TOBY DOUGHER'lY, CPM, CITYMANAGER PAUL J!RlSENO, ASSISTANT Cl'lY MANAGER P.O,BOX490 1507 MAIN STREET HAYS, KANSAS 67601-0490 TEL 785/628-7320 FAX 785/628-7323 www.haysusa.com

January 6, 2014
Kevin Schlemmer Director EAS Program West Building 1200 New JerseyAve. SE Washington D.C. 20590 Docket DOT-OST-1998-3497
Dear Kevin, COY COMMISSION KENTSTEWARD, MAYOR

, HEtiRYSCHWALLER, IV : :EBERPHELPS ' :SHAUNMUSll.

RONMEI.lJCK

This letter is theformal response from the City ofHays, Kansas, to the Department's request for comments on the Hays Essential AirService bids we received on December 10.
In the case ofHays, we have been advised ofand have reviewed three bids: );> SkyWest Airlines has proposed aregionaljetservice 12times perweekto Denver, operating underthe United Airlines code and brand with abid cost of$2,253,132. );> Great Lakes Airllnes offered two proposals, both to Denver. 18trips per weekwith aBeech 19000 for $1,699,520 14trips perweekwith aEMB-120for $1,499,508
The City ofHays and its residents give the strongest possible endorsementto the air service proposal ofSkyWest Airlines. We urge the Department;toaward the Hays EAS contractto SkyWest in aprompt manner. Below are our reasons and justifications. Great Lakes Airlines Has Failed to Provide Hays with Reliable AirServlce
Both the 819000 and E-120 service proposals ofGreat Lakes Airlines assume a97% completion rate on scheduled flights in the bid calculation. Great Lakes Airlines has neverachieved an annuafized 97% competition rate at Hays, Kansas, in its ·entire service history here. Our records show the following flight completion statistics forthe past five years forthe carrier:
2009 2010 2011 2012 2013 95% 91% 93% 94% 85% Januaryto November. In that period we have had 3,606 scheduled flights and 532 have been cancelled.

· In 2013 so far we have also had only 65% ofscheduled flights operate on time, usingthe definition of within 15 minutes ofschedule. Narrowing in on the year 2013, below arethe Hays on time and completion rates by month per ourtracking. Due to this year's declining performance we have very significant concerns aboutthe carrier's abilityto provide reliable airservice at our community goingforward.Month July August September October On Time 62% 59% 65% 52% Completion 86% 89% 90% 70% November 43% 60"A. 

### Asthe Department can imagine, our loyal passengers are deserting our airport in large numbers because local airservice is simply nottrustworthyand has been that wayfor months. Great Lakes Has Lowered Its Hays Subsidy Costs by Increasing Its Great Bend SubsidyCosts Great Lakes current subsidy contract at Hays calls for asubsidy level of$2,164,041 per year, based on 97% completion. Thetwo Great Lakes proposals reduce the subsidy need to either $1,699,520 peryearforthreetrips or$1,499,508 fortwo trips. These are dramaticsubsidy reductions but 

### itappears subsidy needs havejust been shifted from Haysto Great Bend. Our review ofthe Great Lakes B1900D proposal shows the Great Bend subsidy need to be $1,975,110, with a routing change tovia McCook. Current Great Bend subsidy is $1,082,020. The Hayssubsidy reduction is notwhat itappears.**Ci~** Current Subsidy level Great lakes Progosals Difference Hays $2,164,041 $1,699,520 -$464,521 $1,499,508 -$664,533 Great Bend $1,082,020 $1,975,110 +$893,090 Total Difference $3,246,061 $3,674,630 Beech HYS +$428,610 $3,474,618 E-120 HYS +$228,557
In either the B1900D proposal or the EMB-120 proposal Great Lakes Is simply reducing Hays subsidy needs and dramatically increasing Great Bend subsidy needs. Eitherway the DOTwlll pay more in total than currently and, duetothe operational issues, see significantly less passengersforthe subsidy paid out. While we do not know the carrier preferences of oursister city Great Bend, we do note tothe Department that SeaPort Airlines has proposed Great Bend service consisting of3trips per dayto Wichita at very low fares for $1,434,472. It Is our understanding that SeaPort currently offers very reliable and lowfare EAS service at Salina (to Kansas City) and atabout a half dozen other airports nationwide. Should Great Bend choose to endorse SeaPort service the Department 

### will save $540,638 peryear at Great Bend compared tothe Great Lakes bid. Communication and Partnershig with Great lal<es Airlines Has Proven Difficult The City of Hays has reached out to Great Lakes repeatedly over the past several years in the hopes of developing a partnership with our designated air service provider. With rare and limited exception our effortsto develop a partnership with Great LakesAirlines on anysubject have been disappointing. The carrier has virtually no interest in marketing its product and has essentially notsupported any ofour efforts to market carrier service. In 2009 Hays applied for and was granted a Small Community Air Service Development (SCASD} Grant of $216,450. Combined with a local cash match of$15,000 and local in-kind contributions of $203,050, we had available to us $434,500 In funding or support to provide a comprehensive air service marketing program at Hays and in the surrounding 20 county area. Great Lakes did very little to support our marketing efforts. Despite the carrier not participating, we moved ahead with the Grant supported marketing efforts and achieved just under 20,000 annual passengers in and out in both 2011 and 2012. Those totals were on average a20% increase over annual traffic totals ln 2008 to2010. We did this essentiallywithoutthe carrier's support or participation.In January of2012 two representatives ofthe City of Hays, Kansas traveled to Cheyenne to visit with Great Lakes Airlines. One primary goal ofthat meeting was to communicate to the airline that we understood that from time to time Great Lakes may, for any number of reasons, have operational challenges. We made very clear that 

### ifthe airline would tell us when these situations were antidpated to occurwe were very willingto accept a reduction from 4trips per dayto 3trips per dayto ensure reliability. We stressed tothe carrierthat all they had to do was advise us when this might happen and we would workwith them. Itis our understanding that the operational issues we currently endure are primarily due to pilot shortages caused by new FAA pilot duty and rest regulations. It is our understandingthat these regulations where proposed years ago and finalized in either late 2012 or early 2013. This was apredictable bout ofoperational challenges. We visited the carrier in early 2012 and specifically asked the carrier to let us know when operational challenges were forthcoming and we would workwith the carrier to mitigate those challenges. Since our meeting in January of 2012 we have never heard from Great Lakes of any pending oreven potential operational challenges.
In summary we aggressively marketed and promoted the Hays Regional Airport using a DOT grant with very little carrier support. Wejourneyed to Cheyenne and specifically offered the carrier our intention to workwith them when operational issues may be foreseen, but emphasized that we had to be advised in advance. The operational issues we face in 2013 were predictable and we never received any communication of any sort, much less per our January 2012 request, from the carrier. We have worked hard to improve our airport infrastructure and to marketthe air service the Department has designated for us. This must not, this cannot continue. The SkyWestAirlines Regional Jet Proposal Will Mean Significantly Lower LongTerm EAS Subsidy Needs at Hays · The big regional airlines that operate SO-seat regionaljetsfor Network airlines are redirecting some ofthese aircraftto EAS service, with consistent increases in traffic and revenue, and eventually decreases in subsidy requirements. Both SkyWest Airlines and American Eagle Airlines have had outstanding success replacing Great Lakes, or other prop air service carriers, with regionaljets. Some exampleswe are aware ofinclude: · Initial RJ Second Cycle City Old Service/Traffic NewService/Traffic or Old Subsidy RJ Subsidy Garden City ZK DEN /21,102 AA DFW/45,424 $2.9m(AA) $1.4m Grand Island ZK DEN /16,780 AA DFW/45,860 $2.2m (AA) $1.8m Joplin ZK MCI 

## I 7,649 AA DFW

## I48,826 $2.8m(AA) $350k Manhattan ZK MCI 

## I 21,477. MDFWI77,909 $1.2m (ZK) zero All four ofthese cities are within 300 miles of Hays. Garden aty and Grand Island are very similar cities to Hays: strong rural economies, significant isolation from large airports and from low fare carrier service and a strong local focus on retaining and improving local airservice.
While these examples all involveAmerican Eagle and the DFW hub, SkyWest is aleader in developing EAS markets and has had great success placing regional jet or E-120 service in EAS markets. We have met with SkyWest Airlines and they have shared with us some examples oftheir success at four Midwest cities where they replaced network carrier turboprops with regional jets starting in 2010. SkyWest is now in theirthird EAS contract at these cities.**Ci~** 2012 Subsid:-l

## L Traffic 2014**Subsld~**

## L Projected Traffic Change Subsiffi' LTraffic Eau Claire $1,733,576 

### I 35,000 $1,546,536/40,000 -10% +14% Houghton $934,156/44,000 $690,976/50,000 -26% +14% Muskegon $1,576,067 

### I 25,000 $1,389,952/33,700 -12% +35% Paducah $1,710,775 

## I35,ooo $2,034,160 

## I42,230 +19% +21% GroupTotal $5,954,574 

### I 139,000 $5,661,648 

## I 165,930 -5% +19%' • I**~**

SkyWest was able to reduce total subsidy costs is these four cities by 5% in atwoyear period where typical DOT subsidy costs have gone up in many markets by double digit percentages. Atthe sametime SkyWest has reduced subsidy needs in these cities, it is projected to growtraffic 1go,1;, in thefifth and sixth year ofservicefrom thethird and fourth. We are aware ofSkyWest's outstanding reputation for reliable and on time air service, for high quality customer service and forworking with airport partnersto achieve maximum traffic and revenue results in every small dtythey serve. We are eager to work with such an airline. We are extremely confident that our market will react to SkyWest United branded service the same way Garden City and Grand Island reacted to the replacement ofGreat Lakes B1900D service with American branded service. We believe ourtraffic can quickly grow to at least 35,000 annual O&D passengers, if not 40,000 annual passengers. We are therefore confident that SkyWest's initial $2,253,132 subsidy need with 26,000 forecast annual passengers can shrink substantially in the second twoyearterm to$1.5 million peryear or even less. We commit, in this letter, to providing $50,000 in local cash funding to market SkyWest service, should that carrier be designated toserve Hays. Hays, Kansas Has One ofthe Strongest RuraJ Economies in the Nation Hays is a thriving and growing City on the western Kansas plains. Our local unemployment rate is about 3%. It "topped out" during the Great Recession at about 4%. We have a major University in the City (Fort Hays State University) and multiple private sector local employers in Health Care, Telecommunications, Oil and Gas mining and light manufacturing. We actuaHy had a local call center company move out of Hays because they could notfind enough workers in our strong and growing economy. Like any rural economy, our abi.lity to retain existing companies and institutions, support the growth ofthese entities, and recruit new companies toour business friendly City, depends on having reliable and efficient air service. The Department must appreciatethatwe have struggled with Great Lakesforyears now. We have documented our service reliability issues and what appears to us to be the shifting ofthe subsidy burden from Hays to Great Bend. We have documented our efforts to workwith the carrier as partners. We have made significant infrastructure improvements at ourAirport and we market, as best we can, the airservicethat Great Lakes provides at our airport.
It Is time for achange in ourairservice provider. We have done all we can dowith Great Lakes, to no avail. Summary Hays, Kansas, air service is at a crosHoad. We have one of the strongest rural economies in the nation, in many ways stronger than that at Garden City and Grand Island. Our local EAS air service, which has always been disappointing in terms of reliability and sense of partnership, has seen serious declines in reliability and on time performance this year. We have no Indication from our incumbent carrierwhen this might improve. We are at risk ofour local airservice going into a permanent decline, ifGreat Lakes were to continue to provide it. The impact ofsuch an event upon oureconomy isvery great and ItIs critical thatwe avoid that outcome. We have the opportunity, with SkyWest, tojoin similar cities in growing our traffic dramatically, solidifying our air service with a quality network brand, and moving in the direction of reducing and hopefully someday eliminating our need for EAS subsidy. We strongly endorse the air service proposal of SkyWest and call upon the Department to award SkyWest the EAS contract at Haysforthe 2014-2016 contract period.

### Thank you in advance for your consideration ofthis letter and our request and the reasoning behind our request. Please contact me 

### ifthere are any questions regarding our letter or our strong endorsement of SkyWest'to be our air service provider.

# ~~ Kent L. 

### Steward Mayor Attachments CC: Toby Dougherty, 

### City Manager Paul Brlseno1

### Assistant City 

### Manager I.D. Creech 1 

### Director of PublicWorks City Commission