Proposal of Tri

- Cities Airport • Pasco, Washington • July 2014 APPLICATION UNDER
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET DOT

- OST

- 2014

- 01 13

SUMMARY INFORMATION

A. P ROVIDE THE LEGAL SPO NSOR AND ITS DUN AND BRADSTREET (D& B) DATA UNIVERSAL NUMBE RING SYSTEM (DUNS)

NUMBER , INCLUDING +4, EMPLOYEE IDENTIFICAT ION NUMBER (EIN) OR TAX ID

. Legal Sponsor Name:
Tri

- Cities Airport Name of Signatory Party for Legal Sponsor: Ron Foraker, Airport Director
DUNS Number:
04

- 583

- 4921 EIN/Tax ID:
91

- 600100222

B. L IST THE N AME OF THE COMMUNITY OR CONSORTIUM OF COM MUNITIES APPLYING : 1._ T RI

- C ITIES A IRPORT , P ASCO , W ASHINGTON

_

C. P ROVIDE THE FULL AIRP ORT NAME AND 3

- L ETTER IATA A IRPORT C ODE FOR THE APPLICAN T ( S ) AIRPORT ( S ) (O NLY

PROVIDE CODES FOR TH E AIRPORT ( S ) THAT ARE ACTUALLY SE EKING SERVICE ).
1. Tri

- Cities Airport (PSC)

D OES THE AIRPORT SEEK ING SERVICE HOLD AN AIRPORT OPERATING CE RTIFICATE ISSUED BY THE F EDERAL A VIATION A DMINISTRATION UNDER 14 CFR P AR T 139? (I F “ NO ,” PLEASE EXPLAIN WHETH ER THE AIRPORT INTEN DS TO APPLY FOR A CERTIFICATE OR WHETH ER AN APPLICATION UN DER P ART 139 IS PENDING .)

Yes No (explain) 

### XProposal of Tri

- Cities Airport • Pasco, Washington • July 2014

D. L IST THE 2

- DIGIT CONGRESSIONAL DISTRICT CODE APPLIC ABLE TO THE SPONSORI NG ORGANIZATION , AND IF A

CONSORTIUM , TO EACH PARTICIPATIN G COMMUNITY

. 1. WA

- 04

E. A PPLICANT I NFORMATION : (C HECK A LL T HAT A PPLY )
Not a Consortium Interstate Consortium Intrastate Consortium Community now receives subsidized Essential Air Service Community (or Consortium member) previously received a Small Community Air Service Development Program Grant
If previous recipient: Year of grant(s): 2003; Did not execute contract with DOT

a nd, the te x t of the Grant agreement section(s) setting forth the scope of the grant project:

F. P UBLIC /P RIVATE P ARTNERSHIPS : (L IST O RGANIZATION NAMES )
PUBLIC PRIVATE
1. Tri

- Cities Airport 1. TRIDEC
2

. Port of Pasco 2. Tri

- City Regional Chamber of Commerce

G. P ROJECT P ROPOSAL : 1. G RANT G OALS : ( CHECK ALL THAT APPLY ) Launch New Carrier Secure Additional Service Upgrade Aircraft First Service New Route Service Restoration Regional Service Surface Transportation Professional Services Other (explain below) 

### X

X X
X
XProposal of Tri

- Cities Airport • Pasco, Washington • July 2014 2

. F INANCIAL T OOLS T O B E U SED : ( CHECK ALL THAT APPLY )

Marketing (including Advertising): promotion of the air service to the public
Start

- Up Cost Offset: offsetting expenses to assist an air service provider in setting up a new station and starting new service (for example, ticket counter reconfigurat ion)
Revenue Guarantee: an agreement with an air service provider setting forth a minimum guaranteed profit margin, a portion of which is eligible for reimbursement by the community Recruitment of Air Carrier: air service development activities to recruit new air service, including expenses for airport marketers to meet with air service providers to make the
case for new air service Fee Waivers: waiver of airport fees, such as landing fees, to encourage n ew air service; counted as in

- kind contributions only Ground Handling Fee: reimbursement of expenses for passenger, cabin, and ramp (below wing) services provided by third party ground handlers
Travel Bank: travel pledges, or deposited monetary funds, fr om participating parties for the purchase of air travel on an air carrier, with define d procedures for the subsequent

use of the pledges or the deposited funds; counted as in

- kind contributions only
Other (explain below)

H. E XISTING L ANDING A IDS AT L OCAL A IRPORT : Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify) 

### X
X

X

XProposal of Tri

- Cities Airport • Pasco, Washington • July 2014

I. P ROJECT C OST : D O NOT ENTER TEXT IN SHADED AREA
L INE D ESCRIPTION S UB T OTAL T OTAL A MOUNT
1 Federal amount requested $7 5 0,000
2 State cash financial contribution $0
Local cash financial contribution
3a Airport cash funds $35,339.30
3b Non

- airport cash funds $69 ,000
3 Total local cash funds ( 3a + 3b ) $10 4,339.30
4 TOTAL CASH FUNDING ( 1+2+3 ) $85 4,339.30
In

- Kind contribution
5a Airport In

- Kind contribution** Various
5b Other In

- Kind contribution** Various
5 TOTAL IN

- KIND CONTRIBUTION ( 5a + 5b ) Various
6 TOTAL PROJECT COST ( 4+5 ) $85 4,339.30

J. IN

- KIND CONTRIBUTIONS**
For funds in lines 5a (Airport In

- Kind contribution) and 5b (Other In

- Kind contribution), please describe the source(s) of fund(s) and the value ($) of each.
L ocal media companies will offer discounts on advertising; partner airlines will offer free tickets for giveaways, etc.

K. I S T HIS A PPLICATION S UBJECT T O R EVIEW B Y AN AFFECTED S TATE U NDER E XECUTIVE O RDER 12372 P ROCESS ?

a. This application was made available to the S tate under the Executive Order 12372 Process for review on (date) _____________.
b. Program is subject to E.O. 12372, but has not been selected by the S tate for review.

c. Program is not covered by E.O. 12372.

L. I S T HE L EAD A PPLICANT O R A NY C O - A PPLICANT D ELINQUENT O N A NY F EDERAL D EBT ? (I F “Y ES ”, P ROVIDE E XPLANATION )
No Yes (explain)

_____________________________________________________________________________________________Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 1

TABLE OF CONTENTS

Legal Sponsor 1
Introduction 2
The Tri

- Cities Air Service Market 3 Passenger Heat Maps of the Catchment Area 3 Ten Year Passenger Trend 5 Top Origin and Destination Markets 6
Air Service Needs and Deficiencies 8
Airfares in Pacific Northwest Markets 8 Passenger Leakage Profile 9 Regional Airfares 10 Air Service Development Plan : Tri

- Cities

– Los Angeles 11 Top Los Angeles Basin Markets without Service 12
Route Profile and Potential Performance 14 Project Funding 15 Project Timeline 16 Public/ Private Partnership 1 8
Conclusion 1 9



## LEGAL SPONSOR

The Tri

- Cities Airport is the legal sponsor responsible for administering the proposed air service development program. The Airport is a government agency, operated by the Port of Pasco.

Tri

- Cities Airport 3601 North 20 th Avenue Pasco, Washington 99301 Ron Foraker , Airport Director (509) 547

- 6352 rforaker@portofpasco.org 

### Section Page NumberProposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 2

INTRODUCTION

For this year’s Small Community Air Service Development (SCASD) Grant application the Tri

- Cities Airport has developed additional community cash to match its request for federal funding. In addition, the Airport has met with its two target carriers, in person, in the last three months, to ensure their support for this project. With this collation of support the Airport has more confidence that its proposed service, daily non

- stops between the Tri

- Cities and Los Angeles, its number one unserved market, will be successful.

Tri

- Cities Airport has been tremendously active in air service development over the last decade, recruiting new ai r service on five new routes. I t accomplished these air service goals without seeking federal aid. At the same time, the air service climate has changed dramatically, with carriers now avoiding routes without risk sharing in place. The Airport now finds itself in an environment where a dditional air service development will be either difficult, or impossible, without the help of a SCASD Grant.

While Tri

- Cities Airport has solid service to a number of hubs, Los Angeles ranks as the market’s number one destination, averaging 145 passengers per day each way (PDEW). However, o nly 51% of those passengers use Tri

- Cities Airport, with the others “leak ing” to airports in Seattle/Tacoma, Spokane, and Portland.

Passenger retention is a major problem in the Tri

- Cities. The Airport only retains 43% of the
passengers generated by its catchment area. The Airport completed a True Market Study in preparation of this application to better understand its deficiencies for passengers. In most cases those passengers leak to other airports for lower fares. In 2013, the Tri

- Cities had the highest average fare in all of Washington and Oregon, at $215 one way.

The Airport has developed more than $104 ,000 in local cash matching funds for this Grant. It is seeking $75 0,000 in federal assistance to provide a revenue guarantee to a network carrier for Los Angeles service. This amount will allow it to mitigate risk for the new carrier, as well as provide marketing to help curb its passenger leakage. 

## “ Passenger retention is a major problem in the Tri

- Cities. The Airport only retains 43% of the passengers generated by its

catchment area.”Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 3

THE TRI

- CITIES AIR SERVICE MARKET Current and Historical Air Service

The Tri

- Cities Airport , serving the cities of Pasco, Kennewick, and Richland, is the main gateway for a huge area in eastern Washington State, northeastern Oregon, and parts of the panhandle of western Idaho. As the on ly airport in its region with service on more than one carrier
, the Airport has a large role in connecting a regional population of nearly 1.1 million people to the national air transportation system

.

The Airport’s catchment area, including all the areas shaded in green in map 1, is home to 1,036,438 people as of the 2010
US Census. This map illustrates the relative passenger generation of each zip code
within the catchment area

– the darker the green, the more passengers generated. This map does not measure the number of passengers that use the Tri

- Cities Airport, but all passengers using all airports in the region.

T he immediate Tri

- Cities Airport catchment area, which includes the main three

- county area surrounding the airport, generates more than 60% of all the passengers in the larger region. Most of those passengers are generated in the Tri

- Cities. Benton County , seen in the darkest green in map 2, is the largest of the three and generates 59.9% of all passengers in the larger region. 

### MAP 1: Passenger Heat Map of Tri

- Cities Airport Extended Catchment Area Source: Sixel Consulting Group PSC True Market Study, YE3Q13

MAP 2 : Passenger Heat Map of PSC’s Immediate Catchm ent Source: PSC True Market Study, YE3Q13Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 4

Tri

- Cities Airport has non

- stop service to nine cities in the summer season, on four airlines (see map 3). Alaska’s regional sister

- company operates service to both Seattle/Tacoma and Portland; Delta operates service with regional partners to both Minneapolis/St. Paul and Salt Lake City; United’s regional pa rtners operate flights to Denver and San Francisco; while Allegiant operates year ‘round service to Las Vegas and Phoenix/Mesa, with seasonal flights to Los Angeles (LAX). It should be noted, LAX service will be discontinued in September of 2014, and it d oes not re

appear in the Allegiant schedule at this time.

Tri

- Cities airline capacity is flat in August 2014 as compared
to Au gust 2013 (see figure 1). Allegiant’s capacity is up a little more than 25%, as it brought back Los Angeles service for the summer, but that service will end in September. Network airline capacity is actually down from the summer of 2013. The Tri

- Cities network carriers, Alaska, Delta, and United, have cut capacity by an average of 41 departing seats per day, or 4%, as of August 2014. United had the biggest cut, reducing Tri

- Cities service by an average of 38 departing seats per day, or almost 18%.

Alaska is the capacity market share leader in the
Tri

- Cities, with 36% of all available seats. Delta offers 32% of the market’s available seats. United ranks third
, with 18% of available seats
, while Allegiant offers 14% of the
Tri

- Cities airline capacit y. 

### FIGURE 1 : Scheduled Service at Tri

- Cities Airport, 8/12 vs. 8/13 Source: Sixel Consulting Group; OAG Schedule Data, July 2013 MAP 3 : Current Service at Tri

- Cities Airport Source: OAG Schedule DataProposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 5

Fares in the Tri

- Cities have been creeping upwards over the last four years to their highest point in half a decade. The average one way fare in the market was $215 in 2013, which is up from $196 in 2010

– an increase of 10% (see figure 2). Rising fares have begun to suppress passengers, as 2013 saw passengers decline in the market for the first time since 2008, when the Great Recession started.

In 2013, Tri

- Cities Airport averaged 888 passengers per day each way (PDEW), on almost 599,000 domestic passengers and more than 49,000 international passengers (see figure 2). 2013 saw a passenger decline of almost 1% over 2012, which was the all

- time record year for the market. The market saw a big jump in passengers between 2009 and 2010, when Allegiant aggressively expanded service into the Pacific Northwest. The subsequent decrease in fares was a result of this Allegiant capacity.

Allegiant’s impact is also seen in the list of the Tri

- Cities’ top origin and destination passenger
markets. Th e three markets to which Allegiant has provided non

- stop service, Las Vegas, Phoenix/Mesa, and Los A ngeles, all rank in the top five largest m arkets for 2013 (see Figure 3 ). 

### FIGURE 2 : O&D Passengers and Average One Way Fares, Tri

- Cities Airport Source: US DOT OD1A, Calenda r Year 2004

– Calendar Year 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 6 The Tri

- Cities Airport generated an average of 145 PDEW to and from the Los Angeles Basin in 2013, 113 PDEW to and from Las Vegas, 90 PD EW to and from Phoenix/Mesa

. Those numbers include both passengers who use the Tri

- Cities Airpor t, and passengers who “leak” to other airports. Overall, Tri

- Cities Airport retains just 43% of the passengers generated in its catchment area.

While Allegiant’s service at Tri

- Cities Airport provides the region with a low cost alternative for leisure travel, the core of the Tri

- Cities market is driven by eastern Washington and northwest Oregon businesses. Large nuclear research and engineering c ompanies such as Areva, Battelle, Bechtel, Energy Northwest, URS, and CH2M Hill generate more than one hundred passengers per day each way, primarily on network carriers.

Allegiant’s presence, as noted, brings down the overall average fare in the Tri

Cities market, but network carriers rarely match Allegiant on price. The result is high fares on all other carriers, even in markets where they directly compete with Allegiant . If you travel for business, and must travel on specific days of the week, or at specific times, Allegiant is rarely an option. The Tri

- Cities’ b usiness travelers subsequently pay much more for access 

### FIGURE 3 : Top 25 O&D Passenger Markets at Tri

- Cities Airport Source: US DOT OD 1A, Calendar Year 2013

FIGURE 4 : Average One Way Fares at Top 25 Markets at PSC Source: US DOT OD1A, Calendar Year 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 7

to the national air transportation system than the a verage fares would illustrate.

The overall average fares in Allegiant markets run 25% lower than the overall average fares in

non

- Allegiant markets. In an extreme example, the average one way fare to and from Las Vegas, in 2013, was $98 (see Figure 4 on previous page ). Meanwhile, the average fare in Denver, which is a market ser ved non

- stop by United, was $176 each way, despite the fact that both cities are roughly the same distanc e from the Tri

- Cities. T he Tri

- Cities overall non

- Allegiant
average one way fare, not i ncluding taxes and fees, was $230 in 201 3 , versus the fare inc luding Allegiant, which was $215

.

Despite some of the highest fares in the West , passengers in the Tri

- Cities provide the Airport with some of the region’s highest load factors

– or percentage of seats filled. In calendar year 2013
, the Tri

- Cities ma rket had filled an average of 79.4 % of its available seats (see Figure 5 ). Load factors in the market peaked in December of 2013, at 90.3 % for that month.

The market’s high load factors, coupled with high average fares, indicate the ability of the market to profitably support its air service. It also illustrates the ability of the market to support additional air service. There will be a gap in non

- stop connectivity with the loss of Los Angeles service on Allegiant in the fall of 2014 , and that gap would likely be best filled by a network

car rier offering daily flights. 

### FIGURE 5 : Passengers and Seats per Day Each Way, and Load Factor at Tri

- Cities Airport Source: US DOT T100; January 201 1

– December 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 8

AIR SERVICE NEEDS AND DEFICIENCIES IN THE TRI

- CITIES

The Tri

- Cities boast the fastest growing economy in the Pacific Northwest, some of the highest airline load factors in the region, and some of the highest average fares. The Tri

- Cities has seen capacity cuts in the last two years that have made it one of the more underserved markets in the country

.

An analysis of average one way fares in Oregon and Washington markets shows the
Tri

- Cities has the highest avera ge fare in the region as of calendar year 2013 . The one
way a verage in the Tri

- Cities is $215, which is 21%, or an average of $38 each way, hig her than the reg ional average fare (see Figure 6 ). Tri

- Cities had a higher average fare than its similarly sized peer markets, including Medford, which had 15% lower fares; Eugene, which had 24% lower fares; and Bellingham, which had 75% lower fares.

As previously noted, when Allegiant passengers are removed from the Tri

- Cities analysis , the average fare jumps to $230 each way. These high average fares on network carriers have started to suppress the number of passengers using Tri

- Cities Airport, which d ropped in 2013 by 1%. It was the first passenger decline in the market in six years.

In the last six months, the Airport sought to better quantify this passengers suppression, and also its passenger retention and leakage within its catchment area. It co mmissioned a True Market/Leakage Study in support of its air service development efforts. As the Tri

- Cities is
somewhat isolated

– more than four hours away from both Seattle/Tacoma and Portland by car

– it was anticipated that leakage would be relatively minor.

By pulling actual ticket stock by zip code within the catchment area, through the Airline Reporting Corporation (ARC), Tri

- Cities Airport found it retained just 43% of the catchment’s passengers as of the year ended third quarter 2013 (see map 4 o n next page). Surprisingly, the biggest draws away from Tri

- Cities Airport for passengers in the catchment area are the airports 

### FIGURE 6 : Average One Way Fare in WA+OR Markets Source: US DOT OD1A, Calendar Year 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 9

in Seattle and Portland. The True Market Study found that 27% of Tri

- Cities passengers drive to Seattle, over a Cascade mountain pass, to access flights, while another 18% drive through the Columbia River Gorge to Portland. Only 7% of passengers drive the
two hours to Spokane, mainly because Spokane’s service profile is so similar to that of the Tri

- Cities. Smaller percentages of passengers use other airports in the region
with less service.

The Tri

- Cities Airport catchment area generates almost 1.4 million annual
passengers or an average of 1,885 passengers per day each way (PDEW) (see figure 7). Tri

- Cities Airport, itself, retains just 803 PDEW for the p eriod. Seattle/Tacoma is able to draw an average of 500 PDEW from the Tri

- Cities area while Portland draws an average of 333 PDEW.

This passenger leakage reflects the extenuating circumstances with air service in the Tri

- Cities. Tri

- Cities service, on network carriers, is expensive, especially relative to the other airports in the Pacific Northwest. The Tri

Cities also lacks the breadth of service of the larger surrounding airports, with no daily non

- stop service to major markets such as Los Angeles, Phoenix, Sacramento, and San Diego. These factors cause people to seek service at other airports, even if those airports are more than four hours away by car in ideal weather.

The True Market data confirms the reasons behind the passenger leakage from th e Tri

- Cities catchment area. Average fares, paid by passengers from the catchment area at all the airports they use, are lower at all but one of the surrounding airports than at Tri

- Cities Airport. While the average fare at Tri

- Cities, itself, was $216 e ach way for the study period, the fare at Portland, 

### MAP 4 : Airport Used by Tri

- Cities Catchment Passengers Source: Tri

- Cities True Market Study, YE3Q13

FIGURE 7 : Airport Used by Tri

- Cities Catchment Passengers Source: Tri

- Cities True Market Study, YE3Q13Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 10 which captures 18% of Tri

- Cities passengers, was just $174 each way (see map 5). The Portland fare was 19% less than the Tri

- Cities fare. Fares are also lower at the Spokane, and the smaller airports in the region. Both Yakima and Walla Walla have fares below those paid at Tri

- Cities Airport. Walla Walla’s fare averaged $47 less each way than the Tri

- Cities’ far e.

The exception to this trend is found at Seattle/Tacoma. The average one way fare at Seatac, for Tri

- Cities catchment area passengers, was $250 each way or 16% higher than the Tri

- Cities Airport average (see map 5). The data shows that when passenger s from the Tri

- Cities drive all the way to Seattle for a flight, the y tend to fly longer distances. A large proportion of international passengers to and from the Tri

- Cities catchment drive to Seattle to access non

- stop international flights. This drives up the average Seattle fare. But it also illustrates the fact that Tri

- Cities passengers leak out of the catchment area not only for low fares, but also for the breadth of service available.

Passenger leakage in the Tri

- Cities is much higher than origin ally anticipated. The Airport has two mechanisms to reduce leakage: one, work to ensure non

- stops are offered to more high

demand destinations; and two, work to lower fares. The second objective will likely happen organically if the first objective is ac hieved. This Small Community Air Service Development (SCASD) Grant application is a step toward the recruitment of additional, daily, network airline service. It will be critical to reducing passenger leakage and removing the Tri

- Cities from the list of Northwest airports with the highest average fares. 

### MAP 5 : Average One Way Fare by A irport Used Source: Tri

- Cities True Market Study, YE3Q13Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 11

AIR SERVICE DEVELOPMENT PLAN : TRI

- CITIES

– LOS ANGELES

Tri

- Cities Airport seeks to help lower fares and better connect its catchment area passengers to the national air transportation system by recruiting daily, non

- stop, network airline service to Los Angeles. The LA Basin ranks as the Tri

- Cities number one overall origin and destinati on market, and, subsequently, its largest market without daily non

- stops. The Tri

- Cities

– LA Basin market will be left without any non

- stop service at all in September when Allegiant ends its service.

The Tri

- Cities Airport saw an average of 81 passengers per day each way (PDEW) traveling to and from airports in the Los Angeles Basin in 2013 (see figure 8). Almost 43% of those passengers traveled to Los Angeles International (LAX), with smaller percentages using John Wayne/Orange County, Ontario, Burbank, and Long Beach, in that order.

The Tri

- Cities’ Los Angeles Basin passengers have been suppressed in the past three years by the lack of continuous non

- stop service. Allegiant operated seasonal Los Angeles service in 2010, followed by ten months of LAX service in 2011 and 2012. But in 2013, Allegiant operated only summer seasonal service, as it did again in 2014. The Allegiant LAX schedule has not been published for 2015, but, at this point, Los Angeles service does not return to the Tri

- Cities. The result of this non

- continuous service is a passenger decline of 18% from 2011 to 2013 (see figure 8). 

### FIGURE 8 : O&D Passengers and Average One Way Fares, Tri

- Cities

– LA Basin Airports Sour ce: US DOT OD1A, CY2004

– CY2013 ; Includes LAX, BUR, LGB, ONT, and SNAProposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 12

When the Tri

- Cities

– Los Angeles Basin “true market” is taken into account, including those passengers from the Tri

- Cities catchment area that leak to other airports in the region for their LA Basin trips, Tri

- Cities is the largest LA market without daily non

- stops (see figure 9). The Tri

- Cities

– LA Basin true market generates an average of 145 PDEW at an average one way fare of $133. Tri

Cities has a larger market to the LA Basin than other, larger cities such as Hartford, San Juan, Providence,
and Lou isville. With 145 PDEW, the market would be sufficiently large to fill three regional jet flights per day in each direction with 100% passenger retention and no passenger stimulation. Thus, the Airport’s proposal for a single daily flight in each directi on is reasonable when compared to the current passenger data.

Tri

- Cities Airport retains just 51% of its Los Angeles Basin passengers, lea king the other 49% to other airports. Of the 145.2 PDEW in the market on a daily basis, just 74.4 PDEW use Tri

- Cities Airport (see figure 10). Another 70.9 PDEW use airports such as Seattle/Tacoma, Portland, and Spokane when traveling to and from the LA Basin. The entire Tri

- Cities

– LA Basin market generated more than $14.1 million in total fare revenue as of the year ended third quarter 2013, according to the Airport’s True Market Study 

### FIGURE 9 : LA Basin’s Top Unserved Passenger Markets Source: US DOT OD1A, Calendar Year 2013

FIGURE 10 : The True Tri

- Cities

– Los Angeles Basin Passenger Market Source: Tri

- Cities True Market Study, YE3Q13Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 13

It’s unlikely that Allegiant’s Tri

- Cities

– Los Angeles (LAX) ser vice was shifted to a seasonal pattern because of its performance. It averaged a load factor of 94% in 2012 and 2013, when the service was provided. In fact, in the summer of 2013, load factors between the Tri

- Cities and LAX grew from 92% in June to almo st 97% in August (see figure 11).

The service had load factors above 90% in all but four months since the beginning of 2011 (see figure 11). It had been shifted to seasonal, Allegiant reports, because of the Airline’s space constraints at LAX. It does not have the ability to maintain a g ate at LAX full

- time, so it must shift service around. This hurts the Tri

- Cities traveler and is one of the factors leading 49% of passengers between the Tri

- Cities and the LA Basin to fly from other airports. Allegiant will end service again after the s ummer of 2014, with no firm re

- start date announced.

So far in 2014 , the Airport has met, in person, with planners from two prospective network carriers that could serve the route: American Airlines and SkyWest Airlines

. Planners from both airlines
expre ssed the need for the community to share the risk on the route, mainly due to its stage length

– 739 nautical miles

– and potential regional jet fuel burn over that stage length. The funding plan contained in this application constitutes the risk sharing necessary for the service to begin.

Network carrier service to Los Angeles would not only serve the origin and destination market, which current ly generates sufficient traffic to fill at least a single daily 50

- seat regional jet, it would also be able to connect the Tri

- Cities to a number of new one

- stop destinations not 

### FIGURE 1 1 : Passengers and Seats per Day Each Way, and Load Factor, PSC

- LAX on Allegiant S ource: US DOT T100; January 2011

– November 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 14 served through current hubs. When analyzing the connection package on the American
code there are 42 one

- stop destinations that could be

se rved over the LAX hub (see Map 6 ). The Tri

- Cities market

cur rently generates a n average of 815 “true market” passengers per day each way (PDEW) to and from these connecting

c ities and Los Angeles, itself.

Service on American between
Tri

- Cities Airport and L AX would access an average of 154 PDEW to and from the Los Angeles Basin (see Figure 12 ). It would also be able to access large traffic flows to cities in the
Southwest , in Mexico, and in Hawaii. Los Angeles would be the preferred connecting point for Tri

- Cities passengers to cities such as Phoenix, which averages 90 PDEW; San Diego, which averages 66 PDEW; Albuquerque , which averages 33 PDEW; Honolulu, which averages 30 PDEW; Maui, which averages 16 PDEW; and San Jose del Cabo, wh ich averages eight PDEW.

Average fares in many of the Tri

- Cities markets that could be served by American over LAX are high

– they clearly reflect a general lack of 

### MAP 6 : Connection s over LAX on American Airlines Source: Sixel Consulting Gr oup Hub Builder Software, July 2014

FIGURE 12 : Top 25 Markets over LAX on American Source: Tri

- Cities True Market Study, YE3Q13Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 15 competition between Tri

- Cities carriers.
The overall “true average ” fare paid by passengers that could flow over LAX on Alaska or American, for the year ended third quarter 2013, was $190 each way (see Figure 13 ). That overall averag e includes passengers who current ly fly on Allegiant, and it does not include any ancillary fees or taxes. It also includes passengers who drive away from Tri

- Cities Airport to other airports in search of lower fare service. Service to and through Los
An geles on American would be targeting many current high fare markets, providing additional competition in the Tri

- Cities.

The Airport’s recruitment effort for network carrier service to Los Angeles began more than 18 months ago

. In 2014, in anticipation of apply ing for this Grant, the Airport and its partners traveled to meet with both American Airlines and its regional part ner, SkyWest. They also studied other airports ’ recent successful recruiting efforts for Los Angeles service, including the efforts of both Eugene and Bend/Redmond, Oregon. These efforts helped determine the amount of both local and federal funding requi red for the project.

The total project cost is $854,339.30 (see F igure 14 ). The majority of that funding , $764 ,000, will provide a revenue guarantee for the carrier operating the new route. If the route sees immediate success, as would be suggested in the data included in this application, the revenue guarantee portion of the funding would not be used. In addition to the revenue guarante e, the Airport has earmarked $5 0 ,000 for marketing an d advertising of the new service. This cash for marketing comes from local partners. This is a key to getting people onto the flights as soon as they begin. 

### FIGURE 1 3 : Average One Way Fares in Top Markets over LAX Source: Tri

- Cities True Market Study, YE3Q13

FIGURE 14 : Project Budget Source: Tri

- Cities Airport, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 16

The Airport will also set aside $10,000 to cover the carrier’s s tart

- up expenses and another $39 ,339.30 for fee waivers, including landing fee discounts.

A total of ten local partners have pledged cash funding for this project. The largest partners, in terms of cash alloc ation, include the Tri

- Cities Airport, the Tri

- City Development Council (TRIDEC), the Tri

- City Visitor and Convention Bureau, and the Port of Kennewick (see Figure 15). Local groups including the Port of Benton, Tri

Cities Chamber of Commerce, and Washing ton River Protection Solutions have also pledged cash. Private companies including Battelle, Bechtel, and Mission Support Alliance also have pledged cash matches for additional air service at the Tri

- Cities Airport. This diverse group of public and priva te partners all has interest in expanded air service, and represents some of the diverse users of potential new service.

The anticipated timeline for the project assumes a Grant would be awarded in September of
201 4 (see Figure 16 ). If the Grant agreement with the DOT is finalized in October of 2014
, the Airport will step up its recruitment efforts in the fall, endeavoring to meet with the targeted airlines throu gh the winter. In
a best

- case scenario, the Airport wo uld hope to target April of 2015 for a new service announcement, with creative materials ready for the marketing program shortly after a formal service
announcement. The targeted start date for service would be June of 201 5 , with a two

- year revenue guarantee period, allowing the Grant t o be closed by September of 2017

. 

### FIGURE 16 : Project Timeline Sourc e: Tri

- Cities Airport, July 2014 FIGURE 15 : Project Funding Partners Source: Tri

- Cities Airport, July 2014Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 17

As Tri

- Cities Airport has never received a Small Community Air Service Development Grant for a revenue guarantee , it should not be limited in alternate uses. Among alternate routes the Grant could be used for would be Phoenix on a network carrier, San Jose, Sacramento, San Diego, Dallas/Ft. Worth, or any other route that would provide new connectivity for the marke t.Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 18

PUBLIC/PRIVATE PARTNERSHIP

This application for federal Small Community Air Service Development Grant funding is supported with cash that has been committed by a group of community partners . These partners support the effort to bring network service to the Tri

- Cities

– Los Angeles route . Grant application partners include a local economic development organization, a C hamber of
C ommerce, and the port that owns and operates Tri

- Cities Airport.



### TRIDEC

The Tri

- City Development Council , known as TRIDEC, handles all economic development activities in the Tri

- Cities region, which includes the cities of Pasco, Kennewick, and Richland. TRIDEC has been a long

- term Airport partner, sending its representatives with Airport leaders to airline headquarters meetings and conferences. TRIDEC shares in the expense of air service development consulting work, and in the expense of advertising air service. TRIDEC has pledged $50,000 in matching cash for this application.



### Port of Pasco

In Washington State, ports are often charged with owning and operating airports. The Port of
Pasco operate s as an independent government agency , separate from any of the other government structures in the region. The Tri

- Cities Airport is one of the three main divisions within the Port of Pasco, the other two being marine and rail. The Port is constantly working on economic development projects in the Tri

- Ci ties, and the Airport is at the center of that effort.



### Tri

- City Regional Chamber of Commerce

The Tri

- City Regional Chamber of Commerce is the leading business advocate for nearly 1,300 private, public and non

- profit member firms in the Tri

- Cities region. The fifth largest chamber in Washington, the Tri

- City Regional Chamber advocates for a strong business community

. The Chamber promote s regional prosperity and strengthen s its member businesses through advocacy, leadership, networking and innovative business programs. Its businesses have expressed strong support and demand for additional air service.Proposal of Tri

- Cities Airport • Pasco, Washington • July 201 4 

## 19

CONCLUSION

Tri

- Cities Airport is not only the highest fare airport in the Pacific Northwest, with an average one way fare of $215, but one of the highest fare airports in the country for 2013. Increasing fares

– that have gone up much faster than fares at surrounding airports

– have caused the market to be suppressed, posting i ts first passenger loss in six years in 2013. Rising fares have also increased passenger leakage to other airports, as travelers to and from the Tri

- Cities seek fare relief by driving as far as Portland and Seattle for flights.

Specifically for this Grant application, Tri

- Cities Airport commissioned a new True Market Study, to determine, not only , total passenger leakage, but to identify gaps in service that could be filled to reduce leakage. The biggest gap the True Market Study found was the lack of daily non

- stop service to the Tri

- Cities number one origin and destination passenger market: Los Angeles. While the Tri

- Cities generates an average of 145 passengers per day each way (PDEW) to and from the LA Basin, only 51% use their local airport.

The Airport has two mechanisms to reduce leakage: one, work to ensure non

- stops are offered to mor e high

- demand destinations; and two, work to lower fares. The second objective will likely happen organically if the first objective is achieved. This Small Community Air Service Development (SCASD) Grant application is a step toward the recruitment of a dditional, daily, network airline service. It will be critical to reducing passenger leakage and removing the Tri

- Cities from the list of Northwest airports with the highest average fares.

The Tri

- Cities Airport has never won a Small Community Air Servic e Development (SCASD) Grant to be used for a revenue guarantee . It has been able to recruit five new routes over the last decade without federal support. But the Airport realizes the environment has changed and
, in order to be competitive with other non

- hub airports
, it must offer risk sharing on targeted routes. This SCASD Grant application i s the key to additional service, reduced leakage, and lower fares in a large and isolated portion of the Pacific Northwes t. 

## “ [This Grant] will be critical to reducing passenger leakage and removing the Tri

- Cities from the list of Northwest airports with the highest average fares .”