proposal calls for $325,000 of DOT SCASDP funding and $175,000 of local, non

- airport matching funds, in addition to approximately $25,000 in landing fee waivers provided by the airport. Funding this air service improvement project would help alleviate the burden of high fares paid by

trave lers to and from Rapid City, and would greatly encourage economic development throughout the Black Hills region.

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2014 SCASDP Grant Application | Rapid City Regional Airport 

# Regional Background

Location & Isolation

Rapid City is located in western South Dakota along Interstate 90, the major east

- west highway in t he state , at the eastern edge of the Black Hills . At the center of a regional trade area that includes portions of five states, the Rapid City Regional Airport (RAP)

serves a 100

- 1 50 mile radius catchment area of approximately 372 ,000 people.
Within this catchment area , the only other airport that sees any network carrier service is Gillette, WY (GCC) wh ich r eceives a total of only 3

- 5 x daily Brasilia turboprop flights , with most travelers choosing RAP instead. In addition to serving residents of
the are a, RAP handles many inbound tourists, a cornerstone of the local economy.

F IGURE 1 : RAP C ATCHMENT A REA – 100 & 150 MILE RADII INDICATED

However, Rapid City (pop 69,854) 2 and its catchment area are isolated from the
nation’s ma jor population centers

. The c losest major metropolitan areas are Denver (390 road miles

– much of this on two

- lane roads ) and Minneapolis (570 road miles)

, which results in road travel to/from the region being arduous and often unfeasible

.

### 4

2014 SCASDP Grant Application | Rapid City Regional Airport

Additionally, S outh Dakota and Wyoming are the only two states in the
continental U.S. without Amtrak service 3 . This leav es commercial air service as the only practical connection between the Rapid City area and most of the nation , a nd

a critical component of the region al economy

. Consequently , the current lack of adequate air transportation options is direct ly impeding growth of the local economy. Improved air service is needed in order to foster the continued growth of the area’s tourism, governmental, e d ucational, m edical, financial , and energy sectors.



# Economy

Rapid City has a demonstrably strong regional economy, comp ared to the re st of the nation, boasting a 4.1 % unemployment rate as of April 201 4 4

. Recently ranked
the 9 th Best Small City for Business and Caree rs by Forbes magazine, Rapid City is the
second

- largest me tropolitan area in South Dakota

- CNBC’ s 2013 #1 State for Business.

Tourism is a critical component of the economy throughout the entire RAP catchment area, and is an especially important industry sector to consider when evaluating the
need for air service

. As the tourism industry depends on the availability of suitable connections for inbound travelers, inadequate air service negatively impacts this key
economic sector the most

. Key facts about t he area’s tourism economy:

 1 in 11 jobs in South Dakota depends on travel and tourism 5

 An average of $3.8 million daily in direct spending is generated by tourism in SD 6

 19.41% of all state and local tax revenue comes from tourism

- related activity 7

 4.16 mi llion total visitors among the six National Park Service sit es within the RAP
catchment area in 2013 , including Mt. Rushmore Nat’ l Memorial 8

The R apid City area has a diverse and thriving

economy , with a variety of oth er industries alongside tourism, many of which depend on air service connectivity. Other k ey economic
sectors in the RAP catchment area include : (1) g overnmental se rvices, notably Ellsworth AFB ; (2)

_ educational institutions, including the South
Dakota School of Mines an d Black Hills State
Un iversity; (3) medical services

– Regional Health is headquartered in Rapid City, and is one of the region’s biggest employers; (4) financia l services;
and (5) energy services

– the Black Hills are becoming a professional energy services
hub for the nearby Bakken oil field of North Dakota. T ABLE 1: T OP E MPLOYERS IN THE R APID C ITY A REA Ellsworth AFB 4,115
R egional Health 3,602
Federal Gov’t 2,912
RC School District 1,755 State of SD 1,217 Walmart/Sam’s Club 1,029
SD National Guard 1,025
Source: Rapid City Econ. Development

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2014 SCASDP Grant Application | Rapid City Regional Airport 

# Current Air Service

Destinations & Capacity

Table 2 below illustrates RAP’s air service for the period ending February 2014. As can be seen, RAP is very reliant upon United Airlines service to Denver ( DEN ) and Delta Air Lines service to Minneapolis

- St. Paul (MSP). This has historically been the case. Delta also serves Salt Lake City (SLC), while United also serves Chicago O’Hare (ORD) and, during the peak summer season , Houston Intercontinental (IAH)

.

T ABLE 2: RAP P ROFILE
– C URRENT N ON
- STOP S ERVICE T RAFFIC I NFO
- F EB ‘ 13

- F EB ‘ 14

RAP’s other network carrier service is on American Eagle, who flies RAP to Dallas Fort Worth. RAP also has Allegiant Airlines service to both Phoenix

- Mesa and Las Vegas.

As mentioned previ ously, RAP has historically relied upon United Airlines service to DEN
and Delta Air Lines service to MSP , although more recently Delta has been pulling back service, as United has grown moderately. American Eagle also started service
to DFW in 2010. The charts in Figure 2 illustrate capacity trends among these three
network airlines at RAP and overall RAP airline revenue trends.

As can be seen in Figure 2 (a)

, network airline capacity has been declining marginally over the past decade. In 2004, the combin ed UA/DL generated almost 950 daily departing seats. Today there are approximately 800 daily departing seats on the combined (3) network airlines. In particular, DL has reduced capacity by almost 50% over the past decade.

### 6

2014 SCASDP Grant Application | Rapid City Regional Airport (A) (B )

F IGURE 2: ( A ) N ETWORK A IRLINE C APACITY AT RAP VS

. T IME

( B ) A IRLINE R EVENUE AT RAP VS

. T IME

While network airline capacity has declined, airline revenue has grown sharply, up from about $34 million in 2003 to a little over $60 million currently. This translates to a 6% compounded annual growth rate (CAGR) over this time period, which is well in the excess of the rate of inflation or U.S. travel in general. The airline revenue growth in conjunction with less airline capacity has resulted in sharply higher unit revenues
f or airlines serving RAP.



# Air Fares

As noted earlier, over the past decade, RAP’s network carrier capacity has declined marginally (although overall capacity is higher, thanks to Allegiant Airlines). At the same time, airline revenue has increased sharpl y, thanks in part to higher air fares. Figure 3 (on the next page) shows that RAP’s average paid air fare has increased a little over 20% since CY 2000, although if going back to 2003, the average fare paid has increased over 35%. Since just 2009, average fares at RAP have increased over 30%.

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2014 SCASDP Grant Application | Rapid City Regional Airport

Figure 4 illustrates a regression analysis of the top 300 U.S airports (based upon O&D passenger volume). The regression takes into account the average passenger itinerary (the length of trip in miles) and passenger yield (the average fare paid per mile). It is for all markets with an average under 1,000 miles.

F IGURE 4: R EGRESSION A NALYSIS OF P ASSENGER Y IELD VS

. P ASSENGER I TINERARY L ENGTH RAP F IGURE 3: A VERAGE ROUND TRIP FA RES AT RAP INDEXED TO 2000

### 8

2014 SCASDP Grant Application | Rapid City Regional Airport

While there are always other contributing factors beyond passenger haul, a person’s trip haul (miles) is a good fit by itself, as the resulting R

- squ ared of .7415 illustrates. RAP’s average yield is $0 .24 (24 cents) and the average passenger haul is
915 miles.

As can be seen, RAP’s yield is well above what would be explained by the passenger’s average trip length alone. Based upon trip leng th (itinerary), RAP’s yield of $0. 24 is well above the predicted yield of $0 .20. This would indicate that RAP’s air fares are higher than would be predicted by passenger haul alone

– by abou t 20%. Put another way, RAP’s average round

- trip air fare of $440 (pre

- tax & fees) is about $88 higher than for a comparable market.

Table 3 illustrates a similar point. Those markets closest to RAP from a passenger haul perspective are illustrated. As can be seen, RAP’s yield/average fare is generally well
above other com parable markets

– typically by a wide margin. The only comparable
markets with higher far es are two much smaller markets (Bakersfield and Brown sville) and an oil boom town (Wi lliston, ND). Otherwise, RAP is well above other comparable
markets.

T ABLE 3: F ARE /Y IELD COMPARISON BETW EEN RAP AND SIMILAR MARKETS

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2014 SCASDP Grant Application | Rapid City Regional Airport 

# Air Service Deficiencies & Needs

For the purpose of this grant application, the Rapid City Regional Airport (RAP) is targeting Delta Air Lines service to Atlanta (ATL). Delta is actively su ppor t ing this effort,

s ee attached letter.

S ervice to ATL is critical to the State of South Dakota’s tourism efforts, particularly as it pertains to areas nearby Rapid City (Moun t Rushmore, Black Hills, etc.), as well as the general economic de velopment initiatives of the Black Hills region.

Historically and to some de gree still today, South Dakota has been heavily reliant upon traffic from the upper Midwest to support tourism. In particular, South Dakota is support ed by drive traffic from the nearby states of North Dakota, Iowa, Nebraska, Wyoming, Montana & particularly Minnesota. Drive traffic from as far away as Chicago is not unusual.

Over time, as RAP’s air service and passenger traffic has grown, so has the reach of
its tourism efforts. Delta has served the Minneapolis

- St. Paul (MSP)

- RAP market for many years, carrying traffic from throughout the U.S., although with a heavy emphasis from the eastern half of the U.S. Likewise, United h as served the Denver (DEN)

- RAP
market for a similar tim e period. This service has catered primarily to passengers coming from the western region of the U.S.

In April of 2010, American Eagle (AA) started Dallas Fort Worth (DFW) service to RAP. That service has been successful, with AA generating year

- round L oad Factors in the 80% range, with good O&D demand to DFW, with 26 daily passengers traveling
between RAP

- DFW, as noted by the table below.

A key component of th e AA service to RAP was that it generated a new market (tourism) segmen t for RAP. The majority of AA’s traffic b ase came from the south central U.S., primarily from Texas. With earlier United service to Denver and Delta service to Minneapolis

- St. P aul, the Black Hills region was well

- served to most of the U.S., with on e exception: the southeast U.S

.

A little over 10% of RAP’s traffic base travels on 2+ connections. The majority of this
traffic ba se is coming from the southeast U.S. As is typical for itineraries with a higher # of connections, the average fare of this traffic bas e is also relative ly high. The average fare paid for doub le connecting passengers to RAP is almost $800 for CY

### 10

2014 SCASDP Grant Application | Rapid City Regional Airport

2013 (net of taxes/fees) 9

. The majority of this traffic base is flying on Delta Air Lines, connecting over its ATL and then MSP hubs.

The ATL service would add a key component to the state of South Dakota’s tourism efforts, particularly as it pertains to Mount Rushmore, Deadwood & the Black Hills region. Specifically this would address the following:

1) Connectivity. The ATL hub for Delta is bigger than MSP & DTW

– combined. The amount of connectivity to the region, particularly to southeast U.S. markets that in many cases have to double connect today would be huge for the region’s
tourism.

2) ATL O&D market. Currently the ATL market generates about 11 daily

passeng ers at an average one

- way fare of $255 (net of taxes & fees). With nonstop service, it is likely that this demand would increase sharply (possibly exceeding 20 daily passengers over time) and the average fare paid would also decline moderately.

3) Peak tra vel periods. During RAP’s peak summer travel period, airline Load Factors in excess of 90% is the
norm. This service would take some of that pressure off and generate capacity for passenger demand that is likely being constrained today

– directly by the la ck of seat capacity
or the indirect effect that the lack of seat capacity is having on air fares.

4) International. Besides connectivity to the southeast U.S., ATL service would also open up RAP to direct service to Europe, Africa and the Middle East.
This is also another key tourism segment being targeted by the state of South Dakota and would be helpful
to build brand awareness of the South Dakota tourism product around the
world. T ABLE 4: T OP O&D M ARKETS AT RAP

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2014 SCASDP Grant Application | Rapid City Regional Airport

In addition to the tourism industry , all four needs listed above apply to m ost
other local industries as well. The added benefit of a daily, year

- round flight (as opposed to weekly seasonal service) is even greater in terms of developing business ties and encouraging high

- value trade between the Black Hills region and the
southe ast, as a reliable, frequent connection on an established airline provides a stable connection upon which an increasing number of business travelers can rely.

In summary, ATL service would be a critical addition to RAP’s air service and would generate sig nifi cant bene fits to the Black Hills’ economy. Tourism , educational,
medical and other economic sectors would benefit through additional connecting opportunities to the southeast U.S. and international community. In addition, this new service would generat e additional demand from the local ATL O&D market. Delta Air
Lines agrees , as is illustr ated in their attached letter of support.



# Historical Air Service Development Efforts

BHASP

- Public Private Partnership

The Rapid City Regional Airport has acces s to a unique community asset that is an extremely robust, permanent, public

- private partnership completely dedicated to retaining and improving local air service: The Black Hills Air Service Partnership.

The Black Hills Air Service Partnership (BHASP) is a

comm ittee of the Rapid City Chamber of Commerce whose goal is to enhance
commercial air service at Rapid City Regional Airport by fostering partnershi ps with airlines and other area communities to develop new markets and quality service with competitive fares. Sinc e its inception, the BHASP has
l everaged the financial and intellectual capital of numerous area organizatio ns, including local businesses, educational institutions, and governmental entities to accomplish its mission. T ABLE 5 : K EY BHASP M EMBERS Public
RC Chamber of Commerce Rapid City Regional Airport Rapid City CVB Black Hills, Badlands, & Lks
SD School of Mines & Tech

Private Black Hills Corp
BH Central Reservations Eagle Sales of the Black Hills

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2014 SCASDP Grant Application | Rapid City Regional Airport

While administering this grant, the Rapid City Regional Airport would be able to rely on the enormous community support and pooled resources afforded by the BHASP in order to allocate grant funds much more efficientl y and effectively.

The BHASP has been continuously working with t he airport on air service development

, the past three years being no exception . Some initiatives include funding annual trips to the Airport Council International’s JumpStart conference, where important airline contacts are made, and Allegiant Air’s annual airports confe rence, as well as facilitating meetings between airline representatives and local business and government leaders . As a collective result of these air service development initiatives,
RAP ha s recently secure d AA service to DFW, as wel l as s easonal UA service to IAH.



# Previous Grant Award

In 2002, the pilot year of the SCASD program, the Rapid City Regional Airport was
awarded a grant in the amount of $1,400,000 over a three year period for air service development. The State of South Dakot a and the BHASP provided an additional $1,400,000 in matching funds strengthening the effects of the grant on air service in the region. The focus of the grant was on marketing the Black Hills as a vacation
destination.

The 2002 grant was successfully used to attract Frontier and Allegiant Airlines, add direct flights to Chicago, Phoenix and Las Vegas and add capacity to Denver, Minneapolis and Salt Lake. Allegiant service and the non

- stop flights to Chicago, Phoenix, and Las Vegas continue to this da y, although Frontier ceased service to
Denver due to its bankruptcy and other economic considerations after the recent
recession.

In addition to the public awareness generated directly by the 2002 grant’s marketing dollars, it sparked a global interest in the Black Hills, bringing in significant international publicity even after the grant award expired. “ Since 2005, the campaign begun by the [ 2002 grant ] has directly generated more than $424 million
in measurable free publicity from media coverage arou nd the world

. ” 10

The only common element to both the 2002 & 2014 grants are some of the general marketing strategies which were proven successful by the results of the 2002 grant

. The grants have little else in common as a different, specific market is now being target ed with the 2014 grant, and preliminary airline support has been secured in
advance.

### 13

2014 SCASDP Grant Application | Rapid City Regional Airport 

# Strategic Plan for Improved Air Service

Details of Proposed Service

The proposed daily, year

- round, non

- stop RAP

ATL service would be operated by a region al affiliate on behalf of Delta Air Lines utilizing 65
seat Bombardier CRJ

- 700 equipment in a 9F/56Y seating configuration. Assuming a 98 % flight completion rate (resulting in 357 annual flights)

, this would add 23,205 seats annually to the RAP
market. T his represen ts a 6.7% increase in total
annual capacity at RAP , and a 7.6% increase in
annual network carrier capacity. Additionally, this route would represent an even higher proportional capacity increase during the off

- season (Oct

- Apr), which makes the flight even more desirable from a local economic development perspective.

Beginning June 8, 2014, Delta Air Lines introduced Saturday

- only, peak summer
season service on the RAP

- ATL route using a CRJ

- 700. In the first summer season this route has been op erating, select flights have been up

- gauged to a 76 seat CRJ

- 900, and Delta recently announced daily RAP

- ATL service over the 2014 winter holiday season (12/20

- 1/4) utilizing a CRJ

- 700 11 . These up

- gauges and holiday flight additions
so soon after the first flight indicate that the Rapid City

- Atlanta market has plenty of untapped potential demand that Delta didn’t initially anticipate

. Therefore, by building public awareness with a $500,000 strategic marketing initiative, the Rapid City Regional Airport a nticipates being able to increase the O&D and (to a lesser extent) connecting traffic enough in order to make a year

- round, daily flight self

sustaining and economically justifiable. The Rapid City Regional Airport will further support this proposed servi ce by waiving landing fees for a period of two years to any airline willing to provide daily, year

- round, non

- stop service to Atlanta

. T ABLE 6 : S UMMARY OF P ROPOSED A TLANTA S ERVICE

Route RAP

- ATL
Distance 1230 sm Equipment CRJ 700
Seats 65 Frequency 1x Daily
Annual Seats* 23,205 RAP Capacity Incr. 6.7%
* Assuming 98% Completion

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2014 SCASDP Grant Application | Rapid City Regional Airport



# Goal & Objectives

The primary goal of this air service development initiative is to secure economically
self

- sustain ing, daily, year

- round, non

- stop service to Atlanta

. After reviewing different options, it was determined that the proposed service outlined is the way to achieve this goal that is most economical and has the highest chance of success.

In order to achieve this goal, t he Rapid City Regional Airport, in association with the
Black Hills Air Service Partnership

, has developed a strategic plan. The main objectives of this plan are listed below:

1) D evelop a new service agreement with Delta Air Lines for proposed service
detailed previously in order for said service to begin by Q2 2015 2) Utilize marketing tools to i ncrease O&D passenger traffic on RAP

- ATL by 75 % by one year from start of service 3) Utilize marketing tools to build public awareness and usage of the ATL s ervice

to a level that makes it economically self

- sustaining for the foreseeable future

The Rapid City Regional Airport anticipates that the plan described above will be successful by implementing it using the methods described in the following section.

H owever, if market conditions at the time of grant implement ation are such that daily Atlanta service is no longer a feasible goal , then the alternative goal of this initiative is to expand the frequency of the current summer

- peak Atlanta service and extend the season over which the flight operates by u tilizing si milar marketing measures to
those described in the methods section.



# Methods & Funding

The Rapid City Regional Airport will coordinate with members of the Black Hills Air Service Partnership , such as the RC Convention and Visitors Bureau and the Black Hills,
Badlands

, and Lakes Association in devising and executing marketing campaigns
that maximize public awareness of the Atlanta service over the duration of the project timeline.

### 15

2014 SCASDP Grant Application | Rapid City Regional Airport

Some potential ma rketing devices that may be utilized include :

 Digital media advertising

- SD & GA

 Print media advertising

- S D & GA

 Conferences/Trade Shows/Groups  Marketing to Travel Agents

 Marketing Leisure Packages

U sing the marketing devices listed above, the Black Hills Air Service Partnership will coordinate a comprehensive marketing campaign tar geting t he A tlanta region as well as outbound travelers in the Black Hills. Possible specific e fforts may include:

s ponsori ng travel shows in key markets; d eveloping brand “evangelists” through familiarization tours designed to educate travel specialists, bloggers, and meeting

p lanne rs from the new target markets; c reating competitive travel pa ckages for inbound traffic; or c reating cooperative marketing arrangements with Delta.

The Rapid City Regional Airport and the Black H ills Air Service Partnership have been able to successfully leverage these methods in the past to raise public awareness of
new air service , as noted in the Previous Grant Award section.

The proposed funding plan for this project includes a combination of $175,000 in local

non

- airport funds and $325,000 in SCASD grant funds, with an additional estimated $25,000 in landing fee waivers contributed by the airport (based on the proposed service levels described)

. The non

- airport local funding is being contribu ted by the Black Hills Vision fund, a local economic development fund derived from local sales taxes. A summary of the funding plan including approximate percentage
breakdowns i s shown in Table 7

.

T ABLE 7 : S UMMARY OF P ROPOSED F UNDING

P LAN DOT SCASD Grant $325,000 61.9%
BH Vision Fund (non

- airport local) $175,000 33.3%

Airport fee waivers * $25,000 4.8%
Total $525,000

*Estimated value

### 16

2014 SCASDP Grant Application | Rapid City Regional Airport



# Timeline

Table 8 outlines the detailed project comple tion timeline. Although the anticipated project duration is only 30 months (from 1/15 to 6/17), the Rapid City Regional Airport would like to request a full 3

- year grant duration through Q4 2017 , in the event of unforeseen difficulties in initially establ ishing the desired service.



### T ABLE 

### 8 : P ROJECT 

### I MPLEMENTATION 

### T IMELINE



### Project Milestone Date SCASD P Grant Award Q3 2014 DOT Grant Agreement Q3 2014 Meet with target airline regarding proposed service Q4 2014 Mutual acceptance of new service agreement Q 4 2014 Complete initial planning of marketing efforts Q4 2014 Announce expanded service Q 4 201 4 Begin service marketing initiatives Q1 2015 First grant status report to DOT Q1 2015 Inaugural flight

- expanded service Q2 2015
Continue initial market ing efforts , adjust as needed based

on service performance Q2 2015

– Q2 2016
Quarterly grant status reports to DOT Q2 2015

– Q1 2017 Landing fee waivers end on or before Q2 2017 Project completion, final report to DOT Q 2 2017
Close DOT grant on or befo re Q 2 2017



# Summary

As the most populous city in w estern South Dakota, Rapid City is the major gateway to the Black Hills region, home to numerous state and national parks. With a focus on tourism, and medical, financial, educational and energy services , Rapid City has one of the nation’s strongest economies, boasting an unemployment rate of only 4.1%. 12

However, b ecause of its isolated location, the regional economy needs convenient, reliable, and affordable air service in order to continue growth. As a result of network capacity diminishing, while enplanements increase, fares at Rapid City Regional Airport have climbed to levels not seen since before airline deregulation. As a consequence, economic growth in the Black Hills is hampered by the lack of

a dequate air service options.

### 17

2014 SCASDP Grant Application | Rapid City Regional Airport

The air service development initiative laid out in this proposal would help alleviate the current problem of high fares at Rapid City Regional Airport, and provide the Black Hills region with a new non

- stop flight option that w ould grow the local

economy by providing connectivity to the biggest airline hub in the world,

enc ouraging additional tourism and trade on a national and even global level.

The Rapid City Regional Airport requests $325,000 in SCASDP grant funds to implemen t this initiative, which would be matched by $175,000 in local non

- airport cash funding, as well as $25,000 in landing fee waivers. By securing Delta’s support for expanded
service in advance, and by coordinating marketing efforts with members of the Blac k Hills Air Service Partnership, this initiative has a high probability of successfully accomplishing the following:

 Providing material benefits to a broad section of the traveling public

 Reducing the rate of growth of airfares at the Rapid City Regional Airport

 Increasing air service capacity in an economically sustainable way

 Expanding economic development opportunities for the Black Hills region

For of all of the reasons outlined in this proposal, t he Rapid City Regional Airport and
the Black Hills Air Service Partnership, on behalf of the larger Black Hills community, respectfully request the Department of Transportation to give this ap plication all due
consideration.



# References

1 US Bureau of Labor Statistics

2 US Census Bureau 2012 estimate

3 Amtrak State Fact Sheets, available at www.amtrak.com

4 US Bureau of Labor Statistics

5 SD Department of Tourism 2014 Annual Report

6 SD Department of Tourism 2014 Annual Report

7 SD Department of Tourism 2014 Annual Report

8 National Park Service 2013 Annual Visitation Report

9 Diio airline intelligence database

10 TDG Communications

– BHASP Case Study available at http://www.tdgcommunications.com/what

- we

- do/case

- studies/black

- hills

- air

- service

- task

- force

- case

- study.html

11 Rapid City Region al Airport press releases

12 US Bureau of Labor Statistics

This grant application package was primarily authored by Alex Bachwich of the South Dakota School of Mines and Technology and Mike Bown of Trillion Aviation on behalf of the Rapid City Regional Air port and the Black Hills Air Service Partnership730 E. Watertown Street, Suite 102  Rapid City SD 57701  605

- 394

- 1706 www.bhfreebusinesshelp.org 

### July 30 , 2014

Brooke Chapman Associate Director

, Small Community Air Service Development Program Office of Aviation Analysis US Department of Transportation 1200 New Jersey Ave, SE Washington, DC 20590

Subject: Rapid City Regional Airport Grant Application Small Community Air Service Development Program

– Docket ID: DOT

- OST

- 2014

- 0113

Dear Ms. Chapman,

This is a letter of support for two organizations that I represent. Both Black Hills Council of Local Governments and Black Hills Community Economic Development represent the

comm unity and economic development interest of the western South Dakota. Air Service is a critical need in the area for long term growth and prosperity.

As the consolidation of our national carriers, the region has seen a decrease in air
service. As Rapid City Regional Airport serves a larg e rural area in not just western South Dakota but also northwest Nebraska and eastern Wyoming, it is critical that new
markets are available to the residents of the r egion. The a ddition of the Atlanta hub
increase s our connectivity to th e national and international air transportation system. The S CASDP grant would enable Rapid City to attract expanded

, year

- round service to
Atlan ta.

T he region has grown and is in need of increased air service, and receiving a SCASDP grant would provide Rapid City with an excellent opportunity to grow air service in the region. I respec t fully ask that you give the Rapid City Regional Airport’s SC ASDP grant application your highest consideration.

Sincerely,

Blaise Emerson Executive Director Black Hills Council of Local Governments Black Hill Community Economic Development, Inc.PO Box 747 Rapid City, South Dakota 57709

- 0747 • Phone : 605

- 343

- 1744 • Fax: 605

- 343

- 6550 Web: www.rapidcitychamber.com • E

- mail: info@rapidcitychamber.com July 30, 2014

Ms. Brooke Chapman Associate Director, Small Community Air Service Development Program Office of Aviation Analysis U

. S

. Department of Transportation 1200 New Jersey Ave, SE Washington, DC 20590

Subject: Rapid City Regional Airport Grant Application Small Community Air Service Development Program

- Docket ID: DOT

- OST

- 2014

- 0113

Dear Ms Chapman:

Black Hills Air Service Partnership (BHASP) is a committee of the Rapid City Area Chamber of Commerce whose goal is to enhance commercial air service at the Rapid City Regional Airport (RAP) by fostering partnerships with airlines and other area communities to develop new markets and quality service with competitive fares. S ince its inception, BHASP has leveraged the financial and intellectual capital of numerous area organizations, including Black Hills Vision, to accomplish its mission.

As you are probably aware, Rapid City Regional Airport is the largest non

- hub airport for 350 miles of the Black Hills of South Dakota and Wyoming. Improving air service and reducing fares are essential to the Black Hills economy. BHASP was the recipient for a U.S. Department of Transportation grant in 2002 which was matched with 50% loca l funds to develop an innovative marketing plan for the Northern Great Plains Region. This award resulted in the development of a consortium of various public and private entities which has not been accomplished before.

BHASP is excited to be applying fo r a Small Community Air Service Development (SCASD) grant through your office to fund a $500,000 air service development project. This project’s main objective is to support daily, year

- round, non

- stop service to Atlanta on Delta Airlines via a variety of coordinated marketing efforts.

While we know the demand for these grants funds will be enormous, we would encourage you to consider the need to continue and expand this valuable program. The commitment from this area to provide $175,000 matching funds reflects our dedication to this effort and should be strongly considered when compared to other requests for funding.The Black Hills Air Service Partnership’s program is unique and successful, and we hope you agree that it should be funded again

. Thank you for your time and consideration.

Sincerely,

Linda Rabe, IOM, CCE President & CEO Rapid City Area Chamber of Commerce