# Proposal under the Small Community

Air Service Development Program

Docket #: DOT

- OST

- 2010

- 0124

Legal sponsor: City of Eugene
DUNS: 931267301 Congressional District Code: OR-4

Contact: Tim M. Doll AAE – Airport Director

Eugene Airport 28855 Lockheed Drive • Eugene, OR 97402 (541) 682-5430 • tim.m.doll@ci.eugene.or.us 

# Eugene Airport Eugene, OregonProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Prepared by Table of Contents 

# Table of Contents

Page

Summary Information ............................... .........................1 Proposal Highlights ............................... ..............................2

Higher than Average Airfares ...................... ...................................... 2 Community Cost Contribution ....................... ................................... 2 Public-Private Partnership......................... ......................................... 3 Material Benefits ................................. ............................................. 3 Use of Funds in a Timely Fashion .................. .................................... 3


### Air Service Environment ........................... ..........................4

Market Reach and Potential ........................ ...................................... 4 Large and Diverse Employers ....................... ..................................... 4 The Academic Heart of Oregon ...................... .................................. 5 

### Air Service – Existing and Historical ............. .....................7

Existing Air Service .............................. ............................................. 7 Historical Air Service ............................ ............................................. 7 Extenuating Factors that have Affected Air Service .......................... 10 Past Air Service Development Efforts .............. ................................. 10


### Air Service Needs and Deficiencies................. .................11

Major Origin/Destination Markets Not Served Adequat ely ............... 11 Higher Than Average Fares ......................... .................................... 12 

### Strategic Plan – Air Service ...................... ........................13

Project Goals ..................................... ............................................. 13 Proposed Air Service .............................. ......................................... 13 Airline Participation ............................. ........................................... 13 Market Analysis ................................... ........................................... 14 Alternate Plan .................................... ............................................ 15 

### Strategic Plan – Implementation and Funding ....... ........16

Public-Private Partnership......................... ....................................... 16 Incentive and Support Plan ........................ ..................................... 17 Project Continuation and Sustainability ........... ................................ 19 Strategic Plan Funding ............................ ........................................ 19 

### Schedule and Monitoring ........................... ......................20

Milestones for Timely Completion of Project ....... ............................ 20 Strategic Plan Monitoring Program ................. ................................ 21 

### Appendix A. Airline and Community Support ......... .......22 Appendix B. Detailed Market Analysis .............. ..............33 Appendix C. Marketing and Public Relations Plan ... ......40

Situation Analysis ................................ ........................................... 40 Market Segmentation ............................... ...................................... 42 Marketing Strategy ................................ ......................................... 45 Short and Long-Term Projections ................... ................................. 49 Conclusion ........................................ ............................................. 50Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Summary Information 

### 1



# Summary Information

A. Applicant Information: (Check all that apply)

X Not a Consortium Interstate

Consortium Intrastate

Consortium Community now receives EAS subsidy Community (or Consortium m ember) previously received a Small Community Grant If previous recipient, expiration date of grant: N/A

B. Public/Private Partnerships: (List organization names) Public Private City of Eugene/ Eugene Airport Eugene Air Service Community Partnership Lane County Government

C. Project Proposal: (Check all that apply) X Marketing Regional Service Personnel Launch New Carrier Travel Bank First Service
Surface Transportation Secure Additional Carrier
X Revenue Guarantee X New Route
X Start Up Cost Offset Low Fare Service Study Subsidy Upgrade Aircraft Other (specify):

__________ Increase Frequency Service Restoration

D. Existing Landing Aids at Local Airport:
X Full ILS X Published Instrument Approach
X Localizer X Outer/Middle Marker Other (specify): E. Project Cost:
1. Federal amount requested : $ 500,000 2. State cash financial contribution: $0 3. Local cash financial contribution... 3a. Airport cash funds: $ 111 ,300 3b. Non

- airport cash funds: $ 55,00 0 3c. Total local cash funds (3a.+3b.) $ 1 66 ,300 4. TOTAL CASH FUNDING (1.+ 2.+3c.) $ 666 ,300 5. Local funds contributed from already-existing programs or projects included in line 3c. amount: $0 6. Local funds contributed from new commitments or new resources included in line 3c. amount: $166,300 7. Airport In

- Kind contribution: (Landing fee waiver, marketing) $54,300 8. Other In

- Kind contribution: (Marketing) $60,500
9. TOTAL IN

- KIND CONTRIBUTION (7.+8.): $114,800 10. TOTAL PROJECT COST (4.+ 9.): $ 7 81 ,100

F. Enplanements:
2000 376,522 2005 360,049
2001 364, 049 2006 360,495
2002 312,735 2007 37 9,389
2003 301,339 200 8 3 59,960
2004 347,67 2 2009 339,813 * Revenue passengers only

G. Is this application subject to review by State under Executive Order 12372 process? a. This application was made available to the State under the Executive Order 12372. Process for review on (date) _____________. b. Program is subject to E.O. 12372, but has not been selected by the State for review. c. Program is not covered by E.O. 12372.

H. Is the Applicant delinquent on any Federal debt? (if “yes”, provide explanation)
No Yes (explain) 

### X

XProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Proposal Highlights 

### 2



# Proposal Highlights

his Small Community Air Service Development Program grant application for the Eugene Airport meets the criteria of Docket DOT -OST-2010-0124. The City of Eugene, the airport sponsor, is requesting $500,000 in federal assistance to implement a $781,100 air service init iative. Eugene Airport has not received a prior grant award associated with this S mall Community Air Service Development Program.

The project goal is to improve air service to high demand markets in California. The community has strong ties with California, yet toda y, the region is missing a vital link to several of its key cities. New service to California is the region’s top priority, particularly to San Jose to connect the high tech i ndustries of Eugene with like companies in the Silicon Valley. Also San Jose Int ernational Airport is a connecting gateway to destinations in southern California, Tex as, Hawaii and Mexico as well as major hubs in the East. The Strategic Plan, Alask a Airlines/Horizon Air service to San Jose, will achieve the project goal.



### Higher than Average Airfares

The Eugene Airport catchment area is underserved an d overpriced. California is the largest air service market from the Eugene, Springf ield and Corvallis market consisting of 25 percent of the region’s travelers. Missing in Eugene Airport’s service pattern is an air link to San Jose and othe r key California cities. While Eugene Airport captures 56 percent of its total mar ket at the local airport, San Jose retention is only 15 percent. Airfares at Eugene A irport average nine percent higher than the fares at Portland International Airport an d 12 percent higher than the national average (calendar year 2009). Service to a new high demand California market like San Jose will reduce passenger diversio n while lowering airfares to San
Jose and other destinations in California.



### Community Cost Contribution

It is estimated that a $455,000 revenue guarantee a nd $227,100 two-year marketing program will be required for a one-flight service pattern to San Jose. The research and analysis necessary to determine the vi ability of Eugene-San Jose service has been completed (refer to Appendix B ). The route forecast is positive. Feedback from Alaska/Horizon has been encouraging and Horizo n’s letter of support is
included as Appendix A . However, an incentive package to mitigate the st art-up year’s risks will be required. Accordingly, the Ai rport and its partners have created a Strategic Plan that addresses the economic risks th at Alaska/Horizon will face during
start-up. 

# T This section contains: Highlights of the City of Eugene’s grant application
to demonstrate how this application meets the priorities of the Program.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Proposal Highlights 

### 3

To support this air service initiative, the Airport and community will fund 36 percent of the proposed $781,100 Strategic Plan. Non-airpo rt revenue sources will fund eight percent ($55,000) of the $666,300 cash requir ement.



### Public-Private Partnership

The City of Eugene/Eugene Airport has formed a publ ic-private partnership with Lane County Government and the Eugene Air Service C ommunity Partnership. Core partners of the Eugene Air Service Community Partne rship include: the City of Eugene/Eugene Airport, Eugene Area Chamber of Comme rce, Lane Metro Partnership, Springfield Chamber of Commerce and Tr avel Lane County. This partnership has worked together for many years to i mprove air service at the Eugene Airport.



### Material Benefits

Eugene Airport serves a region with a population si ze of nearly 686,000. Local computer tech, agriculture, bio-tech, wine producti on, education and health care all
have extensive ties to central California and San J ose. A link between Eugene and
San Jose will meet the needs of these sectors inclu ding business, education institutions and other enterprises.



### Use of Funds in a Timely Fashion

The public-private partnership has a solid schedule and strategic plan to ensure timely use of the funds. Meetings have been held w ith Alaska/Horizon in anticipation of this grant application, and the rou te is under consideration. 

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.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service Environment 

### 4



# Air Service Environment

he Eugene Airport is located in Oregon’s second lar gest metropolitan area, Eugene/Springfield, Oregon. However, the Airport s erves a much broader part of the state’s population and geography. This section shows the broad segment of the traveling public, including business es, educational institutions and other enterprises that will benefit from the propos ed Strategic Plan.



### Market Reach and Potential

Exhibit 3.1 depicts the market area the Eugene Airport serves. It has an estimated population of nearly 686,000 and represents the cit ies of Eugene, Springfield, Corvallis, Albany and Roseburg which are the second , eighth, 10th, 13th, and 23rd largest cities in the state, respectively. In fact , Eugene Airport serves the majority of
the state’s non-Portland residents. All of these c ities are within a one-hour drive of the Eugene Airport which is significantly shorter t han the drive to Portland International Airport.

While Eugene Airport served 699,557 passengers (rev enue and non-revenue) during 2009, an estimated 618,554 passengers (44 percent) diverted from the area and utilized Portland International Airport. The logic al assumption is that these travelers
made the drive to Portland for lower fares and/or b etter service opportunities. Depending on traffic, the drive to the alternate ai rport, Portland International Airport, takes two and one-quarter hours to three a nd one-half hours.



### Large and Diverse Employers

Around the Eugene Airport exists a large and divers e group of employers with a national and internationa l presence and a high demand for air travel. Technology companies like Hewlett-Packard, Life Technologies and Symantec; lumber mills and construction companies like Roseboro Lumber and Wildish Construction; manufacturers like Monaco Coach, GloryBee Natural Foods, Bulk Handling Systems and A&K Development Company; and healthcare institutions like PeaceHealth Regional
Medical Center and McKenzie-Willamette Medical Center all have significant demand for air travel a nd
connections in California. Table 3.1 , next page, shows the largest employers in the region. Many of these employers have ties to California. 

# T

EXHIBIT 3.1 AIRPORT CATCHMENT AREA This section contains: Description of the Eugene/Springfield community in relation to air
service to demonstrate the benefit to a broad segment of the traveling public.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service Environment 

### 5

TABLE 3.1 TOP EMPLOYERS EMPLOYER INDUSTRY PeaceHealth Healthcare University of Oregon Higher Education Oregon State University Higher Education Eugene School District Education Hewlett-Packard High Technology Lane Community College Higher Education Lane County Government Government City of Eugene Government Springfield School District Education Symantec High Technology McKenzie-Willamette Medical Center Healthcare Bethel School District Education Roseboro Lumber Forest Products Wildish Construction Construction Peace Harbor Hospital Healthcare Three Rivers Casino & Hotel Resort Pacific Source Health Plans Insurance Monaco Coach Transportation Manufacturing Life Technologies Bio-Technology A and K Development Company Equipment Manufacturing Bulk Handling Systems Equipment Manufacturing GloryBee Natural Foods Food Distribution
Source: Lane Metro Partnership



### The Academic Heart of Oregon

The Eugene Airport serves the academic centers of t he University of Oregon, Oregon State University and Western Oregon Universi ty. University of Oregon is located in Eugene, Oregon State University is 35 mi les north in Corvallis, and Western Oregon University is 50 miles north in Monm outh. As Table 3.2 shows, approximately 55 percent of the students within the Oregon University System attend these three universities. Also, Eugene Airp ort is close to three of the state’s largest community colleges, Lane Community College, Linn-Benton Community College and Umpqua Community College and various ot her small private institutions. All in all, an estimated 70,000 stud ents attend schools in the Eugene Airport’s service area, and these schools are growi ng fast. In the past decade total enrollment within the Oregon University System has grown 31 percent.

TABLE 3.2 UNIVERSITY ENROLLMENT

UNIVERSITY ENROLLMENT 2000

- 01 20 01

-

02 20 02

-

03 20 03

-

04 20 04

-

05 20 05

-

06 20 06

-

07 20 07

-

08 20 08

-

09 20 09

-

10 Eastern Oregon University 2,784 2,978 3,418 3,287 3 ,338 3,533 3,425 3,433 3,666 3,957 Oregon Institute of Technology 2,842 3,088 3,139 3, 236 3,373 3,351 3,157 3,318 3,525 3,927 Oregon State University 16,777 18,032 18,774 18,974 19,159 19,236 19,362 19,753 20,320 21,969 Portland State University 19,029 20,185 21,841 23,1 17 23,486 24,015 24,284 24,999 26,587 27,972 Southern Oregon University 5,502 5,469 5,478 5,505 5,161 4,989 5,002 4,836 5,082 5,104 University of Oregon 17,843 19,008 20,044 20,034 20,339 20,394 20,388 20,376 21,507 22,386 Western Oregon University 4,731 4,878 5,030 5,032 4,772 4,879 4,889 5,037 5,349 5,654

Total 69,508 73,638 77,724 79,185 79,628 80,397 80, 507 81,752 86,036 90,969 Source: Oregon University System 2010 Performance R eport 

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.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service Environment 

### 6

The economic impact on the local economy and Oregon is easy to see. Whether talking about the $1.5 billio n of spending and revenue generated throughout the state by Oregon State University, or the fact that Universit y of Oregon is now among the top 25 universities in the US for return on research through licensing of technologies, or the estimated 10,000 employed by both schools together; the impor tance of their sustainability within the local economy an d the state is undeniable. In addition, both schools from a resea rch, academic, student and athletic standpoint have very strong ties to Stanford University and the University of C aliforniaBerkeley which would benefit from nonstop San Jose service.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service – Existing and Historical 

### 7



# Air Service – Existing and Historical

his section provides an overview of existing air se rvice. Carriers providing service, service frequency, nonstop destinations an d equipment types are included in the discussion. A summary of historica l air service is also included with destinations, traffic levels, service provider s, average airfares and an overview of extenuating factors that have affected air servi ce. A description of air service development efforts concludes the section.



### Existing Air Service

Eugene Airport has nonstop service provided by four marketing carriers to nine destinations: United Airlines to Denver, Portland a nd San Francisco; Allegiant Air to Las Vegas, Los Angeles, Phoenix-Mesa and Oakland; A laska Airlines/Horizon Air to Portland and Seattle; and Delta Air Lines to Salt L ake City ( Table 4.1 ). United provides the largest share of departures and seats offering 90 weekly departures and 4,356 weekly seats. Alaska/Horizon is the seco nd highest provider offering 40 weekly departures and 3,040 weekly seats.

TABLE 4.1 EXISTING AIR SERVICE NONSTOP DESTINATION MARKETING

CARRIER AIRCRAFT WEEKLY DEPARTURES WEEKLY

SEATS Denver, CO United CRJ-700 (jet) 14 924 Las Vegas, NV Allegiant MD-80 (jet) 4 600 Los Angeles, CA Allegiant MD-80 (jet) 2 300 Oakland, CA Allegiant MD-80 (jet) 3 450

Portland, OR Alaska Q400 (turboprop) 20 1,520

United EMB-120 (turboprop) 28 840 Phoenix, AZ (Mesa) Allegiant MD-80 (jet) 3 450 Salt Lake City, UT Delta CRJ-200 (jet) 14 700

San Francisco, CA United CRJ-200 (jet) 36 1,800 CRJ-700 (jet) 12 792 Seattle, WA Alaska Q400 (turboprop) 20 1,520 Total 156 9,896

Source: apgDat, July 2010; Note: Allegiant’s Las Ve gas, Oakland and Phoenix-Mesa service will be reduced to two roundtrips in September/October 2010



### Historical Air Service

Although Eugene Airport experienced air service gro wth through 2007, since then air service has been declining due to the economic recession. This subsection summarizes Eugene Airport’s air service history inc luding: destinations, traffic levels, service providers and airfares. Extenuating factor s that have affected air service over
time is also reviewed. 

# T This section contains:



### • Existing air service



### • Historical air service



### • Air service development
effortsProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service – Existing and Historical 

### 8

Destinations, Service Providers and Traffic Levels

Exhibit 4.1 provides a summary of annual departures and enplan ements over the last 10 years, 2000 through 2009. Like many commun ities, the impact of September 11, 2001, was significant with departures declining in 2001/2002 and enplanements following with a 10-year low experienc ed in 2003. However, post 2002 departures increased significantly reaching a 10-year high in 2004 then dropping thereafter. From 2005 through 2009 depart ures decreased significantly, from 10,037 to 7,725, a decrease of 23 percent. En planements followed a similar trend but to a lesser degree with a decrease of alm ost six percent from 2005 through 2009. Seats per departure increased from 49 in 2005 to 61 in 2009 or 24 percent.

EXHIBIT 4.1 HISTORICAL DEPARTURES, SEATS AND ENPLAN EMENTS

Table 4.2 , next page, provides average weekly departures and seats by destination and airline from 2005 through 2010. In 2008, Las V egas and Phoenix service switched from US Airways to Allegiant Air. Allegi ant commenced service to Oakland in 2009. Los Angeles has had continuous no nstop or one-stop service by either Alaska/Horizon or Delta. In June, Alaska/Ho rizon ended one-stop service, and Allegiant began twice weekly service. Medford and Redmond have been the stopover points for Alaska/Horizon service to Los Angel es. Neither city represents an actual local market with Eugene. 200,000 245,000 290,000 335,000 380,000 425,000 470,000 515,000 560,000

4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,0002000200120022003200420052006200720082009Seats/EnplanementsDepartures

Calendar year

Departures Seats Enplanements 

## F r o m 2 0 0 5 t h r o u g h 2 0 0 9 d e p a r t u r e s d e c r e a s e d

s i g n i f i c a n t l y , f r o m 1 0 , 0 3 7 t o 7 , 7 2 5 , a d e c r e a s e o f 2 3
p e r c e n t

.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service – Existing and Historical 

### 9

TABLE 4.2 HISTORICAL DESTINATIONS AND SERVICE PROVI DERS

DESTINATION AIRLINE ITEM MONTH OF JULY 2005 2006 2007 2008 2009 2010

Denver, CO United Dept 14 14 14 14 14 14 Seats 700 798 896 896 896 924

Las Vegas, NV Allegiant Dept 2 4 4 Seats 300 600 600
US Airways Dept 7 7 7 7

Seats 350 566 350 602

Los Angeles, CA Alaska Dept 7 Seats 532
Allegiant Dept 2

Seats 300

Delta Dept 7 13

Seats 350 650
Medford, OR* Alaska Dept 14 14 7 7 Seats 980 1,036 518 518
Oakland, CA Allegiant Dept 2 3 Seats 300 450
Phoenix, AZ (AZA) Allegiant Dept 2 3 Seats 300 450
Phoenix, AZ (PHX) US Airways Dept 14 14 7 14 Seats 952 952 350 880

Portland, OR Alaska Dept 21 21 21 21 20 20 Seats 777 777 777 1,036 1,452 1,520

United Dept 26 32 32 32 28 28

Seats 780 960 960 960 840 840

Redmond, OR* Alaska Dept 7 Seats 532
Salt Lake City, UT Delta Dept 21 20 21 14 19 14 Seats 1,050 1,000 1,050 700 950 700

San Francisco, CA United Dept 56 42 49 28 48 48 Seats 2,898 2,394 2,730 3,052 2,652 2,592

Seattle, WA Alaska Dept 35 35 35 21 20 20 Seats 1,526 1,554 2,114 1,554 1,452 1,520 Average weekly departures 208 199 207 173 164 156 Average weekly seats 10,013 10,037 10,641 11,148 9,960 9,896 Source: apgDat; * One-stop to LAX; Note: Allegiant’ s Las Vegas, Oakland and Phoenix-Mesa service will be reduced to two roundtrips in September/October 2010



### Historical Average Fares

Over the last five calendar years, Eugene Airport’ s average fares have exceeded Portland, the state of Oregon, the Northwest region , and national averages ( Table 4.3) . In calendar year 2009, Eugene’s average fare was nine percent higher than Portland and the state of Oregon, 13 percent higher than the Northwest region and 12 percent higher than the national average. Historically, Eugene’s fares have been as high as 21 percent higher than the national average (2006). TABLE 4.3 AVERAGE ONE-WAY FARE PAID AVERAGE FARE 2005 2006 2007 2008 2009 Eugene $164 $182 $176 $181 $161 Portland $136 $149 $149 $155 $147 Oregon $140 $153 $152 $158 $148 Northwest Region $143 $155 $155 $158 $143 US $137 $149 $149 $160 $144
Source: Data Base Products, Inc.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service – Existing and Historical 

### 10



### Extenuating Factors that have Affected Air

Service

Eugene Airport’s air service has been affected by i ts proximity to Portland (approximately 120 miles) and the availabi lity of low-fare Southwest Airlines’ service there. Eugene catchmen t area market sizes are more compatible with aircraft having 50 t o 75 seats which have higher seat-mile costs mandating fares that ar e higher than
those available at Portland. This has resulted in approximately 44 percent of the catchment area market diverting to P ortland.

While northbound service is reasonably adequate, ea stbound service capacity is limited and load factors are hi gh. However, competitive problems are inherent in the heavily tr aveled
southbound markets where market demand is insuffici ent to support nonstop service in most markets and low far es in the larger Portland market siphon away catchment area demand. Allegiant service in the Las Vegas, Oakland, Phoenix-Mesa and more recently Los Angeles market are exceptions, but this service has limited appeal to business travelers in need of daily servi ce. This fractionalization of demand has resulted in Eugene’ s southbound service being primarily concentrated on San Francis co connections. San Francisco International Airport frequently suff ers from delays and cancellations causing severe reliability issues

.



### Past Air Service Development Efforts

Over the past five years, the Eugene Airport and th e business community have worked together on air service devel opment efforts. These efforts have included market studie s to determine retention of local passengers, pro forma analyses f or many major hubs and regular meetings and presentations to airl ines. Table 4.4 provides an overview of the air service development efforts since 2005. The community has had a lot of success such as retaining service to Phoenix and Las Vegas and getting new no nstop routes to Oakland and Los Angeles. Eugene was the first c ommunity in the US to use the Airline Travel Bank concept to im prove air service. Eugene successfully used three Airline Tr avel Banks to acquire service to Salt Lake City, Los Angeles and Phoenix. The Airport and community continue to be dedicated to l ocal air service development. The Eugene Air Service Community Part nership meets regularly on air service development issues. TABLE 4.4 PAST AIR SERVICE DEVELOPMENT EFFORTS YEAR INITIATIVE RESULT

2005 Delta Air Lines' LAX Proposal Unsuccessful Horizon Air Meeting Completed Passenger Demand Analysis Completed

2006 Allegiant Air Meeting Completed Los Angeles Market Review Completed Passenger Demand Analysis Completed United Airlines Meeting Completed

2007 ACI

- NA Jumpstart Conference Completed
Allegiant Air LAS Proposal Successful Allegiant Air Meeting Completed Delta Air Lines Meeting Completed Horizon Air Meeting Completed Passenger Demand Analysis Completed United Airlines Meeting Completed US Airways Meeting Completed

2008 Air Service Risk Assessment Completed Allegiant Air Conference Completed Allegiant Air PHX Proposal Successful Delta Air Lines Meeting Completed Horizon Air Meeting Completed JetBlue Airways Proposal Unsuccessful Passenger Demand Analysis Completed United Airlines B737 Proposal Successful US Airways Meeting Completed

2009 AAAE National Air Service Conference Completed
Allegiant Air Conference Completed Allegiant Air OAK Proposal Successful Delta Air Lines Meeting Completed Horizon Air Meeting Completed Passenger Demand Analysis Completed United Airlines Meeting Completed

2010 ACI

- NA Jumpstart Conference Completed
Allegiant Air Conference Completed Delta Air Lines Meeting Planned Delta Air Lines Performance Analysis Completed
Horizon Air Meeting Planned Passenger Demand Analysis Completed United Airlines Meeting PlannedProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service Needs and Deficiencies 

### 11



# Air Service Needs and Deficiencies

he Air Service Needs and Deficiencies section identifies the issues at Eugene Airport which have stunted the growth of commercial air service to the community. This section provides a detailed analys is to demonstrate that Eugene is underserved, and the average airfares in this community are higher than other comparable communities.



### Major Origin/Destination Markets Not Served Adequat ely

Eugene Airport and its catchment area are located i n the large shadow cast by Portland International Airport with its air service to an extensive array of destinations. Eugene has supported well its servic e to Denver, Portland, Salt Lake City, San Francisco and Seattle markets. More rece ntly, it has supported new Allegiant Air service in the Las Vegas, Los Angeles , Oakland and Phoenix-Mesa markets. However, due to its proximity to Portland , airlines have been slow to add nonstop service in other markets where sufficient d emand exists. This is particularly true in key southbound West Coast markets which dom inate the Eugene Airport
catchment area’s market demand.

Daily air service is needed by the Eugene catchment area business community to California communities including the h igh demand markets of San Jose, Orange County and San Diego. These markets require backhaul connections over Portland or Seattle or weather and congestion delay prone San Francisco In ternational Airport. Table 5.1 shows Eugene’s top 15 true markets. Six of the top 15 markets are California destinations; non stop service is available to Los Angeles, San Francisco and Oakland although Los Angeles and Oakland service is limited to twice wee kly flights during most of the year. Nonstop service is not ava ilable to San Diego, Orange County and San Jose. Though service i s deficient and needed to all three of these airports, service is most needed in
the San Jose market. In 1993 the market was served by American Airlines, and there is a strong community of intere st in the information technology field between the respective cities. Currently the only available air service from Eugen e is backhaul routings via Portland or Seattle. San Jose service would also add connecting opportunities which would offer greater dependability than those at San Francisco International Airport. 

# T

TABLE 5.1 EUGENE AIRPORT'S TOP 15 CATCHMENT AREA TRUE MARKETS

RANK MARKET RETENTION % TRUE MARKET SIZE 1 Las Vegas, NV 72 85,192 2 Los Angeles, CA 57 68,659 3 Phoenix, AZ (AZA/PHX) 84 54,001 4 San Francisco, CA 83 48,600 5 Seattle/Tacoma, WA 55 43,359 6 Denver, CO 48 42,116 7 San Diego, CA 50 36,184 8 Oakland, CA 84 62,440 9 Orange County, CA 51 28,469 10 Chicago, IL 63 27,871
11 San Jose, CA 15 26,569 12 Orlando, FL 37 22,179 13 Honolulu, HI 28 21,613 14 Salt Lake City, UT 54 20,448 15 Minneapolis, MN 52 19,413 All markets 56 1,318,111 Source: Mead & Hunt Passenger Demand Analysis 2010 This section contains: Eugene Airport’s air service
needs and deficienciesProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Air Service Needs and Deficiencies 

### 12



### Higher Than Average Fares

Compared to Portland, Eugene Airport’s average fare s are seriously overpriced in non-Allegiant markets. Table 5.2 illustrates the fare inequities in Eugene’s other nonstop markets and in primary Arizona, California and Nevada connecting markets which would potentially benefit from new Eugene-Cal ifornia service.

TABLE 5.2 AIRFARE COMPARISON DESTINATION EUG PDX RDM Seattle, WA $117 $98 $105 Portland, OR $63 N/A $64 Salt Lake City, UT $168 $111 $166 Denver, CO $159 $113 $150 San Francisco, CA $175 $136 $89 San Jose, CA $152 $119 $143 Sacramento, CA $148 $91 $128 Reno, NV $157 $94 $143 Monterey, CA $168 $169 $170 Fresno, CA $192 $148 $156 Santa Barbara, CA $168 $153 $140 Ontario, CA $143 $132 $137 Burbank, CA $164 $137 $149 Orange County, CA $164 $128 $146 Long Beach, CA $152 $100 $129 San Diego, CA $172 $139 $146 Palm Springs, CA $154 $133 $121 All markets $160 $150 $135 Source: Data Base Products, Inc.; year ended 3/31/1 0

Eugene’s average airfares in all markets are higher than Portland and Redmond for year ended March 31, 2010. On a market by market b asis, Eugene’s airfares are higher than Portland in all but one of the sample m arkets and higher than Redmond in all but two of the sample markets. This clearly demonstrates that Eugene is overpriced in their nonstop, non-Allegiant markets and California destinations. 

## E u g e n e i s o v e r

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A l l e g i a n t m a r k e t s a n d C a l i f o r n i a d e s t i n a t i o n s
.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Air Service 

### 13



# Strategic Plan – Air Service

he Strategic Plan proposed by the Eugene Airport wi ll achieve the community’s goals and reduce its air service defici encies. This Strategic Plan section provides a detailed description of the goal s of the project and a primary and alternate plan for attaining those goal s. Eugene Airport has not received a prior grant award under the Small Commun ity Air Service Development Program.



### Project Goals

The project goal of this Small Community Air Servic e Development Program grant application is to improve air service to high deman d markets in California. By meeting this goal airfares will be reduced and the need to drive long distances to access adequate air service to these California mar kets will be mitigated.



### Proposed Air Service

Eugene Airport’s air service gap is to key cities i n California, primarily San Jose and San Diego. Alaska Airlines/Horizon Air service to Norman Y. Mineta San Jose International Airport would provide the Eugene Airp ort catchment area with improved air service to central California, connect ions to southern California and
destinations in the southwestern US.

This plan will achieve the project goals by:



### • Improving service to a key city in central Californ ia



### • Reducing the need for air travelers to drive to Por tland for affordable and competitive airfares



### • Adding competition in the marketplace to lower fare s to central California,
southern California and other southwestern US locat ions



### Airline Participation

Over the past five years, members of the public-pri vate partnership have met with Alaska/Horizon regarding nonstop service to Califor nia. Recent discussions with Alaska/Horizon have been positive and have centered on San Jose. In particular, Horizon expressed interest in the Eugene Airport fi ling this grant application and provided a support letter included in Appendix A . Feedback from Horizon is that the community support package proposed in the Strat egic Plan is critical in their decision whether or not to serve the Eugene market. 

# T This section contains:



### • Strategic Plan for meeting Eugene Airport’s air
service needs and
deficiencies



### • Alternate plan to meet the goalProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Air Service 

### 14



### Market Analysis

A financial analysis and pro forma route forecast h ave been developed for
Alaska/Horizon service to San Jose International Ai rport. Results of the Alaska/Horizon analysis are summarized below. The complete analysis for San Jose
service is included as Appendix B, Detailed Market Analysis

.



### Forecast Assumptions

Pro forma route forecast projections were completed for a one roundtrip schedule on a 76-Seat Bombardier Dash-8-Q400. The analysis includes the operating and marketing assumptions listed below:



### • Existing fared passengers will be divided between A llegiant Air, Delta Air Lines, United Airlines and Alaska/Horizon based on the number of
reasonable connections available in the market.



### • The San Jose local market will be stimulated 475 pe rcent (similar to Allegiant’s experience in the Eugene-Oakland market ).



### • Alaska/Horizon will capture a share of the passenge rs that are driving to competing airports (i.e. Portland) to travel to and beyond San Jose.



### • The average one-way fare in the Eugene-San Jose loc al market will equal current Eugene fares.



### Mature Market Results

Table 6.1 provides a summary of the Alaska/Horizon San Jose market analysis for one roundtrip per day on the 76-seat Bombardier Das h-8-Q400. Passenger projections were based on a mature market (i.e., pa ssenger projections would be at 100 percent on the first day of service). It is es timated that one roundtrip per day will generate $6.6 million in annual revenue for Al aska/Horizon. Projected system profit surpasses $1.6 million.

TABLE 6.1 SUMMARY OF SAN JOSE MARKET ANALYSIS

ITEM STATISTICAL CATEGORY MATURE MARKET 1 Available seats per departure 76 2 Segments per day 2 3 Onboard Passengers 41,097 4 Load Factor 74% 5 Average Fare (all markets) $154.94
6 System revenue $6,614,258
7 System profit $1,681,609



### Airline Risk Ramp-Up Risk

It is estimated that Alaska/Horizon will earn a sys tem profit of over $1.6 million after the market matures. Although this market is projec ted to be self-sustaining in the long-run, Alaska/Horizon will not generate this amo unt of revenue or margin at 

## T h e S t r a t e g i c P l a n i s c r i t i c a l i n H o r i z o n A

i r ’ s d e c i s i o n w h e t h e r o r

n o t t o s e r v e t h e E u g e n e m a r k e t t o a k e y c i t y i n C a l i f o r n i a
.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Air Service 

### 15

start-up. Airlines typically incur losses in new m arkets during the first year of the ramp-up period. Adding to Alaska/Horizon’s initial economic risk in the market is the challenge of changing existing travel habits an d airline allegiance which will take time. This could cause a longer than normal ramp-u p period and lead to significant
losses in the short-term.

Table 6.2 provides an adjustment to passenger projections to account for ramp-up to a fully mature market and breaks down the passen ger projections for the first 12 months. At service initiation, it is conservativel y estimated that Alaska/Horizon will realize 75 percent of the potential revenue in a ma ture market. The market will grow to 95 percent of the mature market during the first year. The ramp-up period is highly dependent on service awareness and the co mmunity’s support of the new
service.

TABLE 6.2 SERVICE RAMP-UP

MONTH SEASONALITY ONBOARD PAX SEGMENT 1

MATURE MARKET REVENUE RAMP-UP

ADJ. RAMP-UP

REVENUE ESTIMATED

PROFIT/LOSS May 7.7% 3,149 $334,670 75% $251,002 ($101,902)
June 9.5% 3,891 $413,509 75% $310,132 ($31,388) July 9.7% 3,971 $422,078 75% $316,558 ($36,346) August 9.3% 3,833 $407,343 80% $325,875 ($27,029) September 9.1% 3,741 $397,642 85% $337,995 ($3,525) October 8.8% 3,616 $384,313 86% $330,509 ($22,395) November 8.5% 3,510 $373,069 89% $332,032 ($9,488) December 8.3% 3,412 $362,597 89% $322,711 ($30,193) January 6.9% 2,855 $303,479 92% $279,200 ($73,704) February 6.8% 2,793 $296,860 92% $273,111 ($45,641) March 8.1% 3,349 $355,978 95% $338,179 ($14,725) April 7.2% 2,978 $316,490 95% $300,666 ($40,854) Total 100.0% 41,097 $4,368,027 85% $3,717,970 ($437,190)

Table 6.2 also provides the estimated loss by month and in t otal for the first 12 months of service. Eugene-San Jose segment revenue s adjusted for the ramp-up period for the first year of service total $3.7 mil lion. Revenue is also adjusted for introductory airfares. It is assumed that Alaska/H orizon will offer introductory fares
for the first three to six months of service. In a ddition, the ramp-up is estimated to be slower than normal due to changing travel habits of the existing travelers. The total shortfall is expected to be $437,190 for the first year of service.



### Alternate Plan

If Eugene Airport fails to obtain Alaska/Horizon se rvice to San Jose, alternate carriers will be approached with the intent of obtaining non stop service to San Diego or another key community in California. Alternate car rier service would fulfill the goals of this grant application.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Implementation and Funding 

### 16



# Strategic Plan – Implementation and Funding

his section, Strategic Plan - Implementation and Funding , provides the detailed incentive and support plan required to imp lement the Strategic Plan. A legal sponsor responsible for administering the p rogram has been designated, and a public-private partnership has be en formed to actively participate in implementing the proposed project. In addition, this section identifies selfsufficiency of the service as an integral part of t he community’s goals and provides a description of the community’s plan to continue wit h the project if it is not selfsustaining after the grant award expires. A detail ed description of the funding necessary for implementation of the Strategic Plan, including federal and nonfederal contributions, is included.



### Public-Private Partnership

The City of Eugene, the owner/sponsor of Eugene Air port, has been designated as the sponsor of this grant application. The City of Eugene/Eugene Airport, Lane County Government and the Eugene Air Service Commun ity Partnership have formed a public-private partnership (refer to commu nity support letters in Appendix

A ). Collectively, the partnership is committed to c ompleting the Strategic Plan. Members of the Eugene Air Service Community Partner ship include:

Core Community Partners:

• Eugene Area Chamber of Commerce

• Lane Metro Partnership

• Springfield Chamber of Commerce

• Travel Lane County

All partners in the public-private partnership will be fully involved in the execution of the Strategic Plan ( Table 7.1 ). The City of Eugene/Eugene Airport will execute all federal grant offers, process all associated reimbursement requests and oversee grant administration. The City of Eugene/Eugene Airport will also administer the revenue guarantee. Lane County Government will administer the Lane County Special Tourism 

# T

TABLE 7.1 PUBLIC

- PRIVATE PARTNER ROLES PUBLIC

PRIVATE PARTNER ROLE

City of Eugene/ Eugene Airport Grant and

revenue guarantee administration and assist with the local marketing efforts
Lane County Government Administer Lane

County Special Tourism Grant

Eugene Air Service Community Partnership Assist with local

marketing efforts, coordination of the marketing
program This section contains:



### • Description of the publicprivate partnership



### • Legal sponsor



### • Funding for the Strategic
Plan



### • SustainabilityProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Implementation and Funding 

### 17

Grant of $10,000. The Eugene Air Service Community Partnership will be responsible for administering the marketing campaign in conjunction with the City of Eugene/Eugene Airport
and Alaska Airlines/Horizon Air. Together these partners form a team committed to improving air service at Eugene Airport.



### Incentive and Support Plan

In today’s airline environment, community support p ackages have become increasingly important and virtually required for m ost new service. To be effective, support packages must be structured to address the issues of new airline entry and ensure that the market responds quickly.

The public-private partnership proposes a community support package that has been tested and proven to be successful. To reduce Alaska/Horizon’s breakeven period and offset the risk during start-up, the pub lic-private partnership proposes the following incentives (refer to Exhibit 7.1 ): marketing campaign (create name and service awareness for Alaska/Horizon); revenue guarantee (reduce airline risk); and landing fee waiver (reduce airline start-up cos ts).

EXHIBIT 7.1 INCENTIVE PLAN

Airline Risk Mitigation > Revenue
guarantee

> Fee waivers

> Marketing U.S. DOT Airport Community Funding Service initiation 

# $Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Implementation and Funding 

### 18

Marketing Campaign

Any marketing campaign must be targeted toward aggr essive promotion of the
service to make the new service successful and sust ainable. The public-private partnership understands and agrees with the US Depa rtment of Transportation that a thorough understanding of the target market is es sential for the success of new air service. The partnership has created a target ed advertising and marketing campaign to support the launch and development of t his new service. A detailed Marketing and Public Relations Plan is included in Appendix C . Elements included in this marketing campaign include:

• Television and radio advertising

• Print advertising (e.g. newspapers, magazines)

• Social media

• Direct mail

• Community partners advertising on their websites, e -mail and ads

• Inaugural event

The target audience is business travelers and mid-t o-upper income households and leisure travelers traveling b etween the Eugene/Springfield area and San Jose. Table 7.2 provides the marketing budget for the first and sec ond year of service. The Airport has established an extensi ve partnership agreement with many media outlets. Thi s $227,100 marketing campaign will be funded by non-a irport sources ($55,000 cash and $60,500 in-kind), Airport sources ($36,300 cash and $30,300 in-kind) and the US Depar tment of Transportation ($45,000 cash). A portion of the nonairport cash, $10,000, will be provided by the Lane County Special Tourism Grant.



### Revenue Guarantee

To reduce airline risk and provide incentive to Ala ska/Horizon to provide nonstop service to San Jose, this Strategic Plan includes a revenue guarantee as part of the community support package. Although pro forma proj ections for San Jose service is positive ( Appendix B ), service ramp-up and breakeven can take up to 12 months, particularly in a market with significant barriers- to-entry. It is anticipated that Alaska/Horizon would require a $455,000 revenue gua rantee to initiate service to San Jose. Exact terms of the revenue guarantee agr eement are subject to further negotiations.



### Landing Fee Waiver

The air service support program includes a landing fee waiver. As part of the Airport’s standard rates and charges, signatory air lines are charged a landing fee TABLE 7.2 MARKETING BUDGET MEDIA OUTLET YEAR 1 YEAR 2 TOTAL Television $81,000 $19,250 $100,250 Print Advertising $27,250 $13,250 $40,500 Community Partners Advertising $14,000 $14,000 $28,000
Outdoor Advertising $13,750 $12,900 $26,650 Radio $10,000 $2,500 $12,500 Social Media/Web $2,800 $2,800 $5,600 Direct Mail $5,000 $0 $5,000 Trade Show & Marketing $2,100 $1,500 $3,600

Production fees $5,000 $0 $5,000 Total $160,900 $66,200 $227,100 

## I t i s a n t i c i p a t e d t h a t A l a s k a A i r l i n e s / H o r i z o n A

i r w o u l d

r e q u i r e a $ 4 5 5 , 0 0 0

r e v e n u e g u a r a n t e e t o i n i t i a t e s e r

v i c e t o S a n J o s e
.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Strategic Plan – Implementation and Funding 

### 19

assessed at $2.20 per 1,000 pounds of gross landed weight. The Airport will waive landing fees for at least the first six months of a ny new, nonstop service, including San Jose. Landing fees for the first six months ar e estimated at $24,000 assuming the use of the Bombardier Dash-8-Q400 with one roun dtrip daily. The landing fee waiver may vary depending on aircraft type used and the number of roundtrips
offered.



### Project Continuation and Sustainability

Based on the positive pro forma projections for Ala ska/Horizon service to San Jose, it is anticipated that service to San Jose will be self-sustaining after the start-up period which can take up to 12 months or more. How ever, the public-private partnership understands that service failure is oft en due to the lack of awareness in the community. Because of this, the Strategic Plan includes a $66,200 second-year marketing program. In addition, should the revenue guarantee have remaining funds, the Eugene Air Service Community Partnership would use up to $100,000 for on-going marketing of the San Jose route. The E ugene business community and the public-private partnership understand the econo mic importance of this project to the region and the challenges associated with pr ofitably operating air service to the Eugene market and will work to ensure its long- term success.



### Strategic Plan Funding

The public-private partnership is requesting US Dep artment of Transportation assistance in funding 64 percent, or $500,000, of t he Strategic Plan. Specifically, US Department of Transportation funding will be use d to fund the revenue guarantee and 20 percent of the marketing program. The Airport and community will fund 36 percent of the total proposed air serv ice program. Non-airport funding sources will provide eight percent of the cash requ irement and 15 percent of the funding for the total program including in-kind ser vices ( Table 7.3 ).

TABLE 7.3 STRATEGIC PLAN BUDGET

DESCRIPTION FUNDING SOURCE

TOTAL US DOT AIRPORT NON-AIRPORT CASH CASH IN-KIND CASH IN-KIND Airline incentive program : Marketing campaign
Year 1 $45,000 $14,400 $55,000 $46,500 $160,900
Year 2 $36,300 $15,900 $14,000 $66,200 Revenue guarantee $455,000 $455,000 Fee waivers $24,000 $24 ,000 Monitoring program $75,000 $75,000

Total $500,000 $111,300 $54,300 $55,000 $60,500 $781,100 Percent of total project 64% 14% 7% 7% 8% 100% Percent of cash contribution 75% 17% N/A 8% N/A 100% 

## T h e A i r p o r t a n d

c o m m u n i t y w i l l f

u n d 3 6 p e r c e n t o f t h e t o t a l
p r o p o s e d a i r s e r

v i c e p r o g r a m

. N o n
- a i r

p o r t f u n d i n g s o u r c e s w i l l
p r o v i d e e i g h t p e r c e n t

o f t h e c a s h

r e q u i r e m e n t a n d 1 5
p e r c e n t o f t h e f

u n d i n g f o r t h e t o t a l p r o g r a m i n c l u d i n g i n
- k i n d

s e r v i c e s
.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Schedule and Monitoring 

### 20



# Schedule and Monitoring

he public-private partnership has developed a reali stic timetable for achieving the project goals. This section provides critical milestones to be achieved by the public-private partnership to timely execute th is air service initiative. A monitoring program is also provided to track the pr ogress of the project.



### Milestones for Timely Completion of Project

The following target dates are proposed to track th e progress of this air service initiative assuming a grant award by December 31, 2 010:

TABLE 8.1 STRATEGIC P LAN SCHEDULE

DATE ACTION ITEM DESCRIPTION

February 1, 2011 Marketing campaign development Development of the marketing campaign will be completed in February 2011 in order to begin the marketing campaign 60 days prior to new service initiation.

April 1, 2011 Marketing initiation It is anticipated that the marketing campaign will begin by April 2011 and continue throughout the first and second year of new service.

June 1, 2011 Service initiation The service start date is the critical date for the rest of the Strategic Plan. It is anticipated that Alaska/Horizon will initiate nonstop San Jose service in June 2011. Air service initiation is dependent on airline route planning, economics and availability of right-sized aircraft for the Eugene market.

December 31, 2011 Alternate plan If Alaska/ Horizon has not implemented nonstop San Jose service by December 31, 2011, Eugene Airport will contact other airlines for service to California, which would meet the goals of this grant application.

May 31, 2012 Revenue guarantee contract completion At the end of the first year of service, the revenue guarantee will be calculated based on the terms of the agreement. If the service start date changes due to airline circumstances and/or equipment availability, the revenue guarantee contract term will change accordingly. 

# T This section contains:



### • Monitoring the project



### • The plan/schedule for timely completion of the projectProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Schedule and Monitoring 

### 21



### Strategic Plan Monitoring Program

The monitoring program includes service performance tracking, assessing the effectiveness of the campaign, impact on airfares a nd determining the influence of California service on retention at the Airport. Table 8.2 provides the action items and frequency to monitor the Strategic Plan over a two-year period.

TABLE 8.2 STRATEGIC PLAN MONITORING FREQUENCY ACTION ITEM DESCRIPTION
Monthly Airline performance Load fact ors, enplanements, departures

Revenue guarantee indicators Ticket revenue, cost, drawdown

Quarterly Airline performance Load factors, enplanements, departures, revenue per available seat

mile

Airfares Compare US Department of

Transportation airline reported average airfares on a quarterly basis, when available, to prior quarters Published airfares will be monitored for the first three months of service then quarterly thereafter via one of the Global Distribution/Computer Reservations Systems (GDS/CRS)

9 Months Program assessment Complete an overall assessment of the program to determine if additional community support is needed beyond

one year

12 Months Passenger Demand Analysis Conduct a follow

- up true market estimate to determine changes in passenger diversion after the first 12 months of service. By comparing to the true market estimate conducted prior to service initiation, the true market estimate will determine the impact of the air service improvements on retention/diversion at Eugene

Airport.

Passenger Intercept Survey Conduct a Passenger Intercept Survey to assess the effectiveness of the marketing campaign and determine air traveler's satisfaction with the serviceProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix A . Airline and Community Support 

### 22



# Appendix A. Airline and Community Support

ppendix A includes letters of support for the Eugene Airport application to the US Department of Transportation for improved ai r service to high demand markets in California. Support letters were submitted by H o r i z o n
A i r , participants in the public-private partnership, a nd members of the Eugene community. The letters of support are included on the following pages of this Appendix A and are listed below.



### Airline

Horizon Air



### Government United States Senate – Senator Jeff Merkley United States Senate – Senator Ron Wyden Congress of the United States – Congressman Peter D eFazio



### Public-Private Partners City of Eugene – Mayor Kitty Piercy Lane County Board of Commissioners Eugene Air Service Community Partnership: Eugene Area Chamber of Commerce Lane Metro Partnership Springfield Chamber of Commerce Travel Lane County 

# A This section contains: Letters of support from the target airline, members of the public-private partnership, the local business community and state government.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix B . Detailed Market Analysis 

### 33



# Appendix B. Detailed Market Analysis

onfidential submission of the City of Eugene/Eugene Airport. 

# C This section contains: An in-depth analysis evidencing familiarity with
the San Jose market and
ultimate success of the proposed Strategic Plan.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 40



# Appendix C. Marketing and Public Relations Plan

tarting up a new air service route is a significant financial risk to an air carrier, especially in today’s economy. Financial incentives , including revenue guarantees and marketing support, help mitigate thi s risk. The challenge is to build a solid route in a relatively short amount of time. A significant marketing and advertising effort should be launched 30 to 60 days before inauguration and should be sustained for at least one year.



### Situation Analysis

The goal of this Marketing and Public Relations Plan is to establish a strong route between Eugene and San Jose, building the route to a self-sustaining level as quickly as possible, and stimulating additional pas senger traffic on this route above
current true market levels.



### Company Analysis

Eugene Airport currently employs one full-time empl oyee in the marketing and public relations area and a half-time employee in t enant and general aviation relations (customer service). Recognizing that cur rent trends in airport marketing have changed over the past five years, prior market ing efforts for the Eugene Airport have been analyzed based on how well they r eached target audiences, their effectiveness, and whether they were fiscally prude nt and in compliance with FAA regulations. Changes have been made accordingly.



### Customer Analysis

After several years of increases, including a banne r year in 2007, passenger use dropped in 2009 to 699,557 total passengers (revenu e and non-revenue). This trend was seen across the nation, with Eugene Airport’s d ecline about average or slightly better than airports of similar size. The 2009 Intercept Survey of Eugene Airport passengers shows a passenger mix of 61 percent pers onal/pleasure travel (leisure), 36 percent business/professional travel and three p ercent mix of business and pleasure. Value drivers include ticket price, seat availability and convenience. The decision process differs for business travelers and leisure travelers. Leisure travelers often have tunnel vision in their decision process considering only ticket price, without weighing gas, drive-time, hotel cost (early morning Portland International 

# S This section contains: A detailed Marketing and
Public Relations Plandemonstrating a welldesigned marketing campaign to support San
Jose service.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 41

Airport flights), parking convenience and fees. Bu siness travelers are more likely to add time and convenience into their decision making process. Seat availability is an issue for some business travelers utilizing Portlan d instead of Eugene.



### Competitor Analysis

Portland International Airport is the 30th largest passenger airport in the US. The Portland International Airport capture region serve s a population of more than 3.5 million people in two states. The 2010 Passenger Demand Analysis shows Portland captured 85 percent of Eugene catchment area passen gers traveling to San Jose. Passengers currently diverting to Portland to trave l to San Jose may be utilizing
Alaska Airlines/Horizon Air or Southwest Airlines n onstop service or a connecting hub such as San Francisco International Airport.



### Collaborators

AIRLINES

Horizon Air has been identified as the most likely airline to start a new, nonstop route to San Jose. Company officials have offered a letter of support for the grant application (

Appendix A ) to establish this route at Eugene Airport.

COMMUNITY PARTNERS

The leadership team at the Eugene Airport values it s community partners and will actively work to retain and strengthen these bonds, recognizing that they are an integral part of the success of Eugene Airport, and have an interdependent relationship with the Eugene Airport. Community pa rtnerships such as the Eugene Air Service Community Partnership will be supported through mutual efforts in promotion (including participation in marketing and advertising programs), participation in chamber and association events and air service development
initiatives.



### SWOT Analysis

STRENGTHS

The Eugene Airport has several competitive advantag es:

• Reputation – A general feeling among the community and traveling public that the Eugene Airport is “a great little airport. ”

• Customer Service – Staff, volunteers, tenants and T SA offer friendly and professional assistance to passengers and other gue sts.

• Convenience – Short drive time, short lines at chec k-in, short lines at security checkpoint and nonstop flights to eight hu b airports. 

## E u g e n e A

i r S e r v i c e
M a r k e t i n g R e s o u r c e s :

Core Community Partners:

• Eugene Area Chamber
of Commerce

• Lane Metro Partnership

• Springfield Chamber of

Commerce

• Travel Lane County

Regional Community

Partners:

• Albany Chamber of

Commerce

• Bay Area Chamber of

Commerce

• Corvallis-Benton
Chamber of Commerce

• Cottage Grove
Chamber of Commerce

• Fern Ridge Chamber of

Commerce

• Florence Chamber of

Commerce

• Junction City/Harrisburg
Chamber of Commerce

• Roseburg Area
Chamber of Commerce

Other Community Partners:

• Travel Agents

• Travel Oregon

• Oregon State University

• University of OregonProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 42

WEAKNESSES

The Eugene Airport has several weaknesses, both rea l and perceived:

• Ticket Price - Average ticket price difference is $ 23/each way compared to Portland International Airport. (This can also be v iewed as a strength.)

• Destinations - Significantly fewer nonstop destinat ions than Portland.

• Amenities - Fewer amenities in the terminal compare d to Portland.

OPPORTUNITIES

The Eugene Airport has the opportunity to recapture the 85 percent of catchment area passengers currently using Portland Internatio nal Airport to fly to San Jose.

• Approximately 57 corporations with Eugene-San Jose ties (source: Oregon Secretary of State Corporate Division).

• Continued marketing efforts to show that often perc eived savings by driving to Portland International Airport for a fli ght are negated by the added expense of gas, parking, hotel expenses and p lacing value on passengers’ drive-time to Portland.

• Conveniences and positive experience of the Eugene Airport.

• Conscious support of Eugene Airport by local patron s.

THREATS

Changes in the health of the airline industry will impact airports across the country and have more severe impacts at smaller airports, i ncluding Eugene Airport. These
threats include:

• Oil prices – High fuel prices have in recent histor y placed unprecedented strain on the airline industry and have impacted lo cal air service.

• Economy – The overall economic health of the econom y has a direct impact on commercial air travel. The recession, inc luding layoffs by several key local employers, has impacted local air service , but passenger numbers are increasing once again.



### Market Segmentation

Consumer Market Segmentation

THE BUSINESS TRAVELER

The business traveler accounts for 36 percent of pa ssengers at the Eugene Airport. An additional three percent combine business and pl easure for travel. More importantly, the business traveler has increasing p otential to use Eugene Airport over Portland International Airport for convenience , despite potentially paying more
for a ticket. 

## O n l y 1 5 p e r c e n t o f a i r
t r a v e l e r s u s e E u g e n e A i r p o r t t o t r a v e l

t o / f r o m S a n J o s e
. T h i s r e p r e s e n t s a n

o p p o r t u n i t y f

o r E u g e n e A

i r p o r t t o

r e c a p t u r e t h e 8 5
p e r c e n t o f t r a v e l e r s

u s i n g P o r t l a n d

.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 43

Business travelers want efficiency and ease of trav el. Avoiding hassles is one key in their decision making, including weighing convenien ce of parking, the length of check in and security lines, and expedited baggage return. This is where there is opportunity to promote Eugene Airport through an ed ucational campaign.

This group is reached through a variety of marketin g and public relations efforts, including business-focused organizations and public ations, news talk and sports radio, news and sports television, and increasingly Internet technology including websites, e-newsletters and social media.

THE LEISURE TRAVELER

The leisure traveler accounts for about 61 percent of passengers at the Eugene Airport. Leisure travelers are often more ticket pr ice focused, but convenience plays an important role. They are willing to travel to Po rtland for flights if the price is right. Allegiant Air is likely the reason leisure t ravel has seen a slight increase at Eugene Airport in the past year.

Leisure travelers also want efficiency and ease of travel but are willing to make compromises to save money. Often this savings is pe rceived, not real, when accounting for gas, time, parking and hotel expense s by traveling to Portland. This is where there is opportunity to promote Eugene Airpor t through an educational campaign.

This group is also reached through a variety of mar keting and public relations efforts, including tourism-focused organizations an d publications. The reach to target leisure travelers is broader, but radio and television can still be effective. Internet technology including websites, e-newslette rs and social media are also effective ways to reach this group.



### Geographic Segmentation

The 2010 Passenger Demand Analysis shows diversion to Portland International Airport by location within the Eugene Airport catchment

area. Table C.1 shows
retention/diversion for the communities within the Eugene Airport catchment area. This outlines another potential way to break out target markets. TABLE C.1 AIRPORT USE BY COMMUNITY

COMMUNITY 2009 % 2008 % DIFF. IN RETENTION EUG PDX EUG PDX Albany 6 94 7 93 (1) Corvallis 9 91 13 87 (4) Cottage Grove 59 41 69 31 (10) Eugene/Springfield 71 29 71 29 (0) Florence 55 45 58 42 (3) Lebanon 10 90 10 90 0 Newport 11 89 10 90 1 North Bend 28 78 27 73 1 Roseburg 49 51 46 55 3 Waldport 46 54 22 78 24 Total 56 44 52 48 4 Source: Mead & Hunt Passenger Demand Analysis 2010Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 44

Demographic Segmentation

The 2009 Intercept Survey of Eugene Airport Travelers shows the majority of visitors to the Eugene Airport are:

• Age 45 to 64

• 54 percent female, 46 percent male

• College graduates and/or have competed post-graduat e studies

• Professional/Technical

• Homeowners

• High income

Further breakdowns can be made based on personal/pl easure or business/professional travelers.



### Psychographic Segmentation

Based on the same survey, seven percent of visitors to the Eugene Airport travel from Eugene Airport seven to 10 times a year. Anoth er 24 percent travel three to six times a year, 37 percent travel one to two times a year and 21 percent have never flown before. Of those surveyed, two percent travel from Portland International Airport seven to 10 times a year. Another 14 percen t travel three to six times a year, 38 percent travel one to two times a year and 42 pe rcent have never flown before.



### Behavioral Segmentation

The same survey reveals a very high customer satisf action score for both services that the Airport has direct control or influence ov er. This contributes to brand loyalty.



### Business Market Segmentation

GEOGRAPHIC SEGMENTATION

The manufacturing sector in the Eugene Airport catc hment area makes up the largest share of employment in the region, followed by retail trade and health care. According to data from State of Oregon, there are a pproximately 57 corporations with locations in the Eugene catchment area and the San Francisco Bay Area of
California.

CUSTOMER TYPE

Travel frequency varies greatly among the major man ufacturers and employers within the Eugene Airport catchment area. The unive rsities continue to be a strong air travel population. Travel is also strong in th e high tech industry (includingProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 45

increasing establishment of solar manufacturing and distribution), the bio-tech industry and scientific
research.



### Marketing Strategy

Product

Nonstop air travel between Eugene Airport and San Jose International Airport is the focus of this marketing and public relations campaign. Th e product considered by most consumers is the actual purchase of an airline tick et, but the Eugene Airport brand and quality of the Airport plays into this purchase decision, therefore the product is also the convenience of utilizing the Eugene Airpor t for nonstop travel between Eugene and San Jose.



### Price

Airfares between Eugene and San Jose must be compet itive with competing airlines at Portland to successfully establish this route. T he Eugene Airport will work with airline planners to ensure competitive fares are se t, with the revenue guarantee from the Small Community Air Service Development Pr ogram grant providing financial relief while an acceptable yield is estab lished. Other prices of goods and services at the Eugene Airport should be considered and monitored to stay in line with similar markets, including parking fees, resta urant, gift shop and car rental pricing.



### Distribution

Ticket purchases are increasingly being made online . The promotion section of the www.flyEUG.com website will feature the new nonstop service to San Jose. The airline’s booking widget may also be featured on th e www.flyEUG.com website for at least one year to allow for the purchase of tick ets to San Jose. A request will be made to San Jose International Airport to do the sa me.



### Promotion

A broad approach will be employed to market and pro mote new nonstop service between Eugene and San Jose including public relati ons and advertising.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 46

Marketing Mix

Marketing efforts will target both business and lei sure travelers, with a twothirds/one-third mix, through media and other outle ts reaching those demographics. Use of a media buyer is advantageous to gain the most bang for the buck. A wide variety of communication methods and v ehicles will be used.

ADVERTISING - TRADITIONAL PAID MEDIA

Proposed traditional paid media advertising is incl uded in Table C.2.

TABLE C.2 ADVERTISING - TRADITIONAL PAID MEDIA

MEDIA MARKET EUGENE SAN JOSE

Radio KUGN-590 AM(Eugene area) KCBS-740 AM (Bay Area)

KPNW-1120 AM (Eugene area) KBAY-94.5 FM (Bay Area) KEUG-105.5 FM (Eugene area) KUFX-98.5 FM (Bay Area) KLOO-1340 AM (Albany/Corvallis) KSAN-107.7 FM (Bay Area) KSCR-1320 AM (Eugene area) KEZR 106.5 FM (Bay Area) KUJZ-95.3 FM (Eugene area) KNBR-680 AM (Bay Area) KEJO-1240 AM (Albany/Corvallis) KRTY-95.3 FM (Bay A rea) KSJO-92.3 FM (Bay Area)

Television KVAL-TV (CBS) KICU-TV (Independent)

KEZI-TV (ABC) KMTV-TV (NBC) KMTR-TV (NBC) Fox Sports Fox Sports ESPN ESPN

Newspaper Register-Guard San Jose Mercury News Silicon Valle y/San Jose Business Journal

Magazine Eugene Magazine The Wave

Oregon Quarterly (UO) The Chamber Advocate Oregon Stater (OSU) Open For Business

SOCIAL MEDIA ADVERTISING

Once viewed as experimental, social media is now re cognized as a solid way to connect to thousands of current and potential custo mers. This will be a combined
effort with Horizon Air’s social media efforts. • Twitter: http://twitter.com/flyEUG • Facebook: http://www.facebook.com/flyEUG • YouTube: http://www.youtube.com/user/EugeneAirpor t • Flickr: http://www.flickr.com/photos/eugeneairpor tProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 47

PERFORMANCE PROGRAMS

Demographic information for several local arts orga nizations matches the Eugene Airport business traveler target market. These orga nizations include: • Eugene Ballet • Eugene Opera • Eugene Symphony

In addition a broader segment of Eugene Airport’s s econdary target market can be reached through other arts organizations including The Shedd (White Christmas, Oregon Festival of American Music, Jazz Singers.)

MARKETING AGREEMENTS

Marketing agreements include the promotional suppor t of community events that reach target business and/or leisure markets and in clude measurable benefit to the Eugene Airport in the form of: • Logo on event promotional materials • Banner displayed at event • Ticket giveaway

DIRECT MARKETING

Mailings and email blasts to: • Travel agent databases • Travel coordinators at Eugene-San Jose linked bus inesses
• Chamber of Commerce databases
• Visitors and Convention Assoc. databases

BACKLIT ADVERTISING

• Eugene Airport • San Jose International Airport

OWNED AND ADDED VALUE MARKETING

Billboard - • Eugene Airport • San Jose International Airport

Website - Eugene Airport - www.flyEUG.com (Front page promoti on) San Jose International Airport - www.sjc.org (Front page promotion) City of Eugene Website (News articles and news rele ase on newsroom page) 

## O w n e d o r v a l u e d

a d d e d m a r k e t i n g w i l l b e u t i l i z e d i n c l u d i n g b i l l b o a r d s , w e b s i t e s ,
a n d n e w s l e t t e r s
.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 48

Community Web Pages/Blogs
• KVAL Communities • http://www.myeugene.org • http://www.southsanjose.com • http://www.citizensanjose.com

Newsletter Articles -
• Travel Matters • The Transponder • Public Works Monthly • Eugene City Council weekly newsletter

COMMUNITY PARTNERSHIP ORGANIZATIONS

Eugene Area Chamber of Commerce • www.flyEUG.com banner ad on chamber website
• Announcements on chamber website • Flyer mailings - membership of 2,000 • Ticket giveaways at other Business After Hours ev ents

Springfield Chamber of Commerce • www.flyEUG.com banner ad on chamber website
• Announcements on chamber website • Flyer mailings to membership of 1000 • Ticket giveaways at Business After Hours events

Travel Lane County (formerly Convention and Visitor s Association of Lane County Oregon) • www.flyEUG.com banner ad on TLC website
• Announcements on TLC website • Flyer mailings to membership of 500 • Email blasts to membership of 500 • Traveler e-newsletters, 10,000 recipients
• Travel Trade e-blasts • Tourism Forum presentation

Lane Metro Partnership – Business Development Organ ization • www.flyEUG.com banner ad on Lane Metro website
• Announcements on Lane Metro website
• Trade e-newsletters • Contact with businesses with Eugene-San Jose link

.Proposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

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Other Community Partnership Opportunities • Albany Area Chamber of Commerce
• Corvallis-Benton Chamber of Commerce • Cottage Grove Chamber of Commerce • Fern Ridge Chamber of Commerce
• Florence Area Chamber of Commerce • Junction City/ Harrisburg Chamber of Commerce • Roseburg Area Chamber of Commerce

EARNED MEDIA

Earned media is the advertising equivalencies for e ach print news article or broadcast news story.

Eugene Market:

• Newspaper – Advertising equivalency of $10,500

• Television – Advertising equivalency of $10,000

• Radio – Advertising equivalency of $3,000

• Magazine – Advertising equivalency of $20,000 San Jose Market:

• Newspaper – Advertising equivalency of $10,500+

• Television – Advertising equivalency of $10,000+

• Radio – Advertising equivalency of $3,000+

• Magazine – Advertising equivalency of $2,000+

TRADE SHOWS

The Airport invested in a portable display board fo r use at business trade shows throughout the catchment area. This provides a way to have direct contact with business and leisure travelers to promote the Eugen e-San Jose nonstop service.



### Short and Long-Term Projections

Once the new nonstop route is implemented passenger s accustomed to driving to Portland International Airport to fly to San Jose a re expected to begin changing that behavior, building Eugene Airport passenger numbers to San Jose International Airport over time. Fares need to be competitive to allow this shift to happen. The revenue guarantee will allow for this transition ov er two to three years if needed, but will likely happen earlier.

The key to any successful marketing and public rela tions program is measurement through continuous tracking and evaluation. Tools f or this measurement include:

• Passenger Demand Analysis

• Passenger Intercept SurveyProposal under the Small Community Air Service Deve lopment Program City of Eugene/Eugene Airport

Appendix C . Marketing and Public Relations Plan 

### 50

• Earned media

• Website activity tracking

• Social Media activity tracking

• Continued support from community partners



### Conclusion

A strong Marketing and Public Relations Plan for the EugeneSan Jose nonstop route is critical, especially duri ng times of economic recovery. Consistency in the message, bran ding, and focus of the marketing campaign is important.