Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Spokane Airport Board

Spokane International Airport 

Grant Application Under The

DOCKET OST-2011 - 0119

DUNS # 058 614 496

Congressional District # 5
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Table of Contents

TECHNICAL OUTLINE ..................................................................................................3

I. SUMMARY OF PROPOSAL ........................................................................................4

STATEMENT OF DEFICIENCY .................................................................................................. 4

PROPOSED GRANT SOLUTION ................................................................................................ 4

SPONSORS & PARTNERS....................................................................................................... 4

II. THE AIR SERVICE CHALLENGE...............................................................................5

CURRENT AIR SERVICE ........................................................................................................ 5

HISTORICAL TRAFFIC STATISTICS........................................................................................... 5

AIRLINE SHARES AT SPOKANE ............................................................................................... 6

FARES ARE UP... ................................................................................................................ 7

III. THE SOUTHERN CALIFORNIA SERVICE GAP.........................................................8

GEG-LAX: A SUBSTANTIAL HUB-CONNECT PENALTY................................................................... 8

TODAY: AS MUCH AS FIVE HOURS ADDITIONAL FOR A ROUND-TRIP.............................................. 9

SCHEDULE SHIFTS WILL FURTHER REDUCE LA BASIN ACCESS ......................................................10

THE SOLUTION – NONSTOP FLIGHTS......................................................................................10

IV. THE GRANT STRUCTURE......................................................................................12

REQUIREMENTS ................................................................................................................12

MARKETING PLANS ............................................................................................................13

DISTRIBUTION OF FUNDING .................................................................................................14

POST-PROGRAM SUPPORT ...................................................................................................14
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Technical Outline

A. Airport and Community 

Spokane Airport Board

The Spokane – Coeur d’Alene Region

Contact:

Mr. Lawrence Krauter, AAE, AICP

CEO/Airport Director

Spokane International Airport

9000 W Airport Dr # 204

Spokane, WA 99224-9438

(509) 455-6455

B. Additional Community Members

Greater Spokane Incorporated will be the community partner and will be 

responsible for community outreach and the accomplishment of the 

marketing and promotional efforts to assure the proposed new service is 

a success.

C. Project Sponsor

The Spokane Airport Board will function as the official sponsor of this 

application.

D. Project Description: 

The grant is requested to respond to the lack of nonstop service to the 

Los Angeles Basin. Currently, Spokane-Coeur d’Alene is the largest 

population center in the Northwest without any nonstop flights to the Los 

Angeles Basin. The Airport and community are well aware that the US 

airline industry is not in an expansion mode. However this air service 

deficiency is a strong revenue opportunity for the carrier(s) targeted.

The grant requests $1,000,000 with a local match of $200,000 to 

establish a revenue-guarantee program to reduce the initial risk to the 

carrier recruited. The Airport understands that this approach has been 

successful in other grant awards in establishing service in under-served 

markets.
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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I. Summary of Proposal

Statement of Deficiency

Spokane – Coeur d’Alene Region (the Region) is the largest population 

center in the Northwest that has no nonstop service to any of the major 

commercial centers of Southern California.

This is the single greatest gap in service provided at Spokane 

International, and one that puts the region at a severe business 

disadvantage compared to other commercial and vacation points in the 

Northwest.

Proposed Grant Solution

The Airport and its community partners herein are requesting a grant in 

the amount of one million dollars, to be matched by a local contribution 

of $200,000 to attract and retain a carrier to offer at minimum one daily 

round trip flight to access the business centers of the Los Angeles Basin.

There are several target carriers, including, but not limited to, American, 

Delta, Alaska, United and Southwest, all of which have large operations in 

the Los Angeles Basin, and which can benefit from this opportunity.

Service to LAX, BUR, LGB, ONT or SNA will be satisfactory to meeting this 

deficiency.

Sponsors & Partners

The official sponsor of the application is Spokane Airport Board.

The community sponsorship will be directed and coordinated by the 

Greater Spokane Incorporated. This organization will be responsible for 

the community contribution, the marketing strategies, and other activities 

to assure that the proposed service is a success.

Mr. Lawrence Krauter, AAE, AICP

CEO/Airport Director

Spokane International Airport

9000 W Airport Dr # 204

Spokane, WA 99224-9438

(509) 455-6455
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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II. The Air Service Challenge

Current Air Service

Spokane International Airport has year-round service operated by six 

carriers to six connecting hub airports, plus service to Boise, Oakland, 

Portland, and Las Vegas.1

Pertinent to this application, the map clearly indicates the gap in nonstop

access to Southern California.

Historical Traffic Statistics

In the past five years, capacity, departures, and passengers have 

declined at Spokane. Based on YTD data, enplaned passengers are 

tracking to decline another 10% in 2011 compared to 2010.

The additional service to the Los Angeles Basin is expected to stimulate 

ridership by offering additional seats and nonstop flights.2

 

1 Not yet reflected in filed schedules, Southwest has announced that it will cease service in the GEGSEA market. This will further reduce capacity and departures v 2010. 

2

Year 2011 departures and seats are as filed by airlines with Innovata. LLC as of July 20, 2011.

Spokane – Coeur d’Alene 

Region is the largest 

population center in the 

Northwest that has no 

nonstop service to any of 

the major commercial 

centers of Southern 

California

Year 2007 2008 2009 2010 2011 (Est) PCT Chg

Enplaned 1,743,380 1,715,763 1,527,955 1,592,126 1,427,971 -18.1%

Dept. Seats 2,338,827 2,326,174 1,966,079 2,085,982 1,942,232 -17.0%

Departures 24,109 23,818 19,536 21,044 18,357 -23.9%
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Airline Shares At Spokane

Alaska and Southwest are the largest carriers at Spokane International. 

Pertinent to this application, Southwest captures the second-largest share 

of the traffic between GEG and the Los Angeles Basin.

Of concern, and as will be outlined below, as of July 20, 2011, the 

schedules filed by Southwest indicate a 4% reduction in capacity to be in 

place by the second quarter of 2012. However, not as yet reflected in 

published schedules is the Southwest’s announcement that it is dropping 

all flights between Spokane and Seattle in early 2012 as well.

This indicates almost a 20% reduction in Southwest capacity at Spokane. 

The data above clearly show WN to have the lowest average fares at the 

airport, and the loss of this capacity, plus the loss of Southwest’s service 

in SEA-GEG, the airport’s largest single O&D market, will have a negative 

effect on fare levels.

The loss of WN capacity will also effect O&D passengers to the LA Basin. 

Southwest today has 38% of this market, and the reduced seats could 

cut the O&D severely. Furthermore, the reduction in Southwest capacity 

will likely result in upward pressure on fare levels in the specific GEG – LA 

Basin markets.

For this reason, this grant application is extremely important to the 

Spokane-Coeur d’Alene Region. The nonstop service that the grant will 

support will restore not only some of the lost capacity, but it will 

stimulate the demand base as well.

C arrier P sgr P D EW % P sgr Originating A vg P ax 

F are

A S 976,465 1,337.6 32.89% 51.6% $156.89

DL 501,158 686.5 16.88% 52.5% $229.66

F9 144,208 197.5 4.86% 54.9% $178.38

UA 305,132 418.0 10.28% 54.3% $248.82

US 149,388 204.6 5.03% 52.6% $220.19

WN 888,033 1,216.5 29.91% 54.2% $150.24

Total 2,968,755 4,066.8 100.00% 53.0% $180.91
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Fares Are Up...

Average fares charged by airlines at GEG have edged up by almost 4.5% 

between 4Q 2009 and 4Q 2010.3

The decline in capacity planned by carriers at GEG in 2011 - 2012 will 

tend to increase fares in the months ahead. The reduction in Southwest 

presence at GEG will also tend to push fare levels up.

 

3

Five quarters shown. Fares are those net to the airlines, exclusive of federal fees and taxes.

Spokane has experienced 

a more significant drop in 

capacity than any other 

top 100 airport in 

Western North America.

Data Table Oliver Wyman

Aviation Daily, July 22, 2011 page 10
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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III. The Southern California Service Gap

The Southern California region is a very important part of the traffic 

demand for the Spokane – Coeur d’Alene region. The lack of nonstop 

access to this region hinders economic growth and makes the region 

served by Spokane less attractive as a leisure destination for Southern 

California consumers.

Over 325,000 annual O&D – more than 11% of the airport’s total traffic. 

is generated to and from points in Southern California. The core Los 

Angeles Basin airports of LAX, BUR, LGB, SNA and ONT comprise over 

233,000 GEG O&D. The nonstop service that this grant will recruit will 

generate additional passengers in the market. 

GEG-LAX: A Substantial Hub-Connect Penalty

A review of the average 2010 itinerary miles for GEG consumers to and 

from LAX illustrated the disadvantage faced by consumers going to or 

from GEG to Southern California.

Routing efficiency at 100% is the equivalent of an straight line, nonstop 

flight. Consumers in the LAX-Spokane market today must fly 16% more

miles (a.k.a. the “hub connect penalty”), which translates into additional 

travel time and deters demand in the market.

M arket A vg. T icket 

M iles Efficiency

SEA 962 99.30%

PDX 849 98.28%

GEG 1,134 83.39%
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Today: As Much As Five Hours Additional For A Round-Trip

The current connecting service can entail an additional five hours or more 

to round trip travel time compared to nonstop flights. The current 

connecting service is inconvenient to the point that the GEG regional 

economy is affected. A nonstop flight between LAX and GEG is projected 

to have a block time of 2.33 hours. The current air access can be double 

that amount of time.

Examples:

The current service to 

points in Southern 

California adds as much 

as 5 hours additional RT 

travel time.

This suppresses demand 

and puts GEG at an 

economic disadvantage.

A nonstop flight will 

address this deficiency.
Grant Proposal of Spokane Airport Board

Small Community Air Service Development Program OST – 2011-0119

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Schedule Shifts Will Further Reduce LA Basin Access

Today, Southwest is the second largest carrier between the region and 

points in the Los Angeles Basin. Of the 233,000 O&D, Southwest captures 

over 85,000.4

Southwest, in a major route reorganization, on July 25, 2011 announced 

that it will be reducing service at Spokane in 2012. In fact, the carrier is 

cutting back seat capacity at GEG by 19% between now and the second 

quarter of 2012.

The loss of this capacity and the loss of the fare discipline in the markets 

could easily result in a 25% reduction in passengers between GEG and 

the LA Basin.

This represents a serious reduction in access to Southern California, and 

opens an opportunity for a carrier to begin nonstop flights to a gateway 

airport in the Los Angeles Basin.

The Solution – Nonstop Flights

The Airport and the community believe that the addition of nonstop 

service to a major airport gateway in the LA Basin will tap into strong 

additional passenger demand, and put Spokane on a more level playing 

field with other regions in attracting SoCal business and leisure traffic.

While it is not an exact science to estimate the true stimulation of the 

addition of nonstop flights into a market such as GEG, the data are clear 

and compelling:

 

4

Source: Year 2010 O&D for GEG-LAX/BUR/ONT/LGB/SNA. Aviation DataMinerTM analysis of DOT 

data.

As of 2012, it won’t be 

heading for Seattle from 

Spokane... and the airline 

will be cutting capacity by 

almost 20% at GEG.
Grant Proposal of Spokane Airport Board

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 The reduction in travel time, as noted above, will stimulate market 

demand.

 Other markets with nonstop service to Los Angeles Basin airports 

experience very high load factors. GEG will be no different.5

Using LAX as the example airport, and assuming a 75% load factor, the 

basic cost metrics for a 130-seat A-319 are encouraging:

Basically, it appears that limited market stimulation would be required to 

support the new service. Part of the nonstop capacity would replace the 

expected 2012 loss caused by incumbent service reductions. The 

remainder would represent a 11.1% stimulation.

6 Historical market data 

is instructive. Between 2007, when nonstop service to the Los Angeles 

basin was offered from GEG, and 2010, total passengers have dropped by 

approximately 50,000.

 

5

For the full year ending 1Q 2010, United Airlines nonstops between LAX and BOI averaged 79% 

load factors.

6

Industry average costs were used for the A-319. Average fare was assumed to be that now 

captured by Southwest, plus a 15% nonstop premium. Total GEG O&D LAX/BUR/SNA/LGB/ONT 

dropped to 234,238 in 2010 from 284,791 in 2007.

The grant will allow GEG 

to fill not only a current 

deficiency, but also one 

that is developing in the 

year ahead.
Grant Proposal of Spokane Airport Board

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IV. The Grant Structure

The Airport and community are requesting a grant in the amount of $1 

million, with a match in funding locally of $200,000.

This fund will be used to attract a carrier to provide nonstop jet service to 

one or more of the LA Basin gateways. The program will be for 12 

months only. At the end of that period, any unused federal grant funds 

will be relinquished back to the Department.

Requirements

The majority of the total program funds will be allocated as a revenueguarantee for the carrier. Because of the lack of current nonstop service, 

the cutbacks in incumbent capacity, and the success of Los Angeles Basin 

flights from other airports in the region (such as Boise), it is strongly felt 

that the new service will be revenue-positive very shortly after start of 

operations.

However, given the fact that US carriers are not expanding fleets, an 

incentive program that offsets the risk of moving an existing aircraft to 

the GEG-SoCal application will be necessary.

Flight Schedule

To be eligible for the program funds, an airline will need to commit to the 

following:

 Operation with an aircraft with 99 seats or greater;

 Operation on at least a 6-day basis;

 Nonstop to one of the following LA Basin Airports: 

Los Angeles International

Burbank

John Wayne/SNA

Ontario

Long Beach

 Fare levels within 10% of current connecting service (average);

 Commitment for one year of service;

 Commitment to good faith marketing of the new service.

While a current incumbent carrier at GEG would likely be the strongest 

candidate, the program will be open to any scheduled passenger carrier, 

operating jet aircraft of 65 seats or above.
Grant Proposal of Spokane Airport Board

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Revenue Assurances

The Airport will negotiate a strict agreement with the target carrier 

outlining the following:

 The agreed-upon cost for each segment operated, including a 

profit hurdle.

 The agreed-upon allocation of revenues. Local revenues on the 

flight will be allocated fully. Connecting/beyond revenues will be 

allocated based in agreed prorate.7

 The revenues and costs will be accounted for on a quarterly basis. 

Any short fall between agreed-upon revenues and costs will be 

paid in arrears to the carrier. Any surplus over the agreed-upon 

revenues and profit hurdle will be accrued to the next accounting 

period.

Marketing Plans

The Greater Spokane Partnership will administer the community relations 

and regional marketing for the program.

 Being closely tied to the business base of the Spokane/Coeur 

d’Alene region, the Partnership will accomplish a comprehensive 

outreach to key commercial industries which have ties to Southern 

California.

 The marketing plan will be tied to the specific carrier, and will 

focus on the following general activities as appropriate:

 Electronic media contact: e-mail, social media, radio outlets, 

outlining the new service, the benefits of the nonstop flight, and 

the convenience.

 Because over 50% of the expected traffic originates in Southern 

California, there will be involvement with key GEG-region leisure 

businesses, tapping directly into their internal contacts with 

customers and suppliers in the Los Angeles area.

 The Partnership and the Airport will conduct informational 

presentations with civic groups prior to and after service start.

 The target airline will be required to conduct at least one local 

social event prior to the start of service.

 

7 With the exception of service to LAX, there is very little potential connecting traffic.
Grant Proposal of Spokane Airport Board

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Distribution of Funding

The majority of the funds will be allocated to the risk-guarantee. Media 

and promotional costs in the GEG region allow wide coverage for a 

relatively low amount of funding.

Source

Nonstop Flight 

Revenue 

Guarantee

Local Marketing 

Support Total

DOT Funds $ 850,000 $ 150,000 $1,000,000 

Community $ 150,000 $ 50,000 $ 200,000 

Total $ 1,000,000 $ 200,000 $ 1,200,000 

Post-Program Support

As the data indicate, there is currently a shortfall in access to the LA 

Basin from the Spokane- Coeur d’Alene Region, and with airline capacity 

cutbacks, this will become more severe in the year ahead.

As a result, the opportunity for the target carrier is very strong. 

Subsequent to the end of the program, the Airport and the Partnership 

will continue community outreach and marketing support as necessary to 

assure that the service continues.