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# Westmoreland County Airport Authority Arnold Palmer Regional Airport



# Proposal Under the 

# Small Community Air Service Development Program

Westmoreland Country Airport Authority

DUNS # 023452634 Congressional District #182



### Overview

It took about four months for Spirit Airlines to eclipse the Westmoreland County Airport Authority’s previous air carrier at Arnold Palmer Regional Airport. In one
third of the full year it took Northwest Airlines to enplane 13,000 passengers here, Spirit filled as many outbound seats to Fort Lauderdale, FL, and Myrtle Beach, SC. And there are no signs of slowing, with inbound figures holding nearly neck and neck, reinforcing the region’s drawing power as a destination. At the time of this filing, outbound passenger figures exceeded 18,000 from Feb. 12 through Aug. 1, 2011, with load factors averaging in the 80

- 90% ranges. Since the service started in the dead of winter, through this summer ’s blazing heat, seats on these planes have been mostly full.

Arnold Palmer Regional Airport , l ocated in Unity Towns hip, near Latrobe, PA, had envisioned serving

some 400,000 people in Westmoreland County and a smattering from several surrounding counties

, including Fayette, Indiana

, Somerset and eastern Allegheny , who find the commute to Pittsburgh International Airport, some 60 miles west of Arnold Palmer Regional, a transportation nightmare

. But the reality has been an awakening, as passengers have pour ed in from other parts of the state, as well as Ohio, Maryland, West Virgin ia and even New York and Canada to line up for Spirit’s discounted air fares. Currently, the airport moves more than 1,000 passengers per week

.

And after 18 months with no service, it’s great to see Arnold Palmer Regional busy, once again.

To say that the authority is overjoyed and optimistic is an understatement.

But the WCAA has long been prudent and realistic. While the success of the ne w venture is certainly astounding, we know that the air service industry is fickle and precarious, and now is clearly not the
time to kick back and rest on laurels. Now is the time to look ahead and take the next step to secure and grow this burgeoning ser vice.

The airline has proposed additional destinations to its flight roster at APRA, which currently includes four fights per week each to Florida and South Carolina. D estinations being considered include Chicago (O’Hare) , Ill., New York (LaGuardia) , N.Y. , Boston, Mass., and Orlando, Fla

.

And th us we turn to the Small Community Air Service Development for assistance.3

Innovation The authority is no stranger to the program. A SCASD grant was awarded to and proficiently used by the authority in 2004, to succ essfully negotiate service with Northwest Airlines, which lasted for four years. But since that time, airline bankruptcies, mergers and a big recession changed the playing fields for many airports.

We struggled, we faltered and we got back up, determined , until it finally paid off with a new air service partnership that has raised more than a few eyebrows in the industry and the communities we serve.

The initial success of the partnership between Spirit and the authority was built solely upon the airport authority ’s diligence and willingness to do whatever it takes to succeed

, along with the airline’s business savvy and a mere $200,000 in marketing to brand the new service.

With the results we have seen, w e are confident that a reinvestment of that same size would secure the success of the new venture and double not only the enplanement figures that have elated this region’s economic development community, but also the range of service it would provide. Rather than two
southern east coast destination s, access to the north and west would open dramatically.

The innovative approach undertaken in this partnership differs dramatically from typical airport/airline business models. Rather than charging the airline rents and fees to use the facilities t he authority maintains, or in other cases, offering and paying revenue guarantees to the airline to protect its bottom line if it fails to fill its seats, the authority has taken an alternative approach. In order to provide the
airline with a zero

- cost ope rations environment, the authority created jobs and hired local personnel to service the flights, from the station manager and customer service representatives down to the ramp staff. The airline provides extensive training and support for authority staff and the benefits are mutual. The airline succeeds and we end up with a service that has so far rivaled any that this airport has seen in more than 30 years of providing air service to the communities it serves.

Existing Air Service at LBE
In terms of scheduled service, Arnold Palmer Regional Airport (LBE) is presently served solely by Spirit
Airlines , which offers four direct flights per week to Fort Lauderdale, FL, and four flights per week to Myrtle Beach, SC. The airline uses 145

- seat Airbus 319 air craft.

P eriod ic public charters also carry passengers to several popular casino destinations. Equipment used on these charter flights includes Boeing 737s and McDonnell

- Douglas MD 80s.4

Historical Air Service at LBE Commercial flights began at th e Westmoreland County Airport (the airport’ s name at the time) in the
1980s with Mesa Airlines, flying under the US Airways banner, running as many as eight flights per day

to connections out of Pittsburgh International Airport (PIT). At th at time, US Airway s was the dominant airline in the region , and the Mesa service carried some 25,000 departing passengers a year out of LBE during its heyday using 19

- seat twin turbo

- prop aircraft

.

T hat service halted in 2004 in the buildup to US Airways ’ strategic decline in the western Pennsy lvania region . While the airline never satisfactorily specified reasons for grounding the service, it occurred amid its struggle with t wo separate bankruptcy filings . And, n ot long afterward, the airline signific antly
slashed flights and shrunk its presence at PIT , citing an influx of low

- cost airline competitors

. In the wake of losing i ts former hub status, PIT is still seeking ways to recover from the dramatic declines inflicted by
the airline.

Since that time, the authority has wor ked tirelessly to rebuild air service at Arnold Palmer Regional . Its first success in that endeavor was to land a $600,000 grant under the 2004 SCASD program that was key

in at tract ing and negotiating a one

- year deal with Northwest Airlines to operate dail y scheduled flights through Detroit Metropolitan Airport (DTW) in Michigan. (NOTE: That grant differed significantly from this proposal in that it was a revenue guarantee to establish service, whi le the current project is marketing assistance to expand exi sting service).

The route

, f lown by Mesaba Airlines , started in April, 2005

. A year later, Northwest agreed to susta in the
service at its own risk. The federal grant gave our communities the opportunity to prove to an airline that they were able to suppo rt sustained service without the need for additional safety nets. The airport

prove d that it could be a viable, profitable market , and the airline stayed for three more years without the revenue guarantees it claimed after its maiden year at Latrobe. However, after N orthwest Airlines filed for bankruptcy and subsequently merge d with Delta Airlines

– and the nation slipped into a global

recession

– Delta service out of Latrobe ended on July 31, 2009.

Air Service Development Efforts Recovery did not ha ppen overnight, but the authority kept plugging, talking to just about any airline that would listen. Finally, in mid

- 2010, Spirit Airlines expressed an interest in starting service and negotiations commenced. The service was announced in November, 2010, a nd Spirit launched its maiden flight from LBE to Fo rt Lauderdale on Feb. 12, 2011 (see photo below)

. The first Myrtle Beach f l ight took off on May 6, 2011.5

With the rebirth of air service that Spirit has delivered to our region, airport management has developed a new way of working with air

- service providers. While it took every penny of the $600,000 that the SCASD program provided in 2004 to bring Northwest Airlines to the table to produce tepid results , that
airline was certainly not alone in seeking revenue guarantees or other government subsidies, such as
Essential Air Service contracts. Many of the airlines the authority approached had their eyes on federal
dollars to sustain their businesses.

Spirit sought no such concessions. All th at the airline asked was that we create a zero

- cost operating environment and kick in a modicum of marketing money. And it wasn’t a big stretch for the authority. We made only the same standing offer that we have extended to nu merous other air carriers

– t o waive all landing, ramp and terminal fees for a negotiated period if they will only provide reliable service. Sadly, most still wanted some sort of government subsidy, and went elsewhere when it was not forthcoming here

. Truthfully, we didn’t think there was an airline left out there that was willing to make its money the old

- fashioned way

– by filling seats and flying airplanes, not getting paid millions of dollars to fly empty seats on underused routes. But persistence paid off, and Spirit decided that it was time to tap this region’s potential

– a decision it has yet to regret. Airline officials have informed us that they are well pleased with the airport’s performance thus far.

We couldn’t be happier, either, and we believe that a large part of that success is attributable to the airline’s ability to market its own product, largely through internet

- based means that it has the ability to manage properly. This arrangement works better. Rather than trying to turn a small airport into a
national advertisi ng agency, trying to sell something it can’t control, Spirit markets its own product with personnel that are better trained and qualified to do so . And instead of shaking our heads and grumbling when an airline’s customer service fails to meet the standard s we expect in our terminal, we took that aspect of the operation into our own hands, giving the authority total quality control.

While the airport continues to provide important services to general aviation and business aircraft operators, the authority firmly believes that valuable connections to national and global transportation networks are what truly open airports to the communities they serve. We have invested deeply in this belief, a nd th at investment paid dividends in new jobs, exhilarating econom ic potential and enplanement statistics such as this airport has never seen.

Air Service Needs/Deficiencies With the service Spirit provides, the only need or deficiency that we can currently identify is funding to provide marketing to expand the service to new destinations

.6

While the public has embraced the current offerings, they are obviously limited. Opening new destinations will provide material benefits to a broader segment of the traveling public, including business, educational institutio ns and other enterprises, for which access to the national air transportation systems is somewhat limited by the current primarily leisure/recreational destinations offered at Arnold Palmer Regional.

The airport has an 8,224

- foot

- long runway and other well

- maintained air field facilities critical to air carrier operations, including an air traffic control tower, full ILS, passenger loading bridge and an efficient and comfortable terminal filled with attractive passenger amenities. The authorit y has also added customer service personnel to assist passengers in boarding and ramp personnel to service arriving and departing aircraft. Transportation Safety Administration screening agents and equipment are present for each flight, f uel is provided by an FBO on the field and maintenance services are available. Marketing for expanded routes remains the sole unmet need at present

.

With the track record of success that the first two destinations have established, the authority and the
airline are confi dent that $200,000 should be sufficient to brand additional markets.

Strategic Plan for Meeting Air Service Needs

– Spirit Airlines The Airport Authority ha s negotiated a two

- year agreement with Spirit Airlines . Less than six months into that term, pe rformance has exceeded all expectation of the authority and the airline. A t full capacity, Spirit is expected to produce more than 30 ,000 passenger enpla nements annually at LBE

– more than double the annual number of passengers posted by Northwest Airlines and the airport’s charter flig hts combined in previous years. The airline has achieved these results with primarily internet

based m arketing vehicles and plans to continue using these proven methods to expand its service out of

ARPA.

Marketing spending would be gin immediately upon announcement of the service ; reimbursement would then be sought from the grant

.

Goals and objectives for this project are clear cut

– to help ensure the success of expanded service at Arnold Palmer Regional Airport and to broa den the public awareness of any other potential air service offerings that may become available.

Public

- Private Partnerships Air service at Arnold Palmer Regional is the epitome of a public

- private partnership.

The Westmoreland County Airport Authority is subsidized by annual operations allocations from the county general fund. The county c ommissioners also support airport with funding for special projects on

a case

- by

- case basis , and a ir service projects receive a high priority from the commissioners. The state Department of Transportation Bureau of Aviation has also been a staunch supporter of air service projects at Arnold Palmer Regional, offering matching funds for such needs as infrastructure improv ements to help initiate and sustain new air service initiatives.

Private entities partner in these efforts in several ways. First are the local business communities, such as area chambers of commerce and larger industries individually who participate in air servi ce needs7

surveys and generate support commitments that help the airport attract interest from air carriers. Local philanthropic foundations have also been generous in support for air port projects.

Finall y, the air carriers themselves become partners with the airport to establish and maintain the service through various agreements

. Air service operations at Arnold Palmer Regional are different than for many airports. This airport actually partners with the airline by waiving all charges, such as landing

an d ramp fees, terminal rent and other services that typically generate revenue at other airports. Arnold Palmer Regional provides all of its facilities

– baggage system, deicing equipment, passenger loading bridge, and others, including ample free parking

– at no cost to the airline for a negotiated period in the interest of making the service profitable and self

- sustaining. In exchange, the airline provides the service that the airport strives to provide for the communities it serves. It would be nice to de rive revenue from air service. But the development of self

- sustaining service for the communities is more important to the authority at present.

Funding Needed

- $200,000 The authority is seeking $ 2 0 0,000 in SCASD m a r k e t i n g funding to match the $ 200,000 in local

o p e r a t i o n a l fun ding that the authority will provide to staff Spirit Airlines operations at Arnold Palmer Regional Airport

. The airport has also committed more than $200 ,000 in In

- Kind contributions derived from waivers of standard facility fees and costs, including ramp and landing fees, terminal rents and costs for use of baggage system, deicing equipment and the passenger loading bridge.

To put this into clearer perspective, it should be noted that the airport has also contribut ed $ 4 00,000 to cov er marketing, personnel and operating costs for the airline’s first year at APRA . However, those costs are admittedly related to, but not part of, the program proposed here to expand this service. Also integral to this service , but not a part of the expansion plans for which SCASD funding is being requested, was a $250,000 grant from the state Department of Transportation Bureau of Aviation to purchase equipment and make airport renovations needed to launch and sustain the new service. The authority also covered 25% of those

costs. Both of these expenditures are noted purely to demonstrate the authority’s commitment to providing and maintaining this valuable and successful service, which has produced usage figures beyond all exp ectations.

As for the program proposed for SCASD funding, the breakdown is as follows:

Grant Program Funding Plan

Source

SCASD Grant

Marketing $ 200,000
Local Match

- (payroll/operations) $ 2 00,000

In

- Kind Airport Contributions $ 2 1 3, 42 0

Totals $ 61 3
, 420

There are no revenue guarantees asked or offered for the Spirit service. The funding requested for th is effort is purel y for marketing the expanded s ervice, a ugmenting the $200,000 local share contribution

that the authority has pledged to provide and the in

- kind contributions detailed below.8

As you can see, the authority has invested significantly in this service, and is ask ing the SCASD program

to bolster that investment to prove that good air service can dramatically impact small communities.

Community Monitoring Airport administration closely monitors inbound passenger and enplanement figures and reports those figures to the authority and the community regularly.

Sustaining/Maintaining Air Service The authority and all of its partners in these efforts will take any steps necessary and possible to assure
that the service in itiatives described in this application continue and maintain a self

- sustainable presence of true benefit to the communities the airport serves.

Legal Sponsor

– Westmoreland County Airport Authority

Summary

T he Westmoreland County Airport Authority is seek ing funding through the SCASD program to expand an existing service that is on track to significantly surpass any air service operation that has ever been partnered with this airport.

Despite its drawbacks and lackluster performance, Northwest AirLin k service was attracted, negotiated and established at Arnold Palmer Regional Airport with assistance from a 2004 SCASD grant . The airport was able to keep that service flying for three subsequent years after the initial one

- year revenue guarantee period e xpired. It is also mutually agreed that the service would still have been viable were it not for the events and situations described earlier in this application. But circumstances were what they were, and this authority picked itself up, dusted off and kep t faith that air service was a viable and valued asset for this region and worked hard to bring a successful enterprise to Arnold Palmer Regional’s

apron.

Now , w ith this request, we are not looking for a free ride to establish a risky new carrier. Rather, all we are seeking is some assistance to expand the benefits of one that has proven its viability and worthiness on a level beyond any that has operated here

– and perhaps to bolster the economic potentia ls of our communities as it grows

. Local and In

- Kind Contributions Breakdown

Local M a t c h ( o p e r a t i o n s )

- $ 200,000

In

- Kind Contribution

- $ 213,420

Free Parking
Terminal Rent

- $ 5,000 (at $9.50 per square foot) waived Baggage System

- $ 20,800 (at $50 per use) waived Passenger Loading Bridge

- $ 20,800 (at $50 per use) waived Deicing Equipment

- $ 2,500 (at $50 per use) waived Landing Fees

- $ 164,320 (at $395 per landing) waived