# Santa Maria Public Airport Santa Maria, California

Legal sponsor: Santa Maria Public Airport District
DUNS: 08591 7870
Tax ID #: 95

- 2283152 Congressional District Code: CA

- 23

Contact: Chris Hastert General Manager
3217 Terminal Dr ive Santa Maria, CA 93455 Phone: (805) 922

- 1726

Fax: ( 805 ) 922

- 0677 chastert@santamariaairport.com 

# A PPLICATION 

# U NDER THE 

# S MALL 

# C OMMUNITY


# A IR 

# S ERVICE 

# D EVELOPMENT 

# P ROGRAM

D OCKET 

## DOT

- OST

- 2012

- 0069

### Prepared by 

# T ABLE OF 

# C ONTENTS

P AGE



### Application Highlights

................................ ............................ 1 Higher Than Average Fares

................................ ................................ .............. 1 Community Cost Contribution

................................ ................................ ......... 1 Public

- Private Partnership

................................ ................................ ................. 1 Material Benefits

................................ ................................ ............................. 1 Use of Funds in a Timely Fashion

................................ ................................ ..... 1



### Air Service Environment

................................ ........................ 2 Airport Catchment Area

................................ ................................ .................. 2 Business Community

................................ ................................ ....................... 3 Educational Institutions

................................ ................................ ................... 4 Tourism

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



### Air Service

– Existing and Historical

................................ ...... 5 Existing Air Service

................................ ................................ .......................... 5 Historical Air Service

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



### Air Service Needs and Deficiencies

................................ ......... 8 Major Origin/Destination Markets Not Served Adequately

................................ 8 Higher than Average Fares

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

### Strategic Plan

– Air Service

................................ .................. 11 Project Goals

................................ ................................ ................................ . 11 Proposed Air Service

................................ ................................ ...................... 11 Airline Participation

................................ ................................ ....................... 12 Detailed Market Analysis

................................ ................................ ............... 12 Alternate Plan

................................ ................................ ............................... 13 Previous Grant Recipient

- New Project and Goals

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

### Strategic Plan

– Implementation and Funding

...................... 14 Public

- Private Partnership

................................ ................................ ............... 14 Incentive and Support Plan

................................ ................................ ............ 14 Project Continuation and Sustainability

................................ .......................... 17 Strategic Plan Funding

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

### Schedule and Monitoring

................................ ..................... 18 Schedule and Milestones

................................ ................................ ............... 18 Monitoring Program

................................ ................................ ...................... 19 

### Appendix A. Community Support

................................ ......... 20 Public

- Private Partnership

................................ ................................ ............... 20 Government

................................ ................................ ................................ .. 20 Business and Community Support

................................ ................................ . 20

### T HIS SECTION CONTAINS 

### :

• Project goals

• Description of the Strategic
Plan



### • Highlights of the grant application



# 1 

# A PPLICATION 

# H IGHLIGHTS

his Small Community Air Service Development Program grant application for the Santa Maria Public Airport meets
the criteria of Docket DOT

- OST

- 2012

- 0069

. Santa Maria Public Airport District

, the legal sponsor, is requesting $ 490,000 in federal assistance to implement a $ 730

, 000 air service initiative. The project goal is to obtain nonstop service to a major airline’s hub that is locate d east of Santa M aria

. The Strategic Plan

, Sky W est Airlines / United Express

Denver service

, will achieve the project ’s goal

.



### H IGHER 

### T HAN 

### A VERAGE 

### F ARES

Santa Maria is underserved and excessively overpriced

, particularly to eastbound markets

. With eastbound
connections limited to United Express Los Angeles
servic e
, the options for traveling east are inconvenient and expensive. Santa Maria travelers pay a significantly higher average fare than other nearby regional airports causing diversion of almost 100,000 origin and destination passengers annually from the loca l airport

. On average, Santa Maria’s airfares (excluding Allegiant Air’s Las Vegas fares) are almost double the California

an d national averages

.



### C OMMUNITY 

### C OST 

### C ONTRIBUTION

To support this air service initiative, the Santa Maria Public Airport District and community will fund 33 percent of the proposed $ 730 ,000 Strategic Plan. Non

airport revenue sources will fund 20 percent
($ 13 0,000 ) of the $ 665 ,000 cash requirement. This is

a very strong commitment by the local community to acquire new eastbound hub service.



### P UBLIC



### - P RIVATE 

### P ARTNERSHIP

The Santa Maria Public Airport District, Santa Maria Valley Chamber of Commerce & Visitor & Convention

Bureau and Santa Maria Economic Development
Commission have formed a public

- private partnership. This partnersh ip has been successful in past air service
efforts and is dedicated to the success of this initiative. 

### M ATERIAL 

### B ENEFITS

Nonstop eastbound air service will benefit a broad segment of the traveling public, including business es
, education al institutions and other enterprises. Within 50 miles of the Airport, approximately 5 0 0,000 people

reside in the area

. Importantly, Vandenberg Air

Force Base and its’ associated aerospace

contractors employ over 8

, 6 00 people and has a
high demand for Denver service because of its’

many aerospace partners that are located in and

around Denver. The growing population of North

Santa Barbara C ounty, the US aerospace industry and

many businesses in the region desperately need the proposed service

. Denver has been the area’s number
one market outside of California for many years

. There is no other service improvement th at would mean as much to the region as non stop service to Denver.



### U SE OF 

### F UNDS IN A 

### T IMELY 

### F ASHION

A ll of the elements are in place to ensure the timely use

o f grant funds. A detailed market analysis has been completed for SkyWest/ United service to Denver

. Preliminary discussions with SkyWest/United have already taken place

. I t is reasonable to expect that this service could be implemented in spring /summer 201 3

. 

# T

# 2 T HIS SECTION CONTAINS 

### : Description of the Santa Maria community in relation to air
service to demonstrate the benefit to a broad segment of the traveling public. 

# A IR 

# S ERVICE 

# E NVIRONMENT

he Santa Maria Public Airport is in need of additional air service

. Santa Maria’s connecting hub service is limited to United Express Los Angeles service with the 30

- seat Embraer 120 turboprop aircraft. Vandenberg Air Force Base ’s proximity to Santa Maria Public Airport and the solid and growing business and population bas e in the Santa Maria

area is driving local demand for air service improvements. This section reflects the broad segment of the traveling public, including businesses, educational institutions and other enterprises that will benefit from the proposed Strate gic Plan.



### A IRPORT 

### C ATCHMENT 

### A REA

Santa Maria Public Airport is located on the Central Coast of California in the city of Santa Maria. The Airport is located in northern Santa Barbara County, about 35 miles south of the city of San Luis Obispo, 70 miles nort h of the city of Santa
Barbara and 17 0 miles north of Los Angeles. The A irport’s catchment area, shown in orange in Exhibit 2 .1 , has a population of over 235 ,000. Within 50 miles of the Airport the population is almost 5 00,000.

From 2010 to 202 0 , Santa Barbara County is forecasted to grow by 10 percent

. The fastest growing city in Santa Barbara County, the “ All America City ” of Santa Maria, stands at the center of that growth. Santa
Maria is th e growth region of the
Central California Coast. In the last 10 years, Santa Maria’s population grew over 20 percent. Santa Maria’s

s cenic terrain, moderate climate and quality of life have fueled the dramatic migration of new residents and businesses seeking affordable
locations in California. Additionally, growth has been boosted by Santa Maria’s proximity to and the increased activity at Vandenberg Air
Force Base, the West Coast home of the National Aeronautics and Spac e Administration’s (NASA)

space program. 

# T

EXHIBIT 2.1 AIRPORT CATCHMENT AREA

## S ECTION 

## 2

. A IR 

## S ERVICE 

## E NVIRONMENT



# 3 B USINESS 

### C OMMUNITY

Like other California communities, Santa Maria has evolved from an agricultural background to a diversified economy that
includes aeros pace/military, education, medical, technology
and service sectors. What was once a slow

- paced farming community is now a dynamic regional center . The Santa Maria Valley has a burgeoning agricultural industry, as well as connections with aerospace due to it s proximity to Vandenberg Air Force Base. Other significant manufacturing includes wire and cable production, medical manufacturing, high

- tech communications, dental products manufacturing and a myri ad of other industrial products. Table 2 .1 provides
a lis t of top employers in the Santa Maria area. The following highlights a few of the businesses that would benefit from nonstop eastbound service:

• does business with many Quintron Systems government and defense locations across the county.
Several of these are located in Colorado.

• has significant eastbound travel Hardy Diagnostics needs with a new manufacturing facility in Dayton, Ohio.

• is a family of businesses providing Diani Companies a full range of construction services, predominantly military, with offices in California and Florida. Eastbound hub service would greatly enhance their travel efficiency and productivity.

Vandenberg Air Force Base presents the ideal anchor for companies specializing in space technologies. At present, Vandenberg Air Force Base and i ts’ associated aerospace contractors play an important role in the region’s economic engine collectively employing over 8,600 people. Because Vandenberg is the West Coast home of the US space
program, there are a number of aerospace firms including Lockhee d Martin, Boeing, C& D Aerospace and
InDyne located either on the base or in the community. Significantly, the Air Force Base along with its aerospace
contractors have direct links with sister companies and/or other aerospace contractors that are located i n the Denver/Colorado Springs area.

Agriculture is the number one industry in the Santa Maria Valley, and new technologies are emerging. The Windset Farms project, which features the first hydroponic farming in the region, will have four large, 32

- acre gr eenhouses with 5.7 million square feet in total. The project will create over 240 jobs. This will open the door for further technological advancements in agriculture and create new business opportunities in Santa Maria.

With over 1,300 employees, Marian Medical Center is one of the largest employers in the Santa Maria Valley. Marian
Medical Center’s 216,000 square foot, 188

- room hospital e xpansion will open additional opportunities for medical related businesses, service and medical products. A number of companies in Santa Maria specialize in manufacturing medical and health products. The expansion was completed in 2011. TABLE 2 .1 INSTITUTIONS
EMPLOYER INDUSTRY

Vandenberg Air Force Base Defense and Aerospace Santa Maria School District Public Education

Marian Medical Center Health Care Allan Hancock College Public Education

City of Santa Maria Public Administration Orcutt Union School District Public Education Betteravia Farms Agriculture C&D Zodiac Aerospace Manufacturing

Den

- Mat Corporation Manufacturing VTC Nonprofit
Source: Santa Maria Chamber of Commerce & Visitor & Convention Bureau

## S ECTION 

## 2

. A IR 

## S ERVICE 

## E NVIRONMENT



# 4 E DUCATIONAL 

### I NSTITUTIONS

Santa Maria is home to the campus of Allan Hancock Community College. The C ollege serves all of northern Santa
Barba ra C ounty and parts of San Luis Obispo and Ventura counties at campuses in Santa Maria, Lompoc, Solvang and Vandenberg Air Force Base. Over 1,300 courses are offered in over 100 fields of study via nine academic dep artments. Allan
Hancock Community College, with nearly 1,000 employees, is one of the five largest employers in northern Santa Barbara County. The Santa Maria area also has several university extension programs including: Chapman University Academic

Center s, La Verne University and Embry

- Riddle

Aero nautical University

.



### T OURISM

Santa Maria’s backdrop of coastline and wine country provide unlimited year

- round recreation and leisure opportunities. Tourism is a significant industry due to Santa Maria’s central
location between the Sierra Madres Mountains and Pacific
Ocean and the wide selection of Central Coast activities. Wineries provide a large amount of revenue for the region, both in wine production and through tourism. The Santa Maria Wine Trail is very popular among visitors. Other
attractions include:

• Pismo Beach

• Hearst Castle

• Foxen Canyon Wine Trail

• Solvang

• La Purisima Mission

• Guadalupe

- Nipomo Dunes Complex

# 5 T HIS SECTION CONTAINS 

### :

• Description of existing air

service

• Synopsis of historical air

service



### • Description of air service 

# A IR 

# S ERVICE



# – E XISTING

AND 

# H ISTORICAL

he following is a current and historical look at air service

at Santa Maria Public Airport

. Carriers providing service, service frequency, and nonstop destinations offered are
shown. Also included in this section is a discussion of past air service development efforts and extenuating factors that have
affected air service

.



### E XISTI NG 

### A IR 

### S ERVICE

Santa Maria Public Airport’s only access to the national air transportation system via a hub is provided by United Express to Los Angeles International Airport ( Table 3 .1 ). United Express, operated by SkyWest Airlines, provides an average of four daily departures (only two to three on Saturday) with
the 30

- seat Embraer 120 turboprop aircraft. The Airport also has Allegiant Air point

- to

- point service to Las Vegas and, starting in November 2012, Honolulu, HI. Allegiant provides three to four we ekly departures with the 150

- seat MD

- 80

narrow

- body jet. While Allegiant’s point

- to

- point service is highly valued by the Santa Maria community, the lack of adequate access to a connecting hub other than Los Angeles is a significant deficiency in Santa Mar ia’s service.

TABLE 3 .1 EXISTING AIR SERVICE NONSTOP DESTINATION MARKETING CARRIER AIRCRAFT WEEKLY DEPARTURES WEEKLY SEATS
Las Vegas, NV Allegiant Air MD

- 80 (150

- seat jet) 4 600

Los Angeles, CA United Express EMB

- 120 (30

- seat turboprop) 27 810

Total 31 1,410

Source: Diio Mi, June 2012; Note: Allegiant adding 1 weekly Honolulu flight in November 2012



### H ISTORICAL 

### A IR 

### S ERVICE

Historically, Santa Mari a Public Airport has supported service to a variety of hubs/destinations including: Las Vegas, Los Angeles, Oxnard, Paso Robles, San Francisco, San Luis Obispo and Santa Barbara. The following summarizes the historical air service situation including: destinations, traffic levels, and service providers. Extenuating factors that have affected air
service over time is also reviewed. 

# T

## S ECTION 

## 3

. A IR 

## S ERVICE



## – E XISTING AND 

## H ISTORICAL



# 6 Destinations, Carriers, and Traffic Levels

Since 2003, total departures have declined significantly. Seats and onboard passengers peaked in 2008 but have been declining since then. Exhibit 3 .1 provides a summary of departures , seats and onboard passengers from 200 3 through

20 11

. Departures peaked in 2004 and have since declined by 29 percent. With the addition of Allegiant service to Phoenix

Mesa in late 2007, seats peaked in 2008. The combined
cancellation of Allegiant’s Phoenix

- Mesa service and
United Express’ reduction in departures has led to a 22
Onboard passengers percent reduction in seats by 2011

. improved through 200 8 then declined since then by 24 percent.

EXHIBIT 3 .1 DEPARTURES, SEATS, AND ONBOARD PASSENGERS

Source: Diio Mi

Table 3

. 2 provides additional detail on scheduled departures and seats from 200 4 through 201 2 by destination and

carrier. United Express provided nonstop Los Angeles service over the entire pe riod; however, departures decreased from a high in 200 4 of 64,050 to only 41,460 in 201 2

. During the period, Allegiant began service to Las Vegas in 2006 and
has continued to do so with three to four departures per week. In 2007/2008, Allegiant also provided nonstop service to Phoenix/Mesa but pulled the service in 2008. Historically, Santa Maria Public Airport has not had the benefit of eastbound
hub service flown by a mainline carrier.

TABLE 3 .2 HISTORICAL DESTINATIONS AND SERVICE PROVIDERS

DESTIN ATION AIRLINE ITEM SCHEDULED DEPARTURES/SEATS
2004 2005 2006 2007 2008 2009 2010 2011 2012
Las Vegas, NV Allegiant Air Dept 102 156 170 157 155 158 177
Seats 15,300 23,400 25,500 23,550 23,250 23,700 26,550
Los Angeles, CA United Express Dept 2,135 2,131 1,756 1,761 1,689 1,382 1,398 1,367 1,382
Seats 64,050 63,930 52,680 52,830 50,670 41,460 41,940 41,010 41,460 Phoenix, AZ (AZA) Allegiant Air Dept 20 43
Seats 3,000 6,450 Total D epartures 2,135 2,131 1,858 1,937 1,902 1,539 1,553 1,525 1,559 Total S eats 64,050 63,930 67,980 79,230 82,620 65,010 65,190 64,710 68,010

Source: Diio Mi 0 19,000 38,000 57,000 76,000 95,000

0 500 1,000 1,500 2,000 2,500

2003 2004 2005 2006 2007 2008 2009 2010 2011Onboard passengers/SeatsDepartures

Calendar year Departures Seats Onboards

## S ECTION 

## 3

. A IR 

## S ERVICE



## – E XISTING AND 

## H ISTORICAL



# 7 Extenuating Factors that have A ffected A ir S ervice

Air service at Santa Maria Public Airport has been affected by the proximity of other commercial air service airports. Santa Barbara Municipal Airport is approximately 70 miles away

, and San Luis Obispo County Airport is approximately 35 miles away. The larger Santa Barbara catchment area population resulted in more servi ce at th at airport while airports serving the smaller Santa Maria and San Luis Obispo catchment areas competed vigorously for air service for their air
travelers. The result is both airports having limited north/south

service, but neither airport has service to either of the hubs at

Salt Lake City or Denver.

The proximity of Vandenberg Air Force Base to Santa Maria Public Airport has proven to be a major generator of air travel

, much of which would be best served by air service to a major eastbound hub. San Luis Obispo catchment area air travelers could be conveniently served by
Santa Maria service to an eastbound hub. Such service would negate
the need for air travelers from the two smaller catchment areas to drive

over 70 miles to Santa Barbara to access service to an eastbound hub.



### Past Air Service Development E fforts

The Santa Maria Public Airport District Board of Directors has been actively involved in air service developm ent. T he Board
of Directors has worked closely with the community on air service development efforts and continues to do so

. Santa Maria Public Airport has aggressively pursued the air service initiative outlined herein: U nited Express/SkyWest Airlines

ser vice to Denver.

D etailed market analyses have been completed. Market studies such as route forecasts and retention/diversion analyses have also regularly been conducted to keep the information current for use in this initiative

. In addition to the above, air service workshop s have been held in the community to continue to educate the community on local air service issues, challenges and options for the Santa Maria Public Airport. In 2008, a $7 million Terminal Expansion Project was completed to meet the needs of Santa Maria Public Airport passengers for the foreseeable future, with future growth options incorporated into the design.

In 2004 Santa Maria Public Airport District was one of 13 airports that formed the California Airports Coalition and
receiv ed a Small Community Air Service Development Program grant to evaluate the unmet air service needs in California. This study evaluated the intrastate air service needs of these 13 communities as well as the primary travel demand of each community to non

- Ca lifornia destinations. Importantly, even though the study was completed in 2006/2007 Denver surfaced as Santa Maria’s top non

- California destination. This study focused the management at Santa Maria Public Airport on Denver and all of Santa Maria’s airline initiatives have targeted either Denver o r Salt L ake City service.

This Small Community Air Service Development Program grant is the needed component to incentivize an airline to take the risk and operate service to Denver, consistently Santa Maria’s num ber one non

- California market.

# 8 T HIS SECTION CONTAINS 

### : Description of Santa Maria Public Airport’s air service needs
and deficiencies



# A IR 

# S ERVICE 

# N EEDS AND 

# D EFICIENCIES

he Santa Maria area is underserved and overpriced, particularly to destinations located east of Santa Maria

. The Air Service Needs and Deficiencies section identifies
the deficiencies in air service at Santa Maria Public Airport and what air service improvements are needed to correct these
deficiencies. This section demonstrates that Santa Maria is underserved, and the average airfares in this community are higher than other comparable communities.



### M AJOR 

### O RIGIN 

### /D ESTINATION 

### M ARK ETS 

### N OT



### S ERVED 

### A DEQUATELY

O nly 33 percent of Santa Maria Public Airport ’s catchment area passengers use the local airport. The existing air service to Los Angeles International Airport provides reasonable convenience to north/south air travelers along the heavily traveled

West Coast. However, limited frequency in eastbound Los Angeles nonstop markets and a relatively limited number of eastbound destinations, particularly those where codeshare agreements exist, seriously reduce the convenience of Los Angele s eastbound connecting opportunities. In addition the terminal layout at Los Angeles for connecting passengers is
less than ideal. Dissatisfaction with Los Angeles connecting routings is generally shown by lower retention percentages as illustrated in Tabl e 4 .1 in the top 15 Denver and east markets. Importantly, Denver and Colorado Springs are the area’s
top two eastern origin and destination markets.

TABLE 4 .1 CATCHMENT AREA RETENTION AND DIVERSION

TOP EASTERN MARKETS SMX RETENTION % DIVERSION %

SBA LAX OTHER Denver, CO 38 44 15 2 Colorado Springs, CO 74 17 7 3 Washington, DC (IAD) 63 16 15 6

Chicago, IL (ORD) 31 6 49 14 Orlando, FL 50 32 13 5 New York, NY (JFK) 21 17 54 8

Dallas, TX (DFW) 31 21 45 3 Houston, TX (IAH) 16 23 48 13
New Orleans, LA 29 33 31 7 San Antonio, TX 56 23 16 5

Boston, MA 48 32 16 4 Philadelphia, PA 43 15 40 2 Baltimore, MD 66 11 20 3 Nashville, TN 10 22 65 3 Atlanta, GA 33 26 30 11 Total Domestic 50 21 19 10 

# T

## S ECTION 

## 4

. A IR 

## S ERVICE 

## N EEDS AND 

## D EFICIENCIES



# 9 The most serious deficiency in Santa Maria ’s service is the lack
of service to an eastbound hub such as Denver or Salt Lake City. Service imp rovemen t s are badly needed by
Vandenberg Air Force Base and its’ associated

aerospace contractors which have extensive air travel
to/from Denver and Colorado Springs. Santa Maria service

to an eastbound hub would also serve the adjacent San Luis Obispo community

. Santa Barbara

- Denver service has operated at annual lo ad factors ranging from 83 to 89
percent over the last five years making it hard to get a seat on those flights. Santa Maria service to an eastbound hub would
alleviate the need for Santa Maria or San Luis Obispo travelers
to travel over 70 miles to Santa Barbara

, where seat availability is limited

, o r drive over 170 miles to Los Angeles.



### H IGHER THAN 

### A VERAGE 

### F ARES

The Order Soliciting Community Proposals indicated that the US Department of Transportation ( DOT ) will compare the local community’s airfares to the national average airfares for all commun ities using the Bureau of Transportation Statistics (BTS) database. Unfortunately, for communities like Santa Maria , this comparison can be misleading. The BTS report for calendar year 2011 shows Santa Maria Public Airport with an average roundtrip fare of $3 60

, slightly lower than the national average of $364. However, Santa Maria’s fare is driven down due to the high share (54 percent of passengers) of point

- to

- point service offered by Allegiant Air at very low fares

.

As mentioned previously, the Santa Maria community highly values the point

- to

- point service offered by Allegiant ; however , the primary link to the national air transportation system is through the hub connections offered by United Express at Los Angeles In ternational Airport

. Table 4

. 2 shows a comparison of one

- way airfares ( net of taxes) when Allegiant is excluded from the averages.

TABLE 4

. 2 AVERAGE ONE

- WAY FARE PAID
AVERAGE FARE SMX % HIGHER 2004 2005 2006 2007 2008 2009 2010 2011 Santa Maria $170 $181 $209 $238 $295 $270 $253 $335 Santa Barbara $158 $166 $185 $191 $195 $176 $186 $200 68% San Luis Obispo $156 $167 $192 $195 $218 $206 $195 $195 71% California $129 $138 $151 $152 $159 $143 $160 $175 91%
West Region $129 $137 $149 $148 $159 $144 $160 $175 91%
US $134 $137 $150 $149 $160 $145 $159 $173 93% Source: Data Base Products, Inc.; excludes Allegiant Air

When excluding Allegiant’s point

- to

- point, low

- fare impact in all markets, Santa Maria’s airfares in 2011 were almost double the state of California, the West region and the national averages. While Santa Maria’s fares have always exceeded those at Santa Barbara and San Luis Obispo, from 2010 to 2011, Santa Maria’s non

- Allegiant fare increased by $81 making the fare differences excessive. While Allegiant’s presence in the Santa Maria market dramatically improved fares to/from Las Vegas, their top origin and destination market, other options are needed in the Santa Maria marketplace to bring fares more in line with other airports regionally and nationally. There are very few airports
across the nation suffering from airfares as excessive as at Santa Maria when trying to access a hub.

## S ECTION 

## 4

. A IR 

## S ERVICE 

## N EEDS AND 

## D EFICIENCIES



# 10 Looking specifically at eastbound markets, the focus of this grant application, h igh airfares combine d with the lack of
direct service to an eastbound hub push air travelers to divert to alternate airport s for service to Denver and east. Table

4

. 3 compares calendar year 201 1 Santa Maria average airfares with those of San Luis Obispo, Santa Barbara and Los Angeles in the catchment area’s top 15 markets Denver and east.

TABLE 4 .3 AIRFARE COMPARISON

MARKET ONE

- WAY AVERAGE FARE DIFFERENCE

SANTA MARIA SAN LUIS OBISPO SANTA BARBARA LOS ANGELES SBP SBA LAX Denver, CO $332 $163 $142 $120 $169 $190 $212 Colorado Springs, CO $474 $215 $242 $223 $259 $232 $251 Washington, DC (IAD) $365 $216 $220 $248 $149 $145 $117

Chicago, IL (ORD) $214 $206 $200 $190 $9 $15 $24 Orlando, FL $378 $213 $229 $204 $165 $149 $174 New York, NY (JFK) $195 $228 $234 $301 ($33) ($38) ($106)

Dallas, TX (DFW) $374 $213 $200 $164 $160 $174 $209 Houston, TX (IAH) $353 $195 $210 $233 $159 $143 $120 New Orleans, LA $316 $203 $223 $200 $113 $94 $117 San Antonio, TX $468 $187 $194 $192 $281 $274 $276

Boston, MA $336 $204 $248 $236 $132 $88 $100 Philadelphia, PA $351 $294 $261 $264 $57 $90 $87 Baltimore, MD $533 $254 $274 $209 $278 $259 $324 Nashville, TN $374 $215 $235 $200 $159 $139 $173 Atlanta, GA $352 $244 $212 $192 $108 $140 $160 Source: Data Base Products, Inc.; CY 2011

Though this is a limited sample, it further demonstrates that Santa Maria ’s fares in eastbound markets are overpriced compared to adjacent airports. One

- way airfare differences are as high as $281 over San Luis Obispo, $274 over Santa Barbara, and $324 over Los Angeles. Denver and Colorado Springs, in particular, two markets extremely vital to
Vand enberg Air Force Base, are excessively high. Service to an eastbound hub with improved routings and added capacity
will result in lower fares.

# 11 T HIS SECTION CONTAINS 

### :

• Strategic Plan

• Alternate plan



### • Previous grant recipient with new project and goals



# S TRATEGIC 

# P LA N


# – A IR 

# S ERVICE

his Strategic Plan section provides a detailed description of the goals of the project and a primary and alternate plan for attaining those goals. This application reflects a new project with different goal s from those detailed in Santa Maria’s 2002 grant award.



### P ROJECT 

### G OALS

The following goals will be accomplished by the proposed Strategic Plan:

• Secure air service to a major airline’s hub located east of Santa Maria Public Airport

• Improve convenience of service and fare competitiveness

• Mitigate the need to use alternate airports to access adequate air service



### P ROPOSED 

### A IR 

### S ERVICE

The proposed Strategic Plan to meet the project’s goals is: Santa Maria

Denver service, one or two daily regional jet roundtrips operated by SkyWest Airlines/United Express ( Exhibit 5 .1 )

. The effect of this plan on the project goals will be:

• Adding nonstop , regiona l jet service to United Airline s ’ Denver hub will provide the region with direct access to its number one eastern destination and improve connectivity to markets located beyond Denver.

• Nonstop service to Denver will reduce the number of passengers that are now diverting to other airports to fly to Denver or traveling to destinations beyond Denver. Currently, almost
100,000 origin and destination passengers annually divert
to an alternate airport. Almost 40 percent of those
travelers use Los Angeles International Airport, a lengthy

170

- mile drive.

• Added capacity will p rovide greater availability of cheap er seats thereby reducing Santa Maria’s excessively high airfares. Lower
airfares and improved convenience will influence passengers to
use Santa Ma ria Public Airport that are now traveling to alternate airports. 

# T

EXHIBIT 5 .1 ROUTE MAP

DEN SLC

SMX

## S ECTION 

## 5

. S TRATEGIC 

## P LAN



## – A IR 

## S ERVICE



# 12 A IRLINE 

### P ARTICIPATION

Over the past several years, members of the public

- private partnership have met with United Airlines, Delta Air Lines and SkyWest Airlines regarding nonstop service to the hubs at Denver and Salt Lake City. Because this is a new market, an airline’s willingness to serve Santa Maria depends heavily on offsetting the airline’s start

- up risk in the market. A grant award for this application would provide the necessary tools to
lower the risk for an airline to initiate service between Santa
Maria and an eastern hub such as Denver or Salt Lake City

.



### D ETAILED 

### M ARKET 

### A NALYSIS

A detailed market analysis has been completed for SkyWest/United service to Denver International Airport. Key points of the analysis are described below. Projections were completed for a one and two roundtrip sc hedule on a 50

- seat Canadair Regional Jet. The operating and market assumptions are listed below:

• The Denver local market will be stimulated 50 percent for one roundtrip and 100 percent for two roundtrips. Connecting mark ets will be stimulated up to 10 per cent for one roundtrip and 50 percent for two roundtrips depending on SkyWest/United’s market share of existing passengers.

• SkyWest/United’s Santa Maria

- Denver service will capture a share of the passengers now driving to an alternate airport (i.e. Sa n Lu is Obispo, Santa Barbara, and Lo s Angeles ).

• Diversion from SkyWest/United ’s existing Santa Maria

- Los Angeles servic e was taken into consideration.

• SkyWest/United’s fully allocated operating costs between Santa Maria and Denver were estimated usin g Diio Mi
Form 41 data for SkyWest , adjusted by the manufacturer ’ s cost curve and SkyWest feedback.

Table 5 .1 provides a summary of the SkyWest/United Denver market analysis for one and two roundtrip s per day on a
50

- seat regional jet

. Passenger projections were based on a mature market (i.e., passenger projections would be at 100 percent on the first day of serv ice). It is estimated that one roundtrip per day wil l generate $615,195 (15 percent margin ) in segment profit for SkyWest/United

. Two roundtrips per d ay are projected to generate $804,531 (10 percent margin) in
segment profit for SkyWest/United

. The Santa Maria

- Denver route is forecast to be a strong economic performer for both SkyWest and United after ramp

- up is complete. Wi th an estimated 31 percent fully allocated system profit margin for one roundtrip and 29 percent for two roundtrips

, this

. market will be self

- sustaining

Although it is estimated that SkyWest/United will earn a profit after the Santa Maria

- Denver market matures, SkyWest/United will not generate this amount of profit

at start

- up. New markets typically have losses during the first year of operation, hence the need for a revenue guarantee to temper the airline’s risk. The uncertainty in the airline industry including the fluctuating cost of fuel
will play a large part in the reve nue guarantee negotiations with SkyWest/United

. TABLE 5 .1 SANTA MARIA

- DENVER MARKET ANALYSIS
ITEM STATISTICAL CATEGORY 1 RT 2 RT

1 Available seats per dept 50 50
2 Segments per day 2 4
3 Onboard passengers 28,545 54,437
4 Load factor 78% 75%
5 Average fare all markets $268 $276
6 Segment 1 revenue $4,093,808 $7,761,756
7 Segment 1 cost $3,478,613 $6,957,225
8 Segment 1 profit margin $ $615,195 $804,531
9 Segment 1 profit margin % 15% 10%
10 System revenue $6,267,277 $12,312,614
11 System cost $4,326,266 $8,732,060
12 System profit/loss $1,941,011 $3,580,554
13 System margin 31% 29%
Source: Mead & Hunt, Inc.

## S ECTION 

## 5

. S TRATEGIC 

## P LAN



## – A IR 

## S ERVICE



# 13 A LTERNATE 

### P L AN

If Santa Maria Public Airport fails to obtain SkyWest/United service to Denver, the secondary target is Delta Air Lines ’ service to Salt Lake City. Consistent with the intent of the air service initiative proposed, Delta’s Salt Lake City hub fills the need for service to a hub airport located east of Santa Maria. A previous analysis of this option that was completed for a presentation to Delta planners indicated that the service would perform well for Delta. Frontier Airlines’ service to Denver or
US Ai rways’ Phoenix service would also meet the goals of this grant application.



### P REVIOUS 

### G RANT 

### R ECIPIENT



### - N EW 

### P ROJECT

AND 

### G OALS

In 2002 the Santa Maria Public Airport District was awarded a Small Community Air Service Development Program grant. The 2002 gran t goals included the following:

• Recruit jet service to areas not currently served

• Increase service from the current carrier

• Attract a new carrier to stimulate competition thus creating competitive fares

• Increase community awareness with regard to recruitin g air carriers to the area

The US DOT’s porti on of the project budget, $217, 530, included a plan for partial funding of an air service marketing program and support for a leakage study.

The 2002 application’s goals targeted the improvement of overall air service at the A irport through marketing, research and meeting with airlines. This 201 2 application is focused on securing service to a major airline hub whose location promotes the flow of passengers to markets east of Santa Maria. By adding high value service to the east

, passenger diversion will be reduced and the added capacity will push airfares down further attracting travelers that are now using alternate airports. Also, the 201 2 im plementation plan is different from the 2002 application. This year’s plan includes a revenue guarantee, airport fee waivers and marketing program specifically supporting new service to eastern
hub s /destinations.

In summary, the goals and plan associated with this 2012 grant application are different and encompass 10 years additional market growth experience from Santa Maria’s 2002 grant application/award. Accordingly, this application qualifies as a new project and meets the requirements of the Small Com munity Air Service Development Program.

# 14 T HIS SECTION CONTAINS 

### :

• Public

- private partnership

• Designation of a legal

sponsor

• Funding



### • Sustainability of the project 

# S TRATEGIC 

# P LAN


# – I MPLEMENTATION AND 

# F UNDING

his section, Strategic Plan

- Implementation and Funding , details the incentive and support plan required to implement the Strategic Plan. A legal sponsor has been designated and a public

- private partnership that will actively participate in implementing t he proposed project has been formed. Also, this section addresses the self

sufficiency of the service and provides a description of the community’s plan to continue the project if it is not self

sustaining after the grant funds are expended. A project budg et and breakdown of the sources of funds is included.



### P UBLIC



### - P RIVATE 

### P ARTNERSHIP

Santa Maria Public Airport District is the sponsor of this grant application. For the purpose of this application, Santa Maria Public Airport District, the Santa Maria Valle y Chamber of

Commerce & Visitor & Convention Bureau and the Santa Maria Economic Development Commission have formed a public

private partnership (refer to community support letters in Appendix A ). Collectively, this partnership is committed to completing t he Strategic Plan outlined herein.

All partners in the public

- private partnership will be involved in the execution of the Strategic Plan ( Table 6 .1 ). Santa Maria
Public Airport will execute all federal grant offers, process associated reimbursement requests, oversee grant administration, and manage the revenue guarantee. The Santa Maria Valley Chamber of Commerce & Visitor & Convention Bureau along with the Santa Maria Economic Development Commission will assume responsibility for the implementation and management of the marketing program associated with the proposed service.



### I NCENTIVE AND 

### S UPPORT 

### P LAN

The public

- private partnership pr oposes a community support package that has been tested and proved to be successful in acquiring airline service and generating new passengers. To reduce SkyWest Airlines/United Express’ breakeven period and offset the economic risk during start

- up, the pu blic

- private partnership proposes the following incentives ( Exhibit

6 .1 , next page):

• Revenue guarantee: reduce airline economic risk

• New service marketing campaign: create new service awareness for SkyWest/United

• Airport fee waivers: reduce airline start

- up costs 

# T

TABLE 6 .1 PUBLIC

- PRIVATE PARTNER ROLES PUBLIC

- PRIVATE PARTNER ROLE Santa Maria Public Airport District Grant and revenue guarantee administration Santa Maria Valley Chamber of Commerce &

Visitor & Convention Bureau Coordination of the marketing program

Santa Maria Economic Development Commission Coordination of the marketing program

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## P LAN



## – I MPLEMENTATION AND 

## F UNDING



# 15 Revenue Guarantee

To reduce airline risk and provide an incentive for SkyWest/United to provide nonstop service to Denver, this Strategic Plan includes
a revenue guarantee. Although pro forma projections for new eastbound hub service are positive , service ramp

- up and breakeven can take up to a year. It is anticipated that SkyWest/United will require a $ 600,000 revenue guarantee to mitigate the risk of starting this new market. The exact terms of the revenue guarantee a greement are subject to
furth er negotiations.



### Marke ting Campaign

The success of the proposed service between Santa Maria and Denver will live or die based on the success of the marketing program. Making local travelers aware of the new, nonstop regional jet service to Denver and influencing the thousands of travelers that are now driving to alternate airports to use the local airport is the key. It helps that the new service wil l have the United Express brand since Unit ed Express is already in the Santa Maria market, but this does not guarantee the success of the
Denver service. The importance of an aggressive promotion campaign cannot be overemphasized.

Table 6 .2 provides a breakdown of the marketing dollars to be

spe nt on maximizing passenger utilization of new flights between
Santa Maria and Denver. This $ 5 0,000 campaign will be funded by non

- airport funds through Santa Maria Economic Development Commission ($20,000 cash and $10,000 in

- kind) and airport funds through the Santa Maria Public Airport District ($20,000 cash). The Santa Maria Economic Development Commission and the Santa Maria Valley Chamber of Commerce & Visitor &
Convention Bureau will be responsible for management and implementation of the marketing cam paign.

The marketing campaign will include a kick

- off phase utilizing public relations and social media, an on

- going media campaign and a promotional event with a media partner approximately three months after kick

- off. The marketing campaign will be moni tored and adjusted as necessary for
maximum results.

KICK

- OFF PHASE

A social media campaign will help get the word out. S. Lombardi & Associates’ social media expert will set up and maintain social media accounts and be responsible for gathering, networki ng and informing fans and followers of the latest updates in air travel specials and new flights out of Santa Maria Public Airport. The firm will work to create awareness of the convenience of the Santa Maria Public Airport and generate more traffic to its website and location. TABLE 6 .2 MARKETING BUDGET

DESCRIPTION CASH IN

KIND TOTAL Kick

- Off Phase Public relations $1,000 $0 $1,000 Social media $600 $0 $600
On

- Going Media Television airtime and commercial production $29,600 $0 $29,600

Targeted email

campaign $2,000 $0 $2,000

Print media $2,000 $0 $2,000 Promotional Event Television airtime $4,800 $0 $4,800 Program Administration Santa Maria Economic Development Commission $0 $10,000 $10,000

Total $40,000 $10,000 $50,000

## S ECTION 

## 6

. S TRATEGIC 

## P LAN



## – I MPLEMENTATION AND 

## F UNDING



# 16 Public relations will also be utilized to help secure news coverage of the announcement of new flights coming to Santa Maria. A professionally organized news conference will be a key part of the initial public
relations effort.

ON

- GOING MEDIA

A six

- month on

- going media campaign is proposed with television advertising as the core. This campaign will start immediately following the press conference announcing the new flights. Santa Maria

- based television stations KCOY (CBS) and KKFX (FOX) will be primary buys, with Comcast Cable (in Santa Maria, Lompoc and Santa Ynez Valley areas) and San Luis Obispo

- based KSBY

- TV (NBC) as secondary buys. The “Central Coast Now” package from KCOY/KKFX gives very good frequency for the money. This can be supplemented with targeted buys in News and other appropriate programming on KCOY/KKFX and

KSBY. The budget of $29,600 will be spent on television airtime and commercial production, spread over six months, with a higher proportion being spent near the k ick

- off.

A targeted email campaign will also be used and directed at persons likely to be higher income, frequent fliers and/or skiers. For print media, small, targeted publications such as the Pacific Coast Business Times

, which reaches business owners a nd managers who are likely to travel frequently and be decision makers for corporate travel

, will be used. Chamber of Commerce publications will al so be used to reach this target market.

PROMOTIONAL EVENT

Partnering with a media outlet for a contest will inject some fun and energy into the campaign about three months after
the kick

- off. With easily

- arranged support from public and private entities in the Denver area and from SkyWest/United , a trip to the Denver area including airfare, accommodations and activities will be given away.



### Fee W aivers

The air service support program includes three fee waivers: landing fees, terminal fees and fuel flowage fees

. The Airport will waive landing fees for the first 12 months of new service. Landing fees for the firs t 12 months are estimated at $ 20,000 assuming the use of the Canadair Regional Jet with one roundtrip daily. An additional six months of landing fees will be offered as part of the sustainability initiative following the one

- year anniversary of service. Th e landing fee waiver may vary depending on aircraft type used and the number of roundtrips offered.

The Airport will waive common us e terminal fees for the first six months of service. These fees are estimated at $ 15 ,000
for the first six months. Fuel fl owage fees will also be waived for the first 12 months of service worth an estimated $2 0,000. An additional six months of terminal and fuel flowage fees will be offered as part of the sustainability initiative following the one

- year anniversary of service.

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## 6

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## P LAN



## – I MPLEMENTATION AND 

## F UNDING



# 17 P ROJECT 

### C ONTINUATION AND 

### S USTAINABILITY

Based on p ositive pro forma projections for SkyWest/United service to Denver, it is anticipated that new eastbound hub
service will be self

- sustaining after the start

- up period which can take up to a year. A leading cause of service failure is
lack of awareness in t he community. The public

- private partnership will fund an additional $3 0,000 marketing campaign if at the end of the first year of service the average load factor for the 12

- month period averaged less than 70 percent. Additionally, Santa Maria Public Airpo rt will abate landing, terminal and fuel flowage fees for an additional six months, a savings of $ 35 ,000 for SkyWest/United

. The public

- private partnership and the Santa Maria business community are committed to the success of this project and understand t he difficulties associated with profitably oper ating new
air service.



### S TRATEGIC 

### P LAN 

### F UNDING

The public

- priv ate partnership is requesting the U S DOT’s assistance in funding 67 percent, or $490,000 of the Strategic P lan ( Exhibit 6 .2 )

. Specifically, US DOT funding
will be used to fund the revenue guarantee. A ll other elements including the marketing campaign, Strategic Plan monitoring, airline negotiations and airport fee waivers will be funded by the community. Table 6 .3 provides the Strategic Plan budget by element and sources of funding. The Airport and community will fund 3 3 percent of the total proposed air service program. Non

- airport funding sources will provide 20 percent of the cash requirement
and 19 percent o f the funding for the total program including in

- kind services.

TABLE 6 .3 STRATEGIC PLAN BUDGET

DESCRIPTION FUNDING SOURCE

TOTAL US DOT AIRPORT NON

- AIRPORT

CASH CASH IN

KIND CASH IN

KIND Airline incentive program:

Marketing campaign $20,000 $20,000 $10,000 $50,000 Revenue guarantee $490,000 $110,000 $600,000
Fee waivers: Landing fees $20,000 $20,000 Terminal fees $15,000 $15,000 Fuel flowage fees $20,000 $20,000 Consultant fees:

Airline negotiations $10,000 $10,000 Strategic Plan monitoring $15,000 $15,000 Total $490,000 $45,000 $55,000 $130,000 $10,000 $730,000 Percent of total project 67% 6% 8% 18% 1% 100% Percent of cash contribution 74% 7% N/A 20% N/A 100% Cash: Non

Airport

18%

Cash: US

DOT 67% Cash: Airport

6% In

- Kind: Non

Airport

1% In

- Kind: Airport

8% EXHIBIT 6 .2 CASH VS IN

- KIND FUNDING

# 18 T HIS SECTION CONTAINS 

### :

• Schedule and milestones for timely completion of the project



### • Monitoring program



# S CHEDULE AND 

# M ONITORING

r ealistic timetable for implementation of the grant project has been developed to achieve the project goals and ensure the timely use of the grant funds. This section details the milestones and a monitoring program to track the progress of the project.



### S CHEDULE AN D 

### M ILESTONES

The following milestones are proposed to track the progress of this air

service initiative. A timeline follows on Exhibit 7 .1 , next page.

• : After the grant is awarded and Airline negotiations agreement is signed, the public

- private partnership will contact SkyWest Airlines/ United Express and continue airline negotiations.

• : While the airline agreement is being finalized , the marketing Marketing campaign development/initiation campaign will be developed. The timing of the marketing campaign is critical; ideally, marketing would begin 30

to 60 days prior to new service initiation. Development of the marketing campaign is dependent on the timing
of SkyWest/United’s announcement and initiation of daily Denver service.

• : The public

- private partnership anticipates daily service to Denver would begin in spring/early Service initiation

summer of 201 3 following successful negotiations with SkyWest/United

. The remaining elements of the Strategic Plan depend on this date. The public

- private partnership understands the realities of the airline industry; airline route planning and availability of right

- sized aircraft are critical to air service initiation and may delay the service start date.

• : The revenue guarantee will be calculated based on the terms of Revenue guarantee contra ct completion the agreement, typically at the end of the first year of service. Assuming a June 2013 start date, the revenue guarantee contract would expire May 201 4

. If the service start date changes due to airline circumstances and/or equipment availability, the revenue guarantee contract term will change accordingly.

• : SkyWest/United service to Denver is the primary target of the Strategic Plan. If SkyWest/United Alternate plan

does not show interest in starting service by May 2013 , then Delta Air Lines’ service to Salt Lake City will be pursued. If neither air carrier has shown interest in implement ing the propo sed service by December 31, 201 3

, Santa Maria Public Airport Distri ct will propose an alternate plan that meets the goals of this grant application. 

# A

## S ECTION 

## 7

. S CHEDULE AND 

## M ONITORING



# 19 The timeline proposed in Exhibit 7 .1 is highly contingent on the timing of the grant award and successful airline
agreement negotiations. If either is delayed, other elements on the timeline will be pushed back.



### M ONITORING 

### P ROGRAM

Monitoring new air service initiatives is critical to success. Given the turbulent state of the aviation industry, a irline
staff do not have the time to monitor sm all markets on a regular basis as other initiatives often take priority

. Given this, an aggressive and comprehensive monitoring program is proposed for new Santa Maria

- Denver
service

. The monitoring program includes: service performance tracking, assessing the effectiveness of the marketing campaign and determining the impact of the service on retention of catchment area passengers at Santa Maria Public Airport

. The Strategic Plan will be
monitored as follows:

• Available service performance indicators will b e reviewed on a monthly basis. The indicators are dependent on availability of data reported by
the airline to the US DOT and data reported to the Airport. It is anticipated that the following indicators will be reviewed monthly: departures, available seats, enplaned passengers and load factors.

• On a quarterly basis, average airfares will be compared and evaluated to prior quarters.
Published airfares will also be tracked via one of the Global Distribution/Computer Reservations Systems (GDS/C RS). Revenue per available seat mile will be reviewed and compared against other markets served by SkyWest/ United

at Denver.

• On an annual basis, an updated retention/diversion study will be completed to assess the impact of the service on retention of

pass engers at the local airport. EXHIBIT 7 .1 PROPOSED TIMELINE

# 20 T HIS SECTION CONTAINS 

### : Letters of support from members of the public

- private partnership, the local business community, and state
government. 

# A PPENDIX 

# A. C OMMUNITY 

# S UPPORT

ppendix A includes letters of support for the Santa Maria Public Airport ’s application to the US DOT for eastern
hub service. Support letters were submitted by participants in the public

- private partnership and members of the

Santa Maria community. The letters of support are included on the following pages of this Appendix A and are
listed below.



### P UBLIC



### - P RIVATE 

### P ARTNERSHIP

Santa Maria Economic Development Commission Santa Maria Valley Chamber of Commerce & Visitor and Convention Bureau , Chairman of the Board Santa Maria Valley Chamber of Comme rce & Visitor and Convention Bureau, President & CEO



### G OVERNMENT

County of Santa Barbara, Supervisor Joni Gray City of Santa Maria, Mayor Larry Lavagnino



### B USINESS AND 

### C OMMUNITY 

### S UPPORT

Benedetti & Associates Charter Brokerage & Investments Diani Companies Hardy Diagnostics Heritage Oaks Bank Pacific Coast Energy Company, LP
Prince Lionheart Quintron Systems, Inc. VTC Enterprises Your People Professional s 

# A