# Northwest Florida Regional Airport

Grant Application Proposal Under The 

# Small Community Air Service Development Grant Program

DOCKET OST

- 2010

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DUNS # 613277649 Congressional District # 1Northwest Florida Regional Airport 2

Application: Small Community Air Service Development Program OST

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## Table of Contents

PROPOSAL SUMMARY

................................ ................................ ................................ ............................ 3
OUTLINE OF APPLICATI ON

................................ ................................ ................................ ...................... 4 T HE G RANT W ILL A DDRESS A M AJOR A IR S ERVICE D EFICIENCY

................................ ................................ ......... 4 T HE L OW

- C OST A IRLINES A VAILABLE T O S ERVE VPS A RE L IMITED

................................ ................................ ..... 4 A DDRESSING T HE D EFICIENCY : R ECRUITING A L OW

- F ARE A IRLINE A T VPS

................................ ......................... 5 THE NORTHWEST FLORID A REGIONAL AIRPORT M ARKET

................................ ................................ ..... 7 VPS S UFFERS F ROM M ATERIALLY H IGHER F ARES

................................ ................................ ............................ 8 S UBSIDIZED E NTRY OF S OUTHWEST A T ECP T HREATENS VPS

................................ ................................ ........... 9 N ORTHWEST F LORIDA R EGIONAL H AS A C LEAR P LAN

................................ ................................ ..................... 10 MARK ET OVERVIEW

................................ ................................ ................................ ............................. 11 T RAFFIC P ROFILE

................................ ................................ ................................ ................................ ....... 11 VPS E CONOMIC B ASE

................................ ................................ ................................ ................................ 12 E FFECTS O F G ULF O IL S PILL

................................ ................................ ................................ ....................... 12 F RONTIER R EVENUE P ROJECTIONS

................................ ................................ ................................ .............. 14 A LTERNATIVE S OLUTIONS

................................ ................................ ................................ ............................ 16 GRANT ADMINISTRATION

................................ ................................ ................................ .................... 18 G RANT A GREEMENT S TRUCTURE

................................ ................................ ................................ ................. 19 A DMINISTRATION OF T HE M ARKETING P ROGRAM

................................ ................................ .......................... 20 P ROGRESS R EPORTS TO DOT

................................ ................................ ................................ ..................... 20 P ROGRAM D URATION

................................ ................................ ................................ ................................ . 20 M ARKET S UPPORT B EYOND T ERM OF P ROGRA M

................................ ................................ ........................... 20 A PPLICATION OF G RANT F UNDS

................................ ................................ ................................ ................... 21 P RIOR A IR S ERVICE E FFORTS

................................ ................................ ................................ ...................... 21Northwest Florida Regional Airport 3

Application: Small Community Air Service Development Program OST

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## Proposal Summary

a) Propo ser Northwest Florida Regional Airport 1701 State Road 85 North Eglin Air Force Base, Florida 32452 Telephone: (805) 651

- 7160 Facsimile: (805) 651

- 7164
DUNS# 613277649
Contact: Mr. Greg Donovan

Director Northwest Florida Regional Airpo rt serves a population of over 320,000 in the Florida Panhandle and South central Alabama, including strategically important Eglin Air Force Base. b) Local Community Support Organization This proposal is supported by Okaloosa County Tourist Development C ouncil and the Economic Development Council of Okaloosa County c) Official Sponsor Okaloosa County’s Northwest Florida Regional Airport is the official sponsor of this proposal. d) Brief Synopsis of Grant Request The proposal requests $500,000 in gran t funds from the Program to recruit low fare service to bring down ticket prices and recapture traffic leakage that is increasing to both Pensacola and to Panama City. A 20% match of $100,000 in locally generated funds will be included, for a total program fund of $600,000, supplemented with “in

- kind” airport fee waivers having an approximate market value of $200,000.Northwest Florida Regional Airport 4

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## Outline of Application
The Northwest Florida Regional Airport , serving the Florida communities of Fort Walton Beach, Destin, Niceville, Crestview, Eglin Air Force Base and South Walton and Santa Rosa Counties, and its community partners hereby submit s its request for a grant under the 2010 Small Community Air Service Development Program. In this application, Northwest Florida Regional Ai rport is requesting a grant of $500,000, to be matched locally by an additional $100,000 to recruit a low

- fare carrier to recapture excessive leakage, address substantially higher fares, and compete with other airports in the Florida Panhandle.


### The Grant Will Address A Major Air Service Deficiency Structural changes in the airline industry have resulted in VPS experiencing significantly higher airfares at the same time that incumbent carriers are reducing capacity. This has begun a spiral that, if not ad dressed, could result in continuing loss of air service for consumers in the VPS region

. This situation is becoming more threatening

. Pensacola to the west of VPS enjoys substantial low

- fare service. But of concern is that to the east, the Panama City Air port (ECP) has successfully offered approximately $25 million over two years from private sources to artificially subsidize service from Southwest Airlines. This is entirely from a land developer which has extensive holdings in the immediate area

. The No rthwest Florida Regional Airport finds itself in a situation where its fares are substantially higher than those offered at either ECP or at PNS. The result is that ridership is being materially diverted. The Airport understands and supports free enterpr ise efforts to increase traffic. But in the current economic situation, it is almost impossible to recruit a low

- fare carrier, or any major carrier for that matter, without some mechanism to reduce the initial risks of starting service at a new destinatio n. 

### The Low

- Cost Airlines Available To Serve VPS Are Limited The community is losing significant traffic to all parts of the nation due to unreasonably high local fares and increasing levels of low

- fare airline service elsewhere in the Florida Panhandle. As the Department knows well, there actually are few low fare airlines, and fewer still that are in a strategic position to establish service at VPS. Since 2008, airlines have reduced capacity a t VPS by almost 14%

- at the same time that a whopping 25% variance in fares has taken place... To the top 25 VPS O&D destinations, consumers pay an average of 31% more in air fares.Northwest Florida Regional Airport 5

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- 0124 Today, AirTran serves Pensacola to the west of VPS. Southwest Airlines is serving Panama City to the e ast. Understandably, both of these carriers have declined to consider service at VPS.
The Southwest service at Panama City (ECP) that is being materially propped up by subsidies provided by a large land developer, provides two daily low

- fare flights to th ree of Southwest’s focus cities

– Houston, Nashville, and Baltimore/Washington, plus Orlando. This represents access to virtually all major airports served by Southwest. In addition, the AirTran service at Pensacola provides excellent low

- fare access to p oints in the Middle Atlantic , the Midwest, and New England.

As these airports have seen massive entry of low

- fare service, VPS has seen a corresponding decline in air access, with scheduled seats declining 13.8% between the second half of 2008 and that of 2010. 

### Addressing The Deficiency: Recruiting A Low

- Fare Airline At VPS One of the challenges facing VPS is that it faces nationwide low

- fare competition from the combination of ECP and PNS, with service from Southwest and AirTran. But there is no single alternative low

- fare carrier that can address both of these challenges. This leaves VPS with limited choices in seeking low

- cost airline service. Therefore, this proposal is aimed at recruiting one of the only two such car riers that have the potential of having a meaningful effect on lowering ticket prices and recapturing leakage in the region

. They each access markets in different parts of the nation

– but analyses by the airport ATL BWI

HOU BNA

MCO

PNS



### VPS ECP

VPS Is Bracketed By Low - Fare Service Accessing All Parts of The United States. This Results In Air High Fares &

Decl ining Capacity 

# The Challenge:

Over the past five years, VPS has seen increased traffic leakage due to higher fares. This grant will incubate successful, long term low

fare airline service.Northwest Florida Regional Airport 6

Application: Small Community Air Service Development Program OST

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- 0124 indicate either one will materially reduce leakage and have a major effect upon bringing fare discipline to the marketplace. These are Frontier Airlines, with access to its vibrant operation at Denver International, and jetBlue, with access to one of its key destinations on the East Coast.
This grant is intended to provide a risk

- offset to attract one of these carriers. The airport has been in on

- going contact with both airlines. The option that will provide the highest access

– in terms of numbers of new low

- fare destinations opened

– is Frontie r. The carrier is interested in pursuing the concept of entering the Florida Panhandle market, and VPS represen ts the airport of least competitive resistance. Frontier serves every major US point west of Denver, and is a true hubbing carrier.
While Fronti er has been receptive in discussions with VPS to investigating the Panhandle market using VPS, the airline industry changes very rapidly. In this, the community asks the Department to allow it to also consider jetBlue as an alternative should negotiations with Frontier not prove fruitful.
This service will materially reduce inflated air fares at VPS, recapture leakage to ECP and PNS, and address a decline in capacity. The service proposed has very high probabilities of success, but without the risk

reducti on dollars made possible by this grant, it will be difficult to convince either carrier to enter the market. There is a rich opportunity for specific new airlines at VPS... But they will require risk

offsets before they will move their limited fleet resources to a new market. This grant will make such service

– and much re duced fares for VPS consumers – possible.Northwest Florida Regional Airport 7

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## The Northwest Florida Regional Airport Market
Today, VPS has service from four major airline systems, American, Continental, Delta, and US Ai rways . The majority of flights are operated by 50

- seat or smaller regional jets. This does not allow any substantial number of discount seats.

The current schedule pattern filed for the 2 nd half of 2010, and compared to that of just two years ago

- 2008

- clearly indicates a decline in air service access. Virtually all of VPS service is flown with 50

-

seat regional jets. These can offer very few discount seats. The additional air service made possible by this grant will address this situation and reduce the leakage to other airports in the region.Northwest Florida Regional Airport 8

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- 0124 A 13.8 % reduction in seats offered has resulted in increased leakage. The reasons are clear: the airline industry has re

- structured:

- Re

- allocating its Chicago/O’Hare capacity, American deleted access to its hub at that dominant airport;

- Delta has been pulling down service at CVG, in the process eliminating flights to VPS.

- Subsequent to the Delta/Northwest merger, Delta began to retire older DC

- 9

- 30s from the fleet. With no direct seat

- capacit y replacement, the carrier substituted 50

- seat regional jets for these 100

- seat DC

- 9s.

- Delta has also shifted some MD

- 88s into 50

- 70 seat regional jets to Atlanta Jackson

- Hartsfield. 

### VPS Suffers From Materially Higher Fares
A comparison of actual averag e fares paid indicates a 25% premium paid by VPS consumers, compared to Pensacola.Northwest Florida Regional Airport 9

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- 0124 This data is for the full 12

- month year ending 3/13/10, and includes all federal fees and taxes. 1 

### Subsidized Entry of Southwest At ECP Threatens VPS
These data, howev er, do not fully illuminate the emerging challenges faced by VPS. Southwest Airlines, artificially supported by a private sector subsidy of $25 million over two years, implemented service in early 2010 at nearby Panama City. They are operating two daily fl ights each to MCO, BNA, BWI, and HOU, the last three of which are de facto connecting hubs for Southwest. While fare data is not yet available for this ser vice, we can make projections based on the average yields of Southwest to key VPS O&D markets from o ther points on the WN system. We compared the current average fare (including federal fees and taxes) at VPS, with the average Southwest fares at three airports in the region.

It is entirely reasonable to expect that the average system fares that South west is attaining at these markets will be very similar at Panama City/ECP.
Without service from a low

- fare carrier locally, VPS will continue to see fares that are betwee n 40% and 70% higher than at ECP , and at least 25% higher than at Pensacola.
This i s another reason that Northwest Florida Regional Airport would ask the Department for favorable consideration of this application

1 Source: Aviation DataMinerTM from US DOT filings. With a $25 million two

year private subsidy, Southwest is adding 797,000 low fare seats annually at nearby Panama City. This grant will allow VPS to level the playing field and assure that its consumers do not pay comparatively

- exorbitant ticket prices.Northwest Florida Regional Airport 10

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### Northwest Florida Regional Has a Clear Plan Northwest Florida Regional Airport has an aggressive air service enhancement pr ogram. In addition to the traditional activities of meeting with airlines and offering in

- kind incentives, the airport works extensively with community and business entities This grant

– which will allow VPS to recapture significant leakage and reduce ve ry high fares

– is fully supported by civic and public entities in the region. The plan is to combine the $500,000 grant with $100,000 in local cash commitment to provide a risk

- reduction program for one of two low

- fare carrier targets, Frontier and jetB lue. The plan herein is to use $50,000 of the funds in a carefully

- focused marketing plan to assure that both local and national travel

- generators are aware of the new service. Working with major travel, tour, and resort operators will be a key part of th e program, due to the fact that 6 2 % of all VPS passengers are inbound

- generated. The Airport will spearhead negotiations with the target carrier, and in developing the performance and revenue metrics that will be required of the carrier . As noted, the fir st carrier to be contracted will be Frontier, which will open VPS to a strong west

- focused connecting hub.
These activities will include:

 Initiating contact with the target airline upon notification of grant award.

 Preparation and submission of traffic and revenue projections for the new service to the target carrier.

 Negotiating a mutually

- acceptable risk

- abatement program. This will include the establishment of revenue goals, including both local VPS

DEN traffic as well as that connecting to points b eyond Denver.

 Monitoring traffic, fare, on

- time, and schedule completion performance of the selected carrier

.

 The Airport will be the point of contact with the Department in all areas of the grant program

.

 Development of key program metrics and provid ing quarterly reports to the Department outlining each, and keeping the Department apprised of the progress of the program. A grant represents a business relationship between the Airport, the Department, and the airline involved. The objective is to assure that the grant dollars are applied to assure a net improvement in air service. VPS has a clear plan to assure this goal.Northwest Florida Regional Airport 11

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## Market Overview

The Northwest Florida Regional Airport (VPS) serves a population of 321,000 in the Florida Panhandle

. T he re gion served by VPS has experienced strong in

- migration of population with the three primary counties in the service area

– Okaloosa, Santa Rosa, and Walton

– seeing a 48.3% net increase in residents between 1990 and 2009 , and projected to incre ase an addit ional 27.5% by 2015.

The geographic location of VPS near the center of the Florida Panhandle and along Interstate 10 positions the airport as an important air service gateway for this growing and strategically important area. This convenient surface access will provide VPS with the ability to quickly recapture existing leakage with the entry of low

- fare airline service.


### Traffic Profile Northwest Florida Regional Airport represents a traffic profile that is 62% inbound generated. This means that near ly two thirds of all passengers are essentially visitors to the region. This again showcases the critical importance of both frequency and fares as tools to compete with other leisure destinations. As noted in this document, the high fares at VPS are a ma jor threat to the local economy, and without question result in both direct and latent leakage

– the latter being consumers who would fly to the region but decide not to because of insufficient capacity and high fares. The grant herein requested will be a major step in assuring that VPS and the consumers it serves will have air fares and capacity that tend to level the playing field with Pensacola and

– going forward

– with the artificially

supported Southwest service at Panama City/ECP. VPS has a strong population and is a strong draw from the rest of the nation.
Because 62% of passengers are in

- bound generated, the disparity in fares with PNS and ECP represents a very real economi c threat. VPS can support low fare service

– this grant will facilitate the entry of such a carrier.Northwest Florida Regional Airport 12

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### VPS Economic Base
Northwest Florida Regional Airport serves a diverse economic base that has its roots in two key industries: defense and tourism. Military Activity The VPS service area is home to three major military installations

– Eglin Air Force Base, Hurlburt Fiel d and Duke Field. These bases include a diverse range of national defense activities including Air Force Material Command, the Air Armament Center, Air Force Special Operations Command, and 919 th Special Operations Wing.
In 2011 The 7 th Special Forces Gro up will relocate to the area from Fort Bragg, NC and Eglin Air Force Base will be the worldwide training center for the F

- 35 Joint Strike Fighter aircraft. Private Sector Activity While military and government activities are major contributors to the VPS service area, the region also plays host to a vibrant and diverse private sector economy. Tourism plays a leading role as a result of a warm climate and miles of beach front access. Activities include bathing, boating, fishing, snorkeling/scuba diving, a nd golf. Major festivals and attractions in the region include the World Cobia Fishing Tournament, Air Force Armament Museum, Blue Angels Classic, Milton Opera House, Sandestin Resort, Sandestin Wine Festival, and Chautauqua Assembly and Festival.
Other major private sector industries include medical care, real estate development, retail, manufacturing, and aircraft support services. Technical and aerospace companies are increasingly locating in the region as a result the established knowledge base creat ed by military installations. Included in this group of companies are Boeing, Raytheon, and Lockheed

- Martin. The VPS service area is also home to a number of colleges and universities including University of West Florida, University of Florida, Troy Unive rsity, and Northwest Florida State College , and Embry

- Riddle Aeronautical University. 

### Effects of Gulf Oil Spill As may be expected the media coverage of the effects of the April 2010 BP oil spill in the Gulf of Mexico has had severe effects on the touris t industry all along the Panhandle. The much

- publicized Gulf oil spill has made consumers reticent to visit the Florida Panhandle. The fare disparities at VPS put the community at ev en more of a disadvantage.Northwest Florida Regional Airport 13

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- 0124 It is not the purview of this document to project the long

- term effects of this event. However, it has affected the ability of the region to compete for tourist dollars with other leisure destinations elsewhere.
This m akes the imperative of VPS having competitive air fares even more important. With average ticket prices being 25% higher than alternative access points to the Panhandle, VPS is at a severe disadvantage. The implementation of low fare access to VPS will be a major step in assuring that the effects of the BP spill are mitigated and do not translate into a long

- term shift of traffic to other airports in the region.Northwest Florida Regional Airport 14

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### Frontier Revenue Projections Given the competitive situation in the Florida Panhandle, the en try of a low

- fare carrier at VPS would enhance the region’s access as well as relieve the burden of disproportionately higher fares at VPS. The Airport reviewed the current capacity, routing options, and fare levels between western O&D destinations on the Frontier Airlines system. From this, an estimated traffic increase in each market was generated, based on expected fare reductions as a result of the new service that would both stimulate new traffic and recapture leakage. This was related to the estimate d traffic capture that Frontier could expect with two daily round

trip flights using 70 seat E

- 170 aircraft. 2 The result was a projection of just under 70,000 annual passengers for Frontier in the VPS market.

Based on a two round

- trip pattern, with a reduced week

- end frequency, this would indicate approximately an 79 % load factor for the airline.

2 They could also use 100

- seat E

- 190 jets. The difference in the sector costs of these two variants is not substantial.Northwest Florida Regional Airport 15

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- 0124 Based on forecast data, Frontier will find VPS a strong contributor to its bottom line, with strong net

- new system traffic:Northwest Florida Regional Airport 16

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### Alternative Solutions

A s noted above, Frontier is the first LCC target for VPS. But airline strategies can change rapidly. For that reason, the community wishes to reserve the right to apply the grant to attracting jetBlue service to the East Coast. Preliminary forecasts of a j etBlue entry at VPS are very encouraging. Using the same methodology as in the Frontier analysis, it is indicated that two daily flights to the jetBlue operation at JFK would yield approximately 101,000 passengers in the VPS market.

In this analysis, t he traffic to the three metro NYC airports was combined. The low fares offered by jetBlue draw a wider catchment area in the Tri

- State area. Furthermore, only specific connecting points at JFK were considered. 3 As indicated on the following page, with a p attern of 2 daily 100

- seat E

- 190 jets, the data indicate a very strong opportunity for jetBlue.
While the East Coast traffic is important to VPS, the Frontier option opens more communities to VPS. Nevertheless, the jetBlue option is one that the Airport w ishes to pursue should discussions with Frontier not prove fruitful.

3 jetBlue is increasingly using JFK as a connect point. Approximately 31% of its passengers at that airport are through or connecting as of th e 1Q 2010. Source: Aviation DataMiner analysis of JFK and jetBlue data.Northwest Florida Regional Airport 17

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- 0124 Based on forecast data, jetBlue will also find VPS a strong contributor to its bottom line, with strong net

- new traffic to JFK, plus some feed traffic :Northwest Florida Regional Airport 18

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## Grant Administration

The Northwest Florida Regional Airport and the community have clearly identified a specific, demonstrable, and quantifiable air service deficiency of the type that is intended to be addressed by the Small Community Air Service Development Grant Program.
Risk
- Abatement Only If Needed. The proposed mechanics of the application of the grant and local match are outlined below.
It is clear that both the VPS

- DEN and the VPS

- JFK market s can be strong contributor s to the airlines involved . Therefore, the purpose of the grant

– aside from some initial marketing programs

– will be to provide a safety net for the airline. The community and the airline will negotiate and develop specific revenue targets, based on the airline’s costs and the revenues that VPS contributes to the carrier’s system. Any shortfall between the costs and the revenues will be the purpose of the grant and community funds. It is specifically noted that this will be based on a pre

- negotiated, and pre

determined set of cost and revenue projections, a nd is not in any way a subsidy, “travel bank” or fare

- offset. The market is felt to have a high potential to be self

- sustaining, and the revenue guarantee will be applied only if revenues fail to reach pre

- determined levels. It is noted that this approac h has worked well in other grant awards, and it is possible that the full funding may not be eventually spent due to the market maturing quickly. The forecast indicates that, on a steady

- state basis, the service to either point can achieve profitability d uring the first year of service.

A Note Regarding Frontier : The data are based on a full two

- flight per day schedule. It is specifically noted that Frontier’s current strategy is to develop markets on a “day of the week” model. This is based on a schedul e pattern that begins on a 3

- 4

- day per week basis and expands from that point. The Airport is completely comfortable with this approach. First, it better protects the Department’s risk: should the service clearly indicate that it will not meet projections, it can be dropped quickly. Second, it allows the carrier to build the market with less risk to its own bottom line.Northwest Florida Regional Airport 19

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### Grant Agreement Structure

 Revenue and operating expense expectations for the new service will be based on the level of service provide d (frequencies, equipment, schedule, etc.);

 Reasonable fares will be offered that approximate those in similar markets, including availability of lower fare buckets;

 Schedules will be timed for maximum connectivity;

 On

- time performance and completion ra tes will determined. S pecifically, a 98% ex

- weather completion rate will be a standard, and 90% on

- time arrivals (using the Department’s 15

- minute standard) will be required;

 All local VPS revenues to the carrier’s hub airport will be attributed to the ro ute , and applied to the revenue requirement ;

 An acceptable percentage of revenues for connecting passengers beyond the carrier’s hub will be determined. In general, this would be computed by the total VPS revenues generated to/from points beyond the hub, less an agreed

- upon “spill” figure. 4

 The carrier will serve the route for the duration of this program, allowing sufficient time to achieve profitability;

 The program will be for one year from start of service. Preferably, the determination of whether re venue - guarantees are due will be accomplished at the end of two six

- month periods. Total costs v total revenue allocation for each period will determine if, and what amount would be due. Based on these criteria, operating expenses, revenue, and performan ce will be monitored and reported on a monthly basis, to provide input regarding remedial local marketing activity or feedback to the carrier to address service shortfalls, if any. Prior to executing any agreement , the airport will provide the revenue gua rantee documents to Department staff for review and approval. Comprehensive Marketing Program Because forecast data indicates that profitable demand levels exist for VPS service , the Airport has developed a focused marketing and promotional program to in crease public awareness of the new service. Of

4 New service into a connecting hub tends to result in some displacement of existing passengers

– this is particularly true when system load factors are over 80%.Northwest Florida Regional Airport 20

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- 0124 the cash funds in this proposal, $50,000 will be budgeted for this purpose, including the following elements:

 A marketing campaign in the Fort Walton Beach/Eglin Air Force Base service area promoting the new service that includes radio, print, and outdoor media;

 Targeted communication with companies in the service area that have a known communities of interest in the hub cities of the carrier, plus specific points on the carrier’s system.

 Public relations an d communications activities that utilize the local media as an additional outlet for increased public awareness.



### Administration of The Marketing Program The Airport will complete and submit to the Department a projected budget for these activities, based on a planne d 12

- month program. The Airport w ill monitor all expenditures and provide the Department with a quarterly accounting, along with the Department’s prorated share of the expenses. 

### Progress Reports to DOT

The Airport will provide the Department with progress reports on the marketing expenditures, and airline operational performance on a quarterly basis, unless the Department requires a different schedule. 

### Program Duration The grant under this proposal requested for a period of one year from th e date service commences. The Airport agrees that any unused funds not applied toward marketing or revenue guarantee during this period will be relinquished to the Department.



### Market Support Beyond Term of Program The Airports System believes that nonsto p service facilitated by this grant will be well received by the community and achieve self

- sufficiency during the term of this program. Nevertheless, it is also possible that factors outside the direct control of either the Airports System or the carrier could impact route performance, and prevent the market from achieving forecasted performance. Should this occur, Airports System staff are prepared to assist the carrier with marketing support and other assistance, to be developed in consultation with the carrier, to ensure service continues beyond the term of this program.Northwest Florida Regional Airport 21

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### Application of Grant Funds

In addition, the airport is offering the new carrier up to $200,000 in in

- kind support in the form of fee and rental waivers for two years,



### Prior Air Se rvice Effort s The Northwest Florida Regional Airport maintain s an aggressive air service enhancement program. This program goes beyond typical air service recruitment efforts. In a volatile airline environment, it is critical that a community proactively work to forecast events that will affect the access VPS has to and from the rest of the globe.

 As one example, VPS carefully monitored the unfolding relationship between Southwest Airlines and the St. Joe Company, the developer of land around the new Pan ama City/ECP airport. When it became apparent that the tens of millions offered by St. Joe to Southwest could not be reasonably countered by VPS, the Airport proceeded to develop a detailed action plan to reduce and prevent to the extent possible any leaka ge to the new airport.

 The Airport routinely works directly with planners at Delta, American, Continental and US Airways to identify new service options.

 Key airline trends are watched constantly. For example, the Airport is targeting additional capacity upgrades as US Airways builds service at CLT. This is important in light of the reduction in Delta service to CVG.

 The Airport proactively provided incumbents with projections of the effects of the artificially

- subsidized Southwest service at Panama City /ECP. These resulted in substantive shifts in incumbent scheduling and capacity.

 The Airport is working with a number of second

- tier leisure carriers to implement service to VPS as a focus city.