### Ralph Cordova Jr. County Executive Officer

May 13, 2014 Kevin Schlemmer 

### COUNTYEXECUTIVE OFFICE

Chief, Essential Air Service & Domestic Analysis Division United States Department ofTransportation/W86-309 1200NewJersey Ave SE Washington, DC 20590 RE: Response to USDOTTentative Order# 2014-4-26 DearMr. Schlemmer: County Administration Center 940 Main Street, Suite 208 El Centro, CA 92243 760-482-4290 Tel 760-352-7876 Fax www.co.imperial.ca.us ralphcordova@co.imperial.ca.us

Imperial County Airport ("IPL") is one of 13 airports thatwere notified by Tentative Order by the United States Department of Transportation ("US DOT") on April 241 h, 2014 that the community may lose Essential Air Service ("EAS") eligibility because IPL fell short ofthe criteria requirement to serve fewer than ten passengers per day during the year-ended September 30, 2013. Further, the Tentative Order indicates thatthe community needs to "show cause as to why the Department ofTransportation should not terminate the eligibility ofthe community underthe Essential Air Service (EAS) program." I urge you to grant a waiver so that IPL does not lose its EAS eligibility on the basis that it is a temporary circumstance that IPL's passenger performance has dropped below ten passengers per day. As this letter will demonstrate, the service area around IPL was hard-hit by the Global Credit Crisis and Mortgage Meltdown Crisis in 2008, but economic and demographic trends have improved since. In addition, the EAS airline and routes changed in May 2013, and in the shorttime since the new service has been in place, passenger acceptance has built steadily.

Introduction IPL is located in Southeastern California bordered by Arizonato the East, San Diego County to the West, and Mexico to the South. Even though it is about 113 miles to San Diego, road access to the nearest large hub airport to Imperial County is made uniquely more challenging than distance alone due to congestion and the unpredictably of stationary border patrol traffic stops on all major roadways leading out ofthe County. As demonstrated below, SAN is the closest**m~or** airport to Imperial County, but it is almost a two hour drive.

AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER

### Figure 1: Distance to MajorAirportsfrom Imperial County
San Diego 113 1hour, 49 minutes Los Angeles 213 3 hours, 26 minutes Phoenix 243 3 hours, 53 minutes Tucson 296 4 hours, 16 minutes Las Vegas 384 6hours, 2 minutes Paso 613 8hours, 40 minutes San Francisco 591 9 hours, 21 minutes Sacramento 596 9 hours, 36 minutes
Sources: CaliforniaDept ofFinance; US Census Bureau; CA EmploymentDevelopmentDept; Rand McNally.com This increases the amount oftimethat passengers need to travel to other airports, as well as increases the community's reliance, thus importance, on IPL for access 

### to the national and international air transportation network to support economic growth in the area. In addition, traveling to either San Diego International Airport ("SAN") or Burbank's Bob Hope Airport ("BUR") also means passengers are driving in two ofthetop 15 mostcongestedregions in the US. 1 IPL's passenger performance peaked in 2007 with 64 enplanements per day on United Express. In 2008, the economy ofImperial County was devastated by the housing crisis and economic recession, which greatly hurt the county, the state ofCalifornia, and the country. That said, from 2008 to 2012, passenger performance at IPL was approximately doublethe US DOT'sthreshold oftenpassengers per day.



### Economic andDemographicTrendsinImperialCounty The economy ofImperial County was hard hit by the Global Credit Crisis and Mortgage Meltdown of 2008, but prudent investments in the future have been made there, and positiveresults are being achieved. Imperial County was disproportionately impacted by the poor global economy because it is a market that relied upon the agricultural sector forjobs. This coupled with the loss ofconstructionjobs in the county due to the housing crisis leftthe county as one ofthe worstperformingeconomic areas in California. Offshoring of manufacturing jobs to Asia has also affected Imperial County's economy; however as wages increase in Asia, Mexicali, which is located on the US-Mexico border, is beginning to see these jobsreturn. Imperial County is now looking to grow with green-energy companies and eventually become the renewable energy capital ofthe country. Tenaska Solar Ventures is one ofthe companies investing in the areawith an investmentofmore than $500 million dollars in the Imperial Valley's economy. This project will lead to 500 constructionsjob, 70 percent ofwhich will be local. It 

### will also lead to more than $20 million in construction contracts to local companies. There are other companies that are also investing

1 Greater Los Angeles is the 2nd most congestion car travel market and San Diego is ranked 15th (TexasA&M Transportation Institute, Annual Transportation Survey)
2

### and partnering with the county such as Ocotillo Wind, CalEnergy, and 8minute Energy all ofwhich are soiar energy firms. The effect ofthe recession on Imperial County is demonstrated in the county's gross regional product (GRP), which is shown on Figure 2. From 2009 through 2011, Imperial County's GRP declined one percent. Since 2012 ithas been increasing and in 2013 was at a 10 year high of$4,928 million.


### Figure2: Imperial County'sHistoricalandForecastGrossRegional Product

iii 6,000.00


# .. 5,500.00 ..!!! 0 5,000.00 Q en 4,500.00 Q 

### 2 4,000.00 Ill c: 3,500.00

### ~ 

# 1 3,000.00 c. 2,500.00 1:1: (.!1 2,000.00

Source: Woods & Poole Gross Regional Product (Millions)



### Imperial County'spopulation increased between two and three percent until the housing crisis in 2008 as illustrated on Figure 3. Since then the population increased at a slower rate. Income per Capita has experienced similar trends, but it has experienced a more robust recovery in 2013, when the income per capita grew at a higherrate.

3Figure3: Imperial County'sHistoricalPopulationand TotalPersonalIncomePerCapita 185 35 Ill 180 175**~** 30 a. 

# a

... 170 25 <LI a. c 165 0 ':;:::; Ill 160 :; a. 155 0 a. 150 <LI 20 E o- uC c Q -c 15 

# -- Ill c 10**~** 

# ... <LI 145 140 a. 5 iS


## .... 0 1- 135 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -Population ,Total Personal Income Per Capita (Current Dollars)
Source: Woods & Poole
Housing values in Imperial County demonstrate the impact the economic recession had on the county. In 2007, median housing values peaked at almost $250,000, but decreased to a low of$130,000 in 2011. In 2012 the housing valuesbegan to show signs ofreboundingwithan increase of2percentper annum.
Figure4: MedianHousehold Value

300 

### i 250 

# g Q 200**~** 

## ar := 150

### ~ 100 50

0 MEDIAN VALUE: Owner-occupied housing units

2005 2006 2007 2008 2009 2010 2011 2012
Source: American Community Survey, US Census

4HistoricalPassengerPerformanceatIPL Ofthe thirteen airports impacted by the US DOT's Tentative Order, IPL has the highest number of passenger enplanements at 9.5 per day as shown on Figure 5. It bears noting that this is only halfan enplanement per day lower than the US DOT's minimum requirement, and that it rounds to the US DOT'sminimum level often.
Figure5: ListofAirportsListed in TentativeOrderRegardingTerminationofEASEligibility 

### EAS Air om Stnte En lanements!Du,· EL Centro California 9.5 FortDodge Iowa 9.4 Greenville Mississippi 9.3 Jackson Tennessee 7.8 Merced California 7.7 Bradford Pennsylvania 6.9 Lancaster Pennsylvania 6.3 Muscle Shoals Alabama 6.3 Athens Georgia 5.9 Franklin/ Oil City Pennsylvania 

### 5.0 Macon Georgia 4.0 Hagerstown Maryland 3.9 Kin an Arizona 2.7
Source: US DOTTentativeOrderRegardingTermination ofEAS Eligibility IPL has been served by two carriers, United Airlines regional Express affiliate operated by SkyWest Airlines ("UAX"), which ceased service in April of2013, and Seaport Airlines ("Seaport"), which took over the flying in May of2013 when the US DOT selected Seaport as the new EAS carrier. When UAX was serving IPL, flights were operated to Los Angeles International Airport ("LAX"), the third busiest airport in the US. The UAX service benefitted passengers because LAX has considerable connecting options with a diverse group ofairlines serving a large number ofdomestic and international cities, to which IPL passengers could connect. United alone serves 48 domestic and 12 international destinations with 184 daily flights at LAX. Connecting service is key becausethe majority (78%) ofiPL'spassengers traveledbeyondLAXin 2012 onUAX's service? Seaport's service replaced flights to LAX with operations to SAN, the 29th busiest large-hub passenger airport in theUS, and BUR, a medium-hub facility north ofLAX. Despitethe advantage ofhavingaccess to two airports, this federally mandated service attracted fewer passengers because it is flown on smaller aircraft(nineversus 30 seats). As aresult ofthe smaller aircraft operated by Seaport, the numberofdaily seats offeredfrom IPL is approximatelyhalfthe level provided by UAX as shown onFigure 6.

2 US DOT O&D Survey, Calendaryear 2012
5Figure6: IPL's Average SeatDepartures perDay

120
100
80

40
20 '06 UAX: LAX & YUM

'11 UAX:YUM is cancelled in

February '13 Seaport enters in May; UAX leaves IPl in April 

# I

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 111 United Airlines Seaport Airlines
Source: lnnovata Schedules, via Diio, Annual seats divided by 365 days, Calendar Year, in 2013, United's servicetransitioned to Seaport Airlines A critical reason for IPL's low passenger performance after Seaport began flying was that Seaport initially did not have interline agreements in place to allow passengers and bags to transfer at SAN and BUR to other airlines. Furthermore, SAN and BUR service levels offer fewer connecting opportunities than LAX. For example, United, the second largest carrier at SAN behind Southwest Airlines, serves seven domestic markets, including LAX, with 35 daily flights, compared to 48 domestic and 12 international markets with 184 daily flights from LAX. Southwest has no interline relationship with any carrieracross its network. As shown on Figure 7, IPL consistently generated approximately twenty passengers per day 2009-2012. IPL passengertraffic peaked in 2007 when the airport had nearly twice daily service to LAX and Yuma, Arizona ("YUM"). United's service with multiple online and interline connecting opportunities at LAX allowed both business and leisure passengers to travel globally and in addition, the larger 30 seat Embraer 120 aircraftcan accommodate more demand.

6Figure7: Historical Enplanements perDay 70.0 60.0 50.0 40.0 30.0 23.6 19.8 

# II 20.0 10.0 0.0 64.5

Onlyyearthat IPLis

## below~~ the US DOT's threshold of 10 enplanements per day 18.5 16.0 17.8 20.6

# 1~1- 

# l
__l_i_

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: T-100 Data, via Diio, YE September, Basedon 313 days

Figure 8: El CentroImperial CountyHistorical Load Factor**---··~--** 60% 52% 50% I 40% 34% 

## ... 28% 0**~** 29% 30% 111 u... 30% "'C Ill 

### .9 20% 10%

0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: T-100 Data, viaDiio, YE September During 2007, IPL also reached its highest load factor of52% as shown on Figure 8. IPL was hard hitby the weak economy in 2008, 2009 and 2010 with an immediate decline in traffic and load factor. As IPL

7startedto emerge from the recession, air travel increased to 20.6 in 2012. In 2013,the US DOT selected a new airiine, Seaport, serving newmarkets, and passengertraffic decreased. This decrease is temporarybecausethe community must adjustto the new air service patterns at IPL, and Seaportneededtime to negotiate critical interline agreements with otherairlines atBURand SAN. In the future, passengertraffic will benefit from the interline agreements that Seaport Airlines has signed with Alaska Airlines and Delta Air Lines. Two more interline agreements with other airlines are due to be signed shortly. These agreements will greatly help generate passengers at IPL with convenient connections atBUR and SAN. Conclusion Despite the effects of the recession, IPL's traffic levels had remained above the mandatory ten enplanements per day by at least six passengers every year except for 2013. Once Seaport's interline agreements take effect, IPL should easily exceed the threshold often enplanements per day as the flights will havethe benefit ofconnectingpassengers. As such, it is certain that the passenger performance below US DOT mtntmums is a temporary circumstance related to the entrance of a new EAS carrier serving new markets from IPL. The community of Imperial County is unified in its support of the Seaport service and will take every opportunity to use the service when travelling by air. Under these circumstances, I feel a waiver is in order and I urge youto grant it forthwith.

alph Cordova, Jr. Imperial County Executive Officer

8