# Proposal under the Small Community Air

Service Development Program For

St. George Airport

Docket DOT

- OST

- 2010

- 0124

Sponsor: City of St. George / St. George Munici p a l Airport

DUNS Number: 627376569

Congressional District Code: UT02

Contact: Mr. Marc M. Mortensen

Support Services Manager

175 East 200 North

St. George, UT 84770

435.627.4005

mm@sgcity.org

Due Date: August 27, 2010

## Table of Contents

Subject Page

DOT Summary Information 1

Support Letter from S ky West Airlines 3

Support Letter from Senator 4

Support Letter from Convention and Tourism Bureau 6

Support Letter from St. George M ayor McArthur 7

Proposal 9

Executive Summary 9

Previous Grant 10

Our Community Team 10

Our Airport 10

Plan is Consistent with DOT Priorities 12

Community Profile 12

Economic Indicators 13

Air Service History 15

Current Air Service 15

High Air Fares 16

Top Markets for St. George 16

Air S ervice Comparison 17

Passenger Forecast for Los Angeles Service 18

Estimated Profitability for Sky West 18

Action Plan 20

Plan Elements 20

Marketing Program 20

Revenue Guarantee 21

To tal Incentive Package 22

Performance M easurement and Schedule 23

Measurement 23

Schedule 23

Community Support 23

Requirements 24

Financial Controls 2 4

Return on Investment 2 4

Alternate Plan with Fro ntier Airlines 2 4

Exit Strategy 2 5

Assurances 25

Letters of Support 26Proposal of the City of St. George and St. George Airport Page 1 

### APPENDIX B

Order: 2010

- 7

- 16

Docket DOT

- OST

- 2010

- 0124

SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET OST

- 2010

- 0124

SUMMARY INFORMATION

All applicants must submit this information with their proposal, along with a completed form SF

424 on http://www.grants.gov

A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY)

Not a Consortium Inte rstate Consortium Intrastate Consortium

Community now receives EAS subsidy

Community previously received a Small Community Grant in 2004.

B. PUBLIC/PRIVATE PARTNERSHIP

Public: Private:

1. City of St. George 1 . Sky West Airlines

2. St. George Airport 2. St. George Area Chamber of Commerce

3. Washington County 3. Washington County Economic Development

4. St. George Convention and Tourism

5. Dixie State College

6. Ft. Pierc e Industrial Park

7. Zion National Park

C. PROJECT PROPOSAL

Project Proposal: (Check All That Apply)

X Marketing Upgrade Aircraft X New Route

Personnel Increase Frequency X Lower Fares

X Tra vel Bank X Service Restoration

___ Subsidy

___ Surface Transport X Regional Service

___ Other (Specify)

X Revenue Guarantee Launch New Carrier

___ Start Up Cost Offset First Competitive Servic e

Study Secure Additional Carrier XProposal of the City of St. George and St. George Airport Page 2



### D. EXISTING LANDING AIDS AT LOCAL AIRPORT:

X Full ILS X Outer/Middle Marker X Published Instrument Approach

X Localizer X Other (Specify) _GPS__

E. PROJECT COST:

1. Federal a mount r equested: $550,000

2. State cash financial contribution 0

3. Local c ash f

inancial c ontribution:

3a. Airport cash funds: 50,000

3b. Non

- a irport cash funds: 5 0, 000

3c, Total local cash funds: 100,000

4. TOTAL CASH FUNDING $650,000

5. Local funds contributed from already existing

p rograms or projects included in line 3c

. 6. Local funds contributed from new commitments 100,000

or new resources included in line 3 c.

7. Airport In

- kind contribution:

7a. Advertising 50,000

7b. Airport l anding f

ees and r ents

8. Other i n

- kind contribution:

8a. Travel Bank Ticket Program 150,000

9. TOTAL IN

- KIND CONTRIBUTION $200,000

10. TOTAL PROJECT COST $850,000

F. ENPLANEMENTS:

2000 42,472 2005 45,110

2001 42,347 2006 53,777

2002 32,621 2007 53,690

2003 38,075 2008 46,607

2004 47,734 2009 38,693

G. IS THIS APPLICATION SUBJECT TO REVIEW BY ST ATE UNDER EXECUTIVE ORDER

PROCESS? Program is not covered by E.O. 12372.

H. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? NoProposal of the City of St. George and St. George Airport Page 3Proposal of the City of St. George and St. George Airport Page 4Proposal of the City of St. George and St. George Airport Page 5Proposal of the City of St. George and St. George Airport Page 6Proposal of the City of St. George and St. George Airport Page 7Proposal of the City of St. George and St. George Airport Page 8Proposal of the City of St. George and St. George Airport Page 9 

## PROPOSAL OF THE CITY OF ST. GEORGE AND

ST. GEORGE AIRPORT

Executive Summary

This proposa l is part of a two phase program to get new air service for the St. George Airport in

St. George, Utah. The first phase secured a grant earlier this year to pay for an Air Service

M arket S tudy to determine passenger demand and to pay f or a r ecrui ting p rogram to attract new

air service. The second phase is to secure a grant under this year’s program to provide a revenue

guarantee and marketing funds to support new air service.

The City of St. George and St. George Airport are seeking a Small Community Air Ser vice

Development Program grant to address the loss of air service at St. George Airp ort. On

September 1, 2009, Sky West Airlines operating as United Express terminated its service to Los

Angeles International Airport leaving St. George Airport with no sch eduled passenger air service

to the West. The only service remaining at St. George Airport is Sky West Airlines operating as

Delta Connection to Salt Lake City with 30 seat EMB

- 120 turbo prop.

The City of St. George is opening a replacement airport on January 13, 2011. This new airport

will have a 9,300 foot runway capable of handling most commercial jet aircraft. The terminal

will be 35,000 square feet and can handle multiple airlines. The old St. George Airport is located

on a bluff and is not able to accommodate commercial jet aircraft and to meet the air travel needs

of the future, St. George needed a new airport.

The leaders of St. George have been actively recruiting airlines to provide air service at the new

airport. During this past year, m eetings and discussions have been held with Allegiant Air,

American Airlines, American Eagle, Delta Air Lines, Fron tier Airlines, Horizon Air, Sky West,

Southwest Airlines, United Airlines, US Airways, and Vision Air. All of the airlines requested

an ince ntive package to consider providing service at the new St. George Airport. The airlines

have requested funds for a revenue guarantee and cost offset for the first year of service, funds

for marketing and advertising and a travel bank advance ticket purcha se program.

In order to create an attractive incentive package, the City of St. George and St. George Airport

will need a grant of $550,000 from the Department of Transportation under the Small

Community program. These funds will be match ed with $100,00 0 of local cash, $50,000 of in

kind funding, and a travel bank program of $150,000 resulting in a total incentive package of

$850,000.

St. George is located in Washington County, the most southern county of Utah. The St. George

Airport provides service t o over 25 0 ,000 residents in southern Utah, northern Arizona, and

eastern Nevada. St. George Airport is a small hub airport and has commuter service to one hub,

Salt Lake City, with small turbo prop aircraft. St. George is also the gateway airport for six

major n ational p arks and other popular destinations. A leakage study developed last year showed

that the local market generated 627 airline passengers per day but the St. George Airport only

retained 122 passengers per day, a retention rate of 19.5%. The destination that had the largest

amount of passenger demand was the Los Angeles metropolitan area

.Proposal of the City of St. George and St. George Airport Page 10



### Previous Grant

The City of St. George has approached the Small Community Air Service Development Program

as a two phased project . The first phase w as to request a grant to fund an Air Service Market

S tudy and start recruiting air line service for the new replacement airport. The second phase was

to request a grant to provide funds for an airline as a revenue guarantee to offset initial operating

losses and provide marketing support to start new air service.

The City of St. George and St. George Airport received the first grant from the Department of

Transportation under this program in 2009 for $100,000 to fund the development of a marketing

program to rec ruit new service and provide for advertising to support existing air service. The

local community contributed $20,000 in cash and $20,000 of in

- kind advertising to support the

air service development program.

The recruiting program has been successful. R epresentatives of the City and the Airport have

attended the Allegiant Conference held in Las Vegas in February, the Network Conference held

in Ft. Lauderdale in March, and the ACI Jump Start Conference held in San Diego in June.

There have been meetings and discussion s with eleven airlines with Sky West Airlines, Allegiant

Air, and Frontier Airlines all expressing interest in providing service at the new St. George

Airport.

Sky West Airlines has stated that they will go ahead and upgrade the existing St. George

– Salt

Lake City service from EMB

- 120 aircraft to CRJ

- 200 as aircraft become available. They have

also expressed interest in returning to the St. George

– Los Angeles market with regional jets

when the new airport opens and aircraft are availab le. The City St. George has developed a

marketing and advertising prog ram to promote the existing Sky West service. It is estimated that

the funding for the air service recruiting and advertising will be spent by the end of December,

2010, making St. Geo r ge eligible for a new grant next year.

Our Community Team

The City of St. George and the local community are moving ahead to improve the air service for

the new replacement airport. The City and the Airport are working with various business

interest, l ocal government departments, the St. George Area Chamber of Commerce, the

Washington County Economic Development Council, St. George Convention and Tourism,

Dixie State College, Zion National Park, and Sky West Airlines in developing a public

- private

partn ership to provide community support for the development of better air service.

Our Airport

The St. George Airport received its first air mail service in 1938 and has had scheduled

passenger air service since 1959. Currently, the Airport is served by Sky West Airlines operating

as the Delta Connection. The Airport meets FAA Part 139 requirements. Passenger screening is

provided by TSA. The Airport meets all FAA avionics requirements. Due to its location on the

top of a mesa, the Airport can only handl e smaller propeller aircraft like the EMB

- 120 for

scheduled passenger service. In order to accommodate regional jets and standard twin jets, theProposal of the City of St. George and St. George Airport Page 11



### City of St. George moved ahead with the development of a $175 million replacement airport.

The new airport wi ll have a 9,300 foot by 150 foot runway and a 35,000 square foot terminal.

Future plans call for extending the runway to 11,500 feet if needed. The opening of the new

replacement airport is scheduled for January 2011.

The new St. George Airport will be a full service Airport. Its passenger terminal will include

state of the art systems for passenger check

- in, baggage handling, and security screening. There

will be space for multiple airlines, rental car companies, and a restaurant. Convenient,

reasona bl y priced automobile parking will be available at the terminal. The new Airport is

located six miles from downtown St. George and is connected to Interstate 15 by its own

highway. Tenants and vendors at the new Airport will provide a full range of aviation se rvices

including fueling, maintenance, instruction, charter flights, and aircraft storage.

LOCATION OF THE NEW REPLACMENT AIRPORTProposal of the City of St. George and St. George Airport Page 12



### Our Plan Is Consistent With DOT Priorities

This project to reinstitute air service to Los Angeles for St. George Airport is consistent with the

priorities established by the Secretary of Transportation. The Airport will work with Sky West

Airlines to add new service to the Los Angeles International Airport and to upgrade service to

regional jets to Salt Lake City Intern ational Airport. The Airport will continue to actively recruit

air service to other hub airports that will facilitate access to the National Transportation System.

This project will benefit local businesses, higher education institutions, the general publ ic, and

the tourism market. It will provide an excellent alternative to long drives to either Las Vegas or

Salt Lake City for flights to southern California and points beyond.

Community Profile

St. George was founded as a cotton mission in 18 61 as pa rt of a greater effort of the Church of

Jesus Christ of Latter

- day Saints to become self sufficient. St. George has become the

population and commercial center for southern Utah. Due to its southern location and its early

cotton farming, the area is some times known as “Dixie”. The City of St. George is located on

Interstate 15 and south of the starting point of Interstate 70. The City is 120 miles north of Las

Vegas and 300 miles south of Salt Lake City.

From 2000 to 2008, the population for the primar y airport catchment area increased 53%.

Washington County (where St. George is located) has seen a population increase of 66% since

2000, one of the largest county increases in the United States. The greatest economic impact has

been the growth of retail sales. The primary catchment area has seen retail sales increase by

130% and effective buying income has doubled.

POPULATION GROWTH OF WASHINGTON COUNTY

Year Population Annual Growth

2005 127,120

--

2006 132,350 4.1%

2007 139,640 5.5%

2008 147,050 5.3%

2009 154,680 5.2%

2010 162,540 5.1%

2020 205,000 2.4%

2030 251,900 2.1%

Source: City of St. George and Washington County



### The St. George economy is service oriented. There is large employment in health, education,

government, and tourism. The St. George Area Chamber of Commerce will continue to support

existing employers in the area while the Washington County Econo mic Development Council is

attracting new businesses that will contribute to the economic growth of the area.Proposal of the City of St. George and St. George Airport Page 13 ST. GEORGE HAS A DIVERSE ECONOMY

Sector Employment % of Total

Retail/Wholesale 8,779 18.3%

Healthcare 7,493 15.5%

Government 7,202 15.0%

Hospitality/Entertainment 7,010 14.6%

Services 5,959 12.4%

Construction 4,021 8.4%

Transportation/Utilities 2,842 5.9%

Manufacturing 2,472 5.1%

Finance/Real Estate/Insurance 2,033 4.2%

Mining/Agriculture 276 0.6%



### The St. Geo rge Area Convention and Tourism Office works to bring visitors to the St. Geo rge

area. There are six major n ational p arks in the St. G eorge Airport catchment are a. There are

approximately 3,100 hotel rooms in the area with prices ranging from $29 to $395 per night.

The area has 23 golf courses within one hour of downtown St. George. St. George has the

second largest conference center in the state of Utah. Dixie Conference Center has a 47,500

square foot exhibit hall, twenty

- one meeting rooms, and seating for 6,200 in the exhibit hall

.

Economic Indicators

The St. George Airport primary catchment area covers four counties in Utah, a nd parts of one

county in Nevada and Arizona. The secondary catchment area covers four more counties in Utah

and one additional community in Arizona. Washington County accounts for 139,640 people or

55.7% of the total market area. The average retail sal es for Washington County is $47,972 per

household and the median household income for Washington County is $46,822.

ECONOMIC DATA FOR ST. GEORGE AIRPORT CATCHMENT AREA

Housing Retail Sales/ Median Income/

Market Populat ion Units Household Household

Utah

Washington County 139,640 54,690 $47,972 $46,822

Iron County 43,525 17,980 42,333 39,909

Sevier County 19,700 7,730 47,620 43,172

Kane County 6,520 4,850 20,204 41,274

Beaver County 6,090 2,870 27,770 41,632

Garfield County 4,530 3,320 17,125 42,398

Wayne County 2,520 1,450 22,715 38,566

Piute County 1,340 800 6,232 35,704

Arizona

P age City 6,800 2,6 00 n/a 60,890

Colorado City 4,800 1,630 n/a 41,640

Fredonia City 1,050 455 n/a 39,275

Nevada

Mesquite City 19,750 9,300 n/a 42,941

T otal 250,415 107,675Proposal of the City of St. George and St. George Airport Page 14

St. George Airport Catchment Area

The St. George Airport catchment area covers southwest Utah, northwest Arizona and part of southeast

Nevada. The area is a combination of high plat eau desert and mountains. There are four counties in

Utah, two cities in Arizona, and one city in Nevada that are considered the primary market. The primary

market is within 1:30 from the new Airport and has an estimated population of 220,000. The secon dary

market is further away and would use the new service to LAX since the St. George Airport would be the

closest airport with nonstop service.

ST. GEORGE AIRPORT CATCHMENT AREA



### Even though the average retail sales and average median income are somew hat moderate, the

residents of St. George have an excellent quality of lif e due to the geographical nature of the

market area and the lower cost of living.

ST. GEORGE HAS A LOW COST OF LIVING

Market Cost of Living Index

St. George 95.6

Boise 95.5

Bozeman 106.8

Corvallis 109.7

Casper 98.0

Fresno 115.6

Laramie 104.0

Portland 113.6

Salt Lake City 101.7

San Diego 101.7

San Francisco 162.0Proposal of the City of St. George and St. George Airport Page 15



### Air Service History

St. George Airport has been served continuously since 1972 b y Sky West Airlines. In the early

years, Sky West shuttled business travelers to Salt Lake City. In the 1990’s the airline started

nonstop service to Las Vegas with flights continuing on to Phoenix. In 2000, new nonstop

service was added to Los Angeles International Airport and this service replaced the service to

Las Ve gas. On September 1, 2009, Sky West termi nated service to L o s Angeles. The airline has

continued to provide nonstop service to Salt Lake City. All flights to Salt Lake City are operate d

with 30 seat EMB

- 120 aircraft due to the restrictions at the current St. George Airport.

HISTORICAL NONSTOP SERVICE AT ST. GEORGE

Los Angeles Salt Lake City All Markets

Year Flts/wk. Sea ts/wk

. Flts/wk

. Seats/wk

. Flts/wk. Seats/wk

. 2000 14 420 37 1,110 51 1,530

2001 14 420 42 1,260 56 1,680

2002 14 420 42 1,260 56 1,680

2003 14 420 48 1,440 62 1,860

2004 14 420 42 1,260 56 1,680

2005 14 420 41 1,230 55 1,650

2 006 12 360 56 1,680 68 2,040

2007 14 420 56 1,680 70 2,100

2008 14 420 45 1,350 59 1,770

2009 14 420 44 1,320 58 1,740

2010 0 0 45 1,35 0 45 1,35 0

Source: Official Airline Guide, Summer ed itions for 2000

- 2010.



### Current Air Service

Sky West currently operates forty

- five flights per week between St. George and Salt Lake City

utilizing the 30 seat EMB

- 120 turbo prop aircraft. These flights are operated as the Delta

Connection. These frequent flights meet the needs of the local passenger going to Salt Lake City

for a day trip to conduct business or visit friends and relatives and for passengers making

connections to Del ta Air Lines flights, other Sky West flights, and the flights of other airlines.

CURRENT ST. GEORGE

- SALT LAKE CITY SERVICE

August 2010

Market Depart Arri ve Aircraft Frequency

St. George

– Salt Lake City 6:04 am 7:25 am EMB

- 120 x Sa, Su

7:50 am 9:10 am EMB

- 120 Daily

9:00 am 10:20 am EMB

- 120 Daily

11:50 am 1:10 pm EMB

- 120 x Sa, Su

1:10 pm 2:25 pm EMB

- 120 Sa

2:55 pm 4:14 pm EMB

- 120 x Sa

5:45 pm 7:00 pm EMB

- 120 Daily

7:20 pm 8:40 pm EMB

- 120 DailyProposal of the City of St. George and St. George Airport Page 16

Market Depart Arrive Aircraft Frequency

Salt Lake City

– St. George 7:25 am 8:50 am EMB

- 120 x Sa, Su

10:10 am 11:40 am EMB

- 120 x Sa, Su

11:00 am 12:25 pm EMB

- 120 Daily

3:20 pm 4:40 pm EMB

- 120 Daily

5:05 pm 6:25 pm EMB

- 120 Daily

7:50 pm 9:15 pm EMB

- 120 Daily

9:30 pm 11:05 pm EMB

- 120 Daily



### High Air Fares

With air s ervice to only Salt Lake City, passengers to and from the cities in southern California,

Hawaii , and the Pacific are paying a premium air fare. For example, a passenger flying from St.

George to Los Angeles will need to connect at Salt Lake City Internatio nal Airport and pay a one

way fare of approximately $215.00. The one way trip time is approximately 4 hours. A

passenger flying from St. George to Honolulu will need to also connect in Salt Lake City and pay

a one way fare of approximately $740.00. The one way trip time is approximately 9 to 10 hours.

A leakage analysis developed by Sab re Airline Solutions in 2009 found that over 80% of the St.

George airline customers went to other airports with 55% of the passengers using Las Vegas.

The average fare s for the top ten markets for St. George for the past five years have been 40% to

60% higher than fares available at Las Vegas.

Top Markets for St. George

There were 75,260 origin and destination passengers for St. George Airport in 2009. The St.

Geor ge

- Salt Lake City market is the number one market and accounted for 47.3% of the total

passengers. The top ten markets accounted for 71.5% of the total passengers. The leakage study

developed by Sabre showed that the St. George

- Salt Lake City market capt ured 88% of all of the

bookings in the local St. George market. On the other hand, over 86% of the passengers going toProposal of the City of St. George and St. George Airport Page 17



### destinations other than Salt Lake City utilized another airport. Listed below are the top origin

and destination markets for St. George for 2009 compared to the “true passengers” (O&D plus

diverted).

TOP PASSENGER MARKETS FOR ST. GEORGE AIRPORT

Market O&D Passengers True Passengers

Salt Lake City 35,620 37,810

Los Angeles 7,010 18,100

Denver 2,480 13,290

Seattle 1,900 8,390

Boise 1,310 6,720

Portland 1,240 3,290

San Francisco 950 20,880

Sacramento 950 2,480

Chicago 880 19,710

Atlanta 800 5,040

Total 53,140 135,710



### The air service at St. George (origin and destination passengers) for the top ten markets only

prod uced 39% of the passengers. If Salt Lake City is excluded, then the air service only

accounted for 18% of the passengers in the top markets.

Air Service Comparison

When the St. George Airport market area is compared to other markets that have similar

po pulations , it is clear that St. Georg e fall s short on air service. The following table compares

five cities that have an average population of 252,000 to t he St. George market area of 250,000.

T hese markets average 24 daily flights to 5 cities while S t. George has 7 daily flights to one city.

AIR SERVICE COMPARISON FOR ST. GEORGE

Cities Daily

Metro Area Population Served Flights

St. George 255, 000 1 7

Lubbock, TX 260,000 6 35

San Luis Obispo, CA 258,000 4 12

Gulfport, MS 250,000 5 22

Lafayette, LA 247,000 4 20

Cedar Rapids, IA 245,000 7 33

Average 252,000 5 24Proposal of the City of St. George and St. George Airport Page 18



### Passenger Forecast for Service to Los Angeles

The Sabre booking data for 20 08 shows that 70% of the local residents were using the St. George

nonstop flights to Los Angeles International Airport. The other 30% were using other airports to

get to Los Angeles with Las Vegas being the primary airport. The daily passenger bookings

were 17.4 from St. George to LAX and 7.4 daily passenger bookings from other airports to LAX.

The other airports in the Los Angeles metro area accounted for 0.3 daily passenger bookings

using St. George Airport and 12.2 daily passenger bookings using othe r airports. The total

passenger bookings for the St. George Airport catchment area were 37.3 bookings per day to the

Los Angeles metro area . This equates to 27,230 St. George area passengers going to and from

the Los Angeles metro area.

FORECAST FOR ST. GEORGE

– LOS ANGELES

Outbound Annual Sky West Sky West

Passengers/Day Passengers Share Passengers

SGU

- LAX 24.8 36,200 80% 29,000

SGU

- Other LA 12.5 18,200 40 % 7,300

Total LA Area 37.3 54,400 36,3 00

SGU

- HNL 13.8 20,100 25% 5,000

SGU

- SAN 6.3 9,200 25% 2,300

SGU

- OGG 3.6 5,200 25% 1,300

SGU

- SBA 1.3 1,800 25% 400

Total Bey ond Markets 36 ,300 9,000

Grand Total All Markets 90,700 45,300



### This forecast shows th at the potential passengers are much greater than the passengers carried by

Sky West previously in the SGU

- LAX market. This is due to a major upgrade in the aircraft to

be flown and the marketing program that will be developed by the St. George parties, especially

in the international market. A s a United Express partner, Sky West does not do marketing or

advertising. United Airlines did not provide any marketing or adv ertising for the previous SGU

LAX service and did not institute an international program or inclu de St. George and the n ati onal

p arks in its own tour program s and packages

.

The passenger forecast for the SGU

- LAX markets indicates that the market could sup port two

daily roundtrip CRJ

- 200 flights per week with a load factor of 5 8%. Since Sky West previously

had a loss operation in this market with the EMB

- 120 aircraft, it is recommended that the airline

start with one daily round trip flight during the first year and see if the traffic response is great

enough to warrant additional flights.

Estimated Profitability for Sky West Airlines

B ased on the operating cost for Sky West , the total expense for a one way flight between St.

George and Los Angeles with a CRJ

- 2 00 is estimated to be $3,040. Based on this expe nse and

based on an average one

- way fare of $113 as reported by Sabre Airline Solutions for 2008 , theProposal of the City of St. George and St. George Airport Page 19



### airline will need 39,300 passengers to break even for the route. This forecast is based on two

trips per day and service in the second year of operation. It is expected that the first year will

operate at a loss and the small community grant will off

- set this loss ope ration.

REVENUE AND EXPENSE FORECAST FOR SGU

- LAX

Passenger Forecast 45,300

Aver age Fare $113

Passenger Revenue $5,118,900

Other Revenue 102,100

Total Revenue $5,221,000

Number of Daily Flights 2 R.T.

Number of Annual Flights 1,460

Cost per Flight $3,0 40

Total Expense $4,438,400

Estimated Operating Profit $782,600

Operating Margin 15.0%



### The first year of operation will have a ramping

- up of passengers and fares during the first few

months. This normally happens wh en new air service is introduced in a new market and the

passenger awareness factor is increased as time goes by . Marketing and advertising usually

begins 90 to 120 days in advance of the air service. It normally takes much longer to develop

top

- of

- the

- mind awareness for the new air service.Proposal of the City of St. George and St. George Airport Page 20



## Action Plan

Plan Elements

The goal of the Action Plan is to address issues associated with the proposed new air service that

are critical to the long

- term success of this service. T hi s action p lan will address two elements

for the St. George Airport : (1) marketing, promotion, and support of new air service; and (2)

revenue guarantees for initial air service.

Marketing Program

We believe that a strong marketing and advertising program is ke y to the success of a grant

program . For this project, we are allocating $ 2 00,000 to advertising, marketing, sales, and public

relations. We have also included a n advance purchase ticket program with a goal of $1 50,000

.

The target audience for outbound service will be the local business traveler. The most effective

way to contact this customer is by targeting: (1) the traveler; (2) the travel agent; (3) the

corporate travel coordinator; and (4) the business associations. All of these targets can be

ap proached utilizing the same advertising media

- radio, newspaper, magazine, direct mail,

internet and billboards. The target audience for the inbound service will be the business traveler

and the vacation/leisure traveler. The business travel market for inboun d will use the same

strategy a s outbound business travel. The vacation/leisure market will include domestic and

international travelers. There will be a m ajor emphasis on tour operators and travel agencies

which specialize in leisure travel.

Adver tising and Media Selection

The market in the St. George Airport market area can best be reached by using local newspaper,

local radio, outdoor , direct mail, trade publications, and online advertising via the internet. The

Los Angeles market c an be reache d via newspaper

, radio , and internet . It is estimated that 35%

of the advertising will be spent in St. George and 65% will be spent in the Los Angeles market.

In the past, no money was spent in Los Angeles for marketing and advertising the air service to

St. George.

ESTIMATED ADVERTISING EXPENDITURES FOR NEW AIR SERVICE

Cash In Kind Total

Advertising

Newspaper/Magazine $ 50 ,000 5,000 $ 55 ,000

Radio 25,000 20,000 45 ,000

Outdoor 10,0 00 20,000 30,000

Production 10,000 10,000

Internet/direct mail 5,000 5 ,000 1 0 ,000

Total $100 ,000 $50,000 $15 0,000Proposal of the City of St. George and St. George Airport Page 21



### Advance Ticket Sales Program

The St. George business community is fully supportive of the new air service to LAX. To show

its support, the Chamber of Commerce will sponsor a travel bank program for advance ticket

sales . The initial local incentive being offered for the new air se rvice is a commitment to sell at

least $1 50,000 of tickets in advance. The Chamber of Commerce will develop a program with a

local credit union or bank to escrow and manage the travel bank. The credit union or bank will

accept deposits and issue debit cards that can be used for travel on Sky West Airlines

.

Direct Sales

Since St. Geor ge is the gateway to six major n ational p arks, there is an excellent opportunity to

sell tour programs and packages to the area. The St. George Area Convention and Tourism

Office has a n $ 800,000 budget for the deve lopment of tourism to the St. George area. They have

agreed to head up the sales program for the new air service and work with the tour operators and

travel companies that will sell vacation/leisure business to the area. They have agreed to also

lead a p rogram to capture the Asian market with an extensive sales program to the major Asian

tour companies that are now busing customers to the St. George area or flying them to Las

Vegas.

Sales Promotions

The St. George Airport in partnership with Sky West Ai rlines, the Convention and Tourism

Office and the Chamber of Commerce will work with a major radio station in the Los Angeles

metro area in promoting a Zion National Park vacation package. This type of program has been

very successful in the Los Angeles m arket area in the past

.

Public Relations

St. George Airport and its marketing partners will sponsor a trip to St. George for travel writers

at various newspapers in southern California to sample t he new National Parks Vacation

P rogram. The Airport will also produce and deliver press releases and stories supporting the new

air service.

Revenue Guarantee

Management at Sky West has told the City of St. George th at the airline will need an incentive

program that includes a revenue guarantee to offset ini tial operating losses. Based on the

analysis of our consultants, it is believed that a $5 0 0,000 revenue guarantee will be sufficient to

support the initial new air service for the first year of operation

.

It is assumed that there will be a ramp up of passengers during the start up period. Load factors

for Sky West are estimated to be 3 0% for the first month and increasing to 55 % in the peak travel

months for an average of 45% for jet service. It should be noted that Sky West had an average

load facto r in the mid 40% with the EMB

- 120 aircraft. It is also assumed that the average fares

will be over 20% lower in the first few months to stimulate air travel.Proposal of the City of St. George and St. George Airport Page 2 2

ESTIMATED REVENUE GUARANTEE TO COVER INTIAL OPERATING LOSSES

FOR SERVICE BETWEEN ST. GEORGE AND LOS ANGELES

Monthly Est. Avg. Cost/ Profit

Month Flights Seats L.F. % Passengers Fare Revenue Flight Expense (Loss)

April 60 3,000 3 0 % 900 $89 $ 80,100 $ 3,04 0 $ 182,400 ($ 102,300 )

May 62 3,100 35 % 1,085 89 96,565 3,040 188,480 ($ 92 ,915 )

June 60 3,000 40 % 1 ,200 99 118,800 3,040 182,400 ($ 6 3,6 00 )

July 62 3,100 45 % 1,395 99 138,105 3,040 188,480 ($ 50,375 )

Aug. 62 3,100 50 % 1,550 105 162,750 3,040 188,480 ( $ 25,730 )

Sept. 60 3,000 45% 1,35 0 105 141,750 3,040 182,400 ( $ 40,650 )

Oct. 62 3,100 45% 1,395 105 146,475 3,040 188,480 ($ 42,005 )

Nov. 60 3,000 50% 1,500 105 157,500 3,040 182,400 ($ 24,900 )

Dec. 62 3,100 55 % 1,705 113 192,665 3,040 188,480 4,185

Jan. 62 3,100 45 % 1,395 105 146,475 3,040 188,480 ($ 42, 005 )

Feb. 56 2,800 50 % 1,400 105 147,000 3,040 170,240 ($ 23,240 )

March 62 3,100 55 % 1,705 113 192,665 3,040 188,480 4,185

1 st yr. total 730 36,500 45% 16,580 $103 $1,720,850 $2,219,200 $498,350

Total Reven ue Guarantee Needed $5 0 0,000



### Total Incentive Package

Combining the Small Community Air Service Development Program grant and local

participation, the City of St. Georg e and St. George Airport will be able to offer a very complete

incentive package for Sky West Airlines . The combined incentive package will create an

extremely strong marketing component, flight guarantee program, and a strong public/private

partnership. With the federal assistance the total incentive package that would be offered for

Sky West Airlines new air service will be $ 850,000

. Total f edera l participation requested is

$55 0,000 with the local community providing $ 30 0,000, 35.3% of the incentive p ackage. The

local community will provide 15.4% of the total cash for the incentive package.

SUMMARY OF INCENTIVE PACKAGE FOR NEW AIR SERVICE

Federal Local Total

Flight Guarantee $45 0,000 50,000 $ 5 0 0,000

Marketing and Advertising 100,000 100,000 2 00,000

Pre

- purchased tickets 1 50,000 1 50,000

Total $550,000 $300 ,000 $ 850 ,000Proposal of the City of St. George and St. George Airport Page 23



## Performance Measurement and Schedul e

Measurement

The performance of the proposed air service development project will be tracked on a monthly

and quarterly basis. This tracking will measure the number of passengers carried by Sky West

Airlines, the average fare , and the passenger revenu e . The Airport will also monitor the number

of flights being provided, the aircraft type, and the amount of revenue guarantee paid out each

month. This measurement of performance will be done by meeting with Sky West Airlines

, reviewing advance schedules in the Official Airline Guide, and reviewing advance tariffs on file.

Ninety days prior to the start of new air service to LAX , the Airport will institute the marketing

and advertising program. Daily and monthly load factors will be tracked to see the i mpact of the

marketing program. If the passengers do not initially respond to the new air service, then the

community will implement an additional marketing and advertising program to spike the market.

Schedule

It is the assumption of City of St. George and St. George Airpo rt that the following schedule

c ould be employed should the grant application be successful. The City and the Airport commit

to the completion of the grant, if awarded, within two years of acceptance and will diligently

pursue an earl ier closeout. The following timeline is proposed:

PROPOSED TIMELINE

Item Estimated Date

Execution of Grant Agreements End of 2010

Completion of Marketing Plan February 2011

Meet with St. George marketing partners March 2011

Sta rt N egotiations with Sky West April 2011

Start Air Service Prior to April 2012



### Community Support

The City and the Airport have created a public/private partnership to aid in our recruitment

efforts. This public/private partnership is composed of business leaders, educational institutions,

association representatives, community organizations and residents. Th e leading organizations

of the p artnership are as follows:

The City of St. George Sky West Airlines

Washington County St. George Area Convention & Tourism

St. George Airport Zion National Park

Washington County Economic Development Ft. Pierce Industrial Park

St. George Area Chamber of Commerce Desert Canyons



### Dixie State CollegeProposal of the City of St. George and St. George Airport Page 24



## DOT Requirements

Financial Controls

As the sponsor, the City of St. George will be the responsible part y for all fiscal matters an d

DOT reporting requirements. As a public entity the DOT can be assured that proper financial

controls are in place to guarantee that this grant will be used in accordance with the agreement

between the C ity and the DOT. The City of St. George understand s that the grant is a

r eimbursable grant and the City will be responsible for program expenditures and will submit

invoices and contracts to the DOT for approval and reimbursement.

Return on Investment

The City of St. George and St. George Airport h ave d eveloped a cost effective and achievable

strategy to recruit new air service that will fill the void in air service in the St. George

- Los

Angeles market . This proposal utilizes proven methods and techniques for forecasting and

developing a successful mark eting program.

The City of St. George and St. George Airport is requesting $55 0,000 from the DOT and will

contribute another $100,000 in cash. For this investment, the St. George Airport will again have

air service to Los Angeles with bigger aircraft a nd competitive fares. It is estimated that

Sky West Airlines will achieve an operating profit of $ 782,6 00 in the second year of operation.

The St. George Airport will get $ 80,000 in revenue from landing fees, fuel fees, passenger

facility charges, and au to parking from the new flight . I t is estimated that the community will

attract over $ 6 million in visitor spending as a direct impact from the new air service.

Alternate Plan with Frontier Airlines

If , for some reason, Sky West Airlines were to decide to not start air service in the St. George

- Los

Angeles market, then St. George will offer the revenue guarantee and marketing program to

Frontier Airlines for air service to Denver. Data from the Sabre study indicated that Denver was

the second most reque sted market after Los Angeles and Denver offers connecting service to

most markets in the U.S. and to key international points. Frontier Airlines has expressed interest

in serving the St. George

- Denver market and has submitted a letter supporting the gran t request

of St. George (included at back of this proposal ).

Frontier has indicated that it could provide 12 roundtrip flights per week between St. George and

Denver with 50 seat ERJ

- 148 regional jet aircraft. Initial analysis of this option indicates that a

revenue guarantee of $500,000 will be sufficient to cover initial operating losses. The remaining

$150,000 for marketing and advertising will provide for a strong program to develop passenger

demand on this route.Proposal of the City of St. George and St. George Airport Page 25



### Exit Strategy

The sponsor has developed this proposal as second phase of a two phase program for new air

service

. The first phase was for a grant to pay for a market study and recruit air service. The

community received a grant for this phase. The funds from the first grant will be e xpended by

the end of December 2010. The second phase is for a grant to pay for a revenue guarantee and

pay for marketing to support new air service. If awarded, th is grant request will start in January

, 2011

. The advertising and marketing will commence 9 0 days prior to the start of air service and

continue for the first six months of air service. The revenue guarantee will be in place for the

first 12 months. Based on the proje ctions contained herein, Sky West Airlines should be

profitable at the end of the first year and should experience a profitable second year.

If Sky West Airlines does not meet the forecast number and the losses are greater than expected,

then the community can either come up with additional funds on its own to supplement the

rev enue guarantee program or the airline may decide to absorb the losses or terminate service.

Assurances

The City of St. George and St. George Airport (hereinafter referred to as “Sponsor”) hereby

provides the U.S. Department of Transportation with the f ollowing assurances:

The Sponsor will com ply with all of the applicable f ederal laws, regulations,

executive orders, policies, guidelines, and requirements as they relate to the

applicati on, acceptance, and use of the f ederal funds for this project.

The S ponsor has the legal authority to apply for the Small Community Air Service

Development Program grant, and to finance and carry out the proposed project; that a

resolution, motion, or similar action has been duly adopted or passed as an official act

of the applicant’s governing body authorizing the filing of the application, including

all understanding s and assurances contained t herein, and directing and authorizing the

person identified as the official representative of the applicant to act in connection

wit h the application and to provide such additional information as may be required.

The Sponsor has access to the funds available for that portion of the project costs,

which are not to be paid by the United States government. The Sponsor has sufficient

fun ds to assure operating and maintenance of items funded under the grant

agreement, which it will own or control.

The Sponsor shall keep all project accounts and records which fully disclose the

amount and disposition by the recipient of the proceeds of the grant, t he total cost of

the project in relation to the grant , and the amount or nature of that portion of the cost

of the project supplied by other sources, and such other financial records pertinent to

the project. The accoun ts and records shall be kept in accordance with an accounting

system that will facilitate an effective audit in accordance with the Single Audit Act

of 1984.Proposal of the City of St. George and St. George Airport Page 26 

### The Sponsor shall make available for the purpose of audit and examination, any

books, documents, papers, and records of the recipient that are pertinent to the grant.

The Sponsor will execute the project in accordance with the approved program

narrative contained in the project application or with the modifications similarly

approved.

The Sponsor wi ll furnish such periodic reports as required pertaining to the project

and activities.Proposal of the City of St. George and St. George Airport Page 27Proposal of the City of St. George and St. George Airport Page 28Proposal of the City of St. George and St. George Airport Page 29